'North should open its own markets in new Round' - UNCTAD

UNCTAD's Secretary-General, Rubens Ricupero, has asserted that the main focus of the next Round of trade negotiations should be on developed countries opening up their markets to the developing countries and rectifying the imbalances of past trade negotiations.

by Chakravarthi Raghavan

THE central focus of the next Round of multilateral trade negotiations, a development round to be agreed at the upcoming Seattle World Trade Organisation (WTO) Ministerial Conference, should be on industrial countries opening their markets to developing countries and redressing the imbalances of past negotiations, UN Conference on Trade and Development (UNCTAD) Secretary-General Rubens Ricupero told the UN Economic and Social Council (ECOSOC) high-level segment on 5 July, during a policy dialogue with the heads of the International Monetary Fund (IMF), World Bank, International Labour Organisation (ILO) and UN Development Programme (UNDP), and the Director-in-Charge of the WTO.

Mr Ricupero also spoke of the 'hard, ugly facts' of the return of 'voluntary' export restriction agreements and 'grey area' measures (in steel and commodities like oil). He said these had to be overturned now, and not at the end of a new trade Round, if developing countries are to be encouraged to persist in the path of liberalisation. Earlier, painting a grim picture of the world ending the century with failure to solve two major threats to a future with security - mass unemployment and growing inequality - and developing countries being worse off than before, Ricupero said the time has come 'to rethink our policies and responsibilities'.

The UNCTAD head said the century was ending with a bang, and not a whimper, 'with failure to solve two major threats to a future with security: mass unemployment and growing inequality.' According to a recent study, the next century could start with an income disparity between the top and bottom quintiles of perhaps 150 to 1 if they were not there already.

Not long ago, the ILO had estimated that one billion people, or 30% of the world's workforce, were either jobless or underemployed. In the poor parts of the world, most of the planet, the turbulent events of the past two years have challenged the very core of belief in the possibility of sustainable and sustained development, and the crisis had struck the most advanced and most integrated of the developing countries - a paradox in that development was supposed to reduce the vulnerability of economies to external shocks.

In Latin America, 17 years after the outbreak of the debt crisis, average growth through the 1990s would be less than 3%, practically half of the 5.5% before the crisis. The crisis has also had dramatic effects on employment in the worst-hit countries, and more so on the more marginal groups.

Referring to the recent recoveries in some local stock markets and stabilisation of currencies (which has been cited in the media and by international financial and development institutions, and to which IMF chief Michel Camdessus also had made references), Ricupero asked how this had translated into the real economy in terms of jobs and family incomes.

'If our goal is the raising of living standards of the poor through the creation of good, well-paid jobs, it would be premature and a sign of guilty complacency to declare the crisis over without taking specific actions to deal with the social and gender fallouts from it.'

Slow death

These effects, Ricupero said, were not likely to disappear automatically as the crisis receded. There were now 80 million more living below the poverty line in Latin America than at the start of the 1980s. And even before the last Mexican crisis, employment in that region was actually declining by an average of 0.3% between 1989 and 1995, and joblessness had jumped from 5.6 to 7.2%.

'What are the measures being considered by the international community to ensure that the same slow death does not befall the population of South-East Asian countries over the next decade?'

Developing countries, he said, had striven hard and at considerable cost to integrate more closely into the world economy, but had all too often been confronted with deep-seated imbalances in economic power and systemic biases in the international trading and financial systems.

Projections of gains in terms of faster growth, greater employment opportunities and poverty alleviation have proved overly optimistic, as was the case with the 'extravagant predictions regarding the impact of the Uruguay Round'.

Whatever might be the intellectual foundations of these predictions, 'the empirical record has been strikingly at odds with the promises,' Ricupero said, pointing out that while economic growth in developing countries in the 1990s had accelerated above that of the 1980s, it was well below the 5.7% average of the 1970s. 'Polarisation among countries, with the disappearance of the 'middle class' group as the IMF rightly noted, has been a worrying trend.'

While trade has had a remarkable performance during recent years, the expansion of imports by developing countries has not been matched by a corresponding increase in exports. This has been particularly true of Latin America where the gap has averaged four percentage points, but the imbalance is a general one. The notable exception has been China, which, perhaps not by coincidence, is not a member of the WTO yet.

While the reasons are complex, 'there is no denying that a combination of declines in terms of trade, losses of purchasing power of developing country exports and big-bang liberalisation of trade and capital accounts have contributed significantly to this situation.'

The result has been that for many developing countries, the average trade deficit in the 1990s was higher than in the 1970s, by almost 3% of GDP, while the average growth rage is lower by 2% annually.

'Faced with this situation, the time has come to rethink our policies and responsibilities. Developing countries need to protect their policy autonomy if pragmatism is to prevail over ideology.'

While reform of the financial architecture with the goal of rolling back the control that finance has gained over real economic activities has rightly been attracting the most attention in recent months, efforts should now turn to the trading system, the UNCTAD head said.

The next trade Round should be a truly development Round, and with this purpose, UNCTAD was actively contributing to a positive or pro-active trade agenda for developing country negotiators.

Redressing imbalances

The central focus of such a Round, Ricupero said, should be 'on industrial countries opening up their markets to developing countries where the latter have comparative advantages and redressing the imbalances of past negotiations.'

Citing the example of Latin America, whose exports to Europe have grown by only 29% during the 1990s while Europe's exports to that region have risen by 164%, Ricupero said that while there were several reasons for this disparity, one of them certainly was the European barriers in agriculture - a competitive Latin American sector, as shown by the fact that Latin exports to other markets have increased by more than 120%.

Citing recent testimony of the US Trade Representative (USTR) before a congressional committee, Ricupero asked: 'In the light of the disappointing results of ongoing discussions of CAP (the EU's Common Agricultural Policy) reform, who is taking bets that a significant liberalisation of agricultural trade is on the cards?' But the panorama of protectionism is no better in industrial goods, the UNCTAD head said, referring to the rise in protectionism on steel and commodities like oil (in the US).

The 'worst setback' since the Uruguay Round was the return of the so-called 'voluntary' export restraint agreements, the comeback of managed trade. A couple of weeks ago, Brazilian steel exporters had to sign an agreement with the US Department of Commerce on hot-rolled carbon steel, and similar arrangements were about to be concluded with Russia and with Japan, conducted in this last case in such oblique fashion as to allow 'plausible deniability' to both sides.

Ricupero said when he first heard the news he could not believe it. He thought how strange it was that Ambassador George Maciel (who had chaired the negotiations on safeguards and non-tariff barriers in the Uruguay Round and to whom went the credit for prohibition of 'grey area' measures (and requiring pre-WTO measures to be phased out by the end of 1999)) had passed away just in time to not see his own country forced to condone the overthrow of one of the major achievements of the Round!

These are not ideological arguments, nor academic lectures about free trade. 'These are facts, hard, ugly facts that have to be overturned not by the end of a new trade Round but immediately, now, if we are to encourage developing countries to persist in and even further the path of liberalisation.'

There is nothing wrong with trade liberalisation if it can be achieved in a gradual, equitable, balanced way. It might do wonders for poor people in general, and disadvantaged groups in particular, like women. Development should be as much female- as export- led. In labour-intensive operations for export, such as production of clothing, semiconductors, toys, sports goods and shoes, the proportion of women workers is very high, as also in international business and financial services, especially in the relatively unskilled data-entry end of the business. In this regard, the challenge is to make global arrangements in trade much more supportive of greater participation of women in development, both as agents and as beneficiaries.

'At the threshold of the new century, globalisation appears as an unfinished business, a work in progress, a process that can still be steered and shaped by human beings according to human values. It is our duty to take this opportunity with both hands if we wish that the shape of things to come is one that will help men and women to achieve basic security and to lead an accomplished life of affection and productive work.' (Third World Resurgence No. 108/109, Aug-Sept 99)

The above article first appeared in the South-North Development Monitor (SUNS- issue no. 4470) of which Chakravarthi Raghavan is the Chief Editor.