The Multilateral Trading System: A Development Perspective
If trade is not an end in itself but a means to balanced, equitable and sustainable development, the current global trading system must be reoriented towards the satisfaction of the needs of the world’s people. This report examines the present system and its implications and offers some suggestions for improving it.
For developing countries, external trade should be viewed as a crucial element of an overall development strategy towards sustainable growth and development. It should contribute to the generation of full employment, fulfillment of needs in areas of food, health, education, and all of this in the context of environmental sustainability.
At the international level, it should cater to the needs of the least developed and developing countries, with guidelines and practical measures that improve their terms of trade, enhance their export capacity and sustain their balance of payments.
Most importantly, trade policy should be seen as contingent on the specific conditions of each country depending on its level of development. A one-size-fits-all approach would not only not work but also, if enforced, potentially do more harm than good.
There are two main aspects to trade: imports and exports. There should be a balance between the two, at least in the long run, for a developing country’s trade policy to be sustainable. Currently, developing countries face pressure on two fronts: rapid import liberalization (under IMF-World Bank conditionality and WTO rules), and uncertain export earnings (especially in cases of low supply capacity and declining terms of trade).
Pressures for import liberalization derive from mainstream trade theory, which holds that it will lead to lower prices and increased efficiency in the domestic economy, thereby benefiting both consumers and producers. However, empirical evidence shows no straightforward correlation between trade liberalization and overall economic performance as measured by GDP growth.
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