Cancun: Kicking away the ladder?

The WTO's 'development round' trade talks get started in Cancun this week, looking for agreement on a number of issues that could impact on the lives of millions in some of the World's poorest countries.

Eight year old Getu Tekle collects Maize in Ethiopia. Open markets for developing countries' agricultural exports are a key demand at Cancun. Photo: Girma Engida/World Vision

If the EU and US can be persuaded to bend and allow significant increases in market access for agricultural goods and textiles, Cancun could result in a major boost to many developing economies. But failing major increases in access, Cancun risks damaging and not assisting developing countries export sectors, according to a new report released this week by World Vision.

"Unless developed countries eliminate their own export subsidies, grant greater access to their markets, significantly increase their aid levels and give poor countries the freedom to implement policies most suited for long-term development, any description of the negotiations as a 'development round' will remain pure rhetoric," says World Vision's economic policy adviser and author of the just-released report, Brett Parris.

The new report argues developing countries need the freedom to develop new areas of comparative advantage, as 'Asian tiger' economies like South Korea did from the 1960s. But the policy tools used by South Korea are now outlawed by the WTO.

"Developing countries are generally urged to liberalise their trade regimes, to specialise in exporting more of what they're good at and to let others produce what they are currently less good at. But that is not how rich countries developed, and following this advice will not necessarily maximise a country's long term growth and development potential," says Mr Parris.

"It is striking to note that the advice to liberalise and specialise is precisely the opposite of advice given to investors managing portfolios where diversification is fundamental to stability and risk New investors are warned on day one: 'Don't put all your eggs in one basket.'"

Now, through the WTO and IMF imposed restrictions, industrialised countries are "kicking away the ladder" that they themselves used to develop.

WTO regulations and IMF conditionalities drive developing countries into export concentration, forcing them to rely on extremely volatile commodity markets. Export concentration - when developing countries export too narrow a range of products ? is linked with increased terms of trade volatility, lower economic growth and increased poverty.

The World Vision report, Risky Development: Export Concentration, Foreign Investment and Policy Conditionality, will be highlighted at the World Trade Organisation's (WTO) so called 'development round' in Mexico, being held from September 10-14.

Other key points of the report were:

- There are significant dangers for developing countries in having their policy options foreclosed by inappropriately restrictive International Monetary Fund and World Bank loan conditions and WTO rules.

- Foreign direct investment has costs as well as benefits and launching negotiations on an investment agreement in the WTO would be premature.

- Increased aid is essential to help poorer countries build the infrastructure, strengthen the institutions and nurture the human capital bases they need to be able to reduce poverty and participate equitably in the international trading system.

The slogan 'trade not aid' is misleading.

"I t has more to do with economic expediency and vested interests in OECD countries than sound development principles," Mr Parris says.

Risky Development uses data from 84 developing countries from the period 1981 to 2000. Brett Parris is based in Melbourne with World Vision International.

The report is available on World Vision's website at: http://worldvision.org.nz/reports/risky_development.pdf

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