DEVELOPMENT: UN Officials Disagree with Orthodox Neoliberalism

By Gustavo Capdevila Reprint | | Print |

Gustavo Capdevila

GENEVA, Jul 7 1998 (IPS) - High-ranking United Nations officials stepped away from the more orthodox neoliberal views predominant in the international economic field this week, when analysing market liberalisation and the Asian crisis.

UN Secretary General, Kofi Annan, rejected the industrialised countries’ proposal to make trade conditional on the fulfilment of labour regulations.

Annan said the trade liberalisation process must continue, but stated there were a wide variety of views on how this should be done.

“Some has suggested using trade rules to achieve goals with respect to labour, the environment and human rights,” he said.

In contrast, Annan maintained the United Nations system should be used instead to pursue such goals.

The industrialised countries tried unsuccessfully for the World Trade Organisation (WTO), an institution outside the UN system, to monitor the imposition of the labour regulations and their influence on trade.

This initiative was rejected at the WTO ministerial conference in Singapore in 1996.

A proposal to the same end put forward by the leading world unions and the developed countries did not gain consensus in the International Labour Office (ILO) conference in June.

Attempts to use the multilateral trade system to resolve problems in these areas – labour, environment and human rights – could place the trade regime under great strain, predicted Annan, and would be much less effective than adopting policy solutions in the sectors themselves.

The UN leader was speaking in New York Monday, during the opening of the annual session of the UN’s Economic and Social Council (ECOSOC).

In the same debate, secretary of the UN Conference on Trade and Development (UNCTAD), Rubens Ricupero, stressed the growing divergence of perceptions about globalisation on the international scene.

Ricupero cited the controversy over “fast track” international agreement negotiations in the United States, the anti-WTO demonstrations in Geneva during the May ministerial conference and the suspension of the Multilateral Agreement on Investment negotiations in the OECD.

He partly agred with the liberal sectors, which praised the results of the multilateral agreements established by the WTO.

However, he criticised the application of these agreements, stating “whilst the implementation of the WTO agreements is on track, we can probably agree that it is not proceeding at a pace and on a scale that is satisfactory to all WTO members.

And if this is not given full and faithful implementation “the credibility of the WTO itself may be at stake,” he said.

At the last WTO conference, the developing countries and especially the least advanced nations said the long delays in the application of the agreements are having effects on the few areas which could benefit them.

The low-income and less developed countries have a major export interest in agricultural products and others with low value added and technological content, like clothing, textiles, footwear and leather products.

And these are precisely the sectors in which market access barriers (tariff and non-tariff), imposed by industrialised and developing countries alike, are at their highest, concluded a joint study by the WTO and UNCTAD.

Given their trading position, the developing countries are more damaged by the Asian crisis than the industrialised countries, due to the negative tendencies in the volume and export prices of their goods, said Ricupero.

From Chile, Cuba, Ecuador and Peru in Latin America, to Angola, Congo, Tanzania and Zambia in Africa, including Kazakhstan, Russia and Rumania, the developing countries in all regions have depended on East Asia for an important part of their export earnings.

Kofi Annan concluded “the developing countries are less able than developed nations to withstand the fallout of the Asian crisis, and even countries far removed geographically and economically from the Asian region are feeling the impact.”

He stated the African nations in particular are experiencing collateral damage in the form of reduced commodity prices.

While debate continues over the extent of the effects of the crisis, “we have learned the hard way that there are important distinctions to be made between short-term, speculative capital flows and long-term commitments such as foreign direct investment,” he concluded.

Ricupero agreed the inherently volatile nature of the short term flows and the fact the financial markets are not like potato markets, meant “it is more difficult to manage integration into international capital markets that it is to successfully insert oneself into an international trading system.”

And this is why the Asian countries succeeded in the latter, but did not do so well in the former, he said.

As a result, he added, developing countries should not be “pushed or pressured into premature financial liberalisation,” as is suggested by the WTO authorities and the industrialised countries.

The UNCTAD secretary pointed out that far from subsiding, the Asian crisis appears to be deepening.

For while economic growth and exports are reducing in China, prices are falling for the seventh month running.

In Hong Kong, a two percent fall in Gross Domestic Product was registered in the first quarter of 1998.

Japan continued to be hit by recession and a depreciating yen, forcing Pakistan to devalue its currency for the second time in nine months.

The Australian dollar has fallen and Australian commodity exports will probably fall for the first time in 20 years, leading to a current account deficit expected to exceed 6.5 percent of the GDP.

The New Zealand government warned the economy was “halfway down the road to recession” as GDP declined by 0.9 percent in the first quarter of 1998.

In the same period, Taiwan registered its first trimester with a trade deficit in the last 17 years, said the UNCTAD secretary.

Due to the bleak prospects for recovery in East Asia, “we expect a widening income gap between North and South,” concluded Ricupero.