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USA: World Bank and IMF Have Stake in Elections

by Gumisai MutumeInter Press Service
November 5th, 2000

WASHINGTON -- The differences may not be much, but it will matter for developing countries which of the candidates -- Vice President Al Gore or Texas Governor George W. Bush -- becomes the next US president.

Bush, the Republican candidate for the Nov. 7 US presidential elections, is more leery of the current role of the International Monetary Fund (IMF) and the World Bank, analysts say.

This may lead his administration to push for a scaling down of the institutions' roles in developing countries, especially if he obtains a Republican majority in both houses of Congress.

''The Bank and IMF have increasingly become unpopular, it is taxpayers who finance these organisations, but activists hope they will have more powers to clip the institutions' influence, especially under a Republican administration,'' says Robert Naiman of the Centre for Economic and Policy Research (CEPR).

Naiman points to the passage of a law in late October, which restricts the IMF and World Bank from insisting that countries charge user-fees for certain social services, as a sign of things that may come under the more conservative Republicans.

The 2001 foreign-aid bill freed 435 million dollars to pay for US obligations under the IMF and World Bank's Heavily Indebted Poor Countries Initiative (HIPC). Under the bill, the US representative on the IMF and Bank boards is required to oppose user fee conditions for basic health care or education services. Congress also increased funding for HIV/AIDS prevention programmes to about 300 million dollars -- a 50 percent rise.

Bush has said that while the IMF has a role to play it must not be viewed as a way to say to world bankers, '' 'If you make a bad loan, we'll bail you out.' It needs to be available for emergency situations''.

Gore has been less clear on how his administration will relate to the Bretton Woods institutions, but it appears he will continue the current relationship. He said during one of the presidential debates, however, that he would look at curbing corruption in the agencies.

He has said he may consider increasing US funding to the agencies which are currently at an all-time low in popularity as activists, opponents of globalisation and poor people in developing countries increasingly question their role.

Gore says he will seek greater efforts, through the Bank and the other multilateral development banks, to provide adequate social safety nets for economies facing turmoil. Gore also supports calls by the Group of 7 industrialised nations for stronger IMF efforts to contain financial crises.

The vice president has come out in support of the Asian Growth and Recovery Initiative, a multilateral initiative involving the World Bank and Asian Development Bank to promote financial restructuring in the region.

''There is potential for more movement towards reforming the international financial institutions with either of the candidates,'' says Naiman.

But how the developing world will fare during the next US presidency does not depend only on who occupies the White House, according to Barry Bosworth of the influential Washington think-tank the Brookings Institute.

What matters most for developing countries is whether the president has a Republican or Democratic Congress, he says.

''Perhaps the worst-case scenario for developing countries would be Gore as president, with a Democratic majority in Congress,'' says Bosworth. ''Such a combination would push for global labour and environmental standards in trade deals more than was true of the Clinton administration or presumably more than would be true of Bush and a Republican congress.''

An announcement by President Bill Clinton at the failed World Trade Organisation (WTO) summit in Seattle last year that the United States could sanction countries that violate labour standards was one of the factors that led to tensions at the negotiating table.

A Gore/Democrat administration would likely have to accommodate its powerful trade union constituency and the green lobby, analysts say. Gore has said in trade he will push for ''standards to end child labour, to prevent the exploitation of workers and the poisoning of the environment''.

Analysts say this could lead to less favourable trading arrangements for a number of major emerging economies that rely on cheap labour and use under-age workers to compete in the global market.

A Gore/Republican combination would be an extension of the present status quo. The House of Representatives consists of 222 Republicans, 211 Democrats and 2 Independents. The Senate comprises 55 Republicans and 45 Democrats.

''With a Republican Congress, Bush would not be felt, there are more stronger Republican characters than Bush and he would be led by Congress,'' says Bosworth, an international trade specialist.

Bush too would be under pressure to accommodate conservative Republicans some of whom welcomed the Meltzer Commission's recommendation for a reduced role for the Bretton Woods institutions. The commission was set up by Congress to report on the reform of the Bank and IMF.

The Commission said the Bank should pull out of developing countries and abdicate its role to regional banks such as the Asian Development Bank. One of the arguments it used was that 70 percent of the Bank's non-grant lending is concentrated in 11 countries, with 145 other member countries left to scramble for the remaining 30 percent.

It noted that the failure rate of Bank projects was 65-70 percent in the poorest countries and concluded that the institutions were not efficiently executing their roles.

On the campaign trail, Bush lashed out at the IMF for misusing taxpayers' money to finance corrupt regimes. During the second of three presidential debates, Bush pointed to Russia as an example of a country that has squandered IMF funds and charged that aid money ''ended up in Viktor Chernomyrdin's pocket''.

Former Russian prime minister Chernomyrdin denied these claims and threatened to sue Bush for slander. While the IMF admitted it had mishandled its 25 billion dollars in loans to Russia during the 1990s, it dismissed the charges against Chernomyrdin.

In the area of trade, both candidates have promised to seek fast- track trading authority from the US Congress as soon as they come to power. The authority facilitates presidential negotiations of trade agreements through expedited congressional approval, limiting amendments.

The House of Representatives defeated President Bill Clinton's request in 1998 - the first time in 25 years a president has not had such powers.

The two candidates have not been specific on their future trade preferences, but both want to see China enter the WTO. The Texas governor also supports Taiwan's early entry into the WTO.

If he seeks new trade arrangements Bush is expected to place priority on Latin America, although he will have to go past the isolationist sections of his party. Bush has said in trade, he would be led ''by US interests''.

Both candidates support the expansion of the North American Free Trade Agreement (NAFTA) with Canada and Mexico, to accommodate the entire Western Hemisphere.

But because US foreign relations have hardly appeared on the radar of the campaign for the 43rd US president, both major candidates have given little detail on their pronouncements. It is also unclear how much of what they are saying is campaign talk.

Gore is expected to continue the policy of the Clinton administration that saw the approval of 270 US trade agreements including NAFTA, the establishment of permanent normal trade relations (PNTR) with China and efforts to increase trade with Africa.

But Bosworth warns that if the Democrats take over Congress with representative Richard Gephardt as speaker, he may choke the passage of trade agreements judging from his record of protectionism.

Bush, on the other hand, has said that Africa ''doesn't fit into the national strategic interests''. His campaign has described HIV/AIDS, which is ravaging sub-Saharan Africa and which the Clinton administration has said poses a threat to the United States, as among the soft issues in his foreign policy thrust.

But, it remains to be seen whether as president, he will be indifferent to the fact that India, China and Russia may soon have rates of HIV infection approaching Africa's.





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