8:19 AM Jan 28, 1994


Geneva 28 Jan (Chakravarthi Raghavan) -- GATT Director-General Peter Sutherland made another pitch Friday, in effect for joint management of the world economy by the IMF, World Bank and the proposed WTO, backed by a high-level forum composed of representatives drawn from the OECD, developing world and the countries in transition.

Such a forum, which he called "framework for communication and cooperation on economic matters", Sutherland told the World Economic Forum meeting at Davos would meet regularly at level of Prime Minister and Trade and Finance Ministers -- with institutional support from the World Bank, IMF and the WTO working together.

The Sutherland speech made a pitch to attract developing country support -- by voicing their complaint about the absence of developing countries in the current global economic policy-making, in the Group of 7 (industrialized countries), the OECD and regional groupings.

But the main thrust of his speech appeared to be to put the WTO on a par with the World Bank and the IMF -- the new "holy trinity" as the former Chair of the Group of 77, Amb. Jaramillo of Colombia characterised it in his speech to the group earlier this month -- and their guiding role over national and world economy.

While Sutherland spoke of the WTO, coming out of the Uruguay Round, being on a par with the IMF and the World Bank -- and the three institutions working together -- the IMF and the World Bank, whatever their public stance, are not exactly known to be keen.

They would like to influence trade policy and trade, but don't want to share power and allow the trade institution to influence them.

In any event, the World Bank has no role or influence over the developed countries and, after the collapse in 1971 of the Bretton Woods system, the FUND itself has no authority or influence, and the two have together lost any legitimacy -- having power and influence only over the developing countries and the socalled economies in transition who come to these institutions to borrow.

The efforts of GATT, and now the WTO to come into being, to be equated with the IMF and the Bank are not new: this has been the hidden agenda of the GATT secretariat throughout the Uruguay Round, voiced at the time of the Montreal mid-term review meeting and subsequently in relation to the negotiations on the Functioning of the GATT System (FOGs), a very thin negotiating mandate which has been stretched to ultimately result in the WTO.

The former GATT Director-General Arthur Dunkel voiced it in the report he produced about the cooperation among the three institutions for coherence on money, finance and trade, though that report clearly showed that while the Fund and the Bank wanted to have a better say in the GATT and use it in pushing their policies via the trade front on the developing world, they were unwilling to have the GATT influencing their own policies.

When Sutherland was tapped for the job, as successor to Dunkel, he made the creation of a new multilateral institution (it was then the MTO, until at the last moment on 15 December the Americans had it changed to the WTO, not liking the implication of 'multilateral' in the title).

Sutherland had at that time wanted the NTO head to be put on a par with the heads of World Bank and the IMF, and the US and EC had more or less agreed, though there was some question about its timing.

But the efforts to give him the same salary and emoluments at the time of being named as GATT D.G. did not fly for various reasons.

An unstated reason, that would still have some effect, is that whereas the emoluments of the World Bank/IMF heads and their staff -- nearly 25 percent above the UN system scales -- comes out of the profits earned by the institutions in lending money to the developing world and now the transition economies -- that of the GATT, and the future WTO, has to be voted by Parliaments and thus could create vibes.

While Sutherland is reported as not being so much concerned about the money as the status -- and in the present 'market-oriented' public life the two go together -- the GATT staff have been looking to such a hefty increase.

While there has been some talk that this, and the structure of the future WTO secretariat would be brought up in some form at Marrakesh, others said that this was unlikely and would be left to the proposed Interim Committee for the WTO (ICWTO).

While the real decision on the WTO opting out of the UN system, and being put on a par with the Fund/Bank system would hinge on what the majors decide -- given that they would be paying 80 percent of the budget in terms of their trade shares -- this is something no one, and least none in the US, would want to put in the public at a time when the Uruguay Round agreements and implementing legislations have to go through Congress, one source noted.

The Congress is sensitive enough, and critical, of the FUND/Bank life styles when they don't have to vote it out of appropriations, but would be more critical if they have vote it in appropriations for the WTO.

In his speech at Davos, Sutherland praised the successful outcome, and argued against the view (voiced latest by the Chairman of GATT CPs) about any losers in the Round. He also placed the outcome in terms of the new world order, and the WTO and annexed agreements being merely a framework to build upon.

But the Uruguay Round, he said, was not the final victory over protectionism and unilateralism. Any premature rejoicing on this score, he added, have been cut show by evidence that major economic powers are still ready to take unilateral approach to trade problems and "we have not heard the last of 'managed trade', an idea the antithesis of a multilateral system", Sutherland said in an obvious reference to the US demands and moves against Japan and other Far East economies.

While rejecting the concept of winners and losers, or of a "socalled North-South division", Sutherland however voiced concerns about the economic problems of Africa, a concern which he said was shared throughout GATT and involved more than trade policy.

"The world clearly has to do more to ensure that the least developed countries in Africa and elsewhere are enabled to break out of the cycle of poverty and dependence," he said.

"The results of the Uruguay Round would help rather than hinder," he added in an attempt to respond to the growing view that Africa would in reality be marginalised further by the Uruguay Round.

Looking ahead to the future, and the problems of the economies in transition (which he said were similar to those of the developing world), Sutherland said that the establishment of the WTO and the strengthening of the institutional basis of international trade and economic cooperation was of prime importance for these countries and would be a key element in redefining their place in the world in terms of democratic and free market principles.

He referred to the new priorities, including that on links between trade and environment, and said that to make the GATT/WTO work on trade and environment effective it was necessary

* to keep markets open and competitive,

* to price environmental resources properly -- some which is rarely attained through restricting trade,

* respect the fact that different countries have different environmental priorities and different environmental endowments, and they do not, and should not, be expected to all meet the same environmental standards, and

* resolve international environmental problems through cooperative multilateral efforts, not through unilateralism.

Sutherland said that the Uruguay Round would be the last of its kind, but with the WTO multilateral trade negotiations would be a permanent event. While GATT, because of its lack of institutional mandate, needed ad hoc rounds and between rounds tended to lose momentum, the WTO would enable governments to pursue liberalization and expansion of trade without a break and keep the trade agenda constantly relevant to changing global needs.

But such an agenda must be built on consensus, and one of the achievements of the WTO would be to lessen greatly the scope for unilateralism. The treatment of new issues would have to fit in with this reality.

Sutherland then dealt with the need for trade, money and finance links and coordination and cooperation.

If the trading system is to be up to the job of supporting multilateral cooperation on such a wide scale, do the other structures of economic cooperation meet the bill, he asked?

WTO would put trade and investment on a par - perhaps in advance - of cooperation in monetary and financial areas. The WTO would stand alongside the original Bretton Woods sisters (the IMF and the World Bank) and the three must learn to work together even more effectively and closely, he argued.

Rather than each body conducting its own separate reviews of country policies, "is there not a case to be made for a more integrated approach on country reviews?" he asked.

But this would not, on its own, add to effective multilateral cooperation and the question really had to be asked: are the G7, the OECD, the regional groupings adequate to provide that cooperation?.

The G7, though they had made a major contribution for the successful conclusion of the Uruguay Round, excluded most of the world's population and large number of the world's substantial and fast growing economies. The OECD had a very similar problem.

While the contribution of various informal groupings could not be ignored, they lacked the institutional underpinnings necessary to put improved cooperation on a firm footing. Countries that would increasingly provide the best hope for economic growth and new markets "were simply not represented where it most counts", he added.

New structures of cooperation which could deal in a practical sense with global economic issues and give further direction to global economic institutions were needed, Sutherland said.

Why should the problems of Russia be discussed simultaneously, but in comparative isolation from each other, in the G7, OECD, GATT, World Bank, IMF, and the BERD (Bank for European Resettlement and Development). And all this for albeit one important country, while the problems of the world's poorest and most populated countries were less obviously sin focus.

Trade but not aid might make an apealing soundbite, but many economies in transition or early stage of development have justified concerned about the reality as opposed to rhetoric.

Sutherland went on to make his suggestion for the new triumvirate and an high-level summit forum to back up the three and their 'management' of the world economy.

"If world readers showed foresight to establish the WTO and create a multilateral trading system, it would seem reasonable to suggest that they should follow this logic in setting up cooperative structures in place for the realities of the 21st century," he said.

"We cannot continue with a majority of the world's people excluded from participation in global economic management", Sutherland added.

While the Fund, Bank and the WTO -- each had a clear mandate of their own -- they were also interdependent. Money, Finance and Trade had all to be treated in an integrated way and the next step is to build for the future on this integrated base.

Sutherland suggested for this the establishment of a new high-level framework for communication and cooperation on economic matters.

Its composition, he said, would be drawn from developing countries and economies in transition as well as OECD countries. It would meet regularly at Prime Minister and Trade and Finance Minister level, with institutional support coming from the World Bank, IMF and the WTO, all three working together.

Setting up such a forum is the logical next step in the development of global economic cooperation and it is the next challenge of international economic leadership.