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World Bank presses WTO to jump-start stalled trade talks

World powers must jump-start stalled global trade talks in Mexico to forge a fairer system and lift 144 million people out of poverty, said World Bank.

business Updated: Sep 06, 2003 14:06 IST

World powers must jump-start stalled global trade talks in Mexico this month to forge a fairer system and lift 144 million people out of poverty, the World Bank said on Wednesday.

A pro-poor World Trade Organization deal could deliver a $291-billion annual boost to the global economy by 2015, of which $159 billion would go to the developing world, the Bank said.

That bonanza could lower the predicted number of people living on less than $2 a day in 2015 by 144 million people, said the World Bank's annual Global Economic Prospects report.

But the negotiations, to be taken up by trade ministers in Cancun, Mexico from September 10 to 14, have ground to a virtual halt as disputes rage in key areas including cutting subsidies for farmers.

"The talks are approaching a critical juncture," said World Bank trade department director Uri Dadush.

"If ministers can reach an agreement to reduce trade barriers affecting the products that poor people produce -- especially farm products and labor-intensive manufactures, it would help raise their standard of living," he said.

"If not, an opportunity will be lost."

The World Bank chided rich countries for allowing inequities to fester in the trading system, especially in agriculture.

For example:

-- The United States spends $50 billion a year on direct support to farmers. Annual US cotton subsidies of $3 billion -- equal to three times US foreign aid to Africa -- depress global cotton prices and crowded out West African competitors.

-- Direct budget subsidies for agriculture by the European Union cost about $100 billion a year, depressing market prices for sugar, dairy products and wheat.

-- Japanese support to rice farmers amounts to 700 per cent of the production costs, shutting out exports from Thailand.

"Exporters from developing countries generally have to pay more to get into foreign markets than exporters in rich countries," said World Bank economic adviser Richard Newfarmer, lead author of the report.

Industrialized countries charged each other on average about one per cent on imported manufactured goods, he said.

But the same rich nations collected manufactured goods tariffs of five per cent from East Asia, six per cent from the Middle East and eight per cent from South Asia.

"Can anyone argue this system is living up to its development potential for the poor?" Newfarmer asked.

Rich nations should take a lead, particularly in removing agricultural protections and slashing high tariffs, said World Bank chief economist Nicholas Stern.

"It makes no sense for rich countries to encourage developing countries to adopt policies that will promote growth, and then adopt policies that reduce the growth prospects of those same developing countries," Stern said.

Cutting subsidies to farmers would save the average family in industrialized nations $1,000 a year while raising the incomes of poor farmers in the developing world, the World Bank said.

But developing countries, especially middle-income nations, also had a responsibility to open up more to foreign trade, it said.

"High protection in middle-income countries hurts their poor neighbors in the same way as trade barriers in rich countries," Dadush said.

For example, he said, East Asian exporters of manufactured goods faced tariffs in other East Asian countries that were 60 percent higher than they faced in rich nations.

And Latin American exporters of such goods faced average tariffs in Latin America that were seven times higher than they encountered in industrialized countries.

First Published: Sep 06, 2003 14:06 IST