8:50 AM Sep 12, 1995

THE NEW RELEVANCE OF UNCTAD

by Bhagirath Lal Das* A Third World Network feature

Geneva Sep 11 (TWN) -- Is there a need for UNCTAD? Is UNCTAD relevant now? Should UNCTAD be wound up? These are the questions asked most frequently at diplomatic receptions and in the corridors of international organisations in Geneva these days.

Even the most ardent believers have developed some diffidence about the role of this organisation. Those to whom it did not mean much, even in its sunny days in the earlier decades, dismiss it promptly as inefficient, archaic and irrelevant. The more soft-spoken ones among them see it as duplicating the role of some other organisations.

Those, on the other hand, who have had long associations with it, look back at its past -- of stimulating ideas and fruitful negotiations in the areas of tariff preferences, commodity agreements, common fund, restrictive business practices, transfer of technology, multi-modal transport and flags of convenience shipping. They wonder how such a vibrant body seems to have lost its life force.

The problems which led to the establishment of UNCTAD and inspired the thoughts and negotiations there have not vanished from the world. They continue with greater ugliness, though their character and relative intensity might have changed. What has been absent, however, for a decade or so, is a matching intellectual exercise with fresh thinking to tackle these problems and a perceptive statesmanship around the world to understand deeply their long term implications.

The environment in which these problems have to be considered has changed significantly in the 1990s. It is now generally believed that widespread inward looking import substitution policies impede the injection of technological inputs into the industrialisation process. This belief has generated massive moves among developing countries to open their borders to imports and investment. Several socialist economies of Eastern Europe have re-carved their borders and all of them have shifted from centrally planned economics to market economics. About a dozen developing countries, mostly in Asia, have followed the path of well modulated trade, industrial and investment policies and have cast themselves on high growth trajectory.

The developed countries have recovered from the shock of the oil price rise of 1970s and the deep recession of early 1980s. They have been generally following coordinated policies to control inflation and are on a slow but steady growth path; and are generally satisfied with it. Their economic success for about a decade has given them confidence that their growth depends more on their mutually supportive policies rather than on the development in the other parts of the world.

These new technologies are mostly controlled by the transnational corporations (TNCs) which have emerged as powerful entities in the world. Most of them have dispersed their production and service activities over several countries. Backed by ever-advancing technology and big finance, the TNCs have the capacity to exert tremendous influence on the world economy.

An important institutional development has been the recent conclusion of the Uruguay Round of MTNs -- after nearly eight years of negotiations and uncertainty. This has strengthened the disciplines of international trade and it has created the World Trade Organisation (WTO).

Amidst all this change, the basic economic problems of the world continue to exist and multiply. A vast number of developing countries, mostly in Africa, are facing extremely low growth, grinding poverty and devastating starvation. Nearly half a dozen developing countries, mostly in Latin America, are swaying between high hopes of growth and investment on the one side and deep frustration of recession, inflation and unemployment on the other. Commodity dependence of most of the developing countries has increased and commodity prices suffer persistent decline. The infrastructure for industrial and agricultural growth is extremely poor in a large number of developing countries and flow of investment for this purpose is grossly inadequate. New and advanced technologies are generally bypassing them as they do not have financial and technical resources to absorb them. Thus the gap between the competitiveness of their firms and those of developed countries are getting wider.

Unemployment in developed countries is increasing and wage disparity in rising in some of them. The easy target in these countries is the import; and thus protectionist sentiments and pressures continue to grow, sometimes in new and varied garbs. The economic growth rate of developed countries is low and their population is almost stagnant creating doubts about their markets being effective engines to pull forward the world industrial growth or even their own growth. There is anxiety all around about depletion of natural resources of the world and the pollution of the soil, air and water, purity of which is necessary for the long term survival of mankind.

The positive and constructive approach and action of economic and industrial operators and also of individual governments can certainly help to tackle these problems, but it will be an exaggerated optimism to believe that these alone are enough to solve them effectively. Very often the objectives of the operators may not be fully aligned with the broader objective of the well being of the world. Individual nations are often too absorbed with their own preoccupations to consider the problems across their borders or even the long term problems of their own. These tendencies have been perceived more and more in recent years. Hence there is a genuine need of serious consideration of these issues at the international level.

Here lies the relevance and, in fact, the compelling need of an institution like UNCTAD. It has within its mandate almost all the issues mentioned above. These have to be taken up in an integrated manner, and any other organisation may find itself handicapped to tackle all these issues together.

(The author, a retired permanent secretary to the Government of India, was a former representative to the GATT and UNCTAD and later served in the UNCTAD secretariat as head of the trade programmes division of UNCTAD. This article in two parts was written specially for SUNS)