12:07 PM Nov 6, 1996

LIBERALIZATION BENEFITS NEED EVIDENCE

Geneva 6 Nov (Chakravarthi Raghavan) -- Assertions about the developmental impact of further trade liberalization need more work to provide solid analytical underpinning to, and empirical evidence for, assertions about the developmental impact of further trade liberalization, UNCTAD's Commission on Trade in Goods and Services, and Commodities was told Wednesday.

The Commission, one of three set up at UNCTAD-IX at Midrand, began its first session (to run till Friday) where it is to agree on a detailed work programme including convening of expert meetings to consider specific issues, in terms of the task set for it by the Trade and Development Board: "enabling countries to respond to the opportunities arising from the Uruguay Round Agreements and so as to derive maximum available benefit by analysing the impact of the Agreements on development and enhancing capacities for participation in the multilateral trading system."

In addressing the Commission, UNCTAD Deputy Secretary-General, Mr. Carlos Fortin hoped that the policy analysis and consensus-building to be engaged in by the Commission would serve to provide "a clearer idea of the relationship between globalization, development and the international trading system, and thus lay a firmer basis upon which both national and multilateral trade policies can be built."

The Commission has before it a secretariat report, which is based on a joint study by the UNCTAD and WTO secretariats, provided to UNCTAD-IX at Midrand on "strengthening developing countries participation in the multilateral trading system".

Like that study, the current report too seeks to put a positive gloss on the outcome of the Uruguay Round, but calls for country-specific studies to make a more detailed assessment.

In a statement on behalf of the Asians group, Pakistan's Amb. Munir Akram said that while the study could be a useful basis for initiating a discussion, it was marked by a number of shortcomings in analysis that rendered its prescriptive portion weak and inadequate.

The joint UNCTAD/WTO study, Fortin said, had concluded that the effective integration of developing countries into the multilateral trading system is a pre-requisite for their drawing benefits from the system, and for this they need support of the international community.

The term 'integration' into the trading system is a code word used by industrialized countries to ensure that developing countries undertake and are governed by all the rules, disciplines and obligations of the trading system.

Fortin said that by 'effective integration', UNCTAD meant that a country has not only to identify and exploit its trading opportunities, but requires many developing countries, in particular the least developed (LDCs) to improve their supply capabilities. It also means they can accede to the WTO and conform to its trade obligations, formulate and pursue development strategies within the framework of the multilateral trade obligations, defend the acquired trading rights, and define and pursue its interests in trade negotiations.

For a proper analysis of the issues, the Commission should undertake further work on

* identification -- based on presentations by individual countries and case studies to be undertaken by the secretariat -- of all relevant constraints on effective integration of countries into the international trading system;

* strengthening of institutions and of human and financial resources in developing countries and transition economies to ensure their effective participation in the international trading system; and

* elaboration of practical recommendations addressed to the governments of developing countries and the international community concerning actions to be taken so as to enable developing countries, in particular the LDCs, to exploit the opportunities arising in the post-Uruguay international trading environment.

The overall mandate for the Commission, which views integration into the trading system as a means of deriving benefits from globalization, Fortin said, would require greater understanding of the relationship between globalization and the instruments of the multilateral trading system.

How to maximise the positive developmental impact of expanding trade was another issue of growing concern to countries in a rapidly liberalising and globalising world. Very little work in this area had been done in any of the organizations dealing with development and/or trade, and this would therefore be a highly relevant topic for an expert meeting.

In the area of trade in services, sectoral analysis should focus on sectors where developing countries have been demonstrating export potential and other sectors where opportunities have not been studied in detail in other organizations.

In the area of commodities, the successful experience of countries in achieving diversification could also warrant examination by experts. Expert analysis might also be needed on integrating trade, environment and development.

In respect of analysing issues on the international trade agenda, including new and emerging issues, Fortin noted the consensus at Midrand that a decision on this should await the outcome of the Singapore Ministerial Conference. An executive session of the Trade and Development Board could be held early in 1997, in the light of the SMC, to suggest additional issues, including new and emerging ones, to be addressed by the Commission.

In terms of assessing results for the four-year work programme, Fortin suggested that among others they should evaluate the results by analysing the economic and trade situation of developing countries and assess how trade liberalization has influenced the growth of their economies and their share in international trade.

In terms of the changing policy environment in many countries, work in the Commission should provide a more solid underpinning to, and empirical evidence for, assertions about developmental impact of further trade liberalization. This was necessary since development strategies of most developing countries and transition economies relied on trade liberalization and better access to world markets as cornerstones of their external policies.

Referring to oft-expressed views of UNCTAD Secretary-General Rubens Ricupero that the phenomenon of globalization is creating "a certain degree of anguish, uncertainty and fear of the future," Fortin hoped policy analysis and consensus-building in the Commission will serve to provide a clearer idea of the relationship between globalization, development and international trading system, thus laying a firmer basis upon which both national and multilateral trade policies could be built.

Speaking for the Asian Group and China, Pakistan's Munir Akram, spoke of the shortcomings in the secretariat report that had made its prescriptive portion weak and inadequate.

An objective analysis of the effects of the Uruguay Round on countries had to view them in the context of the global economic environment which, in many respects was inimical to development.

Persistent debt burdens, declining ODA, uneven private investment flows, and overly cautious deflationary policies of developed countries, inhibit the growth and export prospects of developing countries and even the most strenuous efforts to capitalize on opportunities created by the Uruguay Round founder in the face of structural global economic constraints, Akram said.

And while extolling the potential benefits of the Round, one must not gloss over the flaws inherent in the agreements, he said.

These flaws included:

* absence of tariff reduction on 22% of dutiable imports deemed to be sensitive and which include products of particular interest to developing countries;

* relatively high degree of tariff escalation in most products of export interest to developing countries;

* persistence of peak tariffs on sensitive products such as textiles, leather, footwear, fish and fish products;

* provisions of the accord leading to higher food bills for net food importing countries for what the report vaguely terms as "the period of transition"; and

* most stringent patent production provisions which are likely to result in higher prices for pharmaceutical products and high technology.

In addition to the elements of the Uruguay Round agreements that were not conducive to development, the process of implementation was also revealing factors that impacted negatively.

These included:

* a continued resistance by developed countries to dismantle barriers that protected sectors and industries no longer competitive;

Instead of making necessary adjustments top open up areas of declining comparative advantage, the developed countries continued to engage in strategies to protect these areas.

* little forward movement in areas of particular interest to developing countries;

The integration of textiles in the multilateral trading system is not proceeding satisfactorily. Meaningful discussions on ensuring effective access of developing countries to technology and information networks have yet to start. The process of developing disciplines to ensure qualification procedures, technical standards and licensing requirements do not become trade barriers, has not begun in a meaningful manner.

* there has been woefully inadequate assistance to developing countries to cope with the enormous demands on them by the Uruguay Round agreements.

"The concept of a 'level playing field' is meaningless, if developing countries are left to fend for themselves in negotiations with the richly endowed and well equipped bureaucracies of developed countries.

The Asian group coordinator said that to enable developing countries to avail themselves of the benefits of trading opportunities, a number of measures were needed:

* continuing analysis of global economic factors constraining the ability of developing countries to enhance their trade, and identification of actions required to alleviate these factors;

* strengthening UNCTAD's capacity to provide an ongoing independent and impartial assessment of impact of the Uruguay Round agreements and recommend policy options for developing countries.

"Joint studies with other organizations can be useful, but not if these shy away from pursuing awkward lines of inquiry and from stating uncomfortable truths," Akram said in what was seen as a reference to the UNCTAD/WTO joint study provided to UNCTAD-IX.

Akram added: "The countries acceding to the Uruguay Round agreements indicate their commitment to an open and rule-based trade regime. But, they do so in the expectation that it will be an equitable regime. If the perception gains ground that the principle of equity is being eroded, then their commitment to the Agreements shall come under pressure. History is replete with examples of international arrangements that failed since these could not provide all participants with a shared sense of benefit. We should not add to these unhappy instances of unsuccessful global regimes by failing to address the shortcomings of the Uruguay Round Agreements."

The secretariat's report to the Commission notes that while on average the new tariff commitments of developed countries in the Round represent a 40% reduction in the average tariff on imports of industrial products, tariff reduction did not cover all dutiable industrial products from developing countries in the major markets.

Virtually no reduction was offered on the 22% of dutiable imports which were deemed sensitive. These included products of particular export interest to developing countries -- such as item in leather, rubber, footwear and travel goods category.

A relatively high degree of tariff escalation will also persist in most product groups, particularly those of export interest to the developing countries -- including tropical and natural resource products.

A table in the report shows that while a 40% reduction in duties on trade-weighted average imports of industrial products from all sources, in the areas of industrial products exported by developing countries, the reduction is much smaller.

On imports from developing countries of fish and fish products, it is only a 27% tariff cut, on textiles and clothing a 23% cut, on leather, rubber and footwear a 19% cut and on transport equipment an 18% cut.

As for tariff escalation in developed country markets on imports from developing countries, the tariff escalation, which had been there on imports from developing countries, would continue to remain after the Uruguay Round. But there had been greater absolute reductions in average tariffs at more advanced stages of production -- 2.9 for all finished industrial products (accounting for 57% of all imports from the developing countries, 4.2 for finished tropical industrial products (accounting for 34% of imports) and 2.0 for finished natural resource based products (accounting for 17% of all imports).

In Canada, a relatively high degree of tariff escalation remains on hides, skins and leather products, rubber, jute and tobacco. In the EU, significant tariff escalation remains for hides, skins and leather, wood products, jute fabrics, metal products and tobacco. In Japan, with the exception of rubber and paper, developing economies will continue to face tariff escalation.

But in the USA, the extent of tariff escalation will be eliminated or greatly reduced for several products.

The Uruguay Round tariff reduction methods, which departed from the formula/harmonization approach of the Tokyo Round, has enabled importing countries to main peak tariffs (over 15%) on sensitive products and a rise in relative disparities in tariffs across product groups.

This is particularly evident in the tariff treatment of textiles and clothing in the US and Japan, on leather, rubber, footwear and travel goods in the EU and Japan, and fish and fish products in the EU