Bulletin 09 July 02

To: Organizations addressing Trade-Finance Linkages 1) Trade as a channel of financial vulnerability highlighted by conference outcome 2) Second Aid for Trade Review scheduled for next week

3) Aid for Trade is good news in spite of crisis, OECD says

4) Role of trade in financial crisis addressed by Mauritius Central Bank chief 5) Invitation: IMF involvement in International Trade Policy Issues -Evaluation

1) Trade as a channel of financial vulnerability highlighted by conference outcome Trade-related aspects of the financial crisis were a central issue addressed by a consensus outcome adopted at the UN World Conference on the Financial and Economic Crisis, held last week in New York. Throughout the negotiations, though, the inclusion of trade issues had not always been a given. Clear language of the modalities resolution called on the conference to explore present and future impacts of the crisis on trade and investment. Likewise the UN Commission of Experts whose report provided substantial input into the conference made several references to the linkages between trade and finance (for a detailed analysis visit http://www.coc.org/node/6373). But still trade references were highly resisted by developed countries throughout the negotiations. An important achievement was the specific recognition of the financial vulnerability in which trade reforms of the last three decades have placed developing countries. The outcome acknowledged the role of the "fall in exports and loss in export revenue, diminishing access to trade finance, reduction in export-oriented and infrastructure investment, lower fiscal revenues and balance of payments problems." Other commitments made in this context are, however, less significant. For example, governments agreed to refrain from protectionist measures, a call of dubious value given that some the Group of 20 did it twice in the last 8 months and, yet, reportedly protectionist measures continue on the rise. The same could be said of an "early, ambitious, successful and balanced conclusion" of the WTO Doha Round. This issue would have to be taken up in the World Trade Organization where the proposals of different key players have long ago ruled out

the possibility of a "development" outcome, much less its relevance to the ensuing financial crisis. On the other hand, the document states countries "facing an acute and severe shortage of foreign reserves" should not be denied right to use "legitimate trade defense measures in accordance with relevant WTO provisions, and, as a last resort, impose temporary capital restrictions..." The language on policy space also makes significant progress over the one existing since the UNCTAD 2004 Conference in Sao Paulo. It recognizes that disciplines, commitments and global market considerations "have presented challenges to many developing countries seeking to fashion a national responses to the financial and economic crisis." Among the constraints that these disciplines pose for governments and that they need to evaluate in such arrangements are those necessary to a recovery from the crisis, to address human and social impacts, safeguard progress achieved towards the MDGs or regulate local financial markets, institutions, instruments and capital flows. The document also made progress on the macroeconomic and exchange rate challenges that affect developing countries' trade prospects. Addressing the need to overcome the insufficiencies and inefficiencies of the global reserve system, the agreement calls for study of the feasibility and advisability of an alternative one where Special Drawing Rights (SDRs) would play some function. This would have to be complemented, in the assessment of the UN Commission of Experts, by a mechanism for coordination between surplus and deficit countries and allowing capital controls. But also the role of regional arrangements in such a new system receives mention. Indeed, one of the most promising elements in the text that echoes calls from civil society is its consensus on accepting regional and sub-regional "commercial and reserve currency arrangements," as a crucial contribution to the multilateral response to the current crisis and to improved resilience to potential future crises. Recently, Brazil and China had subscribed an arrangement to pay for their trade in domestic currencies. The broader pursuit of regional systems for payments that allow countries to settle international trade transactions with their domestic currencies, on the basis of regional or South-South units of account, is crucial for a more equitable reserve system, while helping boost intra-regional trade. As stated by a number of civil society organizations on the eve of the conference (see below) "Ultimately, a more balanced and development-oriented system for multilateral management of exchange rates will be one that builds on, and seeks to gradually coordinate, a system that effectively addresses the need for South-South regional currencies and currency units." But the task only begins, as these other commitments will become the subject of a follow up mechanism in an ad hoc open-ended working group of the General Assembly that was also set up by the conference. For a piece assessing the outcome of the World Conference last week from a more general perspective visit http://www.coc.org/node/6402

For a statement on Trade -Finance linkages signed by over fifty organizations and submitted in advance of the conference, visit http://www.coc.org/node/6386 For other civil society statements, including the CSO Background Document and Key recommendations prepared by the Global Social Economy Group see http://www.ffdngo.org/

2) Second Aid for Trade Review scheduled for next week Next week, on July 6-7, the WTO is getting ready for its Second Global Review of Aid for Trade. Coming against a very different backdrop than the buoyant global economy that accompanied the first Global Review (November 2007), the review's stated objectives are: Moving from commitment to implementation Integrating trade in national and regional development strategies Sustaining aid flows during the global economic downturn Assessing the effectiveness of Aid for Trade As was the case in 2007, the review has been preceded by a number of regional reviews, that were carried in partnership with the respective regional development banks. For the press release containing the announcement see http://www.wto.org/english/news_e/pres09_e/pr560_e.htm

3) Aid for Trade is good news in spite of crisis, OECD says

In a piece appeared on one of its newsletters, the OECD anticipates findings of the Aid for Trade Review to be launched next week in Geneva. It claims that despite the current economic crisis, the survey - the second Global Review of Aid for Trade - shows that in 2007, total aid for trade reached USD 25.4 billion - USD 4.3 billion (21%) more than the 2005 baseline. In the same year, non-concessional loans provided a further USD 27.3 billion in trade-related financing.

Read the full article at http://www.oecd.org/dataoecd/43/52/43150493.htm#aft

4) Role of trade in financial crisis addressed by Mauritius Central Bank chief

In a presentation to the Mauritius business community the Central Bank governor of Mauritius, Mr. Rundheersing Bheenick focused on the role of trade in the financial crisis. Read his full presentation at http://www.bis.org/review/r090626d.pdf?noframes=1

5) Invitation: IMF involvement in International Trade Policy Issues -Evaluation

Center of Concern and the IMF Independent Evaluation Office invite you to

IMF Involvement in International Trade Policy Issues: Presentation by the Independent Evaluation Office of the IMF Room HQ2 3-B-838B, IMF, 1900 Pennsylvania Ave NW Friday, July 17, 2009, 11:00 am The Independent Evaluation Office of the International Monetary Fund (IMF) recently completed an evaluation of IMF involvement in international trade policy issues. The IMF Executive Board discussed the report and IMF management's response on June 8, 2009.

The evaluation examined the IMF's involvement in trade policy issues since the establishment of the WTO. Among the specific questions it considered were: Does the IMF have a mandate to be involved in trade policy issues? How well did cooperation with the WTO and World Bank work? How serious were the gaps and overlaps between the work of the three institutions? Was IMF advice and conditionality on trade policy well thought out, clearly linked to macroeconomic outcomes, and evenhanded across countries? Was IMF advice and conditionality on trade policy effective?

Susan Schadler (evaluation team leader) and Ling Hui Tan (coauthor) will present the findings and recommendations from the evaluation on Friday, July 17, 2009, at 11 am. The event will be chaired by Aldo Caliari, Director of the Rethinking Bretton Woods Project at the Center of Concern.

The evaluation documents, along with the Chairman's summing up of the IMF Board discussion, are available at http://www.ieoimf.org/eval/complete/eval_06162009.html

You are cordially invited to attend this presentation. Please register through Annette Canizares, e-mail: [email protected], tel. (202) 623-7312 by Wednesday, July 15, 2009. Please find a flyer at http://www.coc.org/system/files/IEO-Trade-Evaluation.PDF

Aldo Caliari Director Rethinking Bretton Woods Project Center of Concern