12:06 PM Jul 3, 1997

BALANCING OPTIMISM WITH HEALTHY SCEPTICISM

Geneva 3 July (Chakravarthi Raghavan) -- "Optimism about prospects for the world economy is justified... but a considerable and healthy dose of scepticism and caution should provide a useful balance," the President of the UN's Economic and Social Council said Wednesday in summing up the "high-level policy dialogue".

The heads of the IMF, WTO and UNCTAD, and a vice-president of the World Bank had earlier spoken in the ECOSOC, and had responded to some questions and comments from the delegates.

IMF head, Michel Camdessus stressed the need for maintaining the emphasis on macro-economic stabilization, liberalisation of trade and capital markets, price reform, privatization and other reforms.

The WTO chief, Mr. Renato Ruggeiro, said more was needed to help the least developed countries and referred to the Plan of Action for LDCs adopted by the WTO at Singapore, and the joint actions being undertaken in this field by the WTO, UNCTAD and ITC. He also stressed the need for, and benefits of, liberalisation of financial services, information technology.

Mr. Rubens Ricupero, Secretary-General of UNCTAD, warned that unless halted soon, the tendencies for increasing inequality among countries and societies would trigger a backlash that could jeopardise the benefits of recent economic reforms in developed and developing countries.

Generally such summing-up statements, while on the President's own responsibility, are still documents informally negotiated; but it is not clear whether the language and points included were 'negotiated' among the four institutions, or the UN ECOSOC secretariat's perception. Either way, what it said is perhaps as interesting as what it failed to say.

While the summing up, reflected the varying perceptions of the institutions on the prospects for the world economy, and the potential and risks of globalization, in terms of the trade liberalization agenda of the trading system, it failed to mention the points raised by the UNCTAD head, Rubens Ricupero, that the agenda now reflected the issues of primary interest to of the developed world, but not those of the developing world.

It thus spoke of the open trading system as essential for deepening the flow of technology and information around the world, of liberalization of financial services sector.

In his speech, the UNCTAD head had raised issues of importance to developing countries -- tariff peaks, tariff escalation, tropical products and sensitive products like leather, frozen and concentrated orange juice, and many other agricultural products, many of which face several hundred percent tariffs; or issues in trade rules like abuse of anti-dumping measures.

The summing up said that the overall favourable outlook with good conditions for continued expansion over the medium had created a window of opportunity that should not be lost. The emerging new world economy, based on dual forces of an 'economic revolution' and a powerful technological revolution, makes it possible for countries to leapfrog ahead and take advantage of globalization.

However, all is not well with the world economy. Some 25% of the world's population lives in poverty, over 50% of the world's population have less than 5% of global income, and the gap between the rich and the poor is very wide and widening as between the NICs and other developing countries. Unemployment is at unacceptably high levels - not only in developing, but also developed countries.

The current world picture is one of light and shadows, and the world economy is polarizing more than converging. The increasing inequality among countries and inside societies could trigger a backlash negating many of the recent positive developments.

Globalization brings with its considerably potential for good, but has also a downside, and structurally weak countries face the threat of marginalization and exclusion.

The summing up also picked up the "eleven commandments" of Camdessus, and spoke of the need for further reforms including the quality of fiscal adjustment, bolder structural reform, better governance and public accountability, and improvements in domestic financial institutions.

But globalization does not mean giving free rein market forces, the summing-up went on, adding that the role of the government is more crucial than even before.

International cooperation and new approaches to international governance are imperative for an enabling international environment and "building a free, open. fair, equitable and rule-based system is essential; the alternative of power-based relations is too appalling to contemplate."

Consideration of labour standards and other similar issues should be in the appropriate context (ILO) and should not lead to protectionism or affect the comparative advantage of developing countries.

Globalization calls for greater solidarity, and developed countries should strengthen their domestic policies by pursuing low inflation, low interest rates and open their markets to developing countries, and improve macro-economic policy coordination.

The multilateral trading system, it said, is itself a key element in fostering and enabling environment for development and an open trading system is also essential for deepening the flow of technology and information around the world.

"Equally important," it added, "is liberalization of financial services sector and ensuring stability of financial markets as well as of capital flows."

The President's summing up thus in effect picked up the trade agenda of the United States and the industrialized world that were highlighted as a global agenda by the WTO head, but none of the issues of the developing world highlighted by UNCTAD.

The summing up also said that ODA is more essential than ever before and is the best investment in the future of the human family and the negative trends in ODA should be reversed.

It also called for providing the IFIs with more resources to help the poorer countries in their fight against marginalisation, placing the IMF's ESAF on a permanent footing, and bringing more countries into the HIPC Initiative for a comprehensive and durable solution.,

Policy coherence is essential at national and international levels, and cooperation between the BWIs and the WTO, and between UNCTAD and WTO should be increasingly pursued to promote greater coherence between trade, investment and financial policies.

Closer cooperation and coordination is also needed between the UN, the Bretton Woods Institutions and the WTO, to provide integrated support for implementation of internationally agreed policies and goals emerging from recent global conferences.