Page last updated at 13:50 GMT, Monday, 6 July 2009 14:50 UK

Trade 'key for economic recovery'

An undernourished child in Bulla Al-Tabi, Kenya (undated image: Save The Children)
The WTO says protectionism can hurt poor nations

Trade assistance is vital for helping developing nations emerge from the downturn, the head of the World Trade Organization (WTO) has argued.

Speaking in Geneva, WTO President Pascal Lamy said trade was one of the first sectors decimated by lower consumption in high-income countries.

But he added that poor nations could position themselves to use trade to emerge from the recession faster.

The International Monetary Fund (IMF) and United Nations echoed this view.

"Trade can and must be part of our efforts to stimulate a recovery," said United Nations General Secretary Ban Ki Moon.

He said trade had "tremendous potential as an engine of sustained economic growth and development".

The comments were made during a trade-for-aid conference taking place in Switzerland.

Protectionist

Many developing nations have expressed concerns about opening up trade in exchange for aid, due to fears that they would face greater competition from other nations.

To date, aid-for-trade schemes have targeted infrastructure plans - including improving roads and ports. Among those that have benefitted are Iraq, India and Vietnam.

Mr Lamy said protectionist steps introduced during the downturn to protect national interests could cause long term problems for the poor, whose economies are often heavily reliant on a limited number of exports.

The World Bank estimates that between October and April, Latin American exports fell 20%, East Asian exports declined 25% and Central and Eastern European exports fell 35%.

Credit

Aid agencies and major world bodies are meeting to seek ways to encourage trade by emerging nations while the world economy contracts.

AID FOR TRADE

Aims to help developing countries, particularly least-developed ones
Helps develop their trade-related skills and infrastructures
Enables them to implement, and benefit from, WTO agreements and to expand their trade

As well as the IMF, World Bank, and UN, the Organisation for Economic Co-operation and Development (OECD) is also present.

But, as well as trade, availability of credit and an improved outlook for the bank sector was also deemed critical.

IMF managing director Dominique Strauss-Kahn said there was a gap in recovery plans, specifically regarding how banks could improve their balance sheets.

"A lot has been done but a lot still has to be done. Depending on the speed of the cleaning of balance sheets of the financial sector, recovery will come sooner or a bit later," he added.



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