11:52 AM Nov 7, 1996

BANK ACCUSED OF VIOLATING COOPERATION ACCORD

Geneva 7 Nov (Chakravarthi Raghavan) -- Brazil challenged the World Bank Thursday at the World Trade Organisation over the recently leaked Bank study on MERCOSUR, underlining that the issue was one within the WTO competence, and the Bank's study was contrary to the cooperation with the Bretton Woods institutions established by the WTO agreement.

The Brazilian Ambassador, Mr. Celso Lafer, was speaking under any other business at the WTO General Council.

Pending before the Council is a decision over the agreements reached among the secretariats of the WTO, the IMF and the World Bank in pursuance of the Marrakesh Agreement on the WTO and the Ministerial decision for promotion of coherence in global economic policy-making

Lafer, speaking as coordinator of Mercosur, in raising the Bank's Mercosur report, referred to Art III:5 of the WTO agreement, providing for WTO cooperation with the IMF and World Bank, and said Brazil understood that such cooperation was designed to permit WTO to inform the IMF and the World Bank about trade aspects that the WTO deemed important to the coherence in global economic policy.

In turn, the IMF and the World Bank are expected to provide the WTO with information on financial matters, as it has done in relation to the work performed by the Committee on Balance-of-Payments.

Art.III:5 of the Marrakesh Agreement, Brazil said, did not foresee the reverse situation, that is, the IMF and the World Bank replacing WTO's competence over trade issues, nor the WTO acting beyond its mandate to study financial matters under the IMF and World Bank's area of expertise.

Part of the WTO's mandate, Lafer said, is to review the relationship between regional trade agreements and the multilateral trading system. Such role was reinforced by the Understanding on interpretation of Art. XXIV approved in the Uruguay Round.

More recently, the General Council had established a specialized committee to examine regional agreements, and its terms of reference include examination of regional instruments and an analysis of their implications to the multilateral system.

"In this context, it was surprising and perplexing to see published in an important paper a summary of a World Bank's study on "Mercosur's Trade Performance" and the "Effects of Regional Trade Arrangements" signed by its (bank's) 'Principal Economist'.

"The Bank's later assertions regarding the publication did not alter its inadequate and inappropriate content. It is particularly regrettable that, acting without experience on the review of regional trade agreements, the Bank selected one among many existing regional agreements to arrive at premature conclusions. It should also be pointed out that in such a selective approach the World Bank chose to analyze MERCOSUR whose examination by WTO has not been completed."

Citing the strong reservations on the Bank study by the Brazilian Foreign Minister, and Brazil's statement at the committee on regional trade agreements, Lafer added: "At this juncture, as current coordinator of MERCOSUR, Brazil would like to state for the record our disagreement with such action taken by the World Bank on a matter clearly under WTO's competence and not foreseen under the cooperation established by Article III:5 of the Marrakesh Agreement".