8:02 AM Jun 16, 1995
IMPACT ON POVERTY ALLEVIATION NEEDS MORE ANALYSISGeneva 16 June (Chakravarthi Raghavan) -- Modelling the impact of Uruguay Round on poverty in terms of national income can give "order of magnitude" estimations, but analysis on a disaggregated, country-by-country and sectoral basis is needed to understand better the effects on income distribution and poverty. This was one of the agreed conclusions of the UNCTAD Standing Committee on Poverty Alleviation which discussed the impact of the Uruguay Round on poverty alleviation. With some heavy qualifications a secretariat document before the Committee had taken the modelling estimations of national income of the World Bank and sought to extrapolate it into possible effects on poverty alleviation. The UNCTAD Committee, chaired by Amb. Mounir Zahran of Egypt, said that this is a useful way of obtaining an "order of magnitude" estimate of the impact but that analysis on a disaggregated, country-by-country and sectoral basis is needed to contribute to a better understanding of the effects of income distribution and poverty between different sectors of the economy and appropriate policies needed. At a press conference Friday noon, Zahran said that in any event the benefits of the Uruguay Round would not be felt immediately but only after a transition period varying from agreement to agreement. There were also many uncertainties and questions about the distributional aspects which escaped analysis of economists. In the case of agriculture, for example, it is based on the assumption that while there would be transition costs in net food-importing countries, higher prices would lead to more investment and increased production. According to a Chairman's summary of the discussions, presented to the final meeting of the Standing Committee, Mrs Sheila Page of the UK Overseas Development Institute, who was a guest speaker, noted that while the UNCTAD report was the first attempt to link the effects of the Round to poverty, it did not differentiate between which groups of people would be affected. This could be approached on a sectoral basis, but an approach based on a country-by-country basis would have faced insuperable problems, she added. While the effects of the Round - in terms of reducing subsidies to temperate zone agriculture - made more sense of the world agricultural system, measuring the effects in world prices on poor people was difficult since it depended on prevailing conditions in each country. If a government was subsidising imported food, the change in world market prices would affect its budget, rather than living standards of the poor; but the budget effect would affect the government's ability to alleviate poverty, Mrs Page was quoted as saying in the Chairman's summary. It was not clear from the summary whether or how Mrs Page dealt with the fact that with tight budget conditions in developing countries the higher import prices would either need more money from the budget to subsidise it to consumers or would result in higher prices to the poor consumers. Mrs Page was also quoted as stressing that the losses of the Round would materialise fairly quickly while gains would be realized with a delay of up to ten years and there could be a serious problem of a transition period and hence case for transition relief, and not only for the food importing countries (envisaged in the Marrakesh decisions). In the discussions in the Committee, according to the summary, concern was expressed by some delegations that as a result of TRIPs prices of pharmaceuticals could rise. But one delegation said that local market conditions of essential drugs could be as important as patents on this. The agreed conclusions of the Committee said that there was concern over losses that might be incurred by the least developed countries and the net food-importing developing countries due to possible price increases of imported food resulting from the effects of the Round. Such increases would affect their BOP, thus creating hardship for non-food producing poor households. There was hence need for food aid at adequate level and for technical and financial assistance in line with the relevant decisions of the Marrakesh Ministerial Conference concluding the Round. Export of labour-intensive goods would help to increase employment and generating income and thus assist in reducing poverty. But production of such goods can be encouraged by increasing market access for them as well as by facilitating an enabling environment for small and medium-size enterprises. The agreed conclusions also * expressed concern over decline in the quantity of ODA directed to developing countries in recent years and emphasized the need for meeting internationally agreed aid targets while improving the quality of aid as also its use, * agreed that food aid could play a major role in the short-run to alleviate poverty, particularly for women and children, but felt that it is no long-term solution to poverty, * debt relief, directly or indirectly, may be one of the principal elements to help reduce poverty if the resources freed are properly mobilized and channelled for developmental and poverty alleviation purposes. In terms of future work in this area, there was consensus that UNCTAD had a major role to play in the area of international economic cooperate and trade and that it should continue its work on poverty issues where it has expertise and competence. In terms of institutional reform, the review of the work programme of the Standing Committee and orientation of its work would provide an ideal opportunity to reflect on whether the existing form of intergovernmental machinery for addressing poverty alleviation was the appropriate one or the most effective arrangement or whether some alternative form could be envisaged. This issue was deferred for consideration of the Ninth Session of UNCTAD to be held next year.