ECONOMY: IMF Chief Seeks to Enlist Critics, Scores Wealthy States

By Emad Mekay Reprint | | Print |

Emad Mekay

WASHINGTON, Jan 30 2002 (IPS) - The International Monetary Fund (IMF) wants its critics in civil society to join it in fighting for a global market economy better suited to the interests of developing countries.

The Fund will continue to push rich countries to increase aid to poor ones and open their markets to the exports of the developing world by lowering tariffs on imports and subsidies for domestic producers, according to IMF Managing Director Horst Koehler. In turn, activists should join the Fund in urging developing countries to implement economic reforms designed to move them along the road to market.

Activists said they saw some potential to stand on common ground but that the IMF’s stance on market liberalisation in developing countries needed a rethink.

“I would urge the faith-based and civil society organisations to bring the same energy and commitment to a new campaign for increased aid and better access to international trade, that they have shown in advancing the case for debt relief,” Koehler told participants at a conference on humanising the global economy here Tuesday.

Koehler said the groups must show solidarity with the Fund “by pressing for action on increased aid, trade, and more rapid structural change in the advanced economies.”

Koehler acknowledged that non-governmental organisations (NGOs) were instrumental in building consensus among wealthy nations on the need to finance debt relief for the world’s most heavily indebted poor countries.

“It is unconscionable for the United States, Japan, and the European Union to spend hundreds of billions of dollars on agricultural subsidies to maintain marginal activities for the benefit of a small segment of their population, while undermining agricultural sectors that are central to peace and development in poor countries,” Koehler said. “Yet this is exactly what is happening now.”

Koehler singled out the United States – the world’s leader in economic globalisation and democratic proselytising – for its protectionism.

“If it could exercise this leadership also in the phasing out of such unsustainable subsidies, it would pay off, not just for poor and vulnerable countries, but for the American people,” he said.

According to the IMF, U.S. price support payments for cotton alone cost more than two billion dollars a year, an amount larger than the annual cotton production of all of sub-Saharan Africa.

The European Union spends more than two billion dollars a year to buy up excess domestic sugar, which it then dumps on world markets. This means that sugar producers in Latin America, Asia, and Africa incur double losses: market access and market price.

Japan’s agricultural subsidies remain the highest of any advanced country and serve, for example, to shut out Asian rice producers while allowing domestic growers to maintain prices at eight times the world market rate.

“In my view, the true test of the credibility of wealthy nations’ efforts to combat poverty lies in their willingness to open up their markets and phase out trade-distorting subsidies in areas where developing countries have a comparative advantage – as in agriculture, processed foods, textiles and clothing, and light manufactures,” Koehler said.

Rick Rowden, of the Washington-based advocacy group Results, said his group mostly approved of Koehler’s call – but on condition that developing countries be allowed to retain their trade barriers to give them time to develop their own industries and exports.

“We need to also call for the inverse of that (Koehler’s) call,” Rowden said. “Developing countries should be allowed to retain their trade barriers.”

Koehler also faulted the wealthy nations for the lack of international aid to poor nations, saying that the achievement of the U.N. target of 0.7 percent of gross national product in the industrialised nations for official development assistance was far from being met. The current average is 0.22 percent.

Koehler again singled out the United States, saying the world’s largest economy was also its stingiest donor.

Rowden attributed Koehler’s call for a new campaign in part to the run up to the U.N. International Conference on Financing for Development, slated for March in Mexico. So far, the United States has resisted appeals for a firm commitment to increase aid levels.

“I suspect that the IMF and the World Bank are calling for more aid because they may get a portion of the funds,” Rowden added. “It will mean more influence for them and their policies.”

Koehler defended corporate-led globalisation, often accused by critics as a tool of Western hegemony and a means of further impoverishing poor countries. He said that, contrary to what civil society groups have said, the developing world has been the biggest gainer over the past 50 years of globalisation.

“I am convinced that globalisation provides the incentive, the obligation, and the opportunity to make the world a better place for all its people,” he said.

Against the backdrop of a tripling in global per capita income and improvements in literacy and life expectancy, the IMF chief said, developing countries including Brazil, Chile, China, India, South Korea, and Mexico were able to double their share of world trade and raise per capita incomes.

“Their experience demonstrates that integration into the global economy can bring major advantages for developing countries,” he said.