By Rubens Ricupero and - -
GENEVA, Sep 1 2004 (IPS)

One of the consequences of the September 11 attacks was to stall the process of globalisation, writes Rubens Ricupero, Secretary General of the United Nations Conference on Trade and Development (UNCTAD). In this analysis, Ricupero writes that underlying the logic of globalisation was the idea that national borders were losing relevance as the quantity of cross-border transactions rose dramatically. Since September 11 there has been a reversal of this idea. National boundaries are again a central concern. Worldwide, there are many more obstacles to the movement of the people and goods and even services. In the long and middle term, globalisation and the reinforcement of national boundaries are incompatible. The latter tendency, of course, is a mere three years old, so it is premature to predict that it will bring about the end of globalisation. We are seeing to some extent in the US the emergence of a new war economy, like that of the Vietnam era when the combination of a war economy with considerable pressure on oil –which we see today as well– led the Federal Reserve to increase interest rates, setting off the foreign debt crisis. While it cannot be argued that the same is going to happen now –largely because in contrast to the 1970s we no longer have high inflation — nonetheless there are elements which are disturbingly similar.

One of the consequences of the September 11 attacks was to stall the process of globalisation. In the 1990s, globalisation was largely carried forward by the growing movement of convergence of basic political values and the resolution of many long-standing political problems, from the division of Berlin, of Germany, and indeed of Europe into communist and capitalist camps, to the end of apartheid in South Africa.

Underlying the logic of globalisation was the idea that national borders were losing relevance as the quantity of cross-border transactions rose dramatically not only in trade and merchandise but also in services, financial operations and investments. Moreover, an increasing share of these cross-border activities were not physical but electronic, which rendered the border more and more obsolete.

Since September 11 there has been a reversal of this idea. National boundaries are again a central concern. One concrete example is that entering the United States is much more difficult now than it was ten years ago. Worldwide, there are many more obstacles to the movement of people and goods. Because of the fear of terrorism, there are customs inspections and a panoply of new laws, like those regulating biological products, which are extremely strict. New barriers have been raised even to financial transactions as a result of the heightened vigilance regarding the financing of international terrorism.

In the long term, globalisation and the reinforcement of national boundaries are incompatible. The latter tendency, of course, is a mere three years old, so it would be premature to predict that it will bring about the end of globalisation.

What followed 9/11 was not a total reversal of globalisation but rather a loss of its momentum: it simply became far more difficult for it to proceed. A clear indication of this is the fact that the Bush administration never speaks about globalisation. The reason, of course, is plain to see: the Bush government is essentially concerned with national issues, and such pursuits are not compatible with globalisation.

The second area in which we feel the stalling of globalisation is that of security. Today security has become a priority concern of many countries. Fears about international terrorism and the proliferation of weapons of mass destruction have led to an massive entrenchment of the State against the market and against civil society. What was a basic presumption during the 1990’s — namely that markets would become more and more important in relation to the State — has now been reversed. Now it is the State that is important. This started in the US, and is most vividly demonstrated by the fact that Americans are no longer paying much attention to the budget deficit. Indeed, Congress is able to make enormous increases in the security budget because when you are in the grip of war — of total war, as the Bush administration sees it– cost ceases to be a concern.

To some extent we are seeing the emergence of a new war economy in the US, like that of the Vietnam era, when military expenses were so high that in 1971 the United States had to abandon the two pillars of the Bretton Woods monetary order, in place since 1944: the convertibility of the dollar into gold, and the pegging of the currencies of the other signatory countries to the dollar. The soaring inflation generated by the Vietnam War and the ballooning federal deficit, among other factors, made it impossible for the US to remain in the Bretton Woods system. Inflation continued to rise even after the Vietnam War ended in 1975-1976, reaching double- digits in the late 1970s and early ’80s — a situation that was further aggravated by the two oil shocks.

This combination of a war economy with considerable pressure on oil prices –which we see today as well — finally led to the decision by Paul Volcker, then chairman of the Federal Reserve Board, to increase interest rates, which in turn set off the foreign debt crisis. While it cannot be argued that the same is going to happen now –largely because in contrast to the 1970s we no longer have high inflation — nonetheless there are elements which are disturbingly similar, particularly a war economy with a very high pressure on oil prices. Vigilance is needed. (END/COPYRIGHT IPS)

Excerpt:

By Rubens Ricupero and - -
GENEVA, Aug 1 2004 (IPS)

If current trends persist, extreme poverty in the world\’s least developed countries, far from being eradicated, will expand from 334 million people in 2000 to 471 million in 2015, writes Rubens Ricupero, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD). In this article, Ricupero writes that nonetheless there is no justification for development pessimism regarding LDCs. Between 2000-2002 the poorest of the poor countries enjoyed a real average annual GDP growth rate of almost 5 percent, almost 1 percent more than the rest of the developing economies, which shows that development for the LDCs can be achieved and accelerated through the right strategies and a friendly environment. He calls for a new international covenant in which solidarity is granted the same stature in our aspirations as peace. Ricupero notes that the new kinds of threats to peace and security are often found in conjunction with a failed State with an economy in regression. It would be futile to fight these phenomena without addressing the sources of grievances that they exploit. This is a particularly clear example of the lack of coherence in the global system. It is indispensable to widen the door that leads to development and to remove the biases, imbalances, and distortions which make the path to development too steep for the weak to climb.

If current trends persist, extreme poverty in the world’s least developed countries (LDCs), far from being eradicated, will expand from 334 million people in 2000 to 471 million in 2015. This is one of the findings of the 2004 Least Developed Countries Report 2004 by the United Nations Conference on Trade and Development (UNCTAD).

Not only will the LDCs fail to achieve the first of the Millennium Development Goals (MDGs) –halving the proportion of people living on less than a dollar a day by 2015– but they will also likely fail in all the other goals set at the UN Millennium Summit in September 2000. These range from reducing child mortality by two-thirds, empowering women, and ensuring environmental sustainability to making significant progress in the fight against HIV/AIDS, malaria, and other diseases — all by 2015.

Unfortunately, the prospects for success are dismal: only 11 of the 50 LDCs are on course to reduce the under-five mortality rate by two-thirds; only 11 are likely to halve the percentage of the population suffering from hunger; and just seven are on track to halve the proportion of people without access to safe water.

Given their very low incomes, mass poverty, and low savings rates, there is no way the LDCs can lift themselves out of poverty if they rely solely on domestic resources. After subsistence consumption, what is left per person is a paltry 15 cents a day to spend on private capital formation, public investment, and the provision of such vital services as schools, law and order, and public health. On average, LDCs spend less than USD 5 per capita annually on health, compared to USD 1,456 in the OECD Countries.

Other sources of financing include official development aid (ODA), workers’ remittances, foreign direct investment (FDI), trade, and debt relief. While all have increased, they are still insufficient, unstable, and too concentrated in a few countries.

Nor has the debt panorama improved enough. While the majority of aid disbursements now comes in the form of grants, loans have been growing at 27 percent a year. Despite debt forgiveness, in 2002 the total debt stock rose to USD 145 billion and total debt payments reached a record level of more than USD 5.1 billion. The debt stock increased in 43 LDCs.

Trade, in contrast, was a bright spot. LDC merchandise exports reached a new high of USD 37.8 billion in 2002, up from USD 26.1 billion four years earlier. In nominal terms, this represented a 45 percent increase, a good part of it accounted for by oil exports.

But again, export earnings were markedly uneven. During 2000-2002, 56 percent of LDC merchandise exports originated in five LDCs: the four major oil exporters plus Bangladesh. Real annual GDP per capita growth exceeded 3 percent in 14 LDCs but stagnated or declined in 24.

In order to bring about a more balanced performance and eradicate poverty in LDCs, a dynamic new policy is needed, built on three pillars. The first is a development strategy capable not simply of mainstreaming trade in poverty reduction but also of mainstreaming both trade and development within the poverty eradication effort. This requires balanced development based on agricultural productivity growth, export-led industrialisation of processed agricultural products, diversification through management of mineral resources, and employment-intensive technologies.

The second pillar is the improvement of the international trade regime, including on issues beyond the scope of the WTO, to reduce international constraints on development in the LDCs. Among these, commodity dependence and its link with extreme poverty deserve special attention, with three main priorities: 1) the rapid phasing-out of the agricultural support measures in OECD countries that adversely affect LDCs; 2) initiatives to ensure greater international transparency in revenues from oil, gas, and mineral exploitation; and 3) measures to reduce vulnerability to price shocks, including linking debt payments to commodity prices and making aid more countercyclical.

The third pillar is financial and technical support for promoting production and trade capacities in the LDCs, the most neglected area of trade, where large amounts of investment are needed.

It is important to recognise that there is no justification whatsoever for development pessimism regarding LDCs. Between 2000-2002 the poorest of the poor countries enjoyed a real average annual GDP growth rate of almost 5 percent, or real per capita GDP growth of 2.6 percent per annum — almost 1 percent more than the rest of the developing economies. This clearly shows that development for the LDCs can be achieved and accelerated provided that with the right strategies, and a friendly environment, resources are mobilised and channelled into productive uses. This requires a new international covenant in which solidarity is granted the same stature in our aspirations as peace.

As we face new threats to peace and security, let us not forget that these often arise from failed States with regressing economies –like Afghanistan. It would be futile to respond without addressing the sources of grievances that feed these threats. The lack of coherence in the global system in this area is startling. It is indispensable to widen the door that leads to development and to remove the biases, imbalances, and distortions which make the path to development too steep for the weak to climb. (END/COPYRIGHT IPS)

Excerpt:

By Rubens Ricupero and - -
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)

Excerpt:

By Rubens Ricupero and - -
GENEVA, Apr 1 2004 (IPS)

The emerging reality of global enterprises that can shift their business across borders with increasing ease to maximise profits poses both an opportunity for competitive countries and a challenge to some of the standards prevailing in other societies, writes Reubens Ricupero, . In this article Ricupero writes that a heated debate is under way on whether or not outsourcing undermines the accepted trade liberalisation paradigm, is leading to a job exodus from developed to developing countries, and what the cost/benefit ratio is and whether protectionist government intervention is needed. Claims of a big wave of offshoring to poor countries swallowing up high-skill jobs in rich countries do not reflect reality. Outsourcing export opportunities for developing countries are much broader than generally presented, with a wide range of these countries significantly increasing their presence in global outsourcing markets. While the realisation of these opportunities may in fact lead to increased job losses in advanced countries, it should be recognised that these short-term costs will ultimately be trumped by the long-term gains of cheaper services being available to consumers in both advanced and developing countries.

The emerging reality of global enterprises that can shift their business across borders with increasing ease to maximise profits poses both an opportunity for competitive countries and a challenge to some of the standards prevailing in other societies.

International trade is evolving rapidly in the context of globalisation. The information technology revolution is accelerating trade transactions and creating new actors, modes of delivery, directions, and norms of business. The volatility of financial flows and sharp exchange rate movements can send tremors across international markets in an instant, affecting costs and profits.

Many of the aspects of this evolution of international trade raise prospects of realising development gains, but they also fuel anxieties in rich and poor countries about the potential drawbacks of globalisation. One of these developments is the rising importance of outsourcing. Businesses from developed countries are already mining the rich seams not only of low-tech manufacturing manpower in developing countries, but also of high-tech services and research and development through outsourcing.

At the same time, a heated debate is under way on whether or not outsourcing undermines the accepted trade liberalisation paradigm, whether or not it is leading to a job exodus from developed to developing countries, what the cost/benefit ratio is, whether protectionist government intervention is needed, and, if so, whether it will work, and finally, how this can be dealt with in the WTO and other trade negotiations.

The United Nations Conference on Trade and Development (UNCTAD) has been monitoring this phenomenon and has noted its evolution from one occurring primarily among developed countries to one including a new North-South dimension. Offshoring — i.e., outsourcing overseas — is indeed a rapidly growing segment of outsourcing, but despite much excitement about its significance to North-South trade, the current share even of frontline countries like India (3 per cent of global information technology spend) in this business is small. Hence, claims of a big wave of offshoring to poor countries swallowing up high-skill jobs in rich countries do not reflect reality.

On the other hand, it has to be acknowledged that offshoring does constitute a dynamic new area and may provide a big window of opportunity to ensure durable development gains to developing countries through international trade. In this context, it is encouraging to note that outsourcing export opportunities for developing countries are much broader than generally presented, with a wide range of these countries significantly increasing their presence in global outsourcing markets. While the realisation of these opportunities may in fact lead to increased job losses in advanced countries, it should be recognised that these short-term costs will ultimately be trumped by the long-term gains of cheaper services being available to consumers in both advanced and developing countries.

Some of the developing countries are already becoming regional growth dynamos with global presence. They occupy a place of importance in the trade of major developed countries. Last year for the first time ever, the United States imported more goods from developing countries than from developed countries, while its exports to developing countries increased to over 40 per cent of all exports. This is another reason why the trading system and trade negotiations must respond to and accommodate developing-country needs and concerns.

Some developing countries have the potential to become powerhouses of economic activity the way Europe, the US, and later Japan did during the 20th century. The Chinese example of a major importer and vigorous exporter boasting rapid and sustained growth may be replicated elsewhere, albeit on a smaller scale. And this points to the global importance of nurturing developing economies, bulking up their production capacity and purchasing power as a contribution to spreading global prosperity and expanding markets. In addition, the increasing productivity of developing countries will spur innovation in the advanced economies.

I have no doubt that offshoring is a legitimate part of global trade liberalisation. It enables developing countries to leverage their comparative advantage: abundant, competitive labour, and a lower-cost environment. I can do no better than to paraphrase the British Trade Secretary, Patricia Hewitt, on the ”myth” behind the offshoring fears in the UK — its biggest beneficiary — to respond to this and to the cost/benefit ratio argument: ”We cannot argue liberalisation abroad and practise protectionism at home. However strong the short-term costs appear to be, the long-term benefits are greater for, consumers and for jobs,” and, may I add, for the economy. (END/COPYRIGHT IPS)

Excerpt:

By Rubens Ricupero and - -
GENEVA, Jul 1 2003 (IPS)

The most forceful moral and political justification for agricultural subsidies in the EU and US is that they save small farmers, yet the facts clearly demonstrate they are not doing so, writes Rubens Ricupero, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD). Ricupero writes that over the past 15 years, as subsidies have expanded relentlessly small farmers in these areas have become poorer and poorer in relation to the rest of the population. Kevin Watkins, Head of Research of Oxfam, writes: \’\’Far from benefiting small farmers, agricultural support goes overwhelmingly to large-scale, capital-intensive agriculture, and for a good reason: support is closely correlated with production levels, or — in the case of direct payments — to land ownership. \’\’ We should all praise the EU Commissioner for Agriculture and his colleagues in moving away from production and price-linked subsidies. But it is unclear from preliminary reports whether the reforms announced recently will substantially change the current concentration of 80 percent of payments in the hands of 20 percent of the bigger farmers, or to what extent the new system will prove less trade-distorting.

The most forceful moral and political justification for agricultural subsidies in the European Union and United States is that they are needed to save small farmers, yet the facts clearly demonstrate they are not achieving that purpose.

Over the past 15 years, as subsidies have expanded relentlessly –wealthy economies are now spending nearly USD 1 billion a day on them, six times more than what they provide in foreign aid– small farmers in developing countries have become poorer and poorer in relation to the rest of the population, so much so that they are now a vanishing species.

In a New York Times article of 15 December 2002 about the rural United States, Timothy Egan writes: ”Decades of economic decline have produced a culture of dependency, with empty counties hooked to farm subsidies… The hollowed-out economy has led to a frightening rise in crime and drug abuse”. In the US, the percentage of people living below the poverty line is nearly 30 percent higher in rural areas than in cities.

In France, over the past 12 years, the peasant population has declined by one third. More than one in three rural enterprises has disappeared as a result of death, retirement, or the refusal of the new generation to follow in their parents’ footsteps. The number of suicides in the countryside has increased so rapidly that the Mutualite Sociale Agricole considers the phenomenon ”a truly public health problem”, among highly-indebted farmers in particular.

How can this happen in a country well known for its vigorous defence of farm subsidies? A study by Oxfam notes that ”France has one of the most highly skewed patterns of subsidy distribution in the EU… Around one-third of farms receive between E 0 to 1,250 each year. Within this group, one-quarter receive nothing. The 15 percent of farms receiving in excess of E 20,000 account for 60 percent of total payments”.

Kevin Watkins, Head of Research of Oxfam, writes: ”Far from benefiting small farmers, agricultural support goes overwhelmingly to large-scale, capital-intensive agriculture, and for a good reason: support is closely correlated with production levels, or — in the case of direct payments — to land ownership. ”

The evil generated by this misdirected welfare policy is by no means limited to its failure to help its hypothetical beneficiaries. In more than one sense, poor-country farmers are financing the social welfare doled out to rich-country farmers.

First, even if subsidies were given only to domestically consumed products, and even if such subsidies were decoupled from production or prices, as the European Commission proposes to do, they are still of necessity linked to high market-access barriers. Consequently, they limit markets for exports from developing countries.

Second, whenever subsidised products get into the world market, they drive prices down, creating volatility in prices and hurting developing countries’ exporters.

Third, many of the subsidies in the EU and the US go to products exported to the world market — such as dairy products, beef, poultry, wheat, soya, sugar, and cotton — taking significant market shares away from more efficient producers in developing countries.

Fourth, as subsidised foodstuffs from rich nations enter the markets of the poor, they compete unfairly with local producers, who are often driven out of business altogether, creating an artificial dependency on foreign suppliers and aggravating the problem of food security in times when food aid disappears and prices rise.

Nowhere is the linkage between rich country farm support and poverty aggravation more dramatic and less morally defensible than in what I have called “the international scandal of cotton”.

While the US, the EU, and to a lesser extent China all subsidise cotton, American subsidies are the main cause of the cotton crisis, in part because of their sheer size –between USD 3 and 4 billion annually– in part because more than 40 per cent of the output is exported. Even when world prices fell to 38 cents a pound in May 2002, the US was able sharply to increase its share of the world market, despite its considerably higher production costs.

As a result, Africa as a whole lost about USD 300 million, with West Africa losing USD 191 million. Losses for Mali and Benin exceeded what they received in US aid. In Benin, lower world prices for cotton are associated with a 4 percent increase in the national incidence of poverty. In those three West African nations, the poorest of the poor, about 11 million people depend directly on cotton as their only source of cash income.

More than an economic or trade problem, cotton subsidies pose a moral dilemma. The next WTO meeting in Cancun (September 10-14) should call for an accelerated phase-out of production subsidies and immediate transitional compensation to be provided by Northern cotton producers. If we are not prepared to take those relatively straightforward decisions, discussion of rural development in poor countries runs the risk of becoming little more than an exercise in futility.

We should all praise the courage and determination of the EU Commissioner for Agriculture and his colleagues in moving away from production and price-linked subsidies. However, it is unclear from preliminary reports whether the reforms announced recently will substantially change the current pattern of concentration of 80 percent of payments in the hands of 20 percent of the bigger farmers, nor the extent to which the new system will prove less trade-distorting.

Nonetheless, the EU decision does represent an encouraging change in the right direction. Let us now hope that the same inspiration prevails in the US, where the last farm bill was a move in the opposite direction, relinking subsidies to production and prices. (END/COPYRIGHT IPS)

Excerpt:

The era of cheap oil slowed the search for alternative energy sources and the development of environment-friendly technologies. The wide fluctuations of oil prices over the last few years are a reminder of the high level of uncertainty that still surrounds world economic performance. It is also proof that, despite excessive heralding of the ''new economy,'' we remain as dependent as ever on oil, especially for transportation.

The era of cheap oil may or may not be behind us. But there is little doubt that the years of depressed prices which began in 1986 and ended in 1999 stoked demand for the commodity in the industrial countries and everywhere else, discouraged new investment in production and refining, and delayed moves to alternative energy sources and more environment-friendly technologies. All of this only increased the volatility of the market.

For oil-importing developing countries faced with the burden of high import bills, compensatory financing from multilateral institutions on soft terms should be considered. The World Bank's announcement that it would make structural loans and other forms of emergency funding available to oil-importing countries is a step in the right direction.

On the other hand, we should not ignore the circumstances and problems of oil-producing countries, for which oil, a non-renewable resource, is a major — and in some cases the only — source of revenue and the basis for future economic development and diversification. It is only to be expected that these countries would seek stable and remunerative prices for their main export.

It is clear that we need policies and measures which will ensure both fair prices for producers and fair prices for consumers. This issue must be given a prominent place on the future international agenda.

Continued economic growth in this decade will require increases in energy demand, particularly oil. Investments for expanding production capacities in major oil producing countries will be essential but remain problematic for a number of factors, including financial constraints, volatility in oil prices and lack of market predictability and transparency. Lack of transparency has often resulted in decision-making without adequate information on plans by producing and consuming countries with respects to levels of production, trade and consumption. An oil crisis for lack of production or refining capacities, such as the one experienced last year, is indeed ironic in the midst of plentiful oil reserves.

Relying solely on market forces has proved inadequate and generated massive misallocation of resources and instability in energy markets. In this respect, dialogue and cooperation between the owners of plentiful oil reserves on the one hand, and the coordinators of finance and technologies on the other, has become more important than ever before. The industrial countries' call for coordinated policy action after major increases in oil prices last year is undoubtedly to be welcomed. However, it contrasts sharply with the indifference those countries showed to similar calls from the developing world, which was reeling from the devastating consequences of falling commodity prices. Indeed, for most commodities exported by developing countries, the depressed prices of 1998 are still with us.

Oil-importing developing countries thus have the worst of both worlds: they pay more for imported oil but still receive little for their exports. Worst of all, this is taking place against a backdrop of diminishing official development aid (ODA) to the weaker partners in the world economy. Today, ODA disbursements in real terms are at their lowest levels in 20 years.

Asymmetries and double standards prejudicial to developing countries are also present in the multilateral trading system, particularly as regards the balance of mutual rights and obligations, including market access. Before we engage in a new round of trade negotiations, we should make the redress of such imbalances a priority.

Pressuring developing countries to further open markets without giving them possibilities to export and find their way out of poverty and underdevelopment is a shortsighted approach. The risk is that these countries will be unable to obtain the resources needed to pay for imports of capital goods and technology from industrial countries without increasing their debt, and that their markets will simply dry up.

The progress made in the last two decades does not inspire optimism, unfortunately. While investment flows have reached unprecedented levels, long-term capital flows to the least developed countries (LDCs) declined in the last decade by about 40 percent in real terms. This was the result of shrinking ODA coupled with the failure of most LDCs to attract sufficient private capital inflows to offset the decline.

Compounding this problem is the fact that the majority of LDCs — which import oil and export primary commodities — are currently caught in a double bind of high and volatile oil prices on the one hand and low and volatile primary commodity prices on the other. The deterioration of the terms of trade has further exacerbated the liquidity shortage, which in turn discourages much-needed investments in the economic and social infrastructure. All of this will have particularly serious implications for the significant number of LDCs that are beset with problems of domestic peace and security.