6:19 AM Jan 19, 1996

GLOBAL POLICY ISSUES FACE UNCTAD-IX

Geneva 18 Jan (Chakravarthi Raghavan) -- The Ninth Session of the UN Conference on Trade and Development (UNCTAD-IX) at its meeting in South Africa in April-May is being called upon to consider and decide on a mixed bag of issues - some of a policy approach and preparatory work for future multilateral negotiations and others on technical assistance programs including those for continuing and intensifying current ones.

The issues and suggested course of actions are in the Report of the Secretary-General of UNCTAD to the Ninth Session of the Conference.

In a foreword, UNCTAD Secretary-General Rubens Ricupero who took over in September when preparatory work for UNCTAD-IX had advanced considerably within the secretariat, has characterized the report as a 'working document' for an ongoing dialogue, and inviting comments and inputs from governments, multilateral institutions, academia, private sector and NGOs.

In private conversations with many delegates and other visitors, over the last several weeks, Ricupero has said that he would welcome their comments and views, not so much on the analysis but on action-oriented recommendations and programs and that in the light of them he might come up with more definite recommendations to the Conference.

Some 34 pages of the 78 page document, devoted to a discussion of liberalization and globalization and development, has sought to provide an analytical framework for the various substantive issues: trade policy, trade efficiency, commodity issues, the new and emerging issues, promoting enterprise development and competitiveness in developing countries and transition economies.

The major theme of the Conference, built around globalization and liberalization for development, and the broad framework of issues to be tackled under them, were agreed to in mid-1994.

The globalization and liberalisation debate has been influenced since 1990 by the neo-liberal ideology in the Washington 'consensus'. This was a consensus that evolved in the 1980s after the outbreak of the debt crisis -- a consensus amongst Congress, the Administration, the IMF and World Bank, and the think tanks centered there, and which over the next 2-3 years, under the Fund/Bank conditionality and influence, was embraced by the developing country finance ministers and the transition economies. And for a while it looked unstoppable and the only truth in economics.

In picking the theme at that time, UNCTAD sought to make its development focus relevant in this context, and find ways and means by which its risks and the dangers could be mitigated by the developing countries and the international community.

But the Mexican peso crisis of December 1994 made this neoliberal 'Washington consensus' a bubble that burst.

So far even the IMF and the Bank are struggling to find modifications to make the policy credible for benefits to the people and the poor among them.

But the sharp debates over neo-liberalism, raised by the Mexican peso crisis and its continuing after effects on the one hand, and the social marginalisation and increase in poverty that it has brought about not only in the South, but in the North too, is merely getting under way and seems unlikely to be resolved even by the turn of the century and this neo-liberalism too could prove to be a "short 20th century".

The UNCTAD document has attempted to present a mixed picture of benefits, problems and risks of liberalization and globalization and the resulting integration of national economies into a world economy, presenting the pros and cons in somewhat theoretical terms by using "can" both about the risks and benefits. It has been fairly reserved in offering a definite view of its own, and using language in portions of analysis that could appeal to both sides of this debate.

It paints in more positive way the role and beneficial effects of foreign direct investment and the transnational corporations - in substituting for domestic savings, in bringing in technology, setting up new production and growth and welfare effects.

It refers to the role of "international production including transnational production", but does not clarify what is the non-TNC international production and its significance and weight.

The view is advanced that countries by liberalizing the inflows and outflows of capital, and openness to foreign capital, could promote growth and development.

However, even if the history of the Third World is ignored, the experience of much nearer Ireland (in Europe and part of the EU, and on which there is a wealth of economic writings and material) shows that it has been unable to solve the unemployment problem or create a self-sustaining growth where the indigenous sectors and enterprises are able to innovate and produce or of TNCs continuously upgrading their technology and diffusing it. The reasons being attributed are variegated, but there is little question in the debate about the facts.

It is much more clear that while foreign capital and TNCs could be useful to help initial stages of development, an active State role to counter the negative consequences and promote positive linkages of such a foreign sector with the domestic economy would be needed.

The report notes that the principal driving force in globalization drive is the search of private and public firms for profits world-wide. TNCs invest and engage in activities abroad in host countries which have large domestic markets, or cheap labour or location to supply regional markets. They are driven by this profit and capital accumulation motives. Even if shares of such corporations are quoted in other share-markets and purchased by other nationals, the control remains that of major shareholders in the home country. A pepsicola or a cocacola, however global its operation, is for the benefit of its home shareholders. Whether it is a TNC from the US or one from Korea, Malaysia, India or Brazil, the TNC is looking to profit maximisation for benefit of shareholders in its home country.

And if nations in this process of globalization through transnationalization are losing autonomy, but still are faced with the social problems, there is need at international level for institutions and governance to deal with such TNC activity, just as the State in just a few decades sought to hold the balance and bring about social equity. The report hints at need for such action on a global scale, but has not explored further its nature.

In its discussion of some of the substantive issues of a future multilateral negotiating agenda involving investment, competition, environment and social standards or the built-in WTO agenda, the commodity problems, the debt issues, and the conflicts among nations arising out financial and monetary policy conflicts among the majors, the report hints at some serious questions about how the liberalisation and globalization is proceeding or is being pushed.

Speaking at the Caracas regional preparatory meeting of the Latin American and Caribbean nations, Ricupero has differentiated the UNCTAD role from that of other economic organizations in terms of UNCTAD looking at the whole picture, the wood rather than the trees - a focus that does not clearly come out of the comments and views in the report on the individual substantial issues and their effects on development.

The analysis rightly emphasizes the differing situations of countries and the inapplicability of one model, and talks about the controversies and differences of the East Asian model for example, but little about the much larger controversies in the implied assumption about the liberalization policies and the neo-liberal anglo-saxon model.

The Mexican crisis, and its implications for countries with liberalized financial sectors, and the responses of the IFIs, including the IMF interim committee decision of October 1995 -- for increased surveillance to enable the IMF to respond to a similar crises -- is adverted to as a step in the right direction, but with a question mark of its adequacy in the face of large capital flows.

The analytical framework presents globalization as an exogenous inevitable process to which developing countries need to adjust to take advantage of its benefits and avoid risks and mitigate the marginalization effects.

But what is missing is an analysis of the nature of the global integration now taking place.

In a final chapter offering some personal reflections on the future work in UNCTAD, Ricupero sees the world as at a historic moment which could give substance to a vision which began with the European age of maritime exploration five centuries ago, but which the Phoenicians, Vikings, Chinese and other great trading peoples dreamed of: the unification of markets and of economic space on a planetary dimension.

The vision of unification of markets and economic space on a planetary dimension that began with the age of European maritime exploration was however different from that of the earlier ancient trading nations because the Europeans as maritime powers had emerged from feudalism to mercantilism, and were on the way to industrialization.

This was why Vasco da Gama and Colombus's "exploration" and maritime activities, including that of the Dutch before the Britain became the industrial centre and prevailed over them, led to European colonialism and colonization of the Americas, Asia and Africa. Those attempts to integrate countries, markets and economic space, resulted in a selective integration of economies and markets, in creation of enclave economies in what is now the Third World -- port-based centres of foreign trading and supply (to the metropolitan centres) activities and plantation agriculture to supply commodities for Europe,

The current process of integration, through liberalization and globalization activities of the TNCs is similar, but more deliberately, selective, without direct exercise of political power.

The globalization and liberalization process is now being driven not from the perspective or interests of the South, but of the industrialized North and the neo-mercantilism there. The integration efforts are hence being pushed in sectors where the North has an overwhelming advantage.

Hence the push to liberalize, and liberalize precipitately, financial services and other service sectors through investment and commercial presence where the North has major competitive edge, for deregulation and privatization of basic telecommunications (which the report in its detailed trade efficiency part seems to support) and other infrastructural and producer services, bringing them under the grip of Northern-based TNCs. Hence also the drive in WTO goods negotiations on High-Tech sectors of traded goods -- where again the technology is not only closely held by the North and its TNCs, but whose diffusion and spread will be impeded and thwarted in the future both by the TRIPs agreement of the WTO and the other restrictions on technology purportedly under security considerations.

But in areas of comparative advantage and competitivity from the South, there is no movement towards liberalization and integration of economies: supply of labour services and labour-intensive goods (sectors of agriculture, textiles, clothing, footwear etc), and commodities and processed goods. It is this asymmetric integration that UNCTAD, and its developing member nations, have to come to grips with, in the efforts to find space for development and to answer the question posed in the final paragraphs of the report by the UNCTAD Secretary-General when he spoke of the justification for UNCTAD's regeneration and its sole claim for continued existence as "in its ability to make a relevant contribution to the tasks of fostering growth, reducing inequality, and building its capacity to make a difference to people's lives".

He posed it in terms of the attention paid to Africa and the Least developed countries as a whole, but equally relevant for the problems of poverty that is more widespread and even reaching back again into the rich North.

Ricupero in the report's final paras said: "If it is true that each society will be measured by the way it treats its more vulnerable members, then the international community in general, and UNCTAD in particular, will ultimately be judged according to the attention they pay to Africa and to the LDCs as a whole. This is the central problem, the major challenges of the fin de siecle. It will no doubt be with us as a doleful legacy. It is an old, indeed a very old problem, for nothing in mankind's history is older than poverty and deprivation. But the circumstances of the problem are new.

"For while globalization renders deprivation intolerable, it may for the first time show that the problem is mature for a lasting solution. Moreover, globalization makes the problem inescapably that of all of us. We cannot shirk our responsibility. We must hope therefore that the benefits from a global economy will more than match its costs and that the net balance will be enough to eradicate poverty and human under-development.

"We shall have at hand in South Africa and beyond the possibility of starting to redirect these powerful forces to that end provided that we are able to build confidence and consensus in the renewed spirit, approach and language required by the new times. For, as T.S.Eliot wrote, 'Last year's words belong to last year's language. And next year's words await another voice'."

The report adverts to some of the negative consequences of lack of liberalization in the individual sectors of interest to the South and proposes actions to liberalize, suggesting even an attempt to repeat the Uruguay Round process of trading market access in these for liberalization of services etc sought be the North.

Would it succeed now or be as Hegel put it a case of Third World forced to repeat the lessons of history because it refuses to learn from it, and is set on a course to Singapore for a broad agenda for future.

This kind of trade-off was envisaged when the Uruguay Round was launched, but when it concluded resulted in no such trade-off, but with more obligations on developing countries.

In attempting to show in November 1994, that the Punta del Este promise of more market access for developing countries was met in the trade-weighted average of tariff cuts on industrial products, the WTO secretariat was able to show a higher percentage of tariff cuts on exports of developing countries only be excluding textiles and clothing, fish and fisheries products and leather and leather products including footwear. The first two exclusions were indicated in the November document, but it was only at an UNCTAD meeting last year (and a UNCTAD secretariat report) that the WTO economists agreed that footwear was also excluded. This suggests that only negotiations limited to these issues that could create a public pressure where the North could be forced to concede in return what had been obtained by it in the Uruguay Round. It also means that the developing world must find a common approach, bridging their differences, not to confront, but bring collective thought to bear for international coordinated action.

Most of the globalization emphasis in the Secretary-General's report is on finance and capital mobility, of creating level playing fields (for TNCs) with the report's analysis presenting its benefits in broad strokes but with little about the negative effects.

The analytical framework of benefits and risks of liberalization and globalization in the document does not deal with the consequences (to the South, or even to the North) of this selective, Northern-driven, globalization and integration via the new and emerging multilateral negotiating agenda of trade and investment, trade and competition, trade and environment and trade and labour standards -- and the issues lurking behind of trade and human rights, trade and the gender issue etc -- all pushed in terms of a globalizing economy, integration of national economies into a world economy and need for 'level playing fields'. These contrary questions are dealt with in individual areas of discussion - but not in an coherent, analytical overview.

The slogan of 'level playing fields' was brought up by the US and Britain, when they saw their industrial competitivity losing edge before Germany and Japan, and was used to force upon the financial markets in these countries where the two thought they had competitive edge. It was also used against the Far East NICs and the rising competitivity there.

But the 'level playing field' theory is being used generally by the North for opening Southern markets, in the push for globalization and integration of the world economy through TNCs. One of the TNC advocates, Canadian economist Sylvia Ostrey, openly used it in 1990 in pushing the US and Europe to settle their mutual disputes and help conclude the Uruguay Round - painting the TNCs as the integrating agents of the world economy and the Uruguay Round agreements and its rules as needed to create 'level playing fields'.

But even Ostrey has conceded elsewhere in 1993 conceded that the TNCs do not transfer or diffuse technology in the countries where they operate.