3:01 PM Sep 15, 1995

NEW FOCUS ON OLD ISSUES

By Bhagirath Lal Das A Third World Network analysis

Geneva 12 Sep (TWN) -- The world has changed in many ways since the establishment of UNCTAD in 1964, but the problems which led to the establishment of UNCTAD and the need for development of the South have not vanished from the world. They have multiplied and continue with greater ugliness.

What is needed, but absent for a decade or so, is a matching intellectual exercise with fresh thinking to tackle these problems and a statesmanship in the international community to understand deeply their long term implications.

Given the commodity dependence of poorer countries and the decline in commodity prices, serious attention has to be given to two issues: (i) how to create conditions for commodities to fetch appropriate economic prices, and (ii) how to encourage processing of commodities in poorer countries where they exist.

In respect of the first, there is a need to go beyond the old solutions -- like price stabilisation, commodity earnings compensation/stabilization (like stabex), price indexing, producers cartel etc. None of these types of support and intervention measures nor the market forces in commodity markets have resulted in uplifting the economy of commodity producing and exporting countries. The economic weakness of these countries and their extreme vulnerability to exploitation by economically strong and monopolistic operators in this field continues. New types of solutions to overcome these handicaps and to assist these countries to start on a rising growth path initially based on their commodity income have to be found.

In this process, the second issue, the increased processing of commodities in poorer countries, is also very important. Export of processed commodities rather than the raw commodities can bring higher incomes. But it needs use of technology and availability of financial resources which these countries do not have. Waiting for the emergence of entrepreneurs who would rush with technology and finance is not realistic. And technology has a special significance. Advanced technologies are radically changing the production process and transport of commodities, with the result that even in the field of commodities, developing countries may lose their traditional competitive advantage, if they do not introduce such technologies quickly and update them regularly.

UNCTAD is in the best position to handle the issue of prices and processing of commodities as it has a long experience of this matter, and no other institution will be able to undertake an integrated consideration of this issue which involves prices, technology, trade and investment.

The problem of market access and other disciplines in international trade have been elaborately covered by the World Trade Organisation (WTO). The operation of WTO is of contractual nature which has its advantages of specificity and enforceability; but it has, at the same time, the handicap of being constrained within the four corners of the contract. Open and frank consideration of issues is sometimes inhibited as every body is on guard whether any such discussion will lead to new commitments. UNCTAD has been providing a good forum for such frank discussion and consideration of trade issues. Broad consensus can be built in a preliminary way which can be later taken up for contractual negotiations in the WTO.

Besides, what is of special concern is that there are several areas in trade which may not be covered by the WTO and they need priority attention. For example, the WTO may find it difficult to discuss in depth the process of structural adjustment and change in developed countries which takes the production process to higher levels of technology often resulting in lower employment potential and disparities in income, and consequent building up of protectionist pressures with inevitable adverse impact on other countries, particularly the weak ones. The Trade Policy Review process of the WTO will not be effectively able to deal with it for various reasons including the fact that such reviews are largely concerned with specific trade measures, and the countries almost always defend their policies in such review. A frank discussion on the policies impinging on trade without the imminent fear of initiation of the process of enforcement of rights and obligations will be very helpful. And UNCTAD can provide such a forum where consensus can be built up on the structural adjustment process which should be more conducive to the trade and development rather than being restrictive in its impact.

Developing countries have widely accepted the utility of liberalisation of their trade and economy. With these broad objectives in view, there could be several alternatives to achieve the aims of individual countries. These countries will benefit immensely by the consideration and evaluation of the alternatives so that they choose the correct ones for themselves. It is firmly settled by now that there is no unique path or single model of development. Within certain broad parameters, a country should adopt appropriate policies best suited to its own situation. Developing countries do get some advice in this regard from international financial organisations which have specific focus and objectives. An institution like UNCTAD is in unique position to consider various alternatives comprehensively and build up consensus on some appropriate ones. Of course, the choice of appropriate alternatives will depend very much on the judgement of individual countries.

The basic objective, however, should be to infuse viable and sustained internal economic strength in developing countries through trade related development. This process needs technology, infrastructure and financial resources. Separately these aspects can probably be handled in some other institutions, but UNCTAD has considerable advantage in undertaking this responsibility through an integrated approach. Development depends a good deal on the initiative and actions of governments themselves; but an intergovernmental consideration and consensus can facilitate this process. Perceived bottlenecks and handicaps can be removed through this process and the external environment can be made more conducive to achieving these objectives.

Then there are some areas which have direct impact on trade and development and where UNCTAD has done considerable work. These are, for example, competition policy, environment and services. The first has been a subject of intense consideration for nearly fifteen years, and with new liberalisation policies of developing countries, it has re-emerged as an issue of importance. The role of Services (not only trade in services) in development has been studied and considered in UNCTAD for nearly ten years. Similarly the interaction between environment on the one side and trade and development on the other has been extensively studied and discussed at UNCTAD for nearly three years. In all these areas significant contribution has been made by the secretariat studies and inter-governmental discussions and consensus. Further work in these areas in UNCTAD will be no doubt useful.

Finally, the work in the field of Economic Cooperation among Developing Countries (ECDC) which was at the centre stage about a decade ago has to be revived with a new orientation. The primary instrument in this process so far has been the tariff reduction. Though it has not lost its validity and it should continue to be pursued, there are some other centres of importance in this area. For example, there is a great potential for joint production-cum-trade collaborations among developing countries. Besides, some fast growing developing countries may find attractive markets in some of the more populous developing countries, and the latter may find the former an appropriate source of technology and also perhaps finance. The perception of such complimentary features may provide a base for forging new links. Those among them with some technological base will do well to make joint efforts to participate in the advancement of these technologies in specific sectors. Individual efforts may not be adequate in the current situation.

All this may lead one to rush to the hasty conclusion that UNCTAD is relevant only for developing countries. It will be a narrow view. In fact UNCTAD can promote and foster the linkage between developed and developing countries to the advantage of both.

As mentioned above, the demand growth in developed countries may not be able to sustain their growth of industrial and services production; and developing countries, particularly the more advanced ones and more populous ones among them, may prove to be attractive markets. In fact on some occasions in the past, particularly during the recession of early eighties, it was the markets of developing countries which sustained in a big way the industrial production in developed countries. Even more generally, a sizeable portion of production of developed countries is absorbed by the developing countries, and this is so mainly in the area of high value added items bringing in comparatively higher returns. This interdependence was perceived by the statesmen of developed countries in sixties and they realised that they had a big stake in the development of developing countries. Lately, this perception is being dimmed. Developed countries could re-evaluate this possibility and utilise UNCTAD as a forum for strengthening their linkages with developing countries and this may be in their long-term interest.

Developing countries have, of course, a big stake in an institution like UNCTAD which can devote itself to the special problems facing them. Some of these have been enumerated above. One can add to this list. But what is specially important is that this institution can provide them with a forum to forge closer linkages among themselves and also with like minded developed countries as well as with those which have similar interest on many issues. Along with the present functioning of the group system in UNCTAD, based on their interests there can be a possibility of close linkages within selected groups of developing countries across the regional groups.

(This is the second part of a two-part feature. The first appeared in SUNS 3599)