7:22 AM Sep 24, 1993


Geneva 24 Sep (Chakravarthi Raghavan) -- The UN Conference on Trade and Development has hoisted some storm signals over current talk from industrial countries about new international trade agenda and new multilateral negotiating objectives for new disciplines that could offset comparative advantage of developing countries,

The UNCTAD secretariat warning is in a conference room paper at its current session of the Trade and Development Board {TD/B/40 (1)/CRP.1}, reviewing developments and issues in the Uruguay Round of particular concern to developing countries -- a subject that UNCTAD-VIII has mandated the Board to keep under review.

The paper refers in this connection to various suggestions for bringing labour and environment issues and setting global standards with trade instruments, as well as other ideas being discussed in quasi-academic publications for 'managed trade', using the current high unemployment concerns in the North to gain political advantage.

The paper itself does not identify or name the authors of some of these ideas and suggestions.

However, there has been suggestion from some high-level officials and key Congressmen in the United States on putting environment and labour standard issues on the agenda of the GATT (or whatever institution emerges out of the Uruguay Round), and to make this a part of the decisions for concluding the Round.

The EC Commission has come out in favour of putting competition and environment issues on the agenda of the multilateral trade organization it envisages to replace the current GATT.

While the need for international rules and disciplines on competition -- and against cartels, monopolies and oligopolies in international trade -- has long been pressed by the developing world, their efforts to pursue further, through binding international legal instruments, the current UN voluntary code (negotiated in UNCTAD) over restrictive business practices have in fact been opposed by the industrialized world which does not want any thing done to curb the intra-enterprise transactions of its Transnational Corporations.

The effort to put the competition issues in the GATT future negotiations is seen by some as an attempt by the industrialized world to write rules in such a way that problems that now affect them could be tackled through GATT competition rules and disciplines, and as a side effect, curb the powers of national authorities in developing countries to deal with TNC activities that affect their economies.

More recently, both in relation to the post-Maastricht EC and its social clauses, as well as EC's external trade relations, the EC Commission President Jacques Delors, has been talking both in the EC terms as well as in terms of the international trade and economic agenda on need for bringing on to the trade negotiations 'social clause'.

According to the Wall Street Journal, at the meeting of social affairs ministers of EC countries, at Brughes in Belgium, EC officials indicated they were exploring the possibility of requiring other nations to approach some high EC standards -- such as on worker health and safety -- as a condition for broader trade relations sought by these countries.

The WSJ quoted Mrs. Miet Smet, the Labour Minister of Belgium (which is currently chairing the EC) as saying about trade 'distortions' created by differing social norms, "We can either diminish our own or make it a condition to other countries for expanding trade that they adopt our norms. Most ministers are in favour of both.."

The EC Social Affairs Commissioner (Padraig Flynn) was also quoted as echoing Mrs. Smet's views. "We are in competition with central and eastern European countries, the US, Japan and others..They have different rules and apply different standards and they have the advantage...There's no question that global minimum standards in certain areas, such as health and safety, would be contemplated...it would obviously help and we support the thought..."

A number of other politicians and officials, in and out of power, in the United States and Europe have also been talking about 'free trade being alright between Europe and the US which share common values (of consumption, life styles etc presumably), but not justified visavis others where values are different, population and societal standards and cultures favour savings, hard work and willingness to accept lower wages and work longer hours.

Such views have also been heard in the European Parliament, among French politicians and ministers, and in the debates now in the United States over NAFTA and the Uruguay Round (and its provisions, even though over a 10-year period, for removing the discriminatory import restrictions, for example, on textiles and clothing trade originating in the developing countries).

The Clinton administration when it took over, and in its election campaign, voiced some thoughts and a few of them have been incorporated into socalled 'side agreements' over NAFTA.

In Brussels on Thursday, Mexican President Carlos Salinas de Gortari, has suggested the idea of similar side pacts (in the Uruguay Round). He has suggested this as a way to resolve the tangle and disputes over the agricultural trade issues and the Blair House accord -- where the US refuses to 'renegotiate' and the EC wants some changes, but through clarifications and interpretations.

But the idea of side agreements of Ministers and through a future work programme (without its agenda being spelt out) to be launched at the final Ministerial session of the Uruguay Round participants next April (if the negotiations on the Round is concluded by mid-December) has also been voiced and put through as a decision of the Trade Negotiations Committee by the GATT Director-General, Peter Sutherland.

Two recent World Bank staff papers have also tried to provide intellectual basis for these views.

The UNCTAD secretariat paper, without mentioning any of them or specifying names or the quarters from where this talk is emerging, has referred to the attempts to resurrect protectionist philosophies of 'managed trade' to achieve political advantage and talk of a post-Uruguay Round agenda to set multilateral disciplines to offset comparative advantage of developing countries.

The secretariat paper suggests in this regard the start of a more intensive consensus building process over objectives of future negotiations and ensure more universal acceptance of legitimacy of interests of various participants at various levels of development in the international system.

The UNCTAD secretariat notes that the Punta del Este Declaration envisages the international implementation of the results to be decided by Ministers meeting on the occasion of a Special Session of the CONTRACTING PARTIES.

However, a new element, in the shape of a future work programme to accompany the final package of results, has been added at the TNC meeting on 31 August, it notes.

Two categories of issues, the UNCTAD note says, could be associated with such a work programme.

Some of the agreements in the DFA specifically provide for further multilateral negotiations -- e.g. Agreement on Agriculture, General Agreement on Trade in Services, Agreement on Rules of Origin, the decision on Trade-Related Aspects of Investment Measures.

Other multilateral or plurilateral agreements -- such as government procurement code, civil aircraft and multilateral steel agreement -- could also be relevant in this regard.

But already visible, in parallel to efforts for concluding the Round, are efforts to define new multilateral negotiating objectives for the future.

It could be therefore expected, UNCTAD says, that new priorities would be pursued aimed at addressing new areas where, from the point of view of some major trading countries, there is a need for so-called "level playing field" for competition.

Such concepts, the secretariat comments, would seem to be a reaction to the state of liberalization achieved in relation to border protective measures, indicating that other economic policy measures which could influence competitiveness and investment decisions are perceived as requiring international disciplines.

Some major entities have mentioned to date as future negotiating objectives: lower environmental standards, weaker competition rules and lower labour and social protection standards as possible subjects for multilateral disciplines.

"However, these approaches can also reflect essentially protectionist motives and may well be directed at offsetting the comparative advantage which developing countries enjoy and could undermine their efforts towards increased participation in international trade, thus affecting their broader development prospects."

A particularly disturbing phenomenon in the context of a new international trade agenda has been the apparent resurrection of protectionist philosophy visible in the press and in some quasi-academic publications, the UNCTAD note comments.

Proponents of this philosophy, the note goes on, possible seeking to derive political advantage in the light of the current high unemployed levels in developed countries, have recently launched a counter-offensive against trade liberalization, proposing various 'managed trade' schemes as vehicles for sustaining employment in developed countries.

"Imports from more efficient producers are viewed as 'unfair competition', while growing exports to these countries are conveniently ignored. Despite empirical evidence to the contrary -- in that the overwhelming proportion of developed countries' trade is with each other -- competition from other socalled 'low-cost' suppliers is being made the political scapegoat".

Nothing in this philosophy, UNCTAD says is new. The modern international trading system has been designed to prevent such arguments from ever being translated into policy.

Also, in today's globally interdependent world, the costs of such short-sighted approaches would be much higher and unpredictable than ever before and the proponents of a new protectionism tend to forget the lessons of history and the fact that the origins of wealth and high living standards in the developed world has been based on exploitation of comparative advantage, diversity in labour standards aimed at developing a dynamic competitive edge, and continued trade liberalization based on non-discrimination.

These lessons were no less relevant to developing countries and countries in transition to a market economy and it was "paradoxical" that such arguments were being advanced at a time when most developing countries and countries in transition have adopted open market-oriented economic and trade policies and seeking comprehensive trade liberalization at a multilateral level.

The experience of the Uruguay Round, the secretariat note says, has highlighted the need for a more intensive consensus-building process at the international level to more clearly identify the objectives of future negotiations and achieve more universal acceptance of the legitimacy of interests of various participants at different levels of development.

This process should begin immediately in the post-Uruguay round period. Such work had already begun in the trade and environment area after the UNCED summit. This should now be expanded to cover new emerging issues on the international economic agenda and in this, in line with the Cartegena Commitment, UNCTAD could play a substantive role in building a consensus.