Apr 29, 1988


GENEVA APRIL 27 (IFDA/CHAKRAVARTHI RAGHAVAN)ó The differing perceptions of the industrial and Third World countries on the role of UNCTAD in considering international trade issues and annual review of protectionism and structural adjustment surfaced Tuesday at the meeting of the sessional committee of the trade and development board, chaired by Maamoun Abdel-Fattah of Egypt.

While both groups spoke of the problems of protectionism and structural adjustment, and developments since UNCTAD-VII on international trade issues, and cited the final act of UNCTAD-VII, and some of its recommendations, each focussed on different issues.

The industrial countries sought to focus on internal policies and other recommendations arising out of the final act, rather than the international environment and issues, and on south-south trade rather than the south-north trade relationships involved in the review of protectionism and structural adjustment.

The group of 77, on the other hand, cited several parts of the final act relating to international trading environment, and the Uruguay round issues, to argue that the board had a two-fold task: assess how far countries had been able to live up to their commitments and how best the shortcomings of the past could be removed and the way paved for better and fuller implementation.

The industrial countries clearly saw the board discussions and review as an occasion for discussion and analysis, but no more. But the Group of 77 saw the discussions as resulting in conclusions and policy recommendations.

As the G77 spokesman, Amb. S. P. Shukla of India put it in the sessional committee "the opportunity ... to review protectionism and structural adjustment and developments and issues in the Uruguay round would serve little purpose if we allow these discussions to degenerate into a routine debate, or if we fight shy of grappling with the basic issues an the specious ground of organisational jurisdiction, or for that matter if we fail to put this debate in its wider perspective.

"This forum is intended essentially to facilitate debate, negotiations, conclusions and policy recommendations which should lead to accelerated development of developing countries through the interface of trade. And this is not a parochial purpose. For, without the development of developing countries, there can be no stability and sustained growth of the world economy".

Earlier, the director of UNCTADís manufactures division, B. L. Das spoke of the lack of progress in dismantling non-tariff barriers and other protectionist devices, and said "it is difficult to see how developing countries can hope to 'grow out' of their debt problems under current circumstances. If they are to reduce their debt-service obligations - relative to their exports - they must inevitably increase their exports faster than the stock of debt. Slow expansion and unabated protectionism in their major export markets makes this a difficulty task".

Due to growing linkages of economies through trade and financial flows, interdependence could make life difficult for policy-makers, but could also have considerable beneficial effects, Das said.

"In the future restoration of development in the developing countries could become the lynchpin for growth in the entire world economy. The existence of obvious unsatisfied needs in the developing world indicates that the potential for demand expansion is enormous the problem is, of course, how to convert latent demand into an effective one".

In the international context this meant access to foreign exchange, as a result of larger export earnings or greater capital flows.

In the long run so tapped expansion of Third World countries would depend primarily on whether their export earnings rise steadily. Hence all countries had a stake in rolling back current protectionism and preventing new barriers from being erected.

On the view that Third World countries too used trade restrictions as part of development policies, Das pointed out that they were not protecting 'declining industries' where competitive advantage was being lost as in the industrial countries, but to faster development of infant industries.

Even here there was growing awareness that in many cases this protection had gone too far and had encouraged inefficient industries, and attempts were being made by several countries to redress the balance between incentives to produce for domestic and international markets. In several countries import restrictions had been liberalised and export promotion measures undertaken.

But to be successful, they needed supporting policies in importing industrial countries. Otherwise there would be a fallacy of composition.

A single country could introduce policies to make its output more competitive internationally, but a large number of Third World countries could not follow such policies at the same time without accommodating policies in importing countries.

On the Uruguay round, Das recalled that the final act had envisaged a role for the TDB in following developments and issues in the negotiations, and provide technical assistance to Third World participants in the round.

Unlike earlier rounds, the Uruguay round had on its agenda nearly all issues that over the years had emerged as 'sensitive points' of the GATT system. After more than a year, there was now a better clarification of differences among participations, but no observable shift in positions.

Even in the tariff group, where participants had extensive experience, neither modalities nor negotiating techniques had been agreed upon.

Progress in the negotiating process had been uneven. While they had advanced in some areas, there had been no commensurate attention to areas of particular concern to the Third World.

The standstill commitments were far from being implemented, and the surveillance body had got bagged down in disputes over consistency of trade measures with the GATT provisions.

The rollback commitments too were yet to be acted upon.

And despite the express provision in the Punta del Este declaration that industrial countries did not expect Third World countries to make contributions inconsistent with their development,

Financial and trade needs, there were proposals about burden shaping and satisfactory level of reciprocity etc - all at adds with the principle of special and more favourable treatment to Third World countries.

In the negotiating groups on tropical and natural resource products, some proposals called for access to sources of supply involving "the right of each nation to administer its national resources in the way it deems necessary".

For Third World countries, the demand for access to sources of supply raised problems relating to their development efforts through processing of raw materials.

On the issue of safeguard agreement, it would appear that questions of selectivity and evolution of objective criteria (before protective actions are undertaken) might involve complex and difficult negotiations. But so far participants had not engaged themselves in substantive negotiations.

In respect of intellectual property rights, the major challenge was "to address the conflicting objectives of knowledge-rich countries and those who wished to become so ... proposals in this area should not preclude knowledge-poor countries from getting access; to knowledge and information, and developing their own knowledge and information base".

In the separate service negotiations, the complexity of issues and novelty of the subject made it difficult to expect easy solutions in the negotiations. There were differing perceptions of the service-rich and service-poor countries, and the negotiating process would have to reconcile all these differing perceptions and needs.

Referring to the planned mid-term review at Montreal in December, Das said the participants did not seem to share the same perceptions as to the eventual outcome.

Some countries seemed to feel that negotiations had not progressed to the point where some concrete results would be feasible, while others wanted the meeting to result in concrete actions in some priority areas.

Whatever the approach, Das said, ' 'the search for early results should not overshadow the long-term perspectives of the Uruguay Round", and the two processes should complement each other.

In his statement on behalf of the G77, Shukla said that more than a year after launching of the round, "the trading environment has in fact deteriorated".

There were repeated proclamations of faith in the mipal trading system and pledges to preserve it. At the same time there was "open advocacy of cartel-like arrangements, retaliation for alleged breach of such cartelisation, increasing tendency towards bilateralism and, above all, unilateral departures from agreed principles of non-reciprocity and non-discrimination in trade relations between developed and developing countries".

Another serious development was the tendency to seek linkages between trade in goods and other matters like Third World policies on foreign direct investment, protection of intellectual property, services, and fairs labour standards.

"Trade, which is a means of self-reliant development for developing countries, is in danger of becoming an instrument in the hands of certain developed countries for imposing unacceptable linkages an developing countries dependent on trade".

"The hiatus between commitments and implementation is too wide to be bridged by repeated proclamations of principles and intentions or glassed over by optimistic and self-congratulatory assessments of progress of negotiations in the Uruguay round", Shukla commented.

While the Punta del Este declaration was a balanced package reflecting interests of all participants, the progress in the negotiations did not reflect such a balance across a wide front, and there was a clear lack of progress in many areas of interest to the Third World.

In tropical products, a main area of interest far Third World countries and one where special priority had been given in the mandate, there were attempts to reinterpret the mandate in a way that would undermine the basis for negotiations by insisting an contributions from the Third World.

Little progress had so far been achieved on the safeguard issue, recognised as one of the most important systemic issues in GATT.

In the context of consultations under the BOP provisions of GATT, Third World countries were under increasing pressure to remove their quantitative restrictions in total disregard of the structural and long-term nature of their problems.

"There is a tendency to question the content and direction of their autonomous development policies. This is a disturbing development as it signals attempts to weaken and erode the only defence mechanism available in GATT for developing countries facing unavoidable and serious BOP difficulties.

"Indeed, there is a persistent attempt ... to review and revise the relevant provisions of GATT, in what is described euphemistically as an exercise to 'update' these provisions".

The various proposals and submissions in negotiating groups did not also reflect the commitment in the Punta del Este declaration on special and more favourable treatment. Even in an area like tropical products, a new paradigm was sought to be introduced calling far extension of coverage to include products of export interest to industrial countries and seeking reciprocal contributions from the Third World.

"The developing countries", Shukla said "would like to judge the utility and success of the Uruguay round negotiations in terms of the contributions that the negotiations would make to the process of their development".

The functioning of the trading system and successive MTNS for liberalisation in the past had not accelerated process of development.

The process of restructuring in the industrial countries continues to be impeded particularly in sectors where Third World countries had proven comparative advantage. Domestic resources continued to be maintained in the low price-end of the market and protection extended as 'a tsyls' or 'breather' tended to become permanent.

And instead of progressive liberalisation of access, the tendency was to intensify restrictions, as in the case of the MFA.

Despite the concomitance of favourable conditions - low inflation, marked decline in nominal interest rates, lower oil prices and general corporate-financial position - the industrial countries had not induced faster growth, and domestic demand growth was markedly lower.

The questions of trade liberalisation could not also be isolated from wider questions of economic environment, where developments in monetary and financial areas caused serious concern, signifying further deterioration of development.

No long-term strategy had been evolved to tackle the debt problem, exchange rates continued to be volatile, real interest rates still high, and commodity prices low and unremunerative to producers.

"What is sought to be achieved through MTNS seem to be in danger of being neutralised or reversed an account of the adverse developments on other fronts. And this is despite the fact that the linkage between trade, money, finance and development was explicitly recognised in the ministerial declaration"._