Jun 5, 1986


GENEVA, JUNE 3 (IFDA/CHAKRAVARTHI RAGHAVAN) -- Some sharply differing perceptions of Foreign Direct Investments (FDI) and role of TNCS vis-à-vis industrialisation and trade of the third world were presented Tuesday at the UNCTAD Committee on Manufactures.

The Group of 77 rejected any effort to discuss FDI in relation to trade, industrialisation and access to markets, while the industrial countries viewed them as legitimate items for the committee to consider.

The committee heard an introductory statement from the Director of UNCTAD's Manufacturing Division, B. L. Das, explaining the Secretariat Reports, and the viewpoints of the Group of 77 and the Group "B" or the countries in the OECD.

Speaking for the Group of 77, Shrirang P. Shukla of India, said the policy-mix of a third world country (export promotion/import substitution) was an integral part of its whole development strategy and the committee on manufactures was hardly to place to discuss the "autonomous development policies pursued by developing countries".

And FDI was an issue to be rightly studied in the context of increasing net flow of resources to third world countries and their capital requirements, to be discussed in UNCTAD's Committee on Invisible and Finance related to Trade, but could not be considered in the Manufactures Committee as a part of trade policy in manufactures.

"Trade policies based on the principle of comparative advantage assume factor immobility across the borders", Shukla underlined.

"To bring in policies facilitating mobility of capital across the borders, without bringing in the question of similar mobility of labour would be taking a partial view of the matter", he added.

The spokesman for the OECD countries, Canada's Leonard Edwards welcomed "a number of interesting points" made Monday in the inaugural speech of UNCTAD deputy Secretary-General Alistair Mcintyre, on roles of both industrial and third world countries "in following appropriate policies and conditions for further expansion of manufactures and semi-manufactures trade of developing countries".

Edwards also commended Mcintyre's view on need to build up and maintain international competitiveness, on the public sector, on linkages between FDI and trade.

The G77 statement however carefully refrained from any references to the opening speech, but used the references in the documentation to FDI to reject any study of links between investment and trade flows, and national policies oriented to both.

All speakers Tuesday agreed on need for maintaining and strengthening a multilateral trading system based on non-discriminatory most-favoured-nation treatment.

But while the group "B" spokesman, and Australia in its individual statement, referred to GATT efforts to launch a new round, the G77 statement was noticeable silent on this.

In their statement, the Group of 77 underlined that the meeting was taking place at a time when the multilateral trading system was under severe strain, and there had been an intensification of protection against third world exports.

The product base in expansion of manufactured exports of the third world was also "very narrow".

Export performance in food products, drinks and tobacco products, wood and wood products and miscellaneous light manufactures, remained relatively stagnant, while agricultural exports from the third world not only faced protectionist barriers but also "acute market disruption due to heavy subsidization of agriculture by important developed countries".

Instead of facilitating expansion of manufactures exports of the third world, to which everyone was committed, there had been aggravation of problems hindering this.

The standstill and rollback commitments remained unfulfilled, while there was emergence and spread of grey area measures.

The discriminatory trade regime in textiles and clothing, a serious breach of the unconditional MFN principle, was being sought to be perpetrated, and there was now a danger of this spreading to sectors like footwear, steel, petrochemicals and consumer electronics.

The work before the committee should be in the perspective of its mandate to promote veneral and consistent policies to expand and diversify the third world trade in manufactures and semi-manufactures.

"This committee is not the forum to go into the question of appropriateness or otherwise of autonomous development policies pursued by developing countries ... the discussion here should be on problems of access for manufactures and semi-manufactures produced and exported by developing countries".

The OECD countries have been trying to get UNCTAD to promote FDI and TNC investments, and many in the group of 77 have become concerned that the Secretariat may be yielding to such pressures.

The G77 statement appeared to be a response to this.

Adverting to steps needed to improve world economic environment, the G77 spokesman said the first step was for industrial countries to honour their commitments to halt protectionism.

They should implement and strictly adhere to the standstill in all sectors of trade concerning imports from the third world, reaffirm their commitment "to work systematically" towards restricting quantitative restrictions and similar measures on third world export products, and agree on a short time-frame to rollback protectionist measures in all sectors of trade not consistent with or outside the framework of non-discriminatory and open multilateral trading system.

The phenomenal increase in intra-firm trade and the dominant role of TNCS and their increasing resort to RBPS could not also be ignored in looking at international competitive environment, the G77 spokesman underlined.

"Concerted international action is therefore urgently required for controlling RBPS, particularly of the TNCS. The deliberations on the future of the multilateral trading system must take cognizance of these developments and evolve appropriate rules and instruments to reduce and eliminate the incidence of such practices".

Edwards viewed the Secretariat documentation as "among the best...well-researched and well-written", and treating the various elements in most respects "in a reasonably balanced way", though the group could not agree with everything, and particularly some "rather polemical passages".

Australia's Walter Goode, who spoke later, viewed the documentation as showing "an unaccustomed absence of dogmatism and polemicism". And regardless of this conclusions "more balanced and objective".

Edward said while his group could support the "judicious conclusion" of the Secretariat on need for appropriate policy mix, more examination and consideration of individual cases of third world countries was called for.

Edwards also spoke of his group's "main quibble" with the "one-sided" treatment of the effect of IMF stabilisation programmes on industrial investments and export capabilities, while ignoring the fundamental economic problems such programmes were designed to treat.

The OECD spokesman also viewed as a questionable assertion "a rather polemical diatribe against certain 'ill-conceived economic concepts' such as graduation and reciprocity, which are classed as export restraints".

He was also critical of the secretariat's "broad indictment of multinationals" for their RBPS, "without citing any of the advantages offered by these entities to industrialisation and promotion of trade in manufactures".

Edwards expressed his group's concern over the decline in share of third world manufactured exports to the socialist world, a drop from six percent to four over 1970-83, and said these and external factors in intra-developing country trade should be analyzed by UNCTAD Secretariat.

Walter Goode, while mainly explaining Australian policies, referred to the "heightened sensitivity" in countries about manufactures because of the "prospect of the new GATT round, and the recent Brasilia decision of some third world countries to launch preferential trade negotiations among themselves".

While agreeing with the arguments about effects of protectionism in industrial countries, the Australian Delegate wondered why third world policies had been seen purely in terms of outward looking/inward looking debate, and without any reference to "international obligations of developing countries"