Global crisis and the need for policy space for developing countries

Hufbauer argues that since the developing countries do not have the tools to deploy anti-cyclical packages and account a small amount of total world trade, they should be allowed policy space to adopt trade measures to counter the impact of the current economic crisis. Some of the recommendations like depreciation of currency might be very controversial and other like export rebates might not be within the reach of cash-strapped, poor governments. Not an entirely new argument but his suggestions are worth looking at. A recent report by the UN/Stiglitz Commission for reforming globalization had also urged such policy space to be awarded to the developing countries.

- Small developing countries should depreciate their currencies to boost both exports and import-competing sectors.

- Afflicted developing countries should provide across-the-board rebates to their exports during a two-year period. At the same time, WTO members should not enforce rules forbidding export subsidisation against these countries.

- Developing countries should also defer payment of corporate income taxes and customs duties on capital-goods imports by export-oriented firms.

- Multilateral development banks, the IFC, and G20 export credit agencies should ramp up export credits for products sold by small developing countries.

- Multilateral development bank should extend further funding for trade facilitation programs in developing countries.

- All G20 members should implement the duty-free quota-free provisions for developing countries outlined in the Doha negotiations.

- G20 countries should pledge to a time-limited “holiday” on trade remedies (i.e, CVDs, AD, and safeguard measures) against imports from small developing countries.