2003/05/13

IMF-World Bank-WTO Close Ranks Around Flawed Economic Policies

Nancy Alexander
Citizens' Network on Essential Services (CNES)

On May 13th, senior officials of the International Monetary Fund (IMF), World Bank and World Trade Organization (WTO) will meet  in Geneva ostensibly to promote greater “coherence” amongst their policies. There are good reasons to be concerned. Over the past decades, the IMF and the World Bank have systematically  promoted controversial policy reforms in developing countries.

Typically  these include liberalization of trade and financial flows, deregulation, privatization and budget austerity. Strategies for this purpose have required many developing countries to break with past policies and  to pursue closer and faster integration into the world economy. As a result, the economies of developing countries have been  characterized by slow and erratic growth, increased instability, and rising income gaps. With the WTO, such misguided and failed policy reforms are  being progressively locked-in through trade law backed by the threat of economic sanctions through its dispute settlement mechanism.

Shefali Sharma from the Geneva office of the Institute for  Agriculture and Trade Policy (IATP) said, “technical assistance is being used  as a political tool to win support for a ‘development agenda’ that is heavily disputed in the WTO.No amount of technical assistance in implementing policies that, in effect, handicap and shackle  developing countries in the WTO can improve gains towards development.”

Food security. Over the decades, loan conditions of the IMF/World  Bank have forced developing countries to lower their trade barriers, cut subsidies for their domestic food producers, and eliminate  government programs aimed to enhance rural agriculture.However, no such conditions are imposed on wealthy industrial countries. Meanwhile,  the WTO Agreement on Agriculture allows wealthy countries to dump  surplus foods at prices below the cost of production, driving out rural production in developing countries and expanding markets for the  large transnational exporting companies.It also prohibits developing countries from introducing new programs that may help their local agriculture producers. As a result the agriculture sectors in developing countries –key for rural poverty reduction - have been devastated.

Access to Essential Services ( health care, education, water, etc). The IMF and World Bank have made loans conditional upon the liberalization and, frequently, privatization of public service providers. Usually, the entry of foreign corporations to supply these services and the introduction of commercial pricing systems results in higher rates for poor citizens, jeopardizing their access. The WTO is now negotiating rules that would lock-in the liberalization and privatization of essential services through the General Agreement on Trade in Services (GATS). The GATS also seeks to ensure that a country’s domestic regulations are the “least burdensome” to the service provider, jeopardizing public policy and regulatory systems designed to protect social development, labor and human rights, consumers and environmental integrity.

Right of states to regulate foreign investors. Similarly, loan conditions of the World Bank and IMF have long required  borrowing countries to remove measures that limit the operation of foreign investors in their domestic economies – limits designed to ensure  that the investments benefit the domestic economy and protect the environment or worker rights. In 1994, the WTO Agreement on Trade-Related Investment Measures (TRIMs) locked-in the removal  of several of these domestic regulations governing foreign corporate investors. Current negotiating proposals of the European Union,  Japan, Australia and others in the WTO seek to create a completely liberal investment and financial framework under the WTO that would  leave governments vulnerable to foreign corporations and susceptible to lawsuits if their domestic policies undermined free movement of capital.

Governance of the IMF, World Bank and WTO

Instead of owning up to their policy failures and mistakes the WB,  IMF and WTO are now seeking to entrench their misguided approaches  to economic growth and development under the murky guise of  “promoting coherence”. Furthermore, in doing so, they continue to operate in undemocratic and unaccountable ways, which calls their legitimacy  into question.

The voting structures of the IMF and World Bank are heavily  biased towards rich countries. Their heads are chosen through exclusive processes open only to US and European citizens. Their Executive  Board meetings are closed to the public, minutes are not disclosed and  loan documents are only available to parliaments after Board approval,  if at all. This secrecy undercuts the participation by citizens and elected officials in borrowing countries. It also undercuts the participation by citizens in donor countries since they are unable to know what their Executive Board members are doing or saying in their name and with their tax money.

“When you understand how much power the industrial countries  hold in the governance of the Bretton Woods Institutions, you realize why  the trade agenda supported by these institutions tends to be aligned  with the negotiating interests of those same countries within the WTO”, said Aldo Caliari from the Washington DC-based Center of  Concern.

The WTO claims a more democratic structure than the IMF and  World Bank. In theory, all members of the WTO have an equal vote.  However, secretive and undemocratic processes routinely undercut this  structure as well. Voting has never occurred and, for weaker member states,  it is not feasible to block consensus in negotiations when they are dependent on rich countries’ markets and aid. This use of power politics is exacerbated by the institutional practice of the WTO to leave decision-making and selection of leadership as “flexible” through informal procedures.

Social Justice Advocates Condemn Coherence Agenda

Instead of promoting the wrong kind of coherence, there is an  urgent need for new policy options that should be designed and  implemented by democratic and legitimate institutions. At a minimum, the voting structures and leadership selection processes of the World Bank,  IMF and WTO should be democratized and their institutional processes should be transparent and open to the public. The rights of citizens and elected officials to participate in shaping the trade and financial policies of their governments must be preserved. The  social, developmental and environmental concerns of nations are the foundations on which trade and economic policies must be built.  Therefore, civil society organizations condemn any “coherence”  agenda of the WB, IMF and WTO that fails to take these foundations as a departing point.

Note: The content of this press release is drawn from a longer statement that has been signed by 40 Networks and NGOs. For the  full document please go to http://www.coc.org/resources/articles/display.html?ID=484

Contacts: 

Aldo Caliari (Center of Concern, Washington).  T: (202) 635 2757 x  123 E: aldo@coc.org  

Daniela Perez Gavidia (International Gender and  Trade Network, Geneva).  T: (41) 22 320 2121  E: daniela.perez@igtn.org  

Shefali Sharma (Institute for Agriculture and Trade Policy,  Geneva).  T: (41) 79 764 8658  E: ssharma@iatp.org

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Nancy C. Alexander Citizens' Network on Essential Services 7000-B Carroll Avenue Takoma Park, MD20912 USA  PH: 301-270-1000  FAX: 301-270-3600 EMAIL: ncalexander@igc.org  WEB: www.challengeglobalization.org