Sep 9, 1986


GENEVA SEP. 5 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The Secretariat of the UN Conference on Trade and Development should conduct studies and prepare a comprehensive blueprint, to be discussed at UNCTAD-VII, for a new multilateral trading system, the Group of 77 suggested Friday.

The spokesman of the group, Ajit Seth of India, was speaking in a committee of the Trade and Development Board, during its review of the international trading system.

The Board has before it two Secretariat Reports, one reviewing the international trading system, and the other on services.

In introducing the reports, the Director of the UNCTAD's Manufactures Division, B.L. Das, had told the committee that the general tendencies towards erosion of the system continued to exacerbate.

"These tendencies", he said, "included the neglect of the unconditional MFN clause, increased resort to managed trade mechanisms, and bilateral as opposed to multilateral arrangements.

And while a number of other studies elsewhere covered the same area, none of them had related (as UNCTAD had done) these developments to the fundamental changes in other areas like financial flows, changes in technology and the structure of the world economy as a whole.

"Efforts by the international community to strengthen and improve the trading system", the UNCTAD Official underlined, "will have little chance of success if they are not made in a full awareness of these strains originating outside the trading system and of the underlying economic and political factors".

Referring to the efforts to launch a new round of multilateral trade negotiations, Das added "The mere holding of negotiations, in itself, is no guarantee that they will result in a strengthening and improvement of the international trading system".

"In fact the negotiations could well have the opposite outcome, particularly if they merely serve to legalize their (industrial countries) existing trade practices and domestic legalisation which is in conflict with current multilateral principles, or facilitate increased discrimination, trade management and retaliation".

Das contrasted the just concluded MFA-4 and the moves for trade liberalisation through a new round, and said the new MFA implied that "special restrictive measures", and the derogation from GATT would continue in this important sector for another five years, and that the coverage would be extended to all vegetable fibres.

"It should be remembered", he added, "that textiles accounted for a substantial portion of manufactured exports of the third world countries".

Speaking for the G77, Seth supported the conclusions of the UNCTAD reports on the main symptoms of the erosion of the trading system.

"In addition", he said, "there was increasing resort to discriminatory protection against third world countries as seen in the MFA-4, which with its extended fibre coverage left perhaps little room for further deterioration".

Other discriminatory or selective protection against third world countries included agriculture, where there was escalation of competition by major industrial partners through subsidised exports of agricultural products, the way the mineral sectors of the industrial countries were being protected by price fixing, and the depressed commodity prices.

Another area not covered by the GATT System was the increasing resort to restrictive business practices (RBPS) by the TNCS - whose "in-house" trade now accounted for 30-40 percent of world trade, and with 50 percent of world trade in the hands of a limited number of TNCS - and this made it easy to apply protectionist measures.

There was also the tendency of some industrial countries to make continued availability of existing levels of access to their markets conditional on third world countries opening up their own markets in return.

In such a situation the trading system could be preserved only through immediate actions on standstill and rollback of protectionist measures, conclusion of a comprehensive safeguards agreement and trade liberalisation by industrial countries, based on effective application of GATT rules and principles, in agriculture, tropical products, natural resource products, and textiles and clothing.

On the efforts of the US and others to bring services and investment issues into discussions on international trade, the Indian Delegate wondered why discussions were sought to be concentrated only on one of the factors of production, namely capital.

These partial initiatives retarded emergence of consensus in discussions on trade, and "whether a need exists for any multilateral framework on trade in services would have to be a subject for further examination".

For most third world countries, services was a question of development and not of trade, and a vehicle for new technologies that required a set of rules to facilitate such development.

An effective and functioning new international trading system must not only deal with the deficiencies in the current system in the area of goods, but also deal with areas not covered by the GATT System - commodities, RBPS, particularly of TNCS, and should be able to respond to needs of third world countries.

"The UNCTAD Secretariat", the G77 spokesman said, "should conduct studies to prepare a comprehensive blueprint for a new multilateral trading system, so that this could be discussed at UNCTAD-VII".

Canada, speaking for the OECD Group of countries, viewed with "some disappointment", the Secretariat Document, "with its overly pessimistic tone, unduly critical analysis of the functioning of the GATT System, and its anti-developed-country bias".

The OECD spokesman also thought that the Secretariat was confusing the "international trading system", with the "GATT system", sometimes viewing the GATT as the International System and at others including within the international system areas such as commodities, RBPS and activities of TNCS (not covered by GATT).

"GATT is not a universal organisation per se, but a contractual one open to those prepared to negotiate terms of accession, accept its basic market-economy principles, and make its trading and economic systems GATT-compatible", he declared.

On the UNCTAD study on services, the OECD spokesman said it was "interesting and thoughtful", particularly in its assessment of the role of producer services.

But the OECD spokesman complained that here and there in the report, economic arguments gave way to political and social factors, which were properly the business of governments, also the policy prescriptions proceeded on the assumption that activities of TNCS, by their nature, were detrimental to the interests of third world countries.