WASHINGTON (DTN)--Wealthy countries should move more quickly in tearing down trade barriers with poor nations, the leaders of the International Monetary Fund and the World Bank said Sunday, Sept. 29, according to the Associated Press.
That course is one of the best ways to narrow huge inequalities in income around the globe, said IMF Managing Director Horst Koehler and World Bank President James Wolfensohn.
They said the world is in the midst of a difficult period with stock market turmoil in rich countries and concerns about war in Iraq threatening to derail the fledgling recovery from last year's recession.
Both men spoke on the final day of the institution's annual meetings, held under heavy security because of worries about anti-globalization demonstrations. The protests, however, turned out to be much smaller than expected.
Koehler said he was confident that finance officials would do what was necessary to avert a double-dip recession. Playing a critical role are central banks, which can quickly lower interest rates to boost demand.
"There are clearly a number of risks and uncertainties, but we should beware of undue pessimism," Koehler said. "There are still good reasons to expect that the recovery will continue."
Wolfensohn said rich and poor nations had gone through "a tough two years" since the lending organizations' last annual meeting. The sessions last year were canceled because of security concerns after the Sept. 11 attacks.
Wolfensohn, reviewing economic developments since 2000, said, "In the rich world, collapsing stock markets and corporate scandals have shaken confidence and mutual world.
"In the developing world, people have been badly hit by continuing wars and conflict, by falling commodity prices, a slackening of demand and continuing restrictions on their trade with rich countries," he said.
Wolfensohn and Koehler chided wealthy nations for continuing to heavily subsidize their farm sectors. The leaders also urged industrial nations to honor pledges to end farm subsidies and remove other barriers to poor nations' goods.
Wolfensohn said the $1 billion per day spent by rich countries on farm subsidies "squander resources and profoundly damage opportunities for poor countries to invest in their own development."
President Bush was criticized when he signed into law a farm bill this year that provides for a large increase in subsidy payments, reversing a trend in the United States. The Bush administration has said it is prepared to reduce these payments, but only as part of a comprehensive trade agreement with other countries to cut farm subsidies.
Wolfensohn, meanwhile, disagreed with critics of the institutions who contend that wealthy nations do not provide enough money to help poor countries.
The United States and the European Union, he said, have pledged a combined $12 billion in foreign aid over the next three years--enough to begin a number of initiatives to benefit the poor.
He said he was confident nations would start writing checks to make up a $1 billion shortfall in a debt relief program aimed at poor countries.
That did not impress debt relief advocates. Julia Tilford, a spokeswoman for Oxfam International, said the new money was a "patch up job for what is a failing initiative" that needed fundamental reforms.
The weekend's biggest achievement was progress in developing a new way to handle debt crises that have unsettled economies from Asia to South America over the past five years.
The goal is to make it easier for countries to essentially declare bankruptcy, much like corporations can, and enter into negotiations with creditors for more lenient repayment terms.
The proposal, advocates say, would provide more certainty for nations weighed down by unsustainable debt burdens. But it is heavily opposed by the world's largest banks.
Koehler and Wolfensohn spoke to meeting participants from 184 member countries who had been bused to Constitution Hall through quiet and empty streets Sunday morning.
The meetings were to run almost a week, but were scaled back to just the weekend to lower security costs.