Finance and oil don’t blend at Prague

By Chakravarthi Raghavan

Geneva, 25 Sep 2000 - Time was, and not too long ago at that (just six years ago, when the Marrakesh treaty was about to come into being), when the heads of the WTO, IMF and World Bank described themselves as the Trinity of the global economy and strutted around the world preening themselves and lording it over the developing world.

But as the world’s finance ministers, the ‘heads’ of the world’s monetary, finance and trading institutions, and the international banking and financial community meet in Prague for the annual Fund/Bank meetings, and the various sideshows, the contrast of the world of today can’t be more striking. On the one side, the central banks of Europe, Japan and the United States are trying to battle the world’s currency traders, and on the other side, are trying to figure out the real consequences of the oil price rise and its effects on the industrial world and the oil-importing developing world.

Intervening in the currency markets and acting against speculators to shore up the euro shows that when it comes to their own interests, economic theories give way to pragmatism, and the IMF high priests are there to promote and defend it.

But on the other side, there is little inclination to separate the causes of the oil price rise - how much of it is really the effect of the OPEC cartel and its efforts to ‘manage’ production to shore up the market and end the ‘collapse’ of oil prices, how much of it is due to the failure of the petroleum companies to build adequate refinery capacities, and how much is due to speculation, and how to deal with the disparate causes.

Reports from Prague in fact suggest that the IMF and the World Bank officials and management, in effect when left without a ‘mission’ and challenged on their claims of fighting poverty through trade liberalisation, may even in the oil price rise, have a handle to get control over the policy courses of the oil-importing developing countries, as well as the oil-producers themselves.

In a report in The Hindu of Madras (India), its deputy editor, Ram Manohar Reddy, wrote from Prague about how the oil price rise and falling euro dominated the run-up to the official annual Fund/Bank meetings, while it was left to speakers at a seminar to raise the issues of equitable globalization, and how it could not be achieved with the way the international trade regime is structured.

According to the Hindu report, the Indian Finance Minister, Yashwant Sinha, not exactly a radical against the system, while agreeing that trade had a beneficial effect on poverty reduction—in fact, even the worst critics of the trading system don’t challenge it, but only say that trade alone is not enough—threw a series of statistics for his argument that there was “no equity in the rules-based system” of global trade.

Among the data he cited were: tariffs imposed by the developed world against imports from the developing world were four times that on trade in goods among themselves; the customs duties collected by rich countries on imports from the poor countries far exceeded the Official Development Assistance they provided to the poor countries; and the farm subsidies of the rich countries were twice as high as the agricultural exports of the poor countries.

As Mr. Reddy’s analysis in the Hindu shows, there was a consensus at the seminar about the imbalances in the global trading regime.

A leading critic of the Northern agricultural policies, Mr. Kevin Watkins of the U.K.charity, Oxfam, accused the World Bank and the IMF of silently colluding in the perpetuation of the unfair global trade regime. “IMF programmes require poor countries to lower their trade barriers but the organisation cannot do a thing about the massive barriers that the U.S. and the E.U. have in place to keep out exports from developing countries,” he said.

While the IMF and World Bank were making much of the loan write-offs under the Heavily Indebted Poor Country (HIPC) Initiative, “for every dollar that rich countries give by way of aid and debt-relief, they deprive the poor countries of $14 through unfair trade practices.”

And far from there being an equality in global trade practices, “in agriculture and other areas of world trade, the ‘level playing field’ runs all the way downhill from Europe and the U.S.”

And at the 800-year old Prague castle, in a dialogue that the Czech President, Vaclav Havel hosted, to bring an exchange of views among the NGO critics and the officials of the international financial institutions, the street protestors declined to attend—as their leader had been turned away at the Czech border and prevented from entry.

The Hindu report says that the discussion among an international panel of seven speakers (including somewhat curiously, the currency trader-cum-philanthropist Mr. George Soros) and moderated by Ms. Mary Robinson, the U.N. High Commissioner for Refugees, in the presence of a few hundred members of Czech and international civil society, officials of the IMF, World Bank and the Czech Government, quite expectedly saw views ranging from calls to shut down the Bretton Woods twins to commitments by the heads of the two besieged institutions to continue working for the advancement of the welfare of the world’s poor.

The most vociferous criticism came from Ms. Katerina Liskova, representing a Czech NGO, who said that the world would be a better place if the IMF and the World Bank did not exist, while Mr. Walden Bello, from Bangkok’s Focus on Global South, was less fiery than in a speech he gave at an NGO forum yesterday, preferring to speak today on multilateral lending corrupting developing-country governments.

The middle ground was occupied by Mr. Trevor Manuel, South Africa’s Finance Minister, who said that while the two institutions had much to account for, their closure would be disastrous for Africa since only two countries in that continent had access to global private capital, with the rest dependent on multilateral funding.

But Ms. Ann Pettifor, head of Jubilee 2000, the coalition of NGOs campaigning for a write-off of debts of the world’s poorest countries, spoke theatrically, and pointed to an empty chair and said that was for an absent Minister from the Group of Seven industrial nations since it was the G-7 and not the Bretton Woods twins which was standing in the way of debt forgiveness.-SUNS4747

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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