World Bank Chief Cautious On Trade Pacts

Washington, Feb 26: | Updated: Feb 27 2004, 05:30am hrs
James D. Wolfensohn, 70, has been president of the World Bank since 1995, dealing with issues of the global economy, sustainable development and poverty. A native of Australia, Wolfensohn is a naturalized US citizen and holds an MBA from Harvard, in addition to a law degree from the University of Sydney. Prior to joining the World Bank, he spent a career in investment banking and consulting.

Wolfensohn spoke in his office at World Bank headquarters in Washington with correspondent Bob Deans. Excerpts:

In 1985 there were 1.1 billion people in the world living on a dollar a day or less. By 1990 that number had actually risen a bit to 1.2 billion. And by 2000 its again at 1.1 billion, sort of at 1985 levels. Why is the world only treading water in the global anti-poverty fight
First of all population is growing, and the population of the developing world itself is the showing the growth. We now have 5 billion out of 6 billion people living in the developing world, and in the next 25 years it becomes 7 billion out of 8.

So just treading water isnt necessarily a defeat
No, proportionately its coming down. Holding the same absolute number is not as terrible as it sounds, but its still not adequate. Were doing very well in China and India the Chinese have managed to take 250 million people out of poverty in the last 20 years. Sub-Saharan Africa has added to the people in poverty and is likely to do so.

In Sub-Saharan Africa there have been problems with governance, youve had a lot of wars, you now have AIDS ravaging the continent. And the overall question of support by the developed world is lagging. If you look at the percentage of GDP (gross domestic product) that is given to development assistance, youll see a decline over the last 30 years from half a percent to 0.23 percent of GDP of the rich countries. So the rich countries have not done a fantastic job in giving developing assistance.

Global expenditures on defense now are at least $900 billion, very close to $1 trillion and development aid down to $56 billion.
But of the $56 billion, a lot of it goes to consultants, expenses, write-offs on previous debts. When you talk about money that is going directly into development support, youre talking maybe $30 billion in cash.

So something like 3 percent of the money thats being spent globally on defense is now being spent on development aid, actual cash money going to help poor people. Where is that leading the world
We have a colossal imbalance, in my judgment, in terms of the importance of putting money into what I call hope, or development, as compared to policing, military expenditures. You have to give credit to the Bush administration they have announced a 50 percent increase, over three years, in development assistance, and theyve also announced a $15 billion program in AIDS over five years. Thats welcome. But what is needed is really a complete rebalancing in what the world is doing for development, because youre not going to have peace, in my judgment, unless you deal with the question of poverty.

About 80 percent of the worlds population lives in developing countries, yet 20 percent or less of the worlds population controls 80 percent of the wealth and controls the terms of world trade to a large extent, through the WTO (World Trade Organization), through NAFTA (North American Free Trade Agreement), and now the United States is trying to negotiate a Free Trade Area of the Americas (FTAA). Is the global trading system an engine for combatting poverty or is it a tool for putting increasing amounts of wealth in the hands of the wealthy countries
Its a question of how you use the tool. What you need for global stability is a global rules-bsed system, not a regional rules-based system, not bilateral rules-based systems. I dont think that you can leave people behind, you cannot be selective in terms of trade.

The thing that worries me about bilateral and regional agreements is that people get comfortable in bilateral and regional agreements and then what happens to the poorer states Its not that Im against it as a thing in itself, but I am against it if its a substitute for the WTO.

And that would apply, obviously, to the FTAA
It applies to all regional and bilateral agreements.

If there is one thing that could be accomplished to advance the anti-poverty agenda by the G-8 summit at Sea Island in June, what would it be
A clear-cut and forthright statement about interdependence, where the G-8 and the developing country leadership could commit to seek to influence governance on the basis of a greater understanding and a greater commitment to global issues environment, migration, poverty, trade, aid, AIDS, terror, crime and health.

What steps can the G-8 take to make itself more relevant, by formally adding some observer status for these (developing) countries or some other step
Im not a G-8 head of state. But I certainly think that a consultative process between the G-8 and the leading developing countries is something that has enormous value. There is a need for a more equal dialogue between the rich, and less numerous, and the poor, and more numerous, occupants of our planet.