Start of a process to manage globalization

The recent 44th session of UNCTAD's Trade and Development Board has produced a set of agreed conclusions on all the substantive issues before it. The conclusions could lay the basis for an intergovernmental process to manage globalization and liberalization.

by Chakravarthi Raghavan

GENEVA: The conclusions adopted by the Trade and Development Board (TDB) of UNCTAD could start an intergovernmental process on how to manage globalization and liberalization in an interdependent world economy and provide some guidelines for policies at national and global levels.

The Board which ended substantive work on 22 October, adopted by consensus, what Secretary-General, Rubens Ricupero called "significant agreed conclusions with a policy content" on all the issues before it - interdependence and global economic issues, and the UN Programme for Africa and the Least Developed Countries (LDCs).

While the last two addressed the specific problems of these two categories of countries, the Board's discussions and agreed conclusions on interdependence addressed issues that are uppermost, perhaps, in the minds of people around the world, the North and the South, and with which governments everywhere are struggling with.

The text on the interdependence issue was negotiated and put together in a small group by Dutch Ambassador, Mdm. Evelyne Herfkens who had co-chaired the expert panel discussions with Jamaica's Ambassador, Anthony Hill.

The issues of globalization and liberalization creating inequality, and marginalization and uncertainty (focused in the TDR and the panellists discussions), have been forcefully brought to public attention over the last few months as a result of the Asian crisis (hitting currencies and stock markets), which has not ended but has spread (with Hong Kong as the latest storm centre), and could easily spread to the industrial centres themselves - but issues that were not discussed or addressed does not figure on the agendas of the IMF/World Bank or the WTO.

In addressing these questions, member-countries of UNCTAD in their conclusions have agreed that deflation could be as much of a danger to the world economy as inflation, that solutions being sought for the labour market problems in the North have to be sought through higher and sustainable growth, and not through current policies that could threaten the international trade and payments systems.

The Board's conclusions in effect challenged the neo- liberal orthodoxies and the "big bang" approach to liberalization and said, greater openness of developing economies (that could benefit them), has to be an orderly and phased process of integration, tailored to the circumstances of individual countries, and that the increasing number of issues affecting growth and distribution, being taken up in international negotiations, need to reflect the differing starting points and capacities, and take into account areas of particular interest to developing countries.

The Board's agreed conclusions

The remarks of Japan at the final plenary, and its comments and efforts in the private negotiations for a conclusion, suggested that (as a major contributor, trying to buy its way into the UN Security Council veto-wielding permanent seat), it would want all UN system organizations to carry a message to the developing world of what Japan asks them to do, and not what Japan did to become a successful late industriali-zer, in the post-war world, and become a global economic power, rivalling the United States.

In its agreed conclusions, the Board:

  • expressed appreciation for this year's Trade and Development Report (TDR) and asked the secretariat to continue to study aspects of globalization as part of its future work on interdependence, including both opportunities and challenges;

  • noted that despite growing prosperity, income gaps across and within countries have been widening over the past two decades, posing a challenge to policy-makers everywhere;

  • that certain elements of globali-zation may have contributed to the tendency for widening income gaps, even though forces behind this widening are complex;

  • that there are social and political limits to growing inequality and, if pushed too far, income disparities can provoke a backlash, generating instability and triggering populist policies and protectionist tendencies that could nullify the economic gains of closer integration; and

  • that an effective response will have many dimensions.

"A development strategy incorporating a faster pace of investment and growth holds the key to adequate job creation and rising living standards for all and measures to achieve higher employment rates, fiscal stability and social objectives, including appropriate social safety nets, should complement policies that foster economic growth."

In four paragraphs, effectively signalling the swing-back of the pendulum from the current dogma of neo-liberalism, the Board agreed that:

  • "Markets by themselves do not create the full range of factors, inter alia, of skills and institutional capacities, needed to accelerate growth and to meet the challenges of competitiveness associated with globalization. Government policy has a crucial role to play in promoting economic growth and competitiveness and reconciling these with social objectives. This role is to complement and regulate, rather than restrict market forces."

  • "In an interdependent world, successful domestic policies require an enabling global environment. An increasing number of issues affecting growth and distribution are taken up in international negotiations. The regimes agreed to in such negotiations need to reflect the different starting points and capacities of development partners, and should take into account the areas of particular interest to developing countries."

  • "The movement in the direction of greater openness for developing economies should be an orderly process backed by effective policies at the international, as well as the national level. These policies should entail a phased approach to integration tailored to the circumstances of individual countries."

  • "Success in curbing inflation has helped to create conditions for sustainable growth. If this is to be achieved, policy needs to be oriented towards avoidance of deflation, as well as resurgence of inflation. Otherwise, the adjustments to the dynamic competitive forces associated with global integration and rapid technical change are much more difficult. Achieving higher and sustainable growth is a necessary condition for dealing with poverty in developing countries and labour market problems in industrial countries, and is also essential to the avoidance of threats to international trade and payments."

In some closing remarks, Ricupero said, the TDB had met the challenge of undertaking constructive policy dialogue and formulation and all delegations had demonstrated political will and leadership.

"And for the first time in many years," he said, "in a spirit of partnership, we have used our collective wisdom to reach agreed conclusions on all the substantive items on the agenda of the Trade and Development Board. And the policy content of the agreed conclusions 'is fairly significant' and provides a good starting point."

While there was general consensus that greater integration into a globalizing world economy is the ultimate objective for all countries and will bring benefits, nevertheless, the Board recognized the need to "manage" the integration process so as not to generate more income gaps within and among countries. Such growing gaps could give rise to problems not only for national governments but the international community, since they can unleash processes that will go against the process of globalization and liberalization, "and it is in everyone's interest to see this kind of development not take place."

Ricupero also underscored the agreement that "in the management" of the integration process, special attention should be paid to the requirements of developing countries which do not start from the same favourable base as others. The integration of developing countries requires greater consideration to be paid to their capacity to meet the challenges of globalization and competition.

"This message represents a significant policy conclusion and illustrates the role of UNCTAD not only as a source of policy for development but particularly as a place where consensus can be reached and create guidelines for action by the international community and policy-makers."

Praising the conclusions for the convening of the Third UN Conference on LDCs to be held at the end of the decade, with a clear mandate and responsibility to UNCTAD to prepare for this conference, Ricupero gave his personal commitment to ensure that this conference would not be a repetition of old complaints, and would provide "some added value to the consideration of the problematique of the LDCs."

The outcome on Africa, he said, is a comprehensive document of action required by the international community - Aid, speedy and substantial reduction of debt, trade liberalization and structural adjustment, to be adapted to the conditions of each country, and the need to stress potential and actual losses.

UNCTAD, he said, will provide support and research particularly on the relationship between debt and capacity to generate savings, and support the African countries in the Paris Club negotiations, and on efforts to increase the resources for investment including foreign direct investment.

"Beyond the current efforts within the secretariat to renew itself, member-states have just signalled their willingness to contribute to the revitalization of UNCTAD so as to enable it to be at the forefront of international and national policy-making," Ricupero said. "We are particularly encouraged by what has happened (at the Board) and it is the continuation of a process that will confirm the renaissance of UNCTAD, achieved at UNCTAD-IX in Midrand, South Africa last year."(SUNS4082)

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