RESTRICTEDWORLD TRADE
ORGANIZATIONWT/WGTDF/M/4
17 January 2003
(03-0237)
Working Group on Trade, Debt
and Finance
REPORT OF THE MEETING OF 17 DECEMBER 2002
1. The Working Group held its third meeting on 17 December 2002 under the Chairmanship of
Ambassador Hernando José Gómez (Colombia).  The Chairman indicated that, due to the heavy
schedule and overlap of meetings, the representative of the African Group would not be available topresent that Group's submission (WT/WGTDF/W/16),  as scheduled under Item II.A of the proposed
agenda.  Agreeing to postpone this presentation to the next meeting, the Working Group adopted the
agenda contained in WTO/AIR/1993, as amended.
2. The Chairman suggested that, as he had proposed at the last meeting, the Group focus its
discussion on Item III of the Gr oup's 2002 Working Programme - "Towards Greater Coherence" -
thereby continuing its educational process along the lines begun at previous meetings on the
relationship between trade and finance, and trade and debt.  In this context, he recalled that the
Group's mandate, as set out in Paragraph 36 of the Doha Ministerial Declaration, included the aim "to
strengthen the coherence of international trade and fi nancial policies, with a view to safeguarding the
multilateral trading system from the effects of financial and monetary instabilities".
3. He recalled that Coherence was part of an existing process in the WTO, which had already
generated significant activity deriving from the Marrakesh Declaration on Coherence in Global
Policy-Making.  Inter-Agency activities involvin g the WTO that fell under this Declaration were
reported to Members on a regular basis, and were described in the Secretariat Note prepared for the
meeting (WT/WGTDF/W/17).  One issue for discussion therefore was the relationship between theCoherence Mandate and the findings of the Working Group in its examination on the relationship
between trade, debt and finance.  In this connect ion, he highlighted some of the proposals put forward
by the Secretariat in its Note, particularly in Section III, on which Members were invited to reflect.
The underlying issue of this agenda item was whether the examination by the Group could potentially
lead in part to an enhanced cooperation between the WTO, IMF and World Bank, and what kind ofideas and messages the Group should send to Ministers in this area.
Presentation by the representative of the Secretariat
4. The Secretariat introduced its Note "Towards Greater Coherence" (WT/WGTDF/W/17),
which addressed the two sub-items of Item III of the 2002 Work Programme, namely the assessment
of work in progress in the area of coherence, and or ientations for future work.  Section II of the Note
described the Marrakesh Coherence Mandate and regular activities that were being undertaken under
this mandate.  It highlighted the fact that under Article III.5 of the WTO Agreement, achieving greater
coherence in global policy-making through cooperation with the IMF and the World Bank was one of
the five core functions of the WTO.  The Secretariat then provided a brief overview of the Coherenceprocess and issues that were reflected in the Members' and staff' daily operations.
5. The Coherence process involved participation and/or observership in each organizations'
meetings;  high-level meetings between senior management of these organizations;  staff research and
analysis, and exchange of information;  cooperation in policy surveillance and advice;  and technicalWT/WGTDF/M/4
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assistance and training.  Regarding issues, routine cooperation at staff level involved topics such as:
trade and development policies, including the mainstreaming of trade into Poverty Reduction Strategy
Papers (PRSPs) and assistance to developing countries in implementing WTO Agreements;  trade,
monetary, and financial policies, which involved efforts by the institutions concerned in improving
the complementarity of their role as "shock absorbers" of economic crises transmitted through largeexchange rate fluctuations, as well as the better understanding of the factors and mechanisms driving
financial crises and contagion in a globalized economy;  trade financing, a focus of attention of
Members in the Working Group;  the relations hip between the trading system and capital
liberalization, with the relationship [to be clarified] between the GATS and the liberalization of
financial services, as well as that between an eventual multilateral framework on investment and the
IMF Articles of the Agreement;  and other issues such as special exchange arrangement, WTO
provisions on balance-of-payments restrictions and the revenue implications of trade liberalization.
6. The Secretariat then turned to the orientatio n for future work, and focused on the main ideas
emerging from the Working Group's discussions.  He outlined essentially four groups of issues.  One
was the whole issue of exchange rate, exchange controls and capital account liberalization.  For
example, Members had expressed interest in the Working Group in updating the 1984 study of the
IMF on exchange rate volatility and trade, which focused at the time on developed countries.  Anupdate taking into account the lessons of the financial crises experienced by developing countries in
the 1990's was regarded as welcome.  The second topic was trade finance.  The idea that all parties
concerned (multilateral agencies, regional development banks, private sector) sit together and
examine the appropriate, practical mechanism to k eep trade finance alive seemed to gather growing
consensus within the Working Group.  The third and fourth areas of interest for future work werecapacity building and trade infrastructure (how could international organizations better coordinate
work on the ground was seen by many Members as being a priority) as well as forward-looking legal
and economic links between investment and capital account liberalization.
7. The Chairman referred to the presentation by the Secretariat as well as to previous discussions
of the Working Group on some areas of interest for orienting the Members' future work, and
mentioned the need to keep facilities and a mechanism that would guarantee that in periods of
financial instability WTO Members would continue to have access to credit lines for trade, the impact
of exchange rates on trade, the issue of the relationship between investment and the liberalization of
capital accounts.  He also said there was need for improved cooperation between international
organizations in order to enhance capacity building in the trade area.
8. The representative of Korea agreed that achieving greater coherence between the WTO and
the IMF/World Bank in global economic policy-making was an important function of the WTO, as set
out in Article III.5 of the Marrakesh Agreement.  If a policy pursued by a WTO Member in close
cooperation with the IMF and other financial organizations was to serve as the basis for legal
challenge in the WTO, the policy objectives of greater coherence between the two international
economic institutions would be seriously undermined.  During the Asian Financial crisis, which had
started in 1997, the IMF and the World Bank had provided Korea with emergency bailout loans, andthe Korean Government had pursued policies as a part of IMF conditionality that were designed to
overcome its economic problems.  The Korean Government, in particular, had restructured its
financial sector in line with the IMF's recommendations.  The important elements of these measures
had been discussed between the Government of Korea and the IMF.  Disbursement of IMF loans was
contingent upon the implementation of such Letters of Intent and the aim of the programme was firstand foremost to consolidate banking institutions and enhance their soundness.  Like other countries, in
the initial stage of restructuring public funds which eventually totalled 157 trillion Won
(US$125 billion) had been injected by the Korean Government into the financial sector to clean up
non-performing loans and replenish capital.  This had resulted in a temporary increase in government
equities in financial institutions.WT/WGTDF/M/4
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9. He added that, as indicated in Korea's Letter of Intent to the IMF of 10 March 1999
concerning the sale of the Government's shares in commercial banks, such increase was temporary in
nature as plans had been prepared for re-privatisation of the commercial banks.  Furthermore, the
Korean Government had faithfully abided by the principle that, even under Government ownership,
the financial institutions should operate on a fully commercial basis without Government interventionin their day-to-day management.  As a result of these efforts, the financial sector had evolved into an
industry driven by market principles, returning to profitability starting from early 2001.  As a result,
Korea had succeeded in overcoming the financial crisis, repaying the full amount of emergency loans
of US$19.5 billion from the IMF in August 2001, 2 years and 8 months ahead of schedule.  As of
July 2002, the average BIS capital adequacy ratio for the banks had risen to 11.4 per cent from
6.7 per cent in 1998, which was way above the IMF benchmark of 8 per cent.  The Korean
Government had already recovered about one-third of the public funds, and it expected to achieve theredemption ratio over 50 per cent in the near future.
10. Implementation of financial reforms by the Korean Government as recommended by the IMF
had become the basis for a legal challenge in the WTO.  It was claimed that the measures taken by
Korea during the financial crisis constituted actionable subsidies under the SCM Agreement of the
WTO.  In his delegation's view, this claim stemmed from the lack of understanding on the joint effortsmade by the IMF and the Korean Government aimed at financial restructuring.  In accordance with
the understanding reached with the IMF, the Korean Government had set up a mechanism through
which debtors and creditors could make use of out-of-court debt restructuring programmes whereby
conditions for ailing companies would be agreed bila terally.  These measures had been taken strictly
on a commercial basis.  He claimed that corporate restructuring packages were neither company - norindustry-specific.  Under the restructuring programm e, debt forgiveness, equity infusion and interest
relief were provided on commercial grounds by financial institutions, which acted in accordance with
market principles.  His delegation raised concerns that allowing measures taken under the guidance of
the IMF to be challenged in the WTO would have the perverse effect of penalizing Members
embarking on necessary reforms as recommended by international financial institutions.  This wouldgo against the goal of achieving greater policy coherence between the WTO and other organizations
such as the IMF.
11. Commenting on the Secretariat Note, the representative of Japan noted that Coherence
activities were well-grounded in the WTO and that cooperation with other international organizations
was on-going.  However, given the mandate of the Working Group and the limited time available
until the Ministerial Conference, he considered the proposals made in Section III of the paper -
"Prospective Areas of Coherence" - too ambitious.  In this respect, work being done in other foraneeded to be taken into account (e.g. the links between capital account liberalization and financial
services).  Any initiatives that would result in an increase of the workload, or that would overlap with
existing WTO work should be minimal.  He sought  clarifications on paragraph 41 of the Secretariat
Note, on the issue of the relationship between dispute settlement and current work by the IMF on
sovereign bond restructuring, and on paragraph 42, on whether competition policy and improvedgovernance were directly related to the issue of trade, debt and finance.  He asked on what grounds,
from the point of view of the Working Group's mandate, such areas could be part of the prospective
work on Coherence.  Finally, he thought that, as mentioned at the end of the Secretariat Note, it was
too early to discuss work after the Fifth Ministerial Conference.  Rather, the Group should focus its
discussions on the report itself, and on possible recommendations to Ministers.
12. In responding to these requests for clarification, the Secretariat agreed that the issue of the
relationship between an eventual multilateral framework on investment in the WTO and a sovereign
bond restructuring mechanism with IMF involvement wa s at this stage purely prospective, since none
of these frameworks existed yet.  However, as th e two processes were being discussed in parallel in
the two institutions, Members and the staff of both organizations should be aware of theirimplications.  For example, the use of a broad definition of investment  by WTO Members wouldWT/WGTDF/M/4
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mean that portfolio assets would be subject to a State-to-State dispute settlement in the WTO.  This
would in turn need to be examined in relation to private sector involvement under an IMF-sponsored
mechanism.  The Secretariat wished only at this stage to identify this issue as one of potential overlap
between international organizations.  With respect to competition, government procurement, and trade
facilitation, these areas were not only part of the WTO agenda, but also of PRSPs and they formed awider "behind-the-border" agenda aimed at developing countries in order to build a more open,
efficient business environment that helped increase the supply-response to new export opportunities.
In this sense, (and as discussed in earlier meetings of the Working Group) it was linked to trade
liberalization and debt alleviation.
13. The Chairman acknowledged that the representative of Japan had a point in the sense that the
Working Group needed to remain focused on the essential parts of its mandate, which would help
make its report to Ministers in a timely manner.  However, he believed that this requirement was alsoshared by the Secretariat, which had done its best so far to help keep the Working Group on track.
14. The representative of Brazil first highlighted two issues that were of importance to his
country;  both of which were mentioned in the Secretariat Note.  The first was trade financing (both
for exports and for imports), in terms of ensuring that crisis-stricken countries could continue to tap
into international sources of finance;  and the second was market access, particularly for countriesfacing structural external vulnerabilities, which wa s an issue within the remit of the WTO.  He turned
to paragraphs 34-37 and 41 of the Note, concerning the relationship between financial services
liberalization and capital account liberalization.  He wished to point out that it would be useful if the
suggestions made by the Secretariat in this area, if taken up by Members, could incorporate the
question of capital account liberalization and current financial services negotiations, as it seemed thatthe GATS already contained parts of a legal framework for Members to commit to opening their
capital account.  He referred in particular to the GATS Annex on Financial Services which contained
definitions of activities, that, once committed on a cross-border basis by a Member, meant that the
Member in question would be committing to allow free flow of capital on a cross-border basis.  This
would be the case if a Member made a commitment on the cross-border supply of services such aslending of all types, portfolios, asset and pension fund management.  He therefore emphasized the
need to take this up in the context of the Working Group on Trade, Debt and Finance, as, while
concurring that capital account liberalization could be looked at from the point view of investment, it
had already come up in the financial services negotiations (in particular in some of the requests of
Brazil's trading partners).  Requests for further study in the Committee on Financial Services had been
negated by others Members suggesting that the WTO would have little to add to existing work by the
IMF and the World Bank.  He therefore agreed with the Secretariat Note that joint or coordinatedresearch by the three organizations involved in Coherence would be welcome.
15. The representative of Chinese Taipei considered the Secretariat Note as a good basis for
work.  It emphasized in particular issues such as the availability of trade financing in times of extreme
crisis, which should be considered as the priority of the Working Group in its future work.
Responding to the statement made by Korea, he emphasized that the efficient recovery of the Koreaneconomy after the 1997-99 financial crisis, resulting in part from the tough reforms made at the time,
was to be noted by the WTO Members experiencing financial crises.  He considered that the remarks
made by Korea concerning the possible undermining effects of incoherence between international
organizations merited the attention of the Working Group, and therefore sought additional details to
be able to appreciate fully its systemic consequences.
16. The representative of Pakistan qualified Korea's statement as "eye opening" and said that it
showed that there were elements which had a potential to undermine the entire Coherence Mandate
that needed to be further discussed in the Work ing Group.  Referring to the Marrakesh Declaration
and other texts, he believed that one should not lose sight of the main objectives of the three
complementary organizations i.e.:  (i) to facilitate the expansion and balance of growth inWT/WGTDF/M/4
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international trade;  (ii) to raise living standards;  and (iii) to support sustainable development and
developing cooperative policies.  Against this background, he supported Japan's view that certain
prospective areas of coherence proposed in paragraphs 41-43 should be properly dealt with in the
appropriate fora of the WTO and that there was no need to duplicate on-going work or work that had
already been done in the Organization.  For some of these topics, the timing was not appropriate andnothing should be done at this stage to increase the burden of the Working Group.
17. The representative of Malaysia noted that the Secretariat Note raised some interesting issues
that could offer a useful guide for the future.  However, given the time left to the Group to finalize its
report, it should remain within its mandate and focu s on questions referred to in paragraph 36 of the
Doha Declaration, particularly with regard to what  could be done within the WTO remit to alleviate
the debt of poor countries.  In parallel, priority topics should include:  What are the causes of current
account imbalances which prevent the restoration of debt sustainability in such countries?  How canpredictable sources of trade finance for all developing countries be ensured?  What is the implication
of trade liberalization on developing countries and its impact on debt servicing and the reduction in
government revenues?  And what are the implications of exchange rates variability and trade.  While
understanding Korea's and Brazil's points on financial services and capital account liberalization,
Malaysia was unsure how much the Working Group could do at this stage.  Instead he thought theWorking Group should concentrate on how to increase market access and enhance trade, which was in
direct relation with other relevant topics such as trade finance or current account imbalances.  On
capital account liberalization, much of the expertise seemed to lie with the IMF.  Of greater interest
for the WTO might instead be the issue of exchange rate stability.  Malaysia agreed with Japan that
some topics were already being dealt with by other groups and that work should be confined to theWorking Group core mandate.
18. The representative of Argentina found the Note to be far-reaching and a welcome
development. However, when it came to defining what  topics were relevant from the view point of the
Working Group's mandate and the role of the WTO - to protect the expansion of trade or to relieve the
debt burden of heavily indebted countries - the main spearheads should be the role played by marketaccess and the disciplines of the WTO.  The central question was what could be done to expand
developing countries' export opportunities in their areas of main interest, which in turn would ease
balance-of-payment problems at the source of debt overhang.  While many WTO obligations
concerned import policies, a key issue was how the WTO, through its rules and negotiating process,
could actually promote exports.  With regard to proposals contained in Section III of the Secretariat
Note, and given the limited time before the Cancún Ministerial Conference, Argentina said that the
Group should focus on areas with immediate impact, for example the role of increased market access
in the relationship between trade and debt and debt alleviation.  However, his delegation believed that
Korea's intervention, which touched upon the dispute settlement system and the subsidy agreement,
had raised a real systemic problem, which should be addressed.  A broader question that arose from
this experience was whether the Marrakesh Declaration of 1994 offered enough points of contact and
dialogue between the WTO and international financial institutions, and what should be the role ofthese institutions in the dispute settlement process.  Argentina was in favour of an in-depth assessment
of this question.
19. The Chairman briefly summarized and commented on the course of the discussion and
indicated that in the interest of Members the Secretariat paper had aimed at opening as many avenues
for discussion as possible.  Indeed, given the time left until the Ministerial Conference, it was up tothe Members to determine what should be the priorities on which to report to Ministers.  Some of the
prospective issues could be addressed after Cancún and an in-depth study undertaken in areas
identified by Ministers for further examination.  With respect to contact points and fora under which
the issue of Coherence should be dealt with, the Chairman said that this was a question that would no
doubt come up at the Meeting of the General Council on Coherence scheduled for 13 May 2003.WT/WGTDF/M/4
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20. The representative of Canada said that Canada generally supported efforts to improve policy
coherence among international economic organizations and agreements.  He then asked that the
reports mentioned in the Secretariat Note, in particular the 1984 IMF study on exchange rates
volatility and trade (see whether it would be useful to update them) and the one mentioned in footnote
19 could be made available too.  Canada found several of the suggestions for future work to be useful,in particular:  improved scheduling and integration of the work of international organizations with a
view to lightening the administrative burden of Member-countries;  better use of the synergies offered
by the numerous international surveillance mechanisms that existed in international organizations
(notably those that pertained to trade policy);  the issue of trade finance;  the issue of the sequencing
of trade reform and capacity-building, as well as the management of fiscal revenue problems
associated with trade liberalization.  While it might be premature to start discussing possibilities of
work post-Cancún, Canada cautioned against possible overlap of work undertaken in other WTOworking groups and committees (for example, financial services, investment and competition policy),
with the work being undertaken in the Working Group on Trade, Debt and Finance.
21. The representative of the European Communities said that the Secretariat paper should be
used as a reference and, given the quality of work produced to date, the Working Group should not be
afraid of increasing the Secretariat's workload a nd its field of research beyond the strict limits of
market access issues.  In response to Members that wished to focus only on market access issues
instead of the broader Coherence agenda or on limiting the scope of the Working Group's work, he
recalled that enhanced coherence was part of the Doha mandate;  and while the Group should remain
focused it would be quite a challenge to focus on a subject which had no border and which involved
several other international institutions for this reason.  The European Communities supported theSecretariat Note's holistic approach, which built upon remarks by other institutions such as the United
Nations Economic Commission for Africa, by emphasizing areas such as supply-side response in
conjunction with market access issues.  He then commented on paragraph 42 of the Note regarding
the existence of studies quantifying the benefits of trade facilitation and the idea that gains of trade
outweighed ODA and HIPC flows, which, he said, ought to be nuanced by taking into accountqualitative gains as well as quantitative gains.  On paragraph 41, concerning investment and capital
account liberalization, his delegation thought that a multilateral investment framework should not aim
at liberalizing the capital account of Members, but should merely improve the conditions of foreign
direct investment (in terms of transparen cy, predictability and non-discrimination).
22. He then suggested some ideas for future wo rk and areas for improved synergies between
international organizations.  Regarding future work, it would be worth examining how a multilateral
framework on investment, transparency in government procurement, and adequate domesticregulation of competition could contribute to debt alleviation, better resistance to financial crises and
increase of FDI.  He agreed with Canada's request for an examination of how fiscal and customs
administration could be managed more efficiently in Member countries so as to facilitate trade and
improve revenue collection (as also outlined in paragraph 31 of the Secretariat Note).  He also agreed
with Brazil on the need to examine more carefully how the liberalization of financial services could
contribute to debt alleviation and better implementation of multilateral prudential rules, as well as on
the need to examine the role of export credits in resolving financial crisis, building upon Brazil's
initial ideas presented in the Working Group.  He suggested that an examination should be undertaken
on how to improve the inter-agency coordination process on technical assistance, including possible
improvement at the level of programming and implementation to avoid duplication.  Finally, hesuggested that ways on how to improve IMF and Word Bank contribution to the TPRM process
should be examined, while at the same time improving the WTO's contribution to the IMF's
Article IV reports.  Regarding possible future syne rgies between sister organizations, he mentioned
areas such as encouragement of good domestic governance, and correct sequencing of trade
liberalization in developing countries.  He also mentioned the examination of the relationship betweencapital account liberalization and foreign direct investment, as well as the relationship between trade
protectionism and overvalued exchange rates.  Finally, the European Communities would beWT/WGTDF/M/4
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interested in a study being undertaken on the longer-term trade and exchange rate impact on exchange
rate manipulation to promote exports, drawing upon case studies.
23. The representative of the United States understood that both the Secretariat Note and the
Chairman's non-paper were presented as a means to stimulate the discussion among Members and
were not intended for immediate decision or position.  She also indicated that the United States lookedforward to the presentation by the African Group of its paper at the next meeting of the Working
Group.  On the Secretariat Note, she said that her delegation shared a number of views expressed in
the Note.  She found that the section describing the rationale for the Coherence exercise for the WTO,
IMF and World Bank was an adequate description and summary of Coherence efforts to date.  In the
section on trade and development, she concurred with the Secretariat's view that the essential role of
the World Bank and other international financial institutions was to promote trade liberalization as an
instrument of development and poverty alleviation.  For example, the United States had been activelyurging the World Bank to pursue specific initiatives that enhanced the capacity of developing
countries to participate effectively in the world trad ing system.  Those suggestions included that trade
should be fully integrated in the Bank's programs and development strategies, including the Bank's
Country Assistance Strategies, and the World Bank-IMF's PRSPs.  Her delegation also supported the
WTO work carried out under the Integrated Framework (IF), which was pertinent to suggestions thatcame from Members and the Secretariat about capacity-building.  While being specific to least-
developed countries, the IF had brought out good ideas which should be of interest to other
developing countries.  She saw the Bank as being in a unique position to build the institutional
foundations for trade to flourish, including improving customs, developing trade-related
infrastructure, and helping design appropriate regulatory framework.  She supported these efforts, andrecalled that the United States had urged the Bank to stand ready to provide assistance to fulfill
capacity needs on the supply-side angle, insofar as this assistance was demand-driven.
24. She concurred with many observations in the Note concerning trade, debt and finance.  On
trade and finance, she agreed with paragraph 17 of the Note that the WTO played an important role in
providing economic security in periods of economic crisis by making recourse to protectionism moredifficult, and by keeping markets open to ensure that a crisis-stricken economy could count on
exports.  She indicated that the United States had shown restraint in the use of its trade policy
instruments when countries were hit by financial crisis;  and agreed with the Chairman on the role that
trade liberalization played in resource allocation and building up the resilience of internal economies
to external shocks.  On trade and debt, in paragraph 22, she concurred with the Secretariat conclusion
that the main contribution that could be made to debt alleviation was to press ahead with market
access in areas of interest to indebted countries.  This, in her view, required liberalization by bothdeveloped and developing countries alike.  She ther efore endorsed the view expressed in paragraph 23
that trade policies had a role to play in improvin g the supply-capacity of individual countries to meet
export opportunities.  In this respect, the fact that a growing share of trade took place among
developing countries strengthened the need for trade liberalization on the part of developing countries
themselves, a fact that should be kept in mind in the current context of negotiations.
25. Regarding the orientations for future work, her delegation appreciated the Secretariat's efforts
in suggesting ideas, some of which could be taken up in the course of the following year, but she was
concerned that some of these ideas would be more appropriately dealt with in the domain of other
WTO bodies or in other institutions.  As regards to comments made by other Members on capital
account, linkages to investment, and financial services liberalization, she said that her delegationwished to reserve its position at this stage, although she acknowledged that some other fora or
institutions may have better expertise in one or several of these issues.  In terms of actual or future
negotiations in the WTO, her delegation was amongst those in the Working Group pursuing a broad
definition of investment, which generated sensitivities on the impact of certain categories of
investment (short-term).  She thought that this deba te would be more appropriately dealt with in the
Working Group on the Relationship between Trade and Investment.  Similarly, the links betweenWT/WGTDF/M/4
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capital account and financial services liberalization should be discussed more appropriately in the
relevant committee. Nevertheless, she "put a marker" on these topics, until further examination.
26. Regarding the way to proceed, she said that her delegation would rather restrain itself as far as
what recommendations it would be interested in discussing until the following year.  To the extent
that ideas (on further examination of certain topics) had already been expressed in the WorkingGroup, her delegation was willing to discuss this again, but was of the view that it was nevertheless
premature to discuss recommendations.
27. The representative of Brazil wished to correct Brazil's own statement made at the Working
Group's last meeting (paragraph 14 of WT/WGTDF/M3).  While not asking for a corrigendum, he
recognized, for the record, that his statement reporte d as "he pointed out that the total sum of overseas
development aid represented only half of total agricultural subsidies including export subsidies" was
incorrect.  The amount referred to in the statement was in fact six times smaller, according to theWorld Bank.
28. In response to questions raised by Members as to the state of play of the case referred to in his
statement, the representative of Korea explained that the case had been brought to the Dispute
Settlement System about two months previously, and that it was still at the bilateral consultation stagein accordance with dispute settlement procedures.  While he thought that the Working Group was notthe right forum to discuss all the legal aspects of the case, his delegation was willing to inform the
Group whenever necessary of any developments in the consultations.  His delegation also stood ready
to share Korea's experience in overcoming the fina ncial crisis together with the IMF and the World
Bank.  He felt that it would have been very difficult for Korea to overcome the crisis as quickly as it
had done without the assistance of the Fund and the Bank.  He therefore believed that the IMF shouldcontinue to play its role as an important institution of global governance and, if this continued to be
the case, it would be very important to establish greater Coherence in the policies pursued by the IMF
and the WTO.  In this regards, he believed that if a policy pursued in close cooperation with one
institution was being challenged by another institution, it would seriously undermine the Coherence of
policies at an international level.
29. The representative of the IMF confirmed that, from his organization's perspective, the
working relationship with the WTO was excellent and was being maintained on a regular basis.  It
was stimulating for the Fund, and particularly for its headquarters in Washington, to be able to better
understand WTO concerns, and vice versa.  He regarded the Secretariat Note as a stimulating input,
and wished to indicate that there were many areas mentioned in the Note on which work was on-going
at the Fund, and that the Fund and WTO Secretariat should be able to work together in these areas in
the future.  With respect to the question of Coherence in the case of Korea's recovery program,although the IMF  had not as yet reviewed the case in detail, he wanted to mention the general
principles on which the Fund program with Korea, which was regarded in Washington as highly
successful, was based.  The Korean corporate sector was in a state of severe and systematic financial
distress in 1997-1999.  In Korea's economic program of 1997-2000, which was supported by the
Fund, the aim was to resolve this distress through a corporate restructuring process that was based onmarket principles.  The Fund staff usually did not monitor specific industries or sectoral activities;
rather a Fund-supported program focused on macroeconomic and structural policies, with
conditionality referring to general measures and principles and not industry-specific details.  He said
that a two-page note describing the main features of the Korean program would be made available by
the Fund through the WTO Secretariat.  The IMF stood ready to work with Korea as well as withother Members to clarify the facts on this matter.
30. The representative of Cuba said that his delegation would be 
submitting a written contribution
to the Working Group on the relationship between trade, debt and finance. This relationship was
complex and had many links, starting with the idea that the mobilization of internal and externalWT/WGTDF/M/4
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resources was very important when it came to stimulating trade, promoting development, and
reducing poverty.  It was also important to examine the contribution of trade and trade policy in
mobilizing financial resources for development as well  as for debt servicing.  At the same time, the
financial problems of developing countries fell within a broad context highlighted by lack of market
access, deterioration of terms of trade, and the de-industrialization of certain countries.  The subjecthad a significant institutional dimension which was linked to the design of international trade and
financial architecture, and the way least-developed countries integrated into the corresponding
systems. Solutions were linked to the increase of trade in basic goods and commodities and to
overcoming financial limitations that encountered by developing countries that were working hard to
diversify their economies.  Cuba's written contribution underscored the importance of a proper
functioning of the international financial system to  ensure that the multilateral trading system would
be able to function properly.  In this regard, the Working Group had needed to arrive at an effectivelink between the two systems, so that the polici es and adjustments required by the international
institutions involved did not erode the advantages of trade liberalization and the comparative
advantages of developing countries.
31. Reacting to the interventions by the IMF and Korea, the representative of the European
Communities said that he agreed with Korea that  this Working Group was not the appropriate forum
for the exchange of legal arguments for a case which was being dealt with under the dispute
settlement procedures.  He also took note of the IMF's statement which stressed that Fund staff did not
monitor specific activities or industries but rather Fund-supported programs which, according to the
Fund's own terms, "focused on macroeconomic and structural policies, with conditionality referring to
general measures and principles, and not industry-specific details".
32. The Chairman then summarized the themes and potential areas of interest that had been raised
by Members during the course of the discussion on this agenda item, and noted that Members had
focused on:
• the effects of financial and exchange rate instability on trade, drawing on the lessons to be
learned from the financial crises experienced by emerging economies in the 1990's;
• the examination and possible establishment of mechanisms and facilities to keep trade-
finance alive in periods of financial instability;
• the need for better integrating the work of international organizations in the areas of
capacity-building and trade infrastructure;  and
• the issues of the liberalization of financials services, on the one hand, and the efforts
underway in the international financial architecture, on the other hand, which had been
raised several times, as well as the links between WTO and other institutions on long-
term, cross-border investments, and capital account liberalization.  Although these two
topics were being debated in other fora, they nevertheless had been part of the discussionof the Working Group on Trade, Debt and Finance, which encompassed systemic issues
of this kind;
33. The Chairman then turned to the Working Group's work programme for 2003 and recalled
that he had had consultations on this matter with a large number of delegations.  However, since he
had not yet consulted with all delegations, he summarized the state of consensus to date.  Theconsultations had focused essentially on the way to proceed from now up to the Ministerial
Conference.  As a result of the consultations, his feeling was that Members should limit the number of
meetings in the run up to the Ministerial Conference to two, one in the first quarter of 2003 and one in
the second quarter.  At the first meeting, the Group would focus on the "selection" of themes that
would be referred to Ministers in Cancún, and the second meeting would focus on the agreement ofWT/WGTDF/M/4
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the report itself.  Such work would require consultations before each meeting, and the Chairman
therefore suggested that consultations take place before the first meeting and again between the first
and second meeting.  As for possible dates for the two meetings, he suggested 28 March and 5-6 June.
34. Regarding the themes themselves, from the outset the Chairman had understood that he would
endeavour to draft a summary of themes that came out of each of the Group's meetings. In order to beable to report to Ministers, and given the limited time available, he now felt that it was his
responsibility to draft a non-paper to outline those themes as a point of reference, and to stimulate
Members' thinking on matters that were regarded as being worthy for consideration.  The non-paper
reflected some 15 different items some of which overlapped, and the Chairman's idea was that
between now and the Group's meeting in March 2003 – including during consultations – Members
help him to reduce these themes to a maximum of 5-6 items that the Group could focus on, and which
could constitute a report to Ministers.  The Working Group's remit in the run-up to the CancúnMinisterial Conference was to highlight two or three major issues that would emerge as a basis for
further action or reflection after the Ministerial meeting.
35. To guide the "selection" process, the Chairman suggested that the Group place the different
themes in different categories.  The first category would identify those themes of interest to the Group
itself, but which were already under consideration in other WTO working groups.  A second categorywould be themes identified as being within the ex clusive remit of the WTO but not yet subject to any
action, in which case the Group might formulate r ecommendations to Ministers who in turn would
forward them to the various WTO committees and bodies.  A third category would recognize themes
that were of interest to the WTO but that were either under the remit of other organizations or at least
of joint responsibility with them.  In this regard, the Chairman suggested that through Ministers viathe Director-General these themes could be referred to sister organizations for further study or
recommendation for action.
36. The representative of Canada agreed that the list of themes should be narrowed down.
Although the 15 or 20 themes identified reflected the breadth of the discussion so far, he agreed that
the best way to move forward was not to try to a ddress all of them at once.  He then suggested a
fourth category of themes, i.e. themes that, after examination, the Group would not consider as
worthwhile continuing.  It seemed to him that the theme that attracted the greatest interest overall was
that of trade finance which might be worth pursuing.
37. The Chairman agreed that some issues might not be felt by the Group as being relevant,
which itself would help him further reduce the number of themes.  He nevertheless pointed out that
many Members had made points of "general" interest on the relationship between trade, debt and
finance, and that the Group would have to decide how to address them.  He agreed generally howeverthat the aim of future deliberations should be to  reduce the list of themes in line with Members
wishes.
38. The representative of the European Communities asked for the Chairman's clarification on the
first two groups he had mentioned, i.e. the distinct ion between the themes that were currently being
examined by other groups, and to which this Group could therefore transfer subjects, and the secondcategory of themes that contained action that could be undertaken by the WTO and hence by the
Group itself.  In which category would the Chairm an place the "new issues" such as competition,
investment, and trade facilitation.  His delegation's interpretation was that these "new issues" fell
clearly in the second category.
39. The Chairman said that he preferred not to give specific examples before having fully
consulted with Members on the proposed approach.  He nevertheless said that in some cases themes
might have been identified that had a bearing on trade, debt and finance, but which were currently
being examined in other groups (negotiating groups or working groups).  These groups may alreadyWT/WGTDF/M/4
Page 11
have provided some economic analysis, such as th e impact of FDI on the balance-of-payments, which
should not be duplicated.  However, there were points in these themes that the relevant group might
not have touched upon, or to which the Workin g Group on Trade, Debt and Finance could add a
specific angle.  No-one could prevent a delegation from bringing up the same issue in two existing
WTO working groups or committees.
40. The representative of the European Communities said that his delegation's understanding of
the Chairman's proposal was that by principle nothing prevented the Working Group from making
recommendations on, for example, market access whenever there were parallel negotiations going on.
This was indeed only a question of angle, but there would not be per se  any exclusion because of
negotiations in those areas.
41. The Chairman confirmed that this understanding was correct although he wished to be guided
by Members on the matter.
42. The representative of the United States took note of the ideas set out in the Chairman's non-
paper but said that the approach her delegation wished to take was to report on what was listed in the
Group's mandate, including recommendations, if any.  Therefore, she regarded the non-paper as ideas
to help guide the Group, and not as an exercise to parcel out various elements into different
categories.  Her delegation wished to wait until the consultations scheduled to take place before theMarch 2003 meeting before providing more input. It might, therefore, also be premature to start to
focus on where to parcel the different elements listed in the Chairman's non-paper.  At this stage, the
Group should rather reflect on how its work had proceeded, and on the light of this, contemplate what
the report would say to Ministers.  In the same vein, she considered also as premature a discussion of
the scenario after Cancún.
43. The representative of Argentina asked whether the categorization of themes proposed by the
Chairman should serve simply as a guide for the Working Group, or could it also be used in the report
to Ministers.
44. The Chairman responded that the paper only mentioned this categorization as a reference for
categorising themes and turning some of them into proposals for study and action by the Group.  Of
course, all the relevant themes (the 15) had to be reported to Ministers for information.
45. The representative of Japan appreciated the Chairman's initiative concerning the report, and
shared his views on it.  He nevertheless thought th at it would be helpful for the Group to exchange
views with other international organizations such as  the IMF and the World Bank when discussing the
report.
46. The Chairman said that several international organizations had observer status at the Group's
meetings and, if Members had no problem, he would exchange as much information with them as
possible, although not "consult" them in the traditio nal WTO meaning of the word, so that they could
continue to offer their support to the Group's work.
47. The representative of Argentina made clear that the drawing up of the report to Ministers was
solely a matter for the Members.
48. The Chairman agreed that the drawing up of the report would be fully up to the Members, and
if the Members did not wish to ask the observers for their opinions, then nothing obliged the Group to
do so.  The report had to be agreed solely by the Members, and this was why he had made a
distinction between asking the opinions of others and consulting them.  However, if Members did not
wish even to share the report with observers, they would have to revert to the matter in June.WT/WGTDF/M/4
Page 12
49. The representative of Malaysia was unclear about the categorization of the themes and
whether this had to be approved by Members before the Group reported to Ministers.  She also
indicated that all topics of the Work Programme for 2002 had not been exhausted, and that some of
them could still usefully be taken up in 2003.  She agreed with the Chair that the question of
observers' opinions and their participation in drawing up the report had to be revisited in 2003.
50. The Chairman said that he hoped that the issue of observers would be settled in March.  In the
first meeting of 2003, Members might still be able to revisit some themes or examine new ones,
whether or not there was sufficient agreement among Members to make recommendations on them.
He therefore called on Members to make their own written contributions available by the end of
February.  He repeated that his non-paper served only as a means to reflect upon which of those
themes could be deemed to be the most important, and written contributions on these themes would
still be valuable inputs for the Group.
51. The Chairman then summed up the discussion on the work programme for 2003 as follows:
• At the beginning of the year, in late February and/or early March, by way of preparation for the
first formal meeting of the year (scheduled on 28 March), the Chairman would hold consultations
so that delegations might inform him on the themes deserving further analysis, as well as possible
alternatives for further work and/or recommendations.  The African Group would be invited to
present its paper at the March meeting and any other delegations willing to make submissionsshould regard that meeting as the last opportunity to do so.
• Before the March meeting, he would also inform Members on his consultations regarding what
should be the focal themes of the Group's work.  After the March meeting an evaluation of work
in progress would be held during further consultations.  After this, the Chairman said that the
Group should be in a position to circulate an outline of its Report to Ministers which would be
analysed by Members before and during the meeting to be held on 5-6 June 2003.
• At the June meeting, and after a final discussion, the Chairman's idea would be to have the
Members' approve the Report.
52. This proposed Work Programme was so agreed and the meeting was adjourned
.
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