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

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  theseinclude liberalization of trade and financial flows, deregulation, privatizationand budget austerity. Strategies for this purpose have required many developingcountries to break with past policies and  topursue closer and faster integration into the world economy. As a result, theeconomies of developing countries have been  characterizedby slow and erratic growth, increased instability, and rising income gaps. Withthe WTO, such misguided and failed policy reforms are  beingprogressively locked-in through trade law backed by the threat of economicsanctions through its dispute settlement mechanism.

ShefaliSharma from the Geneva office of the Institute for  Agriculture and Trade Policy (IATP) said, “technicalassistance is being used  as apolitical tool to win support for a ‘development agenda’ that is heavilydisputed in the WTO.No amount oftechnical assistance in implementing policies that, in effect, handicap andshackle  developing countries in the WTO can improve gains towardsdevelopment.”

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

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

Right ofstates to regulate foreign investors. Similarly, loan conditions of the WorldBank and IMF have long required  borrowingcountries to remove measures that limit the operation of foreign investors intheir domestic economies – limits designed to ensure  that the investments benefit the domestic economy and protectthe environment or worker rights. In 1994, the WTO Agreement on Trade-RelatedInvestment Measures (TRIMs) locked-in the removal  ofseveral 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 acompletely liberal investment and financial framework under the WTO that would  leavegovernments vulnerable to foreign corporations and susceptible to lawsuits iftheir domestic policies undermined free movement of capital.

Governanceof the IMF, World Bank and WTO

Insteadof owning up to their policy failures and mistakes the WB,  IMFand WTO are now seeking to entrench their misguided approaches  toeconomic growth and development under the murky guise of  “promoting coherence”. Furthermore, in doing so, theycontinue to operate in undemocratic and unaccountable ways, which calls theirlegitimacy  into question.

Thevoting structures of the IMF and World Bank are heavily  biased towards rich countries. Their heads are chosen throughexclusive processes open only to US and European citizens. Their Executive  Boardmeetings are closed to the public, minutes are not disclosed and  loandocuments are only available to parliaments after Board approval,  ifat all. This secrecy undercuts the participation by citizens and electedofficials in borrowing countries. It also undercuts the participation bycitizens in donor countries since they are unable to know what their ExecutiveBoard members are doing or saying in their name and with their tax money.

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

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

SocialJustice Advocates Condemn Coherence Agenda

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

Note:The content of this press release is drawn from a longer statement that has beensigned 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  123E: 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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NancyC. Alexander Citizens' Network on Essential Services7000-B Carroll AvenueTakoma Park,MD20912 USA  PH:301-270-1000  FAX: 301-270-3600EMAIL: ncalexander@igc.org WEB: www.challengeglobalization.org