Global Policy Forum

By Jim Lobe

Despite the sharp increases in the volume of global trade, the world's poorest countries, particularly those in sub-Saharan Africa, are falling further and further behind the industrialised West and most of East Asia in per capita income levels, according to a new report released by the World Bank here Tuesday. Trade volumes could grow by 12.5 percent this year alone, making 2000 the biggest growth year since the early 1970s, according to the Bank, but most of the poorest countries were unable to keep pace, leading to declines in their share of export markets.

In the 2001 edition of its annual 'Global Economic Prospects and the Developing Countries' (GEP), the Bank is calling on wealthy countries to reduce trade barriers against developing-country exports, particularly those which keep out agricultural and textile goods produced by the poorest countries. And it warns against the imposition by industrialised countries of labour and environmental conditions in trade agreements with poor countries - an issue which contributed to the breakdown in global negotiations in the World Trade Organisation (WTO) in Seattle last year.

''(The) use of trade sanctions to support labour and environmental standards are likely to be counterproductive, as they would restrict developing countries' access to international markets while doing little to improve welfare,'' according to the report. ''The imposition of trade sanctions is vulnerable to capture by protectionist interests and hurts workers by reducing demand for the goods they produce,'' the Bank says. The new report is generally optimistic about the global economy over the next few years, although it warns that some uncertainties, including oil prices, renewed volatility in financial markets, and the possibility of a ''hard landing'' for the US economy, the major engine for global growth over the last several years, loom on the horizon.

For the year 2000, the combined rate of economic growth for developing countries should reach 5.3 percent; then gradually ease to five percent next year and 4.8 percent by 2002. Regionally, East Asia will reclaim the role it had for most of the past decade before the 1997-98 financial crisis as the world's fastest-growing region, reaching 7.2 percent growth this year and then easing to 6.4 percent and 6.0 percent for 2001 and 2002, respectively. The reports notes that the countries hardest hit by the crisis - Indonesia, South Korea, Malaysia, Philippines, and Thailand - have largely recovered from their 8.2 percent decline in 1998, with a combined growth rate near seven percent this year. But it warns that Indonesia and the Philippines may be particularly vulnerable in the coming two years due to political uncertainties and corruption.

South Asia also looks poised for continued growth following its 5.7 percent rate in 1999. That is expected to increase to 6.0 percent this year and then slow somewhat to 5.5 percent in each of the two following years, largely as a result of continuing financial problems in Pakistan, higher oil prices, and relative declines in the prices fetched on the world market for cotton, tea and rubber exports. The report predicts ''sustained moderate growth'' for the countries of Latin America and the Caribbean over the next decade due largely to the economic liberalisation they undertook in the 1980s and 1990s. From now through 2002, growth will hover around 4.1 percent, short of the minimum of six percent annual growth which the Bank has said is needed to reduce absolute poverty in the region.

In Eastern Europe and Central Asia, growth is expected to rise to 5.2 percent this year, a major rebound from the one percent rate of last year. Growth for the region should moderate to around four percent over the next two years. Growth in the Middle East and North Africa - a laggard during the 1990s - should accelerate from 2.2 percent last year to 3.1 percent this year and 3.8 percent next year before falling back slightly to 3.6 percent in 2002 primarily as a result of higher oil prices. But the violent conflict between Israelis and Palestinians could reduce confidence, according to the report. In Sub-Saharan Africa, whose economies grew at only 2.1 percent last year, growth, fuelled by higher oil revenues for the region's increasingly important handful of oil producers and improved performance by South Africa, will increase to 2.7 percent in 2000, and 3.4 percent and 3.7 percent in 2001 and 2002, respectively.

The report says that economic reforms and debt relief generally have improved prospects for growth in the region. At the same time, however, wars or major political crises in such countries as Angola, the Democratic Republic of the Congo, Sierra Leone, Ethiopia, and Zimbabwe, and the impact of HIV- AIDS, especially in southern Africa where infection rates run as high as 30 percent, will have a negative impact. Still, the Bank predicts a rise in per capita income for the region of 1.3 percent per year over the decade, a substantial improvement over the negative rates of the 1990s. Nonetheless, sub-Saharan Africa is likely to fall further behind all other regions in per capita income over the next years.

Latin America's per capita income growth rate should be twice the African rate over the period; South Asia, Eastern Europe, and Central Asia, three times the African rate; and East Asia, four times, according to the report. During the same period, the western industrialised nations are slated to grow at a per capita annual rate of 2.7 percent, or twice Africa's rate, and slightly below Latin America's estimated three percent rate. While that estimate is based on the most likely scenario, the situation could be different under a less-favourable scenario developed by the Bank which assumes a short-term global recession brought on by a plunge in the US stock markets and a fall in the value of the dollar, among other factors. Such a ''low-case'' scenario would still result in 1.7 annual per capita growth rates for the industrialised world. But developing-country regions, with the exception of the Middle East, would see their baseline per capita growth rates fall by around 1.5 percent per year over the period, plunging Africa into negative territory.

Despite economic reforms and a major increase in exports throughout the developing world, per capita income rates in industrialised countries grew at more than twice the rate of all developing countries, according to the report, which suggests that industrialised country tariffs bore a major part of the blame. Poor-country exports which face particularly high tariffs in Western markets include major agricultural staple food products, such as meat, sugar, milk, dairy products, and chocolate; tobacco, and some alcoholic beverages; fruits and vegetables, food-industry products, such as fruit juice, peanut butter, and sugar confectionery; and textiles, clothing and footwear where tariff rates have a major comparative advantage but must overcome tariff rates of between 15 and 30 percent.

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