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«EUI Working Papers RSCAS 2012/23 ROBERT SCHUMAN CENTRE FOR ADVANCED STUDIES Global Governance Programme-18 MULTILEVEL GOVERNANCE OF INTERDEPENDENT ...»

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Institutional Praxis in the Seek of Development The World Bank and its “Aid for Development” Approach Both the GATT/WTO and the World Bank have employed a wide array of strategies in order to realize their 'development' mandate. In the case of the World Bank, the record is quite a straightforward. The post-war planners that convened in Bretton Woods in the summer of 1944 managed, despite the profound scepticism about internationalism that dominated the political scene, to lay the cornerstone of the international economic order. The International Monetary Fund (IMF) and the World Bank came into existence as a response to world poverty and a platform for post-war reconstruction that would result from the extinction of discriminatory exchange and trade controls.

As (Gardner, 2008, pp.63–64)has vividly described, “when, on the eve of Bretton Woods, the negotiators turned to the Bank […], they were in a conservative mood,” and that reflected in its limited lending capacity as well as its tendency to finance specific projects with secure repayment perspectives; furthermore, it lent only on commercial terms - “with interest rates of 5 or 6 per cent and repayment schedules of ten or twenty years.” (Gardner, 1980, p. xxii).

It took the World Bank almost a decade to overcome its political, financial, and organizational inhibitions and redefine itself as a truly development-oriented agency. Steadily, it stimulated the flow of private capital that was later channelled into less-developed countries. The creation of the two World Bank affiliates – the International Finance Corporation and the International Centre for Settlement of Investment Disputes – forged ties of trust between private investors and national governments by creating an international forum for the resolution of their disputes. The establishment of the International Development Agency (IDA) was another significant step forward. Already by the 1960s, the World Bank, together with the IDA, were financing projects that would normally fall outside the normal bankers' field of interest, such as education, agriculture, and women's rights. In the 1970s, its focus shifted to policy lending, as a result of several failed projects and conditionality became more stringent as the World Bank had to respect its own budgetary limitations (Thomas and Allen, 2000, pp.205–206).

The international debt crisis in the 1980s was tackled with structural adjustment projects and technical assistance on investment planning and engineering. In pursuit of these projects, the World Bank introduced its 'landmark' policy, the structural adjustment loans (SAL), that were later accompanied by the sectoral adjustment loans supporting sector-specific reforms (SECAL). The economic proceeds of these projects would be utilized to remedy the acute balance of payments problem of the borrowing members while the latter would proceed with the reforms agreed under the adjustment program. The Baker initiative in 1985 paved the way for loan-granting to heavily-indebted countries to meet their exchange requirements (Bartlett, 1985). Since its initial introduction, adjustment lending has grown in size and duration and so did the general loan activity of the Bank.

In the 1990s, poverty alleviation and development were once again prioritized high on the agenda of the Bank which employed a two-pronged strategy: first, the utilization of developing countries' 'comparative advantage' (abundant cheap labour, raw materials etc.) for generating broad-based economic growth; and second the supply of social services (health, education, nutrition etc.) as prerequisites for the creation of new income-earning opportunities (World Bank, 1990). The launch of the Doha Round in 2001 'revamped' the Bank's interest in the general investment and trading climate which, consequently, has enhanced the funding towards institutional and infrastructure aspects, especially the ones regarding trade facilitation (Tsikata, 2006). Although trade lending is not an

Anna Pitaraki

altogether novel approach,4 its resurgence serves the creation of a global system that will be more receptive and open to the 'development' needs of the less and least 'privileged' trade partners (World Bank, 2001, 2002), and the full integration of the latter in the world trade system on an equal basis with the developed countries (Pascal Lamy, 2006; for an interesting study on the importance of Agriculture for developing countries’ economies as well as for the conclusion of the Doha Round, see Anderson, 2005). In furtherance of this initial 'trade incentive framework' policy, the Bank has launched a new trade strategy, identifying four pillars around which the Bank plans to structure its trade-related activities. These priorities include “trade competitiveness and diversification; trade facilitation and trade finance to cut transport costs; support for market access; international trade cooperation for better integrated regional and global markets; and managing external shocks.” (ICTSD, 2011).

Over the arc of the years, the Bank's architecture and modus operandi have been scrutinized, praised 5 and criticized, at the same time (for a critical overview of the Bank’s institutional mentality and its projects, see Woods, 2006). 6 Its contribution to development, though, has been by no means unimportant. As this brief account aims to demonstrate, the Bank, through its Presidency and Board of Directors, has sought to mould an institutional ethos insulate from member states' pressures,7 and consistent with its mandate. The diversification and expansion of its strategies have assisted numerous countries to integrate into the world economy. The Bank has managed to mobilize private capital and distribute it to less and least developed countries, in the form of low-interest loans, interest-free credits, and grants. Additionally, with its training and expertise, as well as its technical assistance, research and other forms of knowledge sharing, the Bank aspires to spur economic growth in the developing countries.





The Global Trade Finance Program summarizes in a tangible way the key elements of the Bank's development work. Comprised of four development-related institutions, the World Bank, the Multilateral Investment Guarantee Agency (MIGA), the International Centre for Settlement of Investment Disputes (ICSID), and the International Finance Corporation (IFC), and owned by 179 shareholder countries, it has vested an international character while acting on a local basis. Its Investment and Advisory Services “support the goal of improving lives and raising living standards through sustainable private sector development” and with its flexible and tailored to a client's specific needs projects work to “promote open and competitive markets, support companies and other private sector partners, generate productive jobs and deliver basic services, and create opportunities for people to escape poverty and improve their lives.” (IFC World Bank Group, 2008) Trade lending flows were greater in the 1990s, yet of a different character. In the 1990s the emphasis was on funding for the purpose of achieving trade liberalization. This time the focus has been on dismantling “behind-the border” barriers in the global trading system.

In 2009, the global economy was hit by one of the worst economic crisis since the times of the Great Depression.

Notwithstanding all, the predictions made in the early years of 2000 were not completely falsified: despite the general decline, in the gross domestic product of numerous countries, East Asia and Pacific grew at 7.5 percent and South Asia at 7 percent. By 2010 many economies rebounded whereas developing countries' contribution to global growth has risen significantly and more consistently than that of developed countries. For more data regarding recession and economic growth, see World Bank (2011).

Woods examines, among other, the case of Sub-Saharan Africa which has stirred an acrimonious debate with regard to the efficacy of the Bank to stir growth and development in the region. The case of Sub-Saharan Africa presented the Bank with a multi-prong test: it required significant resources, it required radical governmental reforms, and, finally, it required continuous flows of technical assistance and the Bank, in Woods opinion, failed to live up to the challenge (2006, p.141-178).

Member States of the World Bank Group appoint Executive Directors of the International Bank for Reconstruction and Development (IBRD), International Development Agency, International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA), who have a dual responsibility: they are representatives of the Bank's Member country or countries that appointed or elected them, and as Bank officials representing the interests and concerns of those countries. The Executive Directors are responsible for the conduct of the general operations of the Bank.

Can the 'Development Dimension' of the WTO Be Secured Without Stronger Synergies Between WTO and World Bank?

The GATT/WTO and the “Aid for Trade” Approach The WTO, on the other hand, is a different kind of 'animal'. Its Members and Secretariat often refer to it as a 'contract organization', otherwise described as a 'member-driven institution' that facilitates negotiations, oversees the implementation of the resulting contractual commitments and issues judicial decisions upon request of a Member which wishes to have its WTO rights vindicated. The role of the Secretariat, unlike that of the President and the Board of Directors of the World Bank, comprises three main functions: first, to serve negotiations (taking place in various negotiating groups); second, to maintain an oversight of Members' compliance with their obligations (through the various councils and committees); and third, assist the dispute resolution in a pre-panel phase. Development, however, is a quite different enterprise (Shaffer, 2005, p.187).

One's view of the WTO's substantive rules and its role, in a conventional sense, will inevitably shape one's understanding of WTO's capacity to generate development-oriented policies. The inquiry into the nature of the WTO has created a chasm. Should the WTO rules be seen as reflections of political choices and contractual bargaining or as 'constitutive' segments in the formation of a global 'constitutional' order? A perusal of the Doha negotiations and the ones that preceded it suggests a predominance of the former - promises of development policies have been given to developing countries in exchange for their agreement to participate in various negotiations. The following analysis draws heavily on Group of Thirty (2004, chap.3); for another brief presentation of the history of trade negotiations in the WTO, see Matsushita (2006).

The conclusion of the Uruguay Round was celebrated as a vindication of the market system and trade liberalization, in particular. The crowning achievement was the establishment of the WTO, which, with its broader agenda and its robust enforcement mechanism, would plant the seed for further liberalization. Some issues were left for later completion (i.e. financial services) and a commitment was made for biennial ministerial meetings in order to keep the political momentum alive. The Ministerial in 1996 in Singapore inaugurated work programs on investment, competition policies, trade facilitation and government procurement and reiterated the Organization's commitment to stand by the side of developing countries. The same reassurances were given at the Ministerial in Geneva in

1998. But this time the atmosphere was already sour and developing countries started complaining about the implementation onus imposed upon them. By 1999, they had already fallen out of love with the trade liberalization as an economic policy and the inevitable collapse of the Seattle Ministerial was attributed exactly to that – the deep cleavage among the positions of the participants on various negotiating items.

The impetus for the Doha Round, otherwise dubbed 'Development Round', has partly derived from the determination to continue, despite all, with the trade liberalization agenda, and partly from the tragic events of 09/11 and the widespread belief that global poverty has bred terrorism and social unrest (Kleimann and Guinan, 2011). The 'Development Agenda' announced therein was long and complex. The main headings were: agriculture, services, manufacturing, special and differential treatment (SDT), the so-called 'Singapore issues', dispute settlement and institutional reform, rules on antidumping, TRIPS and public health, as well technical assistance and capacity building. On the whole, the Doha Development Round focused on the assistance of developing and least developed countries in their economic development and their capacity to participate in international negotiations. 8 The Doha Ministerial Declaration (2001) dedicated more text to 'development' and technical assistance and capacity building than to any other issue treated therein. More particularly, paragraphs 38-41 address the overall technical assistance and technology and capacity building: “support domestic efforts for mainstreaming trade into national plans for economic development and strategy for poverty reduction”; “coordination between the relevant international agencies, bilateral donors, and beneficiaries...”; “ensure long-term funding for WTO technical assistance...”. Paragraphs 42-43 focus on assistance to least developed countries, and paragraphs 2, 20-21, 23-24, 26-27, and 33 address assistance with regards to trade and investment, trade and competition policy, transparency in government procurement, trade

Anna Pitaraki

Unfortunately, the 'Development Agenda' proved too long and too complex to be realized. At the same time, the continuing discontent on the part of developing countries and the emergence of new economic powers (China, Brazil, Mexico, India etc.) gradually fermented new negotiating dynamics.



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