Mar 13, 1991

LONG DRAWN OUT ROUND FRAUGHT WITH HIDDEN DANGERS – DADZIE.

GENEVA, 11 MARCH (BY CHAKRAVARTHI RAGHAVAN) – Satisfaction at the re-start of the Uruguay Round negotiations should not be allowed to abort the necessary sense of urgency and the Round should be concluded well within the time-frame of an extended two-year fast track authority in the United States, according to the UNCTAD Secretary-General Kenneth Dadzie.

Dadzie made these comments at the UNCTAD Trade and Development Board which, in its Sessional Committee, is due to consider a number of trade-related issues.

"A long drawn out conclusion (of the Round) would be fraught with hidden dangers", Dadzie warned.

"Not the least among these dangers is the generation of uncertainty, which would be inimical to judicious decision-making by governments and by economic operatory alike". "Since many decisions cannot be delayed until the Round is concluded, there is the added danger of actions being taken which run counter to the underlying objectives of the Round". "Such actions would further complicate a trading environment which has become increasingly characterised of late by unilateral decisions inconsistent with the principles of the trading system, and by developments which contain the potential if unwisely managed for weakening adherence to multilaterally agreed norms, such as spread of bilateral trading arrangements and the formation of powerful regional blocs".

The resumption of negotiations, he said, should also provide a fresh opportunity to consider new means of strengthening and revitalising the multilateral trading system while taking into account the development dimension of various issues under negotiation. There were two major aspects of this development dimension: achieving improved access to markets for products of the Third World countries and designing new rules and disciplines consistent with their economic, social and development objectives.

Moreover, the broad scope of the Round, extending beyond frontiers of traditional trade policy to embrace new issues in field of investment, services and technology policies highlighted the importance of proceeding "in a coherent and integrated fashion which would be supportive of national development efforts".

"A final agreement which did not fully take into account the development dimension would not be compatible with the generally accepted objective of achieving a balancing outcome".

The active participation of the Third World countries was essential to attain this objective and Dadzie hoped that UNDP assisted UNCTAD technical assistance programmes, which had facilitated the effective participation of Third World countries in the negotiations, could be continued during the remainder of the Round.

But achieving a balanced outcome while promoting further liberalisation and expansion of world trade would not be easy at a time of clear recessionary tendencies in the world economy and the Uruguay Round had to be supported by actions in other areas and forums "to improve coordination of macroeconomic policies, reduce debt burdens and strengthen commodity markets and food security".

It would also be necessary to intensify on-going efforts to translate the growing concern with environmental protection, nationally and globally, into policies supportive of trade and development, Dadzie added.

UNCTAD-VIII, he noted, would focus attention on the whole range of these issues and their interactions and the Conference would look beyond the Uruguay Round to the agenda of trade and development issues for the 1990’s.And if the Round had been concluded by that time, the Conference would provide the first opportunity for the international community to evaluate the outcome of the negotiations and their implications for world trade and for the development process.

The UNCTAD secretariat, Dadzie said, had been entrusted with the preparation of the report on institutional developments, taking into account "all relevant proposals" for the strengthening of international organisations in the area of multilateral trade, called for by the UN General Assembly. The secretariat would be approaching governments and executive heads of organisations and programmes of the UN system for their views.

The continued and secure access to markets of the OECD countries was of crucial importance to the Third World for acquiring the means to expand and diversify the productive base.

Policy issues in the 1990s regarding market access conditions were likely to be influenced by the outcome of the Uruguay Round. A basic issue in tariffs was the continued existence of unusually high tariffs on certain products and to tariff escalation. Other restrictions in form of non-tariff barriers continued to represent formidable obstacle to the smooth conduct of international trade.

All these issues were of the greatest importance to the Third World particularly when a large number of them had taken measures to open their economies to international trade and give exports a prominent role in their development strategies.

There was "increasing incoherence" between trade policy changes in the Third World and Industrial countries. While the number of Third World countries adopting more open trade policies was growing rapidly, "trade restrictions and clear departures from the multilateral approach to trade policy are on the rise in developed countries", he pointed out.

Though it was sometimes argued that the Round has been la restraining influence on proliferation of such policies, these developments "nonetheless suggest some loss of faith in the multilateral system".

"Under the circumstances, the international community faces a clear choice: either to revitalise the multilateral system and improve its rules or to witness a slide into managed trade, tied preferences and inward looking trade blocs".

"Were the latter scenario to come about, it is questionable whether many developing countries would see the pursuit of free trade policies as serving their best interests".

The elimination of protectionism in the ICs must be complemented by governmental policies to facilitate adjustment to structural change and resisting such change through protection created long-term problems with serious adverse implications for other trading partners.

It was in the interest of the ICs, as of all others, to take advantage of possibilities for an improved international division of labour and promote orderly transfer of resources from areas of production with low productivity to areas better suited to their factor endowment. If the North did not allow increasing imports from the South to replace parts of their own production, they also would forego the chance of expanding exports of their own products.

Also lower cost imports from the South increased real incomes of consumers in the North.

Besides determined action at national levels, international cooperation among policy-makers was essential to reach agreement on global requirements for adjustment and for coordinated policy moves to speed up the process.

The market-oriented policy reforms being pursued in Eastern Europe had added a new dimension to this issue. The process of reforms taking place in the context of difficult economic circumstances would be long and there would be considerable short-term costs, not only for the reforming countries but for the trade of Third World countries.

But for the efforts to bear fruit an improved external environment was essential and East European countries would need specific assistance from the international community including greater market access for their exports.

Decisive moves towards trade liberalisation in these countries would maximise long-term benefits. But for Third World countries to share these benefits, they would need support in gaining access to the new market opportunities in Eastern Europe and the assistance extended to the latter countries should be additional to existing and increasing flows of development assistance.

The relationships between trade, foreign direct investment (FDI), technology and services, Dadzie said were complex.

TNCs treated exports to foreign markets and establishment of local affiliates as alternative business strategies. A large share of Third World exports flowed through TNCS. In some cases the exporters tended to be foreign affiliates of TNCs and others exports were undertaken under complex equity and non-equity arrangements between large companies in the ICs and Third World producers.

In most international transactions in services, foreign investment was required to deliver services to foreign markets. A good share of technology imported by the Third World countries originated in TNCs, including through FDI and licensing and management contracts.

Also technological innovation was a major factor in determining export competitiveness. In this area, an important issue of growing concern was the need to develop and use environmentally sound technology. But such justified concern should not lead to creation of new impediments to efforts of Third World countries to expand their trade or to their exclusion from yet another wave of technological innovation.

"The drive for environmentally-sound technology should, therefore be accompanied by measures to promote the transfer of such technology to developing countries on fair and favourable terms".The Uruguay Round had acknowledged the complexity of links and inter-relationships between trade, FDI, globalisation of economic activity as well as of corporate operations, the transfer of technology to Third World countries and the services problematic.

"There is a clear need to address them in a coherent conceptual and institutional framework and they must be reflected in a more comprehensive approach to technical cooperation in support of the external trade sector of developing countries".

Initiatives were under way within the UN secretariat to adapt to new perceptions concerning these linkages, Dadzie said.

Dadzie noted in this regard that the UN Secretary-General had endorsed a proposal made jointly by the Executive Director of the UNCTC and himself to begin a gradual process of integrating the complementary work programmes of the two secretariats.

This proposal, contained in the UN Secretary-General’s report on the restructuring of the economic and social sectors of the UN was expected to receive further consideration at the resumed 45th session of the General Assembly in April. Dadzie hoped that member-States would approach it with a new sense of purpose and lay the ground for lasting reforms.