Opening remarks by Mr Mr Lennart Båge, President of IFAD

18 February 2004 - 27th Session of IFAD's Governing Council

IFAD’s concern here is not trade per se, but the influence of trade and market access on rural poverty in developing countries. Our question: how do we pursue rural poverty reduction in the existing and evolving process of globalization.

Our first point is that the international trade regime – and its well known distortions – strongly affects the rural poor and their development prospects. International trade restrictions hurt not only middle income countries. They also hurt small scale farmers in the poorest countries. So trade reform is not only a development issue, it is also a poverty issue.

Our second point is that while the nature of the trade regime does affect the poverty situation, and while trade reform can contribute to poverty reduction, change in the trade regime by itself will not be sufficient. To give a major boost to poverty reduction, poor small producers have to be empowered. They need better access to land and water, to rural finance, to technology, and to organization for enhanced bargaining power. If this does not happen, they will benefit little from trade reform. In fact, they may eventually be worse off – as they will have to compete for resources and markets with larger scale producers in their own countries.

The third point is that results of trade reform depend not only on what developed countries do. Equally important is what developing countries do themselves. They hold the key to whether better trade leads to poverty reduction or greater inequality. We need to recognize that most studies like the World Bank study cited in the Panel Paper, show that a substantial part of the benefits of trade reform would come from reform by developing countries. This is important because it underlines the point made at Monterrey – that poverty reduction requires a strong partnership between developed and developing countries. It is also important because the success of the trade reform case will hinge partly upon showing that it will be beneficial to the poor.

It would be a mistake to try to address the challenge of poverty reduction only under the heading of changes in international trade rules. Globalization is changing everything – including the situation and opportunities for the rural poor. Markets are critical to the poor, but the nature of those markets is changing rapidly. In particular we have to think about the future of small-scale agriculture as a basis for poverty reduction and development.

IFAD’s mandate is to help eradicate rural poverty. Now in the 21st. century we have to think about 21st. century solutions – diversification, rural enterprise and service development, and strong linkages to the private sector including in some cases the large scale private sector. The possibility of this is closely linked to the structure of the international trade regime – and, perhaps more importantly, to the imagination and innovation we can bring in seeing rural poverty not as an isolated phenomenon – but as something shaped by national and international systems. Its solution may not lie in agriculture alone but in much broader changes in the developed and developing worlds alike.

The background paper developed this issue and also has posed certain key issues for trade and rural development and to achieve the MDGs. I am sure that today’s discussions will provide rich insights into these matters.