The Eleventh session of the United Nations Conference on Trade and Development (UNCTAD XI) will take place in Sao Paulo on June 13-18, 2004. UNCTAD XI is a high-level event attended by many heads of governments and other senior leaders from 192 members of the organisation. UNCTAD was set up in 1964 to assist developing countries in their economic integration with the world economy in a manner that the cause of development is not affected adversely.
It is the focal point within the United Nations system for integrated treatment of trade and development, finance, technology, investment, among other issues. It is credited for a number of initiatives in the area of trade and development such as in evolving the generalised system of preferences (GSP) given by developed countries to developing countries, in taming the international commodity markets, in evolving the law of the sea, a set of multilaterally agreed principles for control of restrictive business practices although its attempts to bring about codes of conduct on multinational corporations did not succeed.
UNCTAD XI is also taking place against the backdrop of the collapsed WTO talks, rising discontent against globalisation, creeping protectionist backlash in the developed countries that is threatening the fledgling recovery of the world economy. The long-pending reform of international financial architecture remains to be addressed and the threat of economic crisis keeps looming large on emerging economies. The net resource flows to developing countries have been negative and the 0.7 per cent target for ODA is nowhere in sight to be met despite the Monterrey consensus on finance for development. The global macro-imbalances represented by the growing twin deficits in the US are also leading to exchange rate realignments and pose the risks for the global recovery.
UNCTAD XI presents an opportunity for the international community to address some of the long-pending issues in trade and development. Here?s a wishlist.
First, UNCTAD should focus on revival of the spirit of global interdependence and the global consensus on development. The protectionist backlash in developed countries does not augur well for global welfare. In a globalised economy, the fortunes of all the economies are linked. Developing countries are important markets for the goods and services of developed countries. Prosperity and growth in developing countries thus in a way increases demand for the goods and services produced by developed countries and thus contributes to their own growth and employment creation. Even the processes that are supposed to be moving jobs away from developed countries, such as business process outsourcing actually improve their own welfare. Analysis by McKinsey Institute has shown that of the one dollar spent by a US corporation on outsourcing, as much as 78 per cent of the value is retained within the US economy with the supplier country getting only 22 per cent of the value.
Second, in the context of the current impasse on the trade talks, UNCTAD XI could announce the appointment of a high-level independent trade and development commission headed by a highly respected economist such as Professor Stiglitz. This would conduct a development assessment of the world trading system and suggest an agenda for its overhaul.
Third, UNCTAD should seek to re-position itself as a body responsible for taking the cause of development in all international negotiations and assisting the developing countries with analytical support rather than just another institution providing technical assistance. The institution served its mandate much more effectively in the 1970s when it was coming out with ideas such as GSP.
Fourth, UNCTAD can assume the responsibility of creating a WTO watchdog of developing countries. Developing countries, individually, lack the capacity to identify and pursue the cases of non-implementation or unilateral policy decisions concerning trade policy on the part of developed countries and seek their redressal under the existing framework. The recent case of the trade distorting export subsidy valued at $4 billion under Foreign Sales Corporations by the US government which was successfully brought by the EU to the DSB is a case in point. Needless to mention that no developing country possesses the capability to do the same.
Fifth, UNCTAD XI could call for a reform of the decision-making process at the WTO. The general perception is that the decision-making process is non-transparent, and non-inclusive. The will of a handful of powerful countries, viz Quad countries, is imposed on the entire membership in the name of ?Consensus?. In an organisation whose membership comprises of countries at varying levels of development, their concerns and interests are expected to be different. Obviously, these differences limit the possibilities of arriving at a consensus. UNCTAD should come up for a comprehensive reform of the WTO decision-making process to make the process more inclusive and participatory.
Sixth, UNCTAD XI should seek a consensus on the urgent need of reform of the international financial architecture. The financial system needs some mechanisms of moderating the volatility of short-term capital flows that bring instabilities to their host economies, among other issues. The proposals that have been made also have the prospect for generating resources for funding programmes of poverty alleviation in poor countries.
Finally, promotion of South-South trade and cooperation in other areas should be attached a high priority. South-South trade now constitutes 41 per cent of total trade of developing countries. Its promotion through South-South trade preferences rather than multilateral approaches would assist in building their supply capabilities and would help them attract investment from developed countries. In this context, the Global System of Trade Preferences (GSTP) among developing countries could be reinvigorated. A third and more ambitious round of GSTP could be launched to bring down tariffs on intra-South trade by 50 per cent with eventual elimination.
One hopes that the eleventh session of UNCTAD will succeed in taking decisions to move forward on some of these issues and will thus contribute to development-friendly integration of developing countries with the world economy.
The author is Director General, Research and Information System (RIS) for the Non-aligned and Other Developing Countries. These are his personal views. Email: nkumar@ris.org.in.