RESTRICTED
WORLD TRADE G/AG/W/12/Add.1
20November 1995
ORGANIZATION(95-3619)
Committee onAgriculture
DECISION ONMEASURES CONCERNING THE POSSIBLE NEGATIVE
EFFECTS OFTHE REFORM PROGRAMME ONLEAST-DEVELOPED
AND NET FOOD-IMPORTING DEVELOPING COUNTRIES:
THE DIRECTOR-GENERAL 'SCONSULTATIONS WITH
THE INTERNATIONAL MONETARY
FUND AND THE WORLD BANK
Note bytheSecretariat
Addendum
Inresponse totherequest made inthisregard atthemeeting oftheCommittee onAgriculture
on28-29 September 1995, theDirector-General inhisrecent consultations withtheManaging Director
oftheInternational Monetary Fund andthePresident oftheWorld Bank raised anumber ofquestions
concerning theirrespective contributions tothefollow-up under paragraph 5oftheMinisterial Decision
ontheLeast-Developed andNetFood-Importing Developing Countries. Thequestions raised bythe
Director-General were asfollows:
(i) whether theIMF/World Bank could envisage giving netfood-importing developing
countries some degree ofpriority inaccess toexisting facilities;
(ii) whether anysoftening ofconditionality could beenvisaged inthecaseofnetfood-
importers thatfaceUruguay Round-related adjustment problems;
(iii) what areprospects forestablishing anynewfacilities withthespecific objective
ofassisting netfood-importers incoping withsuchadjustment problems;
(iv) inwhich ways could theWTO assist inanyefforts onthepartoftheIMF/World Bank
tobeforthcoming inthismatter.
Theresponse tothesequestions bytheInternational Monetary Fundaresetoutintheattachment
hereto.G/AG/W/12/Add.1
Page2
ATTACHMENT
TheIMF'sContribution toFollow-up ontheUruguay Round Decision
onMeasures Concerning thePossible Negative Effects ofthe
Reform Programme onLeast-Developed and
NetFood-Importing Countries
Response toMr.Ruggiero 'sQuestions
Inresponsetoyourfirstquestion,theFundisreadyandwellequippedtoassistmembercountries
confronting balance-of-payments difficulties; thisisso,irrespective ofthecauses ofthose difficulties
andregardless ofwhether thecountry isdeveloped ordeveloping, oraneconomy intransition. Of
course, theFund'sfinancial assistance isdependent onthecountry concerned putting intoplace aset
ofmeasures andpolicies designed toovercome itsbalance ofpayments problems within anagreed
timeframe. TheFundisalsoprepared torespond quickly tosupport countries implementing appropriate
policies upon evidence thatabalance-of-payments problem isemerging. Naturally, theamount of
financial assistance andthechannel through which weprovide itisdetermined, interalia,bythenature
ofthebalance-of-payments problem. Inproviding suchassistance, theFund isrequired toestablish
adequate safeguards toensure thatsuchuseistemporary.
Thisbeing said,Iwould alsonotethattheFund isrequired toapply theprinciple ofuniformity
oftreatment toitsmembers, andthuscannot givepriority inaccess toaparticular country orgroup
ofcountries. Indeed, thequestion of"priority" doesnotariseunder theFund'saccess policy, which
ensures thatanymember country canusetheappropriate Fund facilities without regard totheamounts
thatmaybeusedbyother members. Thelevelofaccess foraparticular member country is,ofcourse,
related toitsbalance-of-payments need, theadjustment effort itundertakes andthecountry 'squota
intheFund. Iamsurethatourfinancial resources andstaffareadequate torespond inatimely manner
tothedemands ofourmembers, including netfood-importing developing countries. Furthermore,
atthisstage, wearenotconvinced oftheneedtocreate newfacilities withthespecific intent toassist
suchcountries.
Clearly, ifthenetfood-importing countries areconfronted bypersistently higher import prices
forfoodstemming fromtheimplementation oftheUruguay Round Agreement (although, Imustadd,
studies undertaken byourselves, theBank andtheOECD suggest thatthiswillnotoften bethecase),
itwould mean thatthetrading context would havechanged, andchanged inapermanent fashion. The
countries would, therefore, beconfronted byaneedforstructural adjustment. Ifirmly consider that,
forthelower income countries, thistypeofproblem fallssquarely within those forwhich theFund
established isEnhanced Structural Adjustment Facility, ahighly concessional lending facility specifically
designed tohelpthem (thecontinuation ofwhose rolewassupported bytheInterim Committee atits
recent meeting). Forother members, theproblem maybeaddressed through other Fund facilities.
If,however, higher foodprices aretemporary andreversals could beenvisaged overtheshort run,
countries could seeksupport through theFund'sCompensatory andContingency Financing Facility,
inparticular itscereals import element.
Astoconditionality, Ibelieve thattheFund'sexisting guidelines onconditionality provide
sufficient scope fortaking fullyintoaccount thecaseofnetfoodimporters thatmayfaceUruguay
Round-related adjustment problems. High foodimport prices stemming fromimplementation ofthe
UruguayRoundAgreementwouldbejustoneofmanypossiblecausesofbalance-of-paymentsproblems-
---andourapproach istolookatthebalance ofpayments asawhole.G/AG/W/12/Add.1
Page3
Astoyourfourth point, studies prepared bytheWTO(GATT) Secretariat, whether country-
specific oronmore systemic issues, havebeenofbenefit tous.Ourfuture collaboration agreement,
currently under preparation, aswellasourforthcoming jointwork ontheissue ofachieving greater
coherence inglobal economic policy making, should assist indefining ways inwhich collaboration
could bestrengthened.