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Not Trade or Aid, but Trade Through Aid

By Ranjit Devraj

Economist Charles Gore sums up best the situation that LDCs seeking investment from large global trading companies find themselves in when it comes to commodity exports - those who can invest won't and those who would invest can't.

That's rough. Because as UNCTAD Secretary-General Rubens Ricupero described it at yesterday's thematic interactive session on international trade, commodities and services, ''the collapse of commodity prices is one of the darkest stories of the last five years''.

Ricupero's solution to the problem was the simple diversification of exports and participants at the session, readily concurred. The Zambian representative, for example, spoke of how his country diversified from copper exports as its main source of foreign exchange to tourism.

Gore, who is UNCTAD's main expert on LDCs, said global trading organisations have the resources necessary for developing LDC commodity exports in the long term, but are deterred by the time and trouble that may be involved over exporting a commodity which may be in small quantities.

But there were several ways out for the LDCs and, according to Gore, the most viable one was for them to take advantage of aid to develop or enhance productive capacities and international competitiveness. ''It's not about trade or aid but about trade through aid.'' Gore cautioned policy makers in the LDCs not to harbour false expectations that foreign direct investment (FDI) can lead the development process. Similarly, donors should not see rising private capital inflows as an opportunity for reducing overseas development aid (ODA), he said.

Using aid to add value to commodities and diversify products will not only increase income for producers but also increase revenues, exports and jobs besides decreasing sensitivity to unavoidable swings in international commodity prices, says Carlos Magarinos, Director General of the United Nations Industrial Development Organisation (UNIDO).

Magarinos said UNIDO has a new initiative to enable LDCs to participate in international trade which focuses on technical support to high-potential export sectors to upgrade production in volume and quality and help exports. ''We are pleased to note that the envisaged activities are essentially included in the draft Programme of Action.'' Already UNIDO has helped the fishing industry in Uganda to overcome a 1999 European ban imposed after catch from Lake Victoria was suspected to have salmonella poisoning, resulting in heavy losses in terms of jobs and income.

Mike Moore, Director General of the WTO said his organisation provided a forum where LDCs could raise particular problems and challenge measures imposed on their exports and identify specific technical assistance. ''WTO agreements limit importing countries' scope to impose arbitrary requirements on LDCs' exports and encourage the use of internationally developed standards.'' Moore said in the long run the ''big benefits and advantages'' for LDCs could only be achieved within the overall context of wider negotiation, in other words, a new Uruguay round.

There were murmurs of dissent with the representative from Uganda saying that his country would like to see ''what is on the table'' before supporting a new round especially when there were too many unresolved issues in the original one. ''We need to examine the agenda.'' Supporting a new round, Jean-Denise Belisle, executive director of the International Trade Centre (ITC) said the time for the LDCs to bargain was not at the beginning of the round, but at the end. ''Enter the dance, but don't leave till you are satisfied,'' was his advice.

Belisle said the ITC's objective was to make more people appreciate that trade has a role in sustainable human development and the way to go was to move step by step until things got resolved. ''But you won't get anything out of the party if you stay out.'' According to Belisle the LDCs needed to realise that they needed both aid and trade. ''Aid alone is not an option in the long term and trade is part of the answer to getting more people to become self-sufficient.'' On the many complaints that bilateral and multilateral aid was not getting to the people it was intended for, Belisle said development was a ''terribly complicated game and implementation far from perfect''.