The Hindu Business Line : Unctad meet to focus on trade vision-development coherence

The Unctad conference in Brazil provides an opportunity for both developed and developing countries to engage themselves constructively before they get into the Geneva process in July.

New Delhi , June 1

AS globalisation and liberalisation had evoked mixed response among the practitioners across the world, the United Nations Conference on Trade and Development (Unctad) has chosen coherence between the national and international visions of trade and development as its central theme for its eleventh four-yearly session from June 13 to 18, to be held in Sao Paulo, Brazil.

In a background paper on the forthcoming conference, the Geneva-based UN body said that the meeting in Sao Paulo aims to "foster coherence between global processes and national development strategies with an emphasis on the link between trade negotiations and the productive sector".

Unctad is of the view that globalisation and liberalisation could not substitute for domestic forces of growth. Careful and well-managed integration into the world economy, appropriately sequenced and tailored to the level of economic and institutional development of each country, could underpin domestic investors and producers. Domestic economic policies in developing countries — especially trade, investment and technology policies — are now constrained by international trade and borrowing commitments. This calls for "revisiting" the issues of appropriate national policy space and policy flexibility in the developing countries and for exploring how this policy space could be used most effectively.

Unctad argues that globalisation has fallen short of the promises of growth, increased employment, higher wages and greater welfare that are touted by the advocates of free trade and financial flows. In an environment of slow and erratic growth of the world economy, the benefits of globalisation have been distributed unevenly among and within countries.

The income gap between rich and poor has widened and poverty has increased in many developing countries. The average GDP per capita in developed countries was 17 times that of the developing countries in the early 1990s and this ratio rose to 20 to 1 in the year 2000.

Hence strategies for development need to be revised at both the international and national levels. At the international level, there is clear evidence that external shocks arising from the international financial and trading systems, such as volatile private capital flows and fluctuations in commodity prices trigger crises and setbacks in developing countries. These crises in turn fuel economic instability, preventing growth and increasing poverty.

The heavy and at times unsustainable debt levels in developing countries pose a risk to the global financial system that must be addressed. At the national level, the results of the liberal economic reforms of the 1990s are mixed: economic growth has been generally sluggish and privatisation, liberalisation and foreign direct investment have led to a greater concentration of industry.

Hence, Unctad said, "the one-size fits all" policy recipe has been widely rejected in favour of recognition of the need for diversity in designing national development strategies. This implies that the State has a critical role to play in fostering a policy milieu conducive to private sector investment and economic growth.

The share of developing countries in world trade has risen from approximately 24 per cent in 1990 to 32 per cent in 2000. But this growth in developing-country exports is extremely concentrated: East Asia produces over 75 per cent of developing world manufactured exports and a greater proportion of high-technology items, while South Asia and Sun-Saharan Africa saw their trade share by only 2 per cent, according to Oxfam.

What is disquieting is that countries in the South have liberalised trade faster than the industrialised nations of the North, resulting in increased import bills at a time when Official Development Assistance (ODA) has been falling. This only worsens the plight of countries already saddled with a heavy external debt burden, making it increasingly unsustainable.

Unctad is urging that a sound global system be established to monitor short-term and speculative capital flows and provide warnings of possible volatility. At the forthcoming Unctad meeting in Brazil these and other allied issues would be studied threadbare so as to evolve policy inputs to developing countries to design their reform measures in tune with developmental orientation.

Official sources told Business Line that as the theme of the Conference gels well with the United Progressive Alliance (UPA) strategy of "reforms with a human face", the country would be represented by a high-level delegation led by the Union Commerce and Industry Minister, Mr Kamal Nath, who would leave for Brazil on June 10. The sources said that the Unctad conference provides an opportunity for both developed and developing countries to engage themselves constructively before they get into the Geneva process in July when the General Council of he WTO meets to tie up loose ends for modalities on negotiations to launch the Doha Development Agenda before the year is out.

Moreover, Unctad conference is the first biggest gathering of Trade Ministers after the WTO Ministerial failed in Cancun (Mexico) in September 2003, the sources added.