The Hindu Business Line : Unctad charts steps for growth of least developed nations

"It is an illusion to think that persistent mass poverty is the result of a lack of integration and insufficient trade liberalisation rather than the result of under-development.

New Delhi , May 31

THE key policy issue confronting the least developed countries (LDCs) and their development partners currently is "how to promote development and poverty reduction in a very open subsistence-level economy situated in a very asymmetrically liberalised international economy", according to the UN Conference on Trade & Development (Unctad).

In its just released LDC Report 2004 on the theme of linking international trade with poverty reduction, the Geneva-based UN body said that making international trade a more effective mechanism of poverty reduction in 50 LDCs calls for "a development approach in which three pillars work together coherently and synergistically".

The three pillars of this approach include better national development strategies which integrate trade objectives as a central component, improvements in the international trade regime, including issues which go beyond the scope of the WTO, to reduce international constraints on development in the LDCs and increased and effective international financial and technical assistance for developing production and trade capacities.

TheSecretary-General of Unctad, Mr Rubens Ricupero, has warned, "it is an illusion to think that persistent mass poverty in the LDCs is the result of a lack of integration and insufficient trade liberalisation rather than the consequence of underdevelopment". He said the policy problem for the LDCs is not the level of integration with the world economy but rather the form of integration.

He said the current form of integration is not supporting sustained economic growth and poverty reduction. The process of trade liberalisation has created a new environment for poverty reduction in the LDCs with the key issue being how the LDCs, supported by their development partners and enabled through a facilitating international trade regime, can promote development and poverty reduction in the new milieu.

The report contends that the LDCs cannot be expected to gain much from the current round of multilateral trade liberalisation, unless improvements are made in their productive capacities to enable them to benefit from any subsequent global growth.

Though the phase-out of agricultural support measures in developed countries is particularly important for the development prospects of the LDCs as they might help countries import cheap foods and meet food security needs in the short-term, they have "a depressing effect on agricultural production in LDCs". The report identifies rice, sugar, maize, sorghum, wheat, potatoes, cotton, beans and beef and veal as some of the key products that receive support in developed countries and are of great importance to production in least developed countries.

The report notes that current special measures, including both market access and preferences and special and differential (S&D) treatment for the LDCs embedded in WTO provisions, have various limitations, which reduce their effectiveness. There is considerable room for strengthening these measures.

Again, the report argues that international trade can be made a more effective mechanism for poverty reduction in the LDCs through increasing South-South cooperation in the field of trade. This became increasingly important, as South-South trade has grown.

Other developing countries supplied only 32 per cent of total LDC imports in 1989 but by 2001 this had increased to 56 per cent.

However, there is a danger that LDCs might become marginalised in South-South trade as they are in North-South trade.

The proportion of total exports of LDCs going to other developing countries only rose from 15 per cent to 34 per cent between 1989 and 2001. The LDCs have a deficit in their international trade with other developing countries, which increased from $5.5 billion in 1990 to $15.6 billion in 2002.

Finally, the report said, the goal of LDCs themselves must be to promote a progressive transition in which sustained economic growth is increasingly founded on domestic resource mobilisation, the attraction of developmental FDI and the tapping of international financial markets and imports are increasingly paid for by exports rather than covered by aid inflows.