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Monday, October 25, 2021
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GENEVA, Dec 12 2006 (IPS) - Though the current state of the global economy is good, there are five areas of concern, writes Supachai Panitchpakdi, Secretary-General of UNCTAD (United Nations Conference on Trade and Development). In this article, the author writes that the first is the current impasse in the Doha Round talks, which hurts the world\’s poorest most acutely. The second concern is poverty. Globalisation and trade liberalisation have had a mixed impact. Some nations have been even further marginalised as a result, with poverty and income distribution in some cases worsening. The third area of concern is migration, which is sometimes perceived as a threat to jobs and to host societies ill equipped to absorb vast numbers of migrants. The fourth is energy security. The author calls for a well-structured, coordinated system of global economic governance that is beneficial to all countries and would help avoid potentially disastrous global imbalances and also avert distortions in international trade relations.
The developing countries have been a big part of this good news: their GDP growth has exceeded 6 percent for the third consecutive year. The recovery in Latin America has continued, and even the poorest region, sub-Saharan Africa, is likely to expand its income by about 5 percent this year. Many middle-income nations have strengthened their competitiveness in world markets for manufactures. Asia has enjoyed particularly phenomenal success
But not all countries have benefited, or benefited equally, from these developments. While the trend has created some undeniable opportunities, I see five main areas of concern:
The first is the current impasse in the Doha Round of the World Trade Organisation negotiations. Expectations were high that the Round would contribute to poverty reduction and better income distribution, but unfortunately this does not yet seem to have been the case.
The suspension of the talks hurts the world’s poorest most acutely. If the current impasse persists, it could reduce their confidence in the multilateral trading system. It could send a negative signal on the future of the world economy and might even encourage a resurgence of protectionism. Bilateral and regional trade initiatives with deeper commitments are already proliferating.
The second area of concern is poverty. Globalisation and trade liberalisation have had a mixed impact. Some nations have been even further marginalised as a result, with poverty and income distribution in some cases worsening.
It is true that although some countries are struggling, the overall picture has improved. Extreme poverty — defined as living on less than a dollar a day — has declined worldwide, by 130 million between 1990 and 2002 alone. The fastest progress has been registered in China and Eastern Asia, where the proportion of people in extreme poverty has plunged from 56 percent to 17 percent in just two decades and gross domestic product per capita has more than tripled. But this good news must be placed in perspective, as some 700 million Asians overall, representing two thirds of the worlds poorest people, remain trapped in extreme poverty.
The third area of concern is migration, which is sometimes perceived as a threat to jobs and to host societies ill equipped to absorb vast numbers of migrants. These fears are real. But like other apparent threats, migration can also be an opportunity. Services account for some 40 percent of employment in developing countries and up to 70 percent in the industrial world. Liberalising trade in services, which are often provided by migrant labour, thus holds great potential for increasing global welfare.
The fourth challenge facing the world economy is energy security. With demand growing for oil and other commodities prices have been rising to unprecedented, and some would say unsustainable, levels. For countries that export oil and commodities, this is good news. African government oil revenues, for instance, jumped by USD 15 billion between 2003 and 2004. But for oil-importing countries, many of which are heavily indebted to boot, the news is less good. The higher fuel costs they are paying eat into the resources available for feeding and housing their people and building much-needed infrastructure. All of this could have a negative impact on both consumers and the macro-economy. The long-term sustainability of our energy sources — not to mention the environmental health of the planet — is in jeopardy.
My final concern about today’s world economy are the persisting imbalances. East Asia, South Asia, and certain Latin American countries are enjoying record current account surpluses. By stabilising their exchange rates at low levels, they have accumulated large amounts of dollar reserves, but the dollar now appears vulnerable. More and more developing countries, especially in Asia, have stopped relying on foreign savings and aim instead at generating trade surpluses as the engine for investment and growth.
A correction of these imbalances requires that both surplus and deficit countries play their part. It would not be good to deflate the former without calling on the latter — and notably Europe and developing Asia, with their great potential for increased demand — to expand and provide much-needed stimulus to the world economy.
But such stimulus may not be possible in present circumstances. While the multilateral trading system contributes to certainty and predictability in international trade, the same does not hold true for current international monetary and financial arrangements. They are not organised around a multilateral rule-based system, and this lack accounts in large part for the disorder and imbalances we see at work today. All of this suggests the need for a well-structured, coordinated system of global economic governance that is beneficial to all countries. This would help avoid potentially disastrous global imbalances and also avert distortions in international trade relations. (END/COPYRIGHT IPS)
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