INCREASED TRADE NO PANACEA FOR DEVELOPING COUNTRIES

By Rubens Ricupero and - - Reprint | | Print |

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GENEVA, Jun 1 2004 (IPS) - In the 40 years since the United Nations Conference on Trade and Development (UNCTAD) was founded, the international environment has been radically transformed by globalisation, and the problems experienced by developing countries today require innovative approaches, writes Rubens Ricupero, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD). The eleventh quadrennial UNCTAD conference will be held in Sao Paulo, June 13-18. In this article for IPS, Ricupero writes that the conference will define the type of national and multilateral measures that are needed to ensure that integration into the world economy yields real development gains for developing countries. Open trade regimes and financial markets alone are not enough. The author notes that in many developing countries, conventional, market-based policies have not lived up to expectations for sustainable development and poverty reduction, arguing that trade policies should be complemented by redistributive policies, primarily through taxes, as UNCTAD proposes.

In the 40 years since the United Nations Conference on Trade and Development (UNCTAD) was founded, the international environment has been radically transformed by globalisation such that the problems experienced by developing countries today require new and creative approaches.

At the eleventh quadrennial UNCTAD conference, to be held in Sao Paulo, Brazil, from June 13-18 — it will also mark UNCTAD’s fortieth anniversary– the organisation will have the opportunity to address these problems and define the type of national and multilateral measures that are needed to ensure that integration into the world economy yields real development gains for developing countries.

With this aim in mind, the conference could help to build the consensus necessary for multilateral and regional trade negotiations to make progress. Negotiations of both kinds are currently proceeding at a less than desirable pace. Negotiations for the Free Trade Area of the Americas (FTAA), for example, suffer from the same lack of dynamism that besets multilateral efforts.

This said, open trade regimes and financial markets alone are not enough. The fact is that in many developing countries, conventional, outward-oriented, market-based policies have not lived up to expectations in terms of promoting sustainable development and poverty reduction.

The impressive trade performance in Latin America, for example, has failed to offset the impact of six years of negative per capita growth, and there are 20 million more poor people there today than in 1997.

Latin America is thus a very appropriate venue for UNCTAD XI, which will focus on exploring how to harness the power of trade for development and poverty reduction. Overall, what is needed is to strengthen the coherence between national development strategies and global economic processes so as to ensure development gains from trade. This is precisely the goal of the UNCTAD XI.

In this context, the conference will look at how to improve the supply capacity of developing countries. Even in those few areas where developing countries have acquired meaningful market access through global trade negotiations, in many cases these countries cannot take advantage of it because of domestic supply constraints and bottlenecks. Many remain dependent on volatile commodity markets. Locally-tailored strategies are needed to overcome these shortcomings by building supply capacity and diversifying exports. This will often require greater policy flexibility in international trade rules. In the case of the poorest countries, increased overseas development assistance will also be necessary. The tendency for such assistance to decrease after a developing country has liberalised has often undermined the ability for these countries to build an adequate capital base needed to benefit from such liberalisation.

Of course, the increasing amount of foreign direct investment has contributed to building supply capacities for some developing countries. Forty years ago, when UNCTAD was founded, developing countries’ share of world manufactures exports was insignificant. Today, their participation in this sector has increased, in many cases as a result of the internationalisation of production through multinationals. Many countries that export manufactures have benefited from this aspect of globalisation.

However, not all of them have benefited from a corresponding increase in the level of value added. The countries that fared best, such as China, did not simply accept globalisation passively. They capitalised on their advantages by using joint venture contracts with multinationals that were limited in time. This system worked because the Chinese took advantage of this period to successfully learn from their teachers and, more often than not, outpace them.

At the same time, India is transforming itself into a major exporter of services. This is not only because, as is often noted, wages are low, but also because Indian labour is highly-qualified. Two million university graduates with impressive proficiency in mathematics and sciences are added each year to the technological wealth of this country, outnumbering those of all industrialised countries combined.

The conclusion to be drawn is that for foreign investment to play a vital and positive role in development, it has to be accompanied by an appropriate, dynamic policy and institutional setting.

UNCTAD XI will thus have before it a triple challenge: (1) to identify the international and national policies that are necessary for growth to permeate the entire social fabric of developing countries; (2) to create all the important developmental linkages, particularly to guarantee that that trade, foreign direct investment, and technology have a substantial positive effect on development; and (3) to help to reinvigorate trade negotiations at the multilateral as well as other levels. (END/COPYRIGHT IPS)