IMF Head Calls For Developing Countries Cut Protectionism

Original Publication Date: 
23 February, 2005

Developing countries would benefit substantially if they cut their owntrade barriers and farm subsidies, Agence France Presse reports IMFDirector General Rodrigo Rato said Wednesday.

'By some estimates, freeing up merchandise trade and removing allagricultural subsidies could generate gains of up to $280 billion by 2015,with a disproportionately high share of these gains going to developingcountries,' said Rato, speaking at Columbia University in New York. Whilemost of the focus on trade barriers is on wealthy countries, Rato saidthat developing states need to face up to their own protectionism. 'Thereis one aspect of the trade debate that is often overlooked, and that isthe trade barriers that developing countries impose on each other,' Ratosaid. 'The costs of these barriers are far higher than those imposed ondeveloping countries by industrial ones. 'Developing countries musttherefore also take steps to remove their own trade barriers,' he said.Rato also said that while there are benefits to the growth of regionalfree-trade agreements, such as those in Southeast Asia and Latin America,the greatest benefits arise from multi-lateral trade liberalization.

Reuters adds that the head of the IMF also urged donors to increase theiraid contributions to impoverished nations, but also said poor countriesneed to find ways to use the aid more effectively. Rato said developingcountries had made progress over the past decade in growth and stability.Growth in Sub-Saharan Africa last year is expected to be the highest in adecade, he noted. Still, many of the world's poorest regions will fail toreach global millennium targets to reduce poverty, Rato said. Rato saiddonors should reduce the transaction costs of delivering aid to thepoorest countries and simplify the procedures for aid disbursements.

The IMF chief also raised the issue of more debt relief for impoverishedcountries, one of the topics at the center of global economic discussionsin recent months. Rato said the IMF was studying all of the proposals,including the revaluation or sale of the IMF's gold stocks, thethird-largest in the world. 'For the moment, let me just say that debtrelief cannot be seen as an end in itself,' Rato said. 'It has to beconsidered in the context of debt sustainability, lasting povertyreduction and sustained growth.'