SUNS4512 Tuesday 21 September 1999

Trade: Focus on righting imbalances of past, says Ricupero

Geneva, 20 Sep (Chakravarthi Raghavan) -- The next round of trade negotiations at the World Trade Organization should focus on setting right the imbalances against developing countries in the WTO agreements, and for revisiting some of the Uruguay Round agreements including TRIPS, TRIMS, Subsidies, UNCTAD Secretary- General Rubens Ricupero said here Monday.

He made this comment in response to questions while speaking at the launch of the UNCTAD Trade and Development Report 1999 (TDR- 99).

Ricupero, said the outcome of the Uruguay Round had not been balanced. While the industrial world took over 30 years, and the periods of fast growth, to liberalise, the developing world had done so since the 1980s, partly under the conditionalities of the IMF and the World Bank, and the outcome of the Uruguay Round.

An UNCTAD survey of the outcome in more than 40 developing countries had found that their average output growth in the 1990s had been two percentage points below that in the 1970s, while their trade deficits, as a proportion of GDP, had gone up by three percentage points.

If economic growth had accelerated it would be reasonable for developing countries to have more deficits, but it was a paradox that after trade liberalization their growth had gone down and deficits had gone up.

"We have had the worst of the two worlds, and a very disturbing trend: a sharp deterioration in trade balance along with a slowing down of output growth."

One of the reasons has been the deceleration in the world economic growth. There have also been other factors, including the sharp declines and collapse in commodity prices, that resulted in the OECD countries gaining for example $60 billion due to the sharp fall in oil prices alone - more than the amount they spent on aid. Oil prices had now changed and firmed up (as a result of actions of OPEC and some non-OPEC producers), and it will have consequences.

But the price recovery in commodities was confined to oil and one or two metals, where it is possible for producers to cut back supplies. But this was not possible in other commodities, and there has been a sharp deterioration in terms of trade exchange between developing and industrial world.

Another factor has been the imbalanced way in which trade liberalisation has taken place - mostly in areas of export interest to the industrial world, and much less in areas of export interest to the developing world.

Ricupero cited in this regard the outcome in textiles and clothing (where any significant dismantling of discriminatory quotas, if it ever takes place, might be in 2002-2005, but with high tariffs still in place) and agriculture where it has been minimal. Trade barriers to exports of the developing world still remained, not to speak of barriers through abuse of rules on anti-dumping, technical barriers to trade, sanitary and phyto-
sanitary measures etc.

The next round must restore a balance, and this means developing countries should get more than 50% of the concessions from the North. The liberalisation even under the WTO had been in areas favouring the North - Information Technology, Telecom, Financial Services.

It is time to do something to restore balance at the WTO, Ricupero said.

Asked whether, in the runup to Seattle, he was advising developing countries not to open up their markets, and for a complete revamping of the Seattle agenda, Ricupero said developing countries should formulate and put on the table their proposals as a part of the positive agenda. Some 50% of the about 150 proposals so far tabled were from developing countries, and they should negotiate on them realistically, and make concessions
themselves only if they get more than a majority of concessions from the industrial world.
Ricupero was asked why developing countries, and their public who are now mobilising against Seattle, should expect more from the WTO this time when the pleas of UNCTAD from the time of Prebisch (in 1964), through successive Secretaries-General had gone unheeded? Why would Seattle be any different?

The UNCTAD head conceded that there was a problem of credibility around the trading system, but he would not share the pessimistic view that nothing had happened or would happen, and cited the case of textiles and clothing and agriculture, which had been outside the purview of the trading system, but now brought in. Also, this time around the participation and level of technical knowledge, command over details and awareness of developing country negotiators was much higher.

But international negotiations were based on power, and in trade negotiations market power counted. And while the industrial north had greater market power, developing countries could compensate by pooling together common interests, forming coalitions. Ultimately they had to appeal, as the Chinese representative did at Singapore when he said that the industrialized countries may use their power and gain market access in developing world, but to a non-existent market, since developing countries would be unable to import without exports.

Ricupero was unwilling to make a judgement whether developing countries should insist only on the "built-in agenda", and said he was not sure whether the built-in agenda alone would enable them to tackle the problem of tariff peaks and tariff escalations their export face.

Asked about the Uruguay Round agreements that should be "revisited", Ricupero gave as his personal view - since UNCTAD had not made any study of this - the need to revisit and make changes in TRIPS, TRIMS,the Subsidies Agreement.

The TRIPS agreement, he said, is one that deserved close scrutiny to see whether the balance that exists inside is adequate - balance in terms of protection of intellectual property rights and competition. There were also many shortcomings of TRIPS that had to be looked at - including on how to deal with Art.27.3 (b) of TRIPS (dealing with plant varieties protection) and the conflicts with the Convention on Biodiversity. The CBD, he noted, provided a clear recognition of rights of traditional indigenous knowledge of aboriganees and local populations and the genetic elements.

In the same way industrial countries were seeking to harmonise, through clarifications, the rules of the GATT and of the Multilateral Environment Agreements, incompatibilities between TRIPS and CBD should be addressed.

The TRIMS agreement would also met close examination to see how far it restricts the ability of developing countries to resort to policies and measures which had been utilized by the industrial countries for their own development and industrialization.

The Subsidies agreement too merited some attention, he said, and one of the major imbalances in the current trading system should be addressed. Industrial subsidies on exports of industrial goods came under its "red light", absolutely prohibited subsidies, whereas in agriculture practically all export subsidies were legal. How could one justify, or find intellectual support whether in Ricardo or any other trade theoretician of free trade
that would allow developed countries to provide export subsidies in agriculture, and deny it in industry for developing countries?

Even in industrial subsidies, the "green box" (non-actionable subsidies) covered everything of interest to industrialized world -- research and development, environment and 'regional development', brought in at the instance of the EC and not developing countries.

And now, the only measure that was clearly prohibited by the WTO, the voluntary export restraints, have come back as in the US- Brazil steel agreement, and being discussed in regard to Russian and Japanese exports of steel. The greatest achievement of the Uruguay round, end to 'grey area' measures had come back. And while he had raised this at the recent ECOSOC meeting, he found that no one had paid any attention.