Rich Will Pay If WTO Lets Poor Down

Trade ministers from around the world will soon gather in Cancún for the World Trade Organisation meeting to review progress and negotiate the next stages in the Doha development agenda. As they do, the question everyone is asking is whether they can muster the courage and political will to reach the compromises that would help lift millions out of poverty.

The Doha round marks the first time developing countries' interests have been placed at the centre of multilateral trade negotiations. But for much of the past two years, negotiations have been deadlocked over issues such as market access in agriculture and labour-intensive sectors, intellectual property in medicines and special treatment for developing countries. While it is encouraging that the US and the European Union recently agreed on joint proposals for agriculture, and also that the EU, the US and Canada have found common ground on non-agricultural market access, tough work still lies ahead.

A "good" pro-poor Doha agreement that lowered tariff peaks and averages in both rich and developing countries could produce up to $520bn in income gains, benefiting rich and poor alike. Such an agreement would increase growth in developing countries and would lift an additional 140m people out of poverty by 2015.

But none of this will happen unless trade ministers can break the deadlock. While this will require action from all countries, rich countries must show leadership by reducing protection and abandoning policies that lower growth prospects in developing countries. On average, those living on $2 a day or less - more than 2.7bn people - face double the trade barriers confronting the wealthy. Yet many rich countries continue jealously to guard trade-distorting policies. Rich countries' total farm subsidies, for example, are greater than Africa's gross domestic product.

In the absence of meaningful steps by rich countries, developing countries have been reluctant to liberalise their markets further. Having already made great strides in opening their markets, they want first to see reciprocal action by developed nations. The fate of the Doha agenda does not rest solely in the hands of rich countries. All must play a part.

Middle-income countries generally have lower and less distorting protection in agriculture, but have high average tariffs in all sectors, and are more restrictive in services. As south-south trade increases in importance, this protection not only undermines poor trading partners, but also tends to undercut their own productivity growth. Latin American exporters, for example, face average tariffs in Latin America that are seven times higher than those faced in industrial countries. Developing countries clearly have much to gain from their own liberalisation.

Low-income countries would benefit from non-discriminatory market access to every market in products where they have a comparative advantage, rather than special preferences in some markets and exemptions from rules. Appropriate timetables for adopting international regulations would also help, as would development assistance to help with implementing trade reforms. At the same time, poor countries can use trade to boost productivity by opening their markets in the context of a well-designed growth and poverty reduction programme.

Reducing trade barriers alone will not fulfil the development promise of Doha. Trade must be part of a larger strategy for each country that includes attention to macroeconomic policy, infrastructure, education, health and governance. One small example is reforming customs procedures. Reducing port and customs transit times by one day has nearly the same value as reducing tariffs by 1 per cent.

The World Bank is committed to helping developing countries take advantage of any new market access that emerges from the multilateral negotiations. We are adapting existing tools and designing new programmes that will provide resources for countries reforming their trade regimes, improving their trade-related institutions, and investing in the infrastructure needed to get the products of the poor and others to markets.

A pro-poor outcome in the Doha agenda would be only one step towards a world more supportive of development. But it would be an important one. The international community has worked hard to create this opportunity. The policymakers in Cancún should not let it slip away.