World Bank says rich nations may be using US-Iraq war to stall trade talks

The World Bank has expressed concern that developed countries may be using the US-Iraq conflict as an excuse to stall or derail world trade talks.

"Free trade, above all in agricultural goods, is very important for growth and fighting poverty in developing countries," World Bank president James D. Wolfensohn said. "The rich countries have shown little willingness so far to improve access to their markets."

Wolfensohn added that development aid in general and the Millennium Development Goals in particular are not being taken seriously enough. Based on its initial assessment, $70 billion would be needed.

Instead industrialized countries continue to support and protect their agriculture with $350 billion in subsidies. "This is an unbearable situation," Wolfensohn said in a statement.

The World Bank head said the world population would rise from six to eight billion in the next 25 years. In the developing world, there will be seven billion people.

"It is clear, that many of them will get angrier, if there is no improvement in their situation," he warned. "But the Doha Round is also known as the Development Round. Still, there is not much to see of this yet."

The Doha round of trade liberalization talks was supposed to wrap up negotiations on trade in agricultural products but the World Trade Organization (WTO) dropped that deadline last week without fixing a new one in its place, according to the World Bank.

France, the main opponent to US-led action on Iraq, remains the staunchest defender of the European Union’s Common Agricultural Policy, which opponents say keeps many EU markets closed for poor countries’ products. The United States and Japan also subsidize their farmers.

A new investment agreement, such as the Doha Round, could help developing countries. But it should tackle issues with the largest development impact such as removing investment-distorting trade barriers facing developing countries’ exports while favoring foreign imports.

Developing countries face external barriers to their trade in manufactures that are twice that of rich countries. The report enumerates many of these barriers, including for example, tariff escalation.

Fresh Chilean tomatoes exported to the US pay a tariff of 2.2 percent; if they are dried and put in a package they have to pay 8.7 percent, and if they are made into ketchup or salsa they have to pay nearly 12 percent.

One barrier to competition described in an earlier World Bank report – that hurts developing countries but has received relatively little public attention is international cartels or groups of large companies, usually based in rich countries that agree among themselves to fix prices and allocate export markets.

Six international cartels prosecuted in the 1990s are estimated to have over-charged developing countries a total of about $3 to $7 billion. The cartels covered products such as vitamins, citric acid and stainless steel tubes.