WTO, EU offer trade adjustments

WASHINGTON, Jan. 14 (UPI) -- With a decision by the Paris Club to freeze debt repayments for countries affected by the tsunami, the World Trade Organization and European Union have urged world leaders to take a further step in offering economic relief by altering trade deals with South Asia.

On Thursday, director-general Supachai Panitchpakdi sent a letter to WTO representatives urging them to increase global market access to South Asia.

"Although we are not involved in humanitarian assistance or disaster relief, clearly we can make a major contribution to the economies of the affected countries (and others) by pressing on with and concluding the Doha Development Agenda as soon as possible," said Panitchpakdi.

"This would be particularly relevant in the field of market access, including trade in some service sectors and certain modes of supply."

Earlier this week on Wednesday, the European Commission announced plans to speed up their generalized preference system, which was expected to be in use by the middle of 2005.

The new system would allow third-world countries to gain better access to trade negotiations by offering preferential access to imports from developing countries.

"There are trade measures we can use to assist rebuilding in the countries affected by the disaster, notably by speeding up measures to improve their access to our markets," said Peter Mandelson, EU trade commissioner.

"Under the new system Sri Lanka for example, will receive duty free access to the EU for nearly all its GSP exports including on its vital textile and clothing exports. India, Indonesia and Thailand will benefit from reduced duties and wider product coverage, especially on crucial seafood exports," the statement from the commission read.

Since the devastation of the catastrophic earthquake, which measured 9.0 on the Richter scale and caused 20 feet high tidal waves, the international community has converged together offering a historical amount of humanitarian and economic relief to the 11 countries hit by the tsunami.

After enormous pressure by the G7 group of industrialized nations, the Paris Club announced Wednesday to freeze debt repayment to all of the countries affected by the tsunami for three months, until the World Bank and the International Monetary Fund had completed their assessment of the cost of damage from the disaster.

According to a statement by the Paris Club, debt repayments will not be expected from affected countries until the World Bank and the International Monetary Fund have concluded "a full assessment of their reconstruction and financing needs" and determined how long a debt freeze should remain in effect.

The assessment is expected to take three months, according to the World Bank.

"The decision is an exceptional measure," said Jean-Pierre Jouyet, Paris Club President at a press conference in Paris. "It is justified by the scale of the catastrophe. In this exceptional situation, creditors wished that the suspension not be submitted to any conditions, neither an accord with the IMF, nor to comparable treatment by private creditors."

Thus far only Sri Lanka, Indonesia and the Seychelles have indicated interest in an unconditional suspension of repayment, which would be effective immediately. Indonesia currently has an external debt of $132 billion, Sri Lanka owes $7.7 billion in debts and the Seychelles has $30 million in debt, according to the World Bank.

The decision to freeze debt repayments would allow the three countries to stave off this year's payments, which would have amounted to $3 billion for Indonesia, $328 million for Sri Lanka and $5 million for the Seychelles.

Thus far, none of the countries have applied for suspension, and both Sri Lanka and Indonesia have been hesitant on acceptance of the debt moratorium by the Paris Club.

"We don't need a long-term moratorium, because we are getting funds from grants," Aburizal Bakrie, Indonesia's chief economic minister told reporters on Thursday in Jakarta. "We will build Aceh from grants. If they are not given, it doesn't matter."

Sri Lanka has also sounded an alarm to debt freeze, suggesting that debt forgiveness would be more beneficial in managing its long-term reconstruction costs. Reconstruction costs are estimated to be $1.5 billion in Sri Lanka.

"We are not looking at numbers at the moment," said Harim Peiris, an aide to Chandrika Kumaratunga, Sri Lanka's president.

"Debt forgiveness would enable the government to raise more capital and would ease the capacity to repay debt."

Other countries, like India and Thailand have said they will not seek a repayment suspension, because of the possible affect on their nation's credit.

"It's my judgment that to hurry that process without getting the people involved is probably not going to work," said James Wolfensohn, World Bank President said Wednesday.

"Their involvement is also an essential part of the healing process for the survivors. There's no plan that we can invent in Washington or Tokyo that's going to work for these fisherman, or for the agricultural workers, or for the salt workers in the south of Sri Lanka," he added.

The World Bank announced Wednesday that it would provide $300 million in initial financial support to Indonesia, $100 million to Sri Lanka and $12 million to the Maldives.

The G7 is comprised of Germany, Great Britain, France, Italy, Canada, Japan and the United States.

The 19-members of the Paris Club include Austria, Australia, Belgium, Britain, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland and the United States.