EXPANSIONARY MACRO-ECONOMIC POLICIES ADVOCATED.

Apr 30, 1987

EXPANSIONARY MACRO-ECONOMIC POLICIES ADVOCATED.

GENEVA APRIL 28 (IFDA/CHAKRAVARTHI RAGHAVAN) -- More expansionary macro-economic policies in industrialised countries, and a coherent set of international policies and measures in the inter-related areas of money, finance, debt, commodities, trade and development, are advocated by the Group of 77 in their proposals for UNCTAD-VII.

These area among several proposals adopted by the Sixth Ministerial Meeting of the Group of 77 which concluded in Havana last week.

The proposal on "interdependence of money, finance, debt, commodities, trade and development", underlines that policy actions in these areas are "mutually supportive".

"Many of the most pressing needs of the developing countries - including a new and comprehensive strategy to reach a lasting solution to the problem of debt - can be hoped to be successfully met only through a coherent set of measures spanning the above areas by the developed industrialized countries", the G77 proposal states.

Industrialized countries should adopt more expansionary macro-economic policies including an easing of monetary policies and of fiscal stances where appropriate, with a view to substantially lowering interest rates, reduce protectionist pressures, expand trade and financial flows and reverse the decline in commodity prices.

The areas covered in UNCTAD, the G77 say, call for "commensurate action in other important current and forthcoming multilateral economic activities, in particular the Uruguay Round and in the framework of the IMF and the World Bank".

In order to enhance UNCTAD's capacity to exercise its central role in the inter-related areas of money, finance, debt, commodities, trade and development, the trade and development board should "strengthen its review of, and monitor on a regular basis, decisions and measures in these areas", the G77 proposal suggests.

A proposal that the UNCTAD Secretary-General should be assisted in this task through the convening of "a meeting of high-level advisors", did not however find favour with the G77, and was dropped.

This proposal called for the convening of such high-level meeting prior to the relevant sessions of the board, and mandating the high-level advisors to prepare a report "laying out the options on policy issues requiring priority attention of governments".

G77 sources said that the proposal was anew idea that had not figured at any of the regional constituent meetings of the G77 and their recommendations nor in any UNCTAD Secretariat documentations published so far.

The idea was thus "sprung" on the delegates almost at the end, without sufficient efforts by the sponsors to informally sound out and canvass support among the regional groups, the G77 sources said.

In the result, it met with strong resistance from the Latin American group of countries, the sources said.

Another G77 source said that while the opposition was voiced by the Latin American Group, there were also many Asians and Africans who were negative to the idea, but were prepared to show some accommodation and accept a very modified version.

The opposition, the source said, was not only because it came up at Havana at the last minute, and was not in the documents of the three regional meetings or in the "harmonised text" prepared by the G77 in Geneva on the three regional reports.

The opposition was also because at the back of the minds of delegates was the question whether such a mandate could be used to examine domestic policies and development objectives of third world countries, and make proposals or "policy options".

These source noted that the U.S., and some of the OECD countries, have been pushing the idea of UNCTAD looking into third world domestic policies with a view to promoting "market-oriented and open economy" development strategies.

The issue, the sources said, has been the subject of an internal debate within the Secretariat, with the Secretary-General yet to take a position. The issue was however discussed at a "staff seminar" early in march, on the basis of a paper prepared by a senior staff member.

The paper in effect would appear to have reflected some of these "ideological fixations" of the U.S. and some of its friends, but the whole idea met with criticism both on the ground that UNCTAD lacked any conference mandate in this area and that UNCTAD Secretariat efforts "to win" U.S. support may result in losing the support of its main constituency, the group of 77.

Some leading third world countries, G77 sources said, have some apprehensions, perhaps erroneous, on this matter and this was also at the back of their minds when they opposed the proposal.