BOARD ACTS ON PROTECTIONISM, ECONOMIC GROUPINGS ISSUES.

Mar 21, 1989

BOARD ACTS ON PROTECTIONISM, ECONOMIC GROUPINGS ISSUES.

GENEVA, MARCH 1 (IFDA/CHAKRAVARTHI RAGHAVAN)— The UNCTAD trade and development board Friday night adopter unanimously a decision on protectionism and structural adjustment, reaffirming commitments in UNCTAD-VII final act and agreeing to study, at a future session, the implications of bilateral and regional trade integration arrangements.

While couched in general language, the major focus in the last would be on the U.S.-Canada bilateral agreement for "free trade" and the European Community plans for a single internal market from 1992.

Both these admittedly are expected to have "a major impact on global trade", and particularly on the trade and development of third world countries, and have arouse wide concerns among all countries outside the particular arrangement.

Though it is not mentioned this will be part of fulfilment of UNCTAD’s mandate relating to the international trading system, from the wider perspective of its "universal" membership and its focus on third world trade and development.

The board ended the substantive part of its work sitting beyond midnight friday, but will meet next week to formally adopt its reports, as well as two decisions on which texts were not available in all languages Friday night.

Among other decisions in trade areas were those relating to east/west and east/south trades.

The decisions to be formally approved next week include procedural decisions with substantive overtones on issues of sustainable development and UNCTAD’s contribution to the international development strategy for the 1990’s, which the UN general assembly is to consider and adopt at a special session next year.

The substantive decisions on protectionism and trade matters was a surprise, and marks the first time since 1985 when UNCTAD has acted on these matters at board level.

Since 1985, the OECD countries have been trying to reduce UNCTAD’s role and mandate and have been blocking adoption of substantive resolutions or decisions, particularly in areas of trade, which they feel should be left to GATT, and areas of money and finance to be left to the Bretton Woods institutions.

Even in other areas acknowledged to be under UNCTAD’s mandate, there have been similar tendencies, aimed as far as the U.S. is concerned to reduce UNCTAD to a talking shop for exchange of information and views among governments, with the secretariat's role of analysis and studies steadily sought to be whittled down.

One factor that perhaps helped the decision this time on protectionism and structural adjustment, and the study called there on the bilateral and regional moves, is perhaps related to their mutual concerns.

The U.S., Japan and others are concerned over the 1992 single internal market in the EEC, and the EEC concerned over U.S. moves towards "managed trade", whether through bilateral agreements as with Canada or those being talked about with Japan.

When the board began its session on March 6, and in the sessional committee, the Group B spokesman (Ireland) had clearly indicated that nothing more than a chairman's summary or agreed conclusions could be possible.

The U.S. had openly said in the sessional committee that the exchange of views on these issues was itself a satisfactory conclusion.

Why the U.S. and others at least acquiesced in the decision to give UNCTAD a role is not clear. Nor was it clear whether this represents a movement away from the trends to downgrade UNCTAD or merely an exception.

However there are those who see an increasing role for UNCTAD and other more universal institutions, in the context of the looming crisis in the world economy, rather than GATT or IMF/World Bank.

They see this in the light of the U.S.-EEC tendencies to settle their trade and economic problems, mutual as well as with the rest of the world, on a unilateral or bilateral basis, using mercantilist and managed trade instruments.

Irrespective of progress in the Uruguay round, for example, this would make GATT and its multilateral system based on non-discriminatory rules and principles, largely irrelevant.

The board agreed to consider the impact of technological changes on patterns of international trade at the next session of the board, it took no action on the issue of services, which was discussed but without any effort to formulate any decision.

In its decision, the board urged governments "to implement fully" the commitments to halt and reverse protectionism as agreed in the final act of UNCTAD-VII.

The board also reiterated the need "to observe the agreement in ... the final act of UNCTAD-VII which states that the observance of multilaterally agreed commitments on trade in goods should not be made conditional on receiving concessions in other areas."

At UNCTAD-VII, this was incorporated into the final act, which was adopted by consensus, with the United States and its use of section 301 of its trade law to extract concessions from third world countries on intellectual property protection, investment rights, and the services "trade", including right of establishment, for U.S. Transnational Corporations (TNCS).

Since then, the EEC too has been adopting such measures, though not flaunting it as the U.S., whose trade representative recently made clear that the U.S. would continue this course even if the GATT ruled its actions illegal in the dispute with Brazil now referred to adjudication by a GATT panel.

The board resolution also recognised the need "to avoid abuse of such non-tariff measures as anti-dumping and countervailing actions, and discipline as appropriate resort to other non-tariff measures which have an adverse effect on products and sectors of export interest to developing countries".

The board reiterated the need for governments to take expeditious and concrete structural adjustment actions favourable, in particular, to the widening of markets for exports of products, in which third world countries have or might develop comparative advantage.

Going slightly beyond the UNCTAD-VII final act, the board asked governments to consider, as part of their fight against protectionism, "concrete actions" for establishment of transparent mechanisms at the national level as indicated in the final act.

Since UNCTAD-VII, the OECD countries have been arguing that the final act had asked governments to consider such a step, and there was nothing further to be done, if governments have considered it and taken no action or decided to take no action.

The board also asked the UNCTAD secretariat to carry out a study of the costs and consequences of non-tariff measures, in particular those which adversely affected the exports of third world countries.

In undertaking measures to improve market access, governments were also asked to bear in mind the special problems faced by the least developed countries.

In the area of trade relations among countries having different economic and social systems, the board adopted a decision to establish an intergovernmental group of experts whose main function would be to contribute to the elaboration of a programme for promoting the inter-systems trade.

The group, expected to meet before the end of the year, is mandated to "analyse and evaluate existing and evolving trends and potential factors related to inter-systems trade with a view to identifying the problems and constraints within inter-systems trade as well as potential areas and necessary conditions for further expansion of that trade".

These might include inter alia "preference schemes, financing of inter-systems trade and economic cooperation including payments arrangements and joint ventures".

On the basis of this work, the group will elaborate the elements of a draft programme and recommend to the board the future orientation of research work within the secretariat.

Parallel to this, the secretary-general of UNCTAD is to continue and complete, in the course of 1989, the consultations he was mandated by UNCTAD-VII and decisions of the board, for the strengthening and promotion of inter-systems trade.

The secretary-general has been invited to make a preliminary report to the inter-governmental group, before reporting to the board at its next session.

The decision also provides for continuation of the UNDP-financed UNCTAD technical assistance in this area to third world countries for promotions and expanding trade with socialist countries of eastern Europe, and for an assessment of this programme is to be made available to the intergovernmental group of experts.

During the consideration of this item in the sessional committee, Soviet spokesman, Aleksei Rubinin said that in the light of new orientations in USSR foreign trade policy and reforms in other socialist countries of eastern Europe, questions relating to their participation in world trade have to be placed in a universal context, and not as hitherto in the framework of inter-systems trade.

The latter should be seen as an integral part of the world trade.

In this light, Rubinin said, the programme to be mounted in UNCTAD should cover the basic orientations of the secretariat's work, including meetings of inter-governmental group of experts or seminars and technical assistance.

If such a programme proved effective, he added, it might not be necessary in future to summon a sessional committee of the board every year to deal with inter-systems trade, but only as required.

This approach, he said, represented a more profound participation by the USSR in the world economy as well as the "radical decentralisation" of external foreign trade management in the last few years.

In presenting the committee's report to the board, Friday, Hani Khallaf of Egypt, chairman of the sessional committee, referred to the "new trends and important changes in national policies and mechanisms" which he said made it difficult "to control the effects of policies at the external level".

The new tendencies, he added, might provide an opportunity to "consolidate trends".

The sessional committee, Khallaf added, had drawn up the beginning of an international arrangement, and he hoped the intergovernmental group of experts as well as the planned consultations by the UNCTAD secretary-general would be used to advantage, especially for promotion of east-south trade.