Trade can stimulate economic recovery

UN Secretary-General Ban Ki-moon said today that help for exporters in developing nations was important to help tackle a global downturn expected to cut trade flows by 10 % this year.
Opening a two-day conference on aid for trade, Ban said that cross-border commercial flows “had tremendous potential as an engine of sustained economic growth and development.”
“Trade can and must be part of our efforts to stimulate a recovery,” Ban told the meeting at the WTO, stressing many countries will need infrastructure upgrades and other support to weather this period of weakened demand, Reuters reports.
“Trade openness alone is not sufficient. Countries must first have a competitive production base in order to export,” he said in his prepared remarks.
The Geneva meeting, attended by the heads of the World Bank, International Monetary Fund and various regional development lenders, is not expected to yield new promises from major donors such as the US, European Union and Japan.
Instead, government officials, exporting businesses, banks and international lenders will discuss priorities for future investments, such as the expansion of regional projects under way to speed up the passage of goods along roads and through ports in Africa, Central America and Southeast Asia.
WTO Director-General Pascal Lamy told the conference that “the global trading environment has worsened dramatically.”
“It is one of the greatest challenges that the multilateral trading system has faced since its inception,” he said of the downturn and credit crunch that has dried up trade finance.
Reignite growth
Aid for trade was promised to poorer nations at a 2005 WTO meeting in Hong Kong to help “to build the supply-side capacity and infrastructure they need to take advantage of trade opening and to connect with the global economy.”
Diplomats say the funds are seen as a sweetener to encourage developing states to accept exposing their industries to more competition under a new global free trade accord under negotiation since 2001.
Lamy hopes to wrap up that deal in 2010.
India, whose reticence about opening up farm markets has been a major stumbling block in the quest for a Doha Round deal, was the largest recipient of aid for trade funds in 2007, the latest year for which WTO figures are available.
Afghanistan and Iraq have been among the biggest recipients of aid for trade funds due to projects related to rebuilding war-damaged infrastructure and energy transit lines.
The WTO and Organisation for Economic Cooperation and Development, in a report prepared for the conference, said investing in roads, ports, electrical grids and telecoms networks appeared to be “the most effective way to reignite economic growth and reduce poverty”.
“Aid for trade can have an immediate stimulus effect,” averting the worst consequences of the downturn,” they said.
Last week, Lamy circulated a report to the WTO’s 153 members estimating that the “fragile” global economy would depress goods trade by 10 % this year.
“Anecdotal evidence shows that the global market situation remains tense, with increased payment defaults and high costs of credit,” he said.