IMF Head Calls For Developing Countries Cut Protectionism

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

"By some estimates, freeing up merchandise trade and removing all agricultural subsidies could generate gains of up to $280 billion by 2015, with a disproportionately high share of these gains going to developing countries," said Rato, speaking at Columbia University in New York. While most of the focus on trade barriers is on wealthy countries, Rato said that developing states need to face up to their own protectionism. "There is one aspect of the trade debate that is often overlooked, and that is the trade barriers that developing countries impose on each other," Rato said. "The costs of these barriers are far higher than those imposed on developing countries by industrial ones. "Developing countries must therefore also take steps to remove their own trade barriers," he said. Rato also said that while there are benefits to the growth of regional free-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 their aid contributions to impoverished nations, but also said poor countries need to find ways to use the aid more effectively. Rato said developing countries 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 a decade, he noted. Still, many of the world's poorest regions will fail to reach global millennium targets to reduce poverty, Rato said. Rato said donors should reduce the transaction costs of delivering aid to the poorest countries and simplify the procedures for aid disbursements.

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