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SHAPING GLOBALIZATION MAY NEED NEW REGULATIONS

by Chakravarthi Raghavan


Bangkok, 11 Feb 2000 -- The industrialized countries and their leaders have changed the language of their discourse, and using more and more of the language of UNCTAD on the trade and development problems of developing countries, and showing more concern to their situation, but this language needs to be translated into facts and actions, UNCTAD Secretary-General Rubens Ricupero declared Friday.

Mr. Ricupero made this comment at a pre-UNCTAD-X joint press conference with Dr. Supachai Panitchpakdi Deputy Prime Minister and Commerce Minister of Thailand and President-designate of the Conference (and the designated successor to Mr Mike Moore as the Director-General of the WTO from September 2002).

Both Supachai and Ricupero in their opening remarks had earlier spoken of the complementarity of UNCTAD and the WTO, with UNCTAD dealing with the broad range of trade and development issues, and the WTO as a body negotiating trade rules and settling disputes.

Dr. Supachai had also spoken of globalization and liberalization as irreversible and the need to shape and influence the process, and see how it could be made more fruitful, enable everyone to work together, harmonise resources and produce the best results for everyone. Supachai also noted that there was now everywhere a demand for reforms of the major institutions including reform of the WTO. The demonstrations at Seattle and more recently even at Davos showed civil society was demanding changes. It was time for governments to sit together and discuss what needs to be done. Also, while countries have been striving for development for so long, and have undertaken trade liberalization and reforms, there were lingering doubts whether they had gained enough by opening up their economies.

This was a kind of task that an institution like UNCTAD, resource-based and knowledge-based institution, and with countries from all parts of the world as members could address.

Supachai said that he and Ricupero had also participated at the meetings of NGOs and their caucus and were listening to their views. There was a need to integrate civil society into the processes of UNCTAD and enable all to carry on a serious dialogue over globalization and liberalization, which were processes that were irreversible.

This conference, Ricupero said, was unique in that it was about development and the challenges faced in this behalf: how to tame financial volatility which was the main cause of monetary and financial crises, how to make developing countries share more in the prosperity brought about by international trade, and how to help developing countries diversify their trade and their economies. Trade, as such, was just a part of this whole picture.

The major task of UNCTAD, as the principal organ of the UN General Assembly, was to seek coherence - coherence in international policy making, coherence between external conditions, finance and trade, and coherence in domestic policies. There was need not only for coherence but solidarity. The plan of action to ensure market access for the least developed countries, in the interests of solidarity was one of the contentious issues that was before the 3rd Ministerial at Seattle and the issue remained open and needed to be settled.

Ricupero referred in this connection to the recent remark of the UK Chancellor of Exchequer Gordon Brown who spoke of the trade talks and said the test was as to whether the developing countries would benefit in concrete terms.

Referring to his meetings with NGOs, with whom "we have had a very respectful and fruitful dialogue, and some disagreement", Ricupero said some of the NGOs wanted to play a more central role in the negotiations, but this was a matter for governments. But he was struck by the sharp contrast between the NGOs, even those from the same areas, and the representatives of various investment promotion agencies of countries who wanted more inflows of FDI and welcomed TNCs. He would like to see a meeting where these two forces of society could interact directly.

On the complementarity of the roles of UNCTAD and WTO, and the compatibility of the two organizations, Supachai, (who is the next designated successor to Moore and to take over as WTO DG in Sep 2002) spoke of the WTO increasingly talking about development issues. He also noted that while there had been a large developing country participation in the Uruguay Round, towards the end when the agreement of the major nations was needed to conclude the talks, the developing countries did not fully participate in the settling the agreements. It was now essential to bring about a full integration of developing countries into the trading system, and this was necessary for the success of any new global round. UNCTAD had been working to improve the capacity of the developing countries and participate effectively in the future negotiations, and had helped them to prepare an alternative agenda for the Seattle meeting.

Ricupero, for his part, spoke of a division of labour between the two institutions, with the WTO mainly dealing with rule making and disputes, while UNCTAD was providing a broader forum for discussion of a wider range of these issues. Earlier, trade negotiations involving tariffs and border measures were easy, but now after the Uruguay Round, any new negotiations would be more complex and difficult.

He referred in this connection to a joint report that UNCTAD and WTO had produced which showed that even when the Uruguay Round results were fully integrated, there were many products of export interest to the developing world that faced tariff peaks and tariff escalation at every stage of processing. The report showed that if these barriers were eliminated the developing countries would earn more from international trade and exports and make unnecessary the short-term financial flows for trade financing and meeting their external trade deficits.

A questioner suggested that the view that globalization and liberalization was inevitable was not really true. Just as the 19th century version of globalization and liberalization was brought down since it failed to deliver benefits to all and ensure equity, it seemed that if the WTO did not use the window of opportunity over a year or two to resolve the problems of imbalances and inequities, and ensure real benefits to the developing world, the system and its version of globalization would also be brought down. If UNCTAD was not to be concerned with trade, how could it resolve the problem?

Ricupero said that the decision to set up the WTO and vest it with rule-making and dispute settlement was one taken by governments, and it was there whether one liked it or not.

As for globalization, said Ricupero, his own views were in the report to the conference. It was an ongoing process and may last 15 to 20 years. But the globalization process could be shaped and influenced through negotiations. The world was living through a period in the evolution of capitalism where new regulations were needed if the challenges were to be met. The history of the industrial revolution had shown that the inequities and imbalances had to be addressed by regulations and institutions. There was no doubt that the present situation too needed more regulations and institutions, but it would take time.

Asked to comment on the contrast between the industrialized world using and adopting more and more the ideas and language of UNCTAD and their very low level of representation at the conference, Ricupero said UNCTAD was not a beauty contest nor in the business of proving which institution was more important. In a sense, UNCTAD was the "anti-devil", looking more closely at the situation of the deprived and marginalized. UNCTAD was very comfortable with the position that it was voicing the position and problems of these countries and peoples. Earlier, he said, while industrialized countries were using UNCTAD's language and talking more and more of the need to address the central concerns of the developing countries, it did not mean they agreed with UNCTAD's ideas on all points. At the level of speeches, they spoke in general terms but the test would lie in how these would be addressed. Ricupero cited, in this regard, the need for the special and differential treatment to developing countries being made operational. Also, it was necessary to ask why there was to be free trade only in industrial goods and high-technology, but not for agriculture or the products exported by the developing countries where they still faced considerable barriers.

Responding to a questioner who referred to the recent biosafety protocol concluded at Montreal, and whether this would avoid a conflict and whether the WTO would accept it or insist on 'free trade', Ricupero said this was a difficult and important problem that the world would be facing in the years ahead - namely conflict of institutions and rules.

On the one hand people don't want to see any limits on free trade. On the other side, we have a situation where people want to make sure that the precautionary principle would apply, and there should be exceptions. According to the UNEP press communique, as a result of the Biosafety Protocol, countries would be able to decide whether they should keep out imports of GMO products on the basis of the precautionary principle and that all such products would be labelled. He would not be surprised that when these are sought to be enforced, it would give rise to differences and disputes. The outcome would be difficult to predict.

This was why he was saying that the major question in terms of the global economy remained the question of coherence. The solution was clear. One has to decide what goal was being pursued, and whether this would affect other goals.

And the concerns of civil society show that if it was sought to pursue these goals, if the frontiers of trade were pushed beyond the traditional ones of tariff and border measures, it would become more and more complicated and give rise to conflicts. This was why any more new negotiations and new areas would become more and more difficult. There were no simplistic solutions.

Asked about the financial flows and volatility, Ricupero said that UNCTAD had set out its views clearly in the report it did on the Asian crisis and then in the 1998 Trade and Development Report dealing with prevention of crises and management of it.

Now many more institutions and experts were coming around to the views of UNCTAD. The IMF has itself been concerned about the extent of short-term debts in a country's debt profile.

There are questions about how one could avoid getting into that kind of situation, how to avoid pressures on their currencies. There is now agreement that countries should exercise some controls on the inflows. But now the IMF has come around to recognizing that in some circumstances, controls on capital flows may be useful. The IMF has even seen some wisdom in the controls on outflows in extreme cases, such as introduced by Malaysia .

But UNCTAD believed that it was not merely for the countries receiving such capital that need to exercise controls. The countries of origin too could exercise some control - more or less similar to what they did even now in domestic situations where a bank lent money unwisely, and was asked to raise its reserves. Such controls on foreign capital flows are technically feasible and simple.

However, there was a danger of complacency. One thought of remedies only at the time of the crisis and when it is over, attention is not focused. Until now, nothing has been done.

But unless something was done to deal with sudden surges in short-term finance, it would be risky. For, such crises would occur again.

Asked about UNCTAD focus on poverty reduction, Ricupero said that UNCTAD was not an organization dealing with social issues, but more directly with economic issues. The central purpose of development was to reduce or eliminate poverty. But UNCTAD was trying to address more centrally the problems of development. But in the final analysis, if there was no economic growth and a strong and vibrant economy, it was not feasible to attack poverty. One had to pay attention to the economic side to deal with social problems. (SUNS4605)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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