Global Economic Prospects 2005 - RTAs Need to be 'Open'

Global Economic Prospects 2005 - RTAs Need to be 'Open'

With the emergence of regional trade agreements (RTAs) increasing six fold since 1980 and covering over one third of global trade, the Global Economic Prospects 2005 released recently by the World Bank suggests that bilateral and multilateral trade pacts need to be "open", so as not to divert trade or cause market distortions that can penalize other developing countries.

Addressing a press briefing to launch the Global Economic Prospects 2005 report, entitled 'Trade, Regionalism, and Development,' Francois Bourguignon, the bank's chief economist and senior vice president for development economics, said: "Regional trade agreements offer some benefits to developing countries, provided they do not occur behind a wall of protection. However, preferences favouring some countries discriminate against others. Nearly all agreements have adverse consequences on excluded countries. The most effective way to curb these negative effects is to open markets more broadly."

Also according to the report, multilateral market openings, which could occur at the Doha Round of the World Trade Organization, hold the promise of greater potential gains to all developing countries.

"A multilateral agreement is the only way to open agricultural markets and reduce or end subsidies in rich countries," said Bourguignon. He added; "These reforms are of critical importance to the poor, but they are not on the table in regional trade talks." 

Apart from analysing trade pacts, the report says that 2004 may be the year in which developing countries have gained the highest growth rate since 1974. Developing countries will enjoy an average growth rate this year of 6.1 per cent thanks to a strong cyclic recovery of the world economy since the 2001-2002 economic slowdown, and a stable growth rate in all the regions. Global economic growth has been quite good for 2004, at four per cent. This will fall to 3.2 per cent in 2005 and 2006. There may be a slowdown in developing countries’ growth rate, from 6.1 per cent in 2004 to around 5.4 per cent in 2005 and 5.1 per cent in 2006.