A trade deal that addresses the concerns of developing nations could spur global growth and reduce poverty by as much as 144-million people by 2015, a new World Bank report claims.

The report was launched on the eve of a World Trade Organisation (WTO) meeting of the world's trade ministers in Cancun, Mexico, where a mid-term review of progress in Doha Development Agenda (DDA) talks will be undertaken. These talks are meant to be concluded by January 2005.

Observers believe the talks will be extremely difficult, particularly as non of the DDA deadlines set for the run up to the gathering have been met. There is also a significant impasse in a number of critical areas of negotiation, particularly with regard to agriculture.

The World bank report, entitled Global Economic Prospects 2004: Realizing the Development Promise of the Doha Agenda, presents a detailed overview of the world economy, and is expected to add weight to those calling for a developmental agenda to be placed at the centre of the DDA round. The report points to inequities in the world trading system that drag down export growth in developing countries. In agriculture, for example, Japanese support to rice producers amounts to 700% of production cost, which effectively shuts out exports from Thailand and other producers. Direct budget subsidies to producers by the EU cost around $100-billion yearly, and depress world market prices in sugar, dairy, and wheat. These subsidies also have the indirect impact of raising prices paid by consumers.

Meanwhile, the report notes that the US spends $50-billion annually on direct support to its agriculture sector alone. Annual cotton subsidies to US farmers of more than $3-billion (three times US foreign aid to Africa) depress world cotton prices and crowd out poor but efficient farmers in West Africa.

The document also offers a rigorous analysis of global trade issues, particularly those that head the agenda for discussion at the WTO meeting this month.

The bank notes that the meetings occurs at a time when the global economy and international trade are languishing. An in its report it laments the fact that trade talks are stalled over disagreements on issues of ‘particular importance to developing countries’, such as agriculture, tariff reductions on manufactures, special treatment for developing countries, and drug patents in poor countries.

It argues that progress in Cancun could bolster investor confidence, and create momentum towards a more significant WTO agreement that would spur trade. Such a result would eventually raise incomes around the world, leading over time to a substantial reduction in global poverty.

The latest GEP projects anemic growth of 1.5 percent in 2003 in the industrialized world, well below potential. It foresees better performance next year, as industrial countries' growth rises to 2.5 percent. Developing countries are somewhat more buoyant than industrial countries, growing at 4 percent in 2003, and, if the recovery stays on track, will grow at 4.9 percent in 2004. (Growth forecasts in table on final page). World trade is projected to grow by 4.6 percent, slightly more than last year, but still less than half the rate in 2000.

World Bank Chief Economist Nicholas Stern believes it is important for the rich countries to take the lead in negotiating a fair outcome to the Cancun negotiations.

"They are the dominant players and account for two-thirds of the global market," says Stern.

"They could show leadership by reducing agricultural protection, cutting high tariffs, and ensuring that the poorest countries have access to affordable medicines on the same terms as bigger developing countries."

The report also notes that developing countries, especially dynamic middle-income nations, can contribute to a good "Doha deal" by agreeing to undertake trade liberalisation measures that would help boost global trade, and that are in their own interests as well.

"The talks are approaching a critical juncture," says Uri Dadush, Director of the Trade Department at the World Bank. "If ministers can reach an agreement to reduce trade barriers affecting the products that poor people produce - especially farm products and labour-intensive manufactures, it would help raise their standard of living. If not, an opportunity will be lost. "

Bank economic adviser and lead author of the report Richard Newfarmer argues that the DDA will also be important in levelling the playing field in non-agricultural trade.

He explains that exporters from developing countries generally have to pay more to get into foreign markets than exporters in rich countries.

“Industrialized countries on average charge each other tariffs of about 1 percent on their imported manufactures, but collect 5 percent from East Asia, 6 percent from the Middle East, and 8 percent from South Asia. Mongolia, for example, pays nearly the same dollar amount in tariffs to the US government as Norway, even though it sells only 3 percent of what Norway sells in the US," Newfarmer says.

The report argues that a "good" WTO agreement could produce about $290-billion-$520-billion in income gains to both rich and poor countries, lifting an additional 144-million people out of poverty by 2015.