Ricupero remains sceptical on new round

by Chakravarthi Raghavan

Geneva, 7 Feb 2002 -- The first priority for developing countries in the new round of trade negotiations launched at Doha is market access, increasing their share in the world trade, and correcting the imbalances that have accumulated over 50 years of the trading system, and ensure the greatest flexibility to enable them to decide for themselves on the domestic policies most advisable from their own macro-economic point of view, UNCTAD Secretary-General Mr. Rubens Ricupero said Thursday at a press conference.

He was answering questions arising out of his opening statement Monday to the UNCTAD Commission on Trade in Goods and Services and Commodities, where he had spoken about the ‘development implications’ of the Doha Declaration.

Mr. Ricupero seemed sceptical about the extent of liberalisation that might take place in the new round, particularly in agriculture and some of the other sensitive areas of ‘core protectionism’ in the industrialized world.

Earlier, an UNCTAD official, Ms Manuela Tortora, who is in the trade division, speaking to the media (before Mr. Ricupero came) and explained the Commercial Diplomacy courses and technical assistance to be provided, had suggested that UNCTAD had no single or unified view and that its advice was tailor-made to the needs of recipients of technical assistance. She had been asked to explain how UNCTAD could be credible when different divisions within the secretariat seemed to have differing views on development, and UNCTAD seemed to be depending on funding for technical assistance on donors who want to promote their own views.  In explaining the UNCTAD plans for technical assistance and the Commercial Diplomacy courses to be run, tailor-made for needs of individual country or group of countries in their negotiations, Tortora had said that UNCTAD did not believe that a single policy would meet the needs of all, and had no single view.

Mr. Ricupero was asked about UNCTAD’s own position, in the light of his own consistent and clear statements over the last two years or so, including in the Trade and Development Reports (TDRs), about the imbalances of the WTO system and need to correct them and his views against the Singapore issues in the WTO, and was asked to reconcile these with the concepts of ‘tailor-made’ technical assistance and views of other sections of UNCTAD promoting the Singapore issues.

The UNCTAD head said that his own views had not changed, and that in his own statement to the UNCTAD Commission, the central point he had made was on how to give concrete expression to the development content of the negotiations, more so when not every member of the WTO was at the same level of development.

When this was sought to be tackled, there were bound to be differences, and this was why negotiations were necessary, more so when there was the possibility of having honest differences of opinion on the proposals. His own personal views were not relevant in any way in this matter.

A second important element related to the question of freedom of action of countries on their development policies, and the need to give attention to concrete measures of market access. And this was a first priority. The market access for developing countries in the trading system, Ricupero said, remained highly imbalanced, with the imbalances that had accumulated over the last 50 years, either by total exclusion of sectors or of high tariff and non-tariff barriers on their exports of ‘sensitive’ products - textiles, footwear etc.

Undoubtedly, in working towards binding commitments on these issues, and that was the purpose of negotiations, one has to take account of the interests of others, in terms of rules etc. However, he said, citing the case of the subsidies agreement in the Uruguay Round agreements, subsidies are not allowed in industrial exports, but are permitted in agricultural exports. And many of the policies that the industrialized countries had pursued in their own development in the past were no longer allowed to the developing countries. All these rules and agreements need to be looked at and dealt with from a development perspective, Ricupero said, adding that this applied to the new issues on the agenda.

Ricupero was asked about the views of a range of economists, including mainstream economists, and even the UN Regional Economic Commission for Latin America (at a seminar in January) that seemed to be calling for a re-thinking.  Other economists had now come to the view that the developing countries in the Uruguay Round had made a Faustian bargain of sacrificing their domestic policy autonomy for market access (which had not materialised either) and that this was a wrong choice and the first development priority was to restore the policy autonomy and options for developing countries.

The UNCTAD’s policy had not changed and remained very clear, Ricupero said.  Development was a very complex business, and it required full flexibility for developing countries, and a single ready-made formula could not be applied to all countries. Each country would need the freedom to decide what policies were most advisable for it from the macro-economic point of view. It was for the developing country concerned to decide. However, since this would affect the rights of other countries, it was legitimate to have negotiations on such issues.

Ricupero cited the Doha declaration on TRIPS and Public Health as an example of WTO members changing their positions and coming around to the view on need for flexibility. In his own view, the agreement itself provided the flexibility, but some interpretations had narrowed it down. In this case it the issue of TRIPS was linked to goals of international public health, and need for clear respect for public health needs. There were any number of other examples involving need for flexibility of application of rules, freedom for policy space. Many of these points were covered in the ‘implementation’ issues raised by developing countries even before Seattle.

Asked about agriculture, market liberalisation issue and reducing tariffs, and the EC view that reducing tariffs as demanded by the Cairns Group would result in ACP preferences being lost, Ricupero said that there were differing interests in the negotiations, including on agriculture. The situation of developing countries on dependence on exports was not the same. There were also other differences, such as in respect of countries in Asia, with very large populations and dependent on agriculture for rural employment. Even in the Uruguay Round, there was such differences, and the problems of the Net Food Importing Developing Countries (NFIDCs) found recognition. It was another matter how far this had been implemented.

Referring to the crisis in Argentina, Mr. Ricupero said in all the discussions about it, an element that had been forgotten, was that in the 19^th century phase of globalization, between 1890 to 1920, Argentina was fully integrated into the world markets, and was exporting to Europe and Britain. But then came the British imperial preferences, and Argentina was excluded from the international division of labour based on its comparative advantage. Amidst all the talk of free market, free trade etc, agriculture was a major exception, and Argentine exports were shut off from the main markets. Asking a country like Argentina to be like Singapore and export micro-chips to the US was not a sound proposition.

Argentina in the 19^th century, he said, had an industrial complex - British capital had gone into Argentina and invested and built infrastructures, and also had trading companies. However, the agricultural protection and other elements had now disadvantaged that country. Mr. Ricupero also cited the case of New Zealand, a very successful industrialized countries which had liberalised, but was now facing considerable difficulty because of lack of market access in agriculture.

[Argentina’s problems had been compounded by the fact that in 1990s in the face of protected markets for its exports it opted for liberalisation of capital markets and financial liberalisation. In the 19^th and early 20^th century, the advantages of Argentina or New Zealand in agricultural exports was from the perspective of the theories of free trade, and static comparative advantage when factors of production were immobile. But even in that Ricardian view of free trade, of comparative advantage of international trade by exchange of Portuguese sherry wines and English textiles, and the trade benefiting both, the Portuguese wines were carried in English ships and bottled and merchandised by the English trade - what now is called trade in services. And, while Portugal derived static comparative advantage, it got locked up on the technology ladder, while England specialising in industrial production, was able both to learn and build on that technical knowledge and capacity, and thus had capital and technological accumulation. And when capital and other factors of production (except labour) became mobile, Argentina got itself doubly disadvantaged by full convertibility and its currency board type system, and liberalisation of capital and financial markets, including foreign ownership of banks etc.]

While stressing the importance of the agriculture negotiations in the new round, Mr. Ricupero, seemed to remain sceptical that things would change very much - citing the relatively high levels of tariffs (about 15%) facing imports in industrialized countries of ‘sensitive’ products like textiles, footwear etc, or of much higher tariffs on agricultural products (where non-tariff barriers were converted into the tariffs, but bound at very high levels) or where ‘specific’ duties were levied as on sugar, or some other such products.

“The older I grow, the more I am beginning to believe in Gandhi’s theories of self-reliance,” Ricupero added, in suggesting that developing countries would need to rely on themselves.

Also, said Mr. Ricupero, “I do not believe trade is a universal panacea. Trade negotiations are important, but they are not a sufficient condition. Countries must develop a productive sector, and developing countries need to have policies to promote industrialization, creating value-added even in exporting commodities, or diversifying from one to another. In many cases, particularly in Africa, they need support of the international community. And when they are heavily indebted, this has to be tackled, and they need increased ODA.

Although in earlier rounds of negotiations, tariffs in industrial countries had come down, they have preserved some areas from competition, what was called ‘core protectionism.’ He also referred to the problems faced in the US, over trade promotion authority (the old fast track authority to the administration for trade negotiations), and referred to the House passed bill, where a number of single products had been mentioned, and requiring special consultations with particular committees before any concessions could be made. While the USTR had assured that this did not mean a rejectin of tariff cuts, in practical terms, when for specific products, a special consultation process was required, liberalisation would be very difficult.

The UNCTAD head also cited the OECD figures about the increase in agricultural support in the OECD countries (since the Marrakesh agreement) of about $100 billion dollars. The direct payments to producers in the United States alone had increased from $5.2 billion in 1998 to $13.9 billion in 2001. And though the Uruguay Round called for reductions in domestic support, there were so many loopholes, such as in the ‘Green Box’ that most of the subsidies were being given using these loopholes.

It was going to be a process of difficult negotiations, and UNCTAD could best help by bringing these to the knowledge of negotiators, he added. – SUNS5056

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