OECD COUNTRIES DIFFER AMONG THEMSELVES.

Sep 6, 1986

OECD COUNTRIES DIFFER AMONG THEMSELVES.

GENEVA SEP. 4 (IFDA/CHAKRAVARTHI RAGHAVAN) -- Some sharply differing views among the OECD countries, on the state of the world economy and what should be done to promote development, were heard Thursday at the trade and development board of UNCTAD.

The board, during its general debate on interdependence and debt issues heard speeches from the United Kingdom, speaking for the EEC members, from Norway on behalf of the Nordics, and from the United States and Japan.

An while the Nordics rejected international laissez-faire and called for multilateral actions to improve systems, as a complement to domestic policy changes in industrial and third world countries, the US preached its familiar reaganomics, which is not even practised now inside de US.

The Norwegian delegate, who spoke for the Nordics, came out strongly in favour of the board taking a "final decision" on a provisional agenda of UNCTAD-VII. "Highest priority", he said, "should be given to the issues of development financing, debt, related monetary issues and possibilities for increased transfers of resources: Trade: and commodities, with appropriate attention to the problems of least developed countries.

This is more or less the neutral agenda that the UNCTAD Secretary-General has suggested, and has been supported by the G77, Socialists and China, but which the OECD has been balking at because of the US, which wants to turn UNCTAD-VII into a conference on privatisation of the third world economies.

The Nordic statement, as well as a separate speech later by Turkey, in effect brought into the open the differences within the OECD group.

Some G77 members have been getting impatient, and even talking in lobbies of settling the issue by a vote.

The US speech did not even attempt to deal with the facts and content of either the trade and development report (TDR) of the Secretariat, around which the debate is taking place, or specifics, merely affirming its general support for the OECD group statement on Tuesday.

Rather, it confined itself to some praise for UNCTAD's leadership and its purported change of direction, and coupled it with attacks on some specific UNCTAD activities like its technology division and the division on East/South and East/West trade and economic relations (TRADESOC).

The British delegate, J.S. Sankey who spoke for the EEC, argued that the assessment of the world economic situation by the UNCTAD Secretary-General at the board was "somewhat more pessimistic" than a review of economic and trading forces would suggest.

Also, the TDR had concentrated excessively on macroeconomic policies of the industrial world, and paid insufficient attention to domestic economic policies of third world countries.

In the EEC view, the net effect of the fall in dollar value, the rapid fall in oil prices, and the continuing decline in interest rates would have a beneficial net effect, and already in the majority of OECD countries most of the economic indicators had improved.

However, there was persistence of serious economic problems that could complicate efforts to sustain non-inflationary growth and increased volume of world trade. Also, there was a substantial degree of uncertainty surrounding the behaviour of exchange rates in future and the medium term prospects for energy and commodity price levels.

In sharp contrast to the US views later, the Norwegian Delegate, Koare Bryn, also speaking for Finland and Sweden, said the development crisis could not "dissolve or solve itself through international laissez-faire, and its various elements could not be managed through ad hoc measures".

It was essential to think and act globally, approach problems within a development perspective, avoid dogmatic generalizations of any one view of trade and development, and realistically deal with the enormous complexity and heterogenous nature of the elements involved.

Quoting Harry Dextern White, the leading US delegate at Bretton Woods, Bryn added: "We must substitute, before it is too late, imagination for tradition, generosity for shrewdness, understanding for bargaining, toughness for caution, and wisdom for prejudice".

While analyzing macro-economic factors and debt servicing, the basic human suffering behind them should not be forgotten.

"A necessary condition for satisfaction of basic human needs is that domestic and external macro-economic policies and conditions are shaped with this objective in mind. In our view, this is the very essence of the north-south dialogue", Bryn declared.

Stressing the need for an external environment supportive of development, Bryn added: "Although there is no substitute for strengthening domestic efforts and policies, at the present juncture the key to unleashing the development potential of developing countries seems to lie in the global trading and financial environment", he added.

The debt crisis, with all its implications, had now reached a scale and scope that made it not only one of the most important economic but also political issues, and the problem had to be addressed in the framework of a coherent long-term growth strategy, building on and supplementing the traditional case-by-case approach.

"The responsibility for addressing the debt problem must be shared by debtor countries, creditor governments, commercial banks and multilateral financial institutions".

The present strategies to deal with debt forced debtors to reduce imports, and thus long-term investment, and with debt being serviced at expense of future productive capacity.

"One billion dollars used in debt service in such circumstances also meant one billion lost in export revenues for other countries, and, in our view, this situation is not sustainable in the long run", Bryn emphasised.

On the commodity front, in the Nordic view it was still necessary to contribute to the improvement and functioning of the commodity markets, and there was scope for renewed efforts towards cooperation regarding those commodities that had not been the subjects of regular producer/consumer cooperation.

While the international tropical timber agreement (ITTO) had now become operational, it shared with the international jute organisation the problem of financing the developmental work, supposed to be met from the second account of the common fund.

A solution must be found to this problem, either by finding a way to activate the resources pledged to the second account or by other international arrangements.

Calling for flexibility by all in agreeing on a "short, concentrated and action-oriented agenda" for UNCTAD-VII, the Nordic spokesman said UNCTAD-VII offered an opportunity to reactivate and reorient, as appropriate, UNCTAD's role in supporting development efforts at national and international levels.

UNCTAD should now tackle in a comprehensive manner the central inter-related issues underlying development and attempt to pave the way towards a new consensus, needed for further concerted measures.

In this view, there should be selectivity in the choice of issue areas for UNCTAD-VII, and careful organisational arrangements would be necessary for efficiency of work and meaningful results.

Development financing, debt, related monetary issues and possibilities for increased transfer of resources, trade and commodities should be given highest priority at UNCTAD-VII, with appropriate attention to the problem of least developed countries.

The Nordic countries also favoured a high official level preparatory phase, leading to a decision-making phase at the Ministerial level.

UNCTAD-VII should result in agreed action for implementation at national and multilateral levels, and project a development dimension into the work of any decision-making in organisations like GATT, IMF and World Bank.

Much attention over the past few years had been focused on containing various international crises, and while a collapse of multilateral trading and financial system has been avoided, pressing problems facing the third world had been postponed rather than solved.

"It is essential that we learn to think and act globally and approach the problems within a development perspective. It is also essential to avoid dogmatic generalizations of any one view of trade and development and to realistically deal with the enormous complexity and heterogenous nature of elements involved".

Interdependence required matching domestic structural adjustments in third world countries by complementary adjustments in industrial countries, complemented by improvements in the international system, through concerted, multilateral action.

Ronald Flack, the acting US Permanent Representative, said that under its present leadership, UNCTAD seemed to be pulling away form its past dogma of development policy, and reaching forward to play a more determined and constructive role in development dialogue.

Flack also welcomed what he called improvements in the quality of UNCTAD's TDRS over the last two years, and its "increasing professionalism", but suggested it should have focused less on macro-economic theory dealing with industrial countries and focused on structural problems of third world countries.

The US Delegate then went on to attack other UNCTAD documentation, and cited the tradesoc paper for its one-sided, unbalanced prescriptions for development.

Instead of being "mired in the mud of the so called new international economic order", UNCTAD should promote, as many third world countries were doing, decentralization, deregulation and denationalization of third world economies and industries.

The efforts of the UNCTAD leadership over the last three years "to grasp leadership of world economic development" was being overwhelmed by "sterile initiatives as work on renewable energies" by UNCTAD's transfer of technology division, the US delegate added.