Sep 21, 1988


GENEVA, SEPTEMBER 19 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The need for building up international consensus to solve the debt crisis through consensual and systematic reduction of interest rates and debt stock, and parallel actions to tackle priority areas of concern for the third world in the Uruguay round, were advocated Monday by the UNCTAD Secretary-General, Kenneth Dadzie.

Looking beyond the immediate issues, Dadzie also called for actions to translate the institutional efficiency of UNCTAD into "political effectiveness" through tangible progress in its development mission.

He advocated in this connection actions for reinvigoration of international commodity policy, exploratory work in UNCTAD of an improved international trading system "looking beyond the horizon of the Uruguay round", and mobilisation of support for south-south cooperation.

Dadzie, who was addressing the 35th Trade and Development board session, said in recent years awareness of interdependence of economies and issues had greatly heightened, and there had been some progress in strengthening plurilateral cooperation.

The major market economies had taken "a more realistic" assessment of capacity of unregulated currency markets to produce sensible exchange rates and engaged more heavily and systematically in official interventions, and had also sought to correct U.S. payments deficits symmetrically by policy efforts of both surplus countries and the deficit.

But coordination would need to be strengthened further to achieve a rapid rhythm of activity. In both surplus and deficit countries fiscal policy would need to be deployed more flexibly to reduce burden on monetary policy, and the recent tendency for increase in interest rates would need to be reversed.

However, third world countries continue to be subject to the traditional asymmetric approach, putting the onus of adjustment on the deficit counties, particularly on debt.

The debt strategy so far had been based on the idea with vigorous domestic adjustment and new lending; the indebted countries could grow out of their problem. But due to inadequacy of lending and failure of external environment to improve, the expectations of the debt strategy were no longer tenable.

With room for adjustment well nigh exhausted, debtor countries would be unable to grow without additional resources. And if they borrowed such resources on commercial terms, they would be unable to improve debt indicators.

Hence the UNCTAD suggestion to complement the current menu of approaches by "wide recourse to consensual, orderly and systematic reduction of interest charges and/or stock of debt", Dadzie said.

The UNCTAD proposals were intended to achieve a debt reduction for all categories of debtors and various types of debt, taking account of particular circumstances of each debtor, and would benefit both creditors and debtors.

Dadzie hoped the boardís consideration of these proposals would generate "the necessary political impulses and build the requisite consensus for concrete action in all appropriate forums, including UNCTAD, and by governments".

An essential assumption for solution of the debt problem was improved efficiency of investment by debtor countries to achieve a substantial increase in exports.

It was difficult to conceive of any long-term solution to the debt problem without a substantial improvement in the export performance of the indebted countries, and this lent additional urgency to the ongoing Uruguay round trade negotiations.

The highly complex negotiating process in the round was dealing with a large number of issues crucial to the third world, including tropical and natural resource-based products, escalation of tariffs, non-tariff barriers, textiles and clothing and safeguards.

"If the international trading system is to be conducive to development, it is imperative that progress be made in these areas", the UNCTAD official said, referring to third world dissatisfaction with the progress as far.

The commitment to "make room" for manufactured exports from third world in the major import markets was "a long standing one".

The development crisis engulfing most of the third world countries made it all the more important that concrete steps be taken to honour the commitment.

There should be effective rollback of existing non-tariff barriers, accompanied by other measures to improve market access. Strict adherence to the standstill and rollback commitments was essential for the success of the Uruguay round.

The Montreal mid-term review "must be fully used to give the negotiations the political impetus they need and to make progress in areas that are critical to developing countries".

"This will enhance the confidence of all parties in the prospects of a mutually satisfactory outcome".

Welcoming the various macro-economic co-ordination efforts among the major market economies, Dadzie said that the focus should be broadened beyond imbalances among the major market economies.

"They should also estimulate action with the same end in view to expand the import capacity of developing countries and, more generally, to work more strenuously in a multilateral setting towards improvements, including greater stability, in the world trading and financial environment".

Addressing himself to the role and work of UNCTAD, Dadzie noted that the final act of UNCTAD-VII had provided a stronger platform than existed previously for international cooperation to revitalise development, growth and international trade.

In the final act, the governments had pledged themselves not only to give effects to policy approaches and concrete measures agreed to but also enhance effectiveness of UNCTAD as an important instrument of international economic cooperation.

An analysis of performance in giving effect to the final act, Dadzie suggested, showed a mixed picture.

While there had been some encouraging developments, others had been more disappointing, Dadzie said without specifically mentioning the areas.

"But there are welcome signs that the retreat from multilateralism, so evident during the period preceding the conference, is being turned around", the Secretary-General said.

In UNCTAD governments had been paying much attention to rationalisation and methods of work, and the secretariat had undergone a substantial reorganisation.

UNCTAD had now "the makings of a more efficient intergovernmental and secretariat machinery".

And while much sustained effort would be needed to ensure efficiency was achieved and maintained, "what is even more important is to translate institutional efficiency into political effectiveness so as to make tangible progress in the development mission of the organisation", Dadzie declared.

In many of the areas UNCTADís work was "on track" but needed continuous nurturing, improvement and strengthening.

Dadzie mentioned in this connection ongoing work at the board on reviews of interdependence and debt, protectionism and structural adjustment, UN conference on least Developed Countries, and the UN programme for Africa (UN-PAAERD).

In other areas it was necessary for governments and the secretariat to marshal available capacities and provide new momentum as well as fresh orientations.

Dadzie referred in this connection to four areas where "new forward movements" could be generated in one or two years; reinvigoration of commodity policy, exploration of elements of an international trading system, strengthening UNCTADís capacity for analysis and advice on national trade and adjustment policies, and mobilisation of support for south-south cooperation.

The long-term solution to the problems of commodity-dependent third world countries, most of whom where LDCS or others in Sub-Saharan Africa, Dadzie said, lay in diversification, which required determined national efforts and committed international support.

Meanwhile these countries needed "a safety net for survival".

It was also necessary not to lose sight of other objectives: achievement of a stable and more predictable conditions in commodity trade, enhancing cooperation among producting countries in rationalisation of investment and supply management, improved compensatory financing for shortfalls in export earnings, increased participation in PMD (Processing, Marketing and Distribution), and access to markets.

Governments would have to work out and implement effective policy measures and cooperative approaches to determine appropriate international action in respect of individual commodities, as well as cross-commodity initiatives.

The imminent entry into force of the common fund should be seized to launch a decisive effort to promote the use of the fund as an instrument of international cooperation on commodities, and give assistance as needed to put faltering international commodity agreements back on track, Dadzie suggested.

On the international trading system, Dadzie underscored the need to look well beyond the horizon of the Uruguay round, and look ahead objectively to trace possible directions of evolution for strengthening of the system of the basis outlined in the UNCTAD-VII final act.

By the end of the century, he pointed out, the economic integration of the European Communities, the economic reforms in the Soviet Union and China, the sharpened export capacities of some third world countries, and growth of trade among third world countries would have created "new realities in world trade".

While not the stuff of current negotiations, these were important issues for study and clarification, in anticipation of a future agenda for deliberation or negotiations.

Also, though would have to be given as to the vest way of integrating the development objectives in the international trading system of the future, so as to be more responsible to the need of third world countries.

On south-south cooperation, Dadzie said that this was a growth area for the world economy, but perhaps also the weakest link in international economic cooperation.

UNCTADís role, Dadzie said, was to be "supportive" to initiatives from the south, whether regional or Ė as in the recent instance of the GSTP (Global System of Trade Preferences) and the South Commission Ė Interregional.

But the key to the potential of south-south exchanges lay "in the perceptions of political and economic leaders of developing counties".

"There are indications", Dadzie noted, "of a widespread tendency for the pressures of the fight for survival and the immediate prospects of north-south relationships to divert attention of those leaders from the more distant fruits of south-south cooperation".

"Furthermore, there may well be some anxiety in international forums such as this one that south-south issues may be used to deflect pressure from the north-south agenda".

"It would be tragic however, if such problems of perception were to continue to retard the liberation of the enormous potential of the developing countries".

"Innovative ways must be sought to enhance consciousness of the southís own capacities for mutually beneficial exchange and for more effective participation in global economic management".

"The alternative prospect is of the marginalisation of the developing countries in the world economy".