Global Policy Forum

By Chakravarthi Raghavan

Bangkok -- The tenth session of the UN Conference on Trade and Development got off to its substantive work Sunday with a call from Secretary-General Rubens Ricupero for a stock-taking exercise of development over the last few decades and to chalk out a path ahead. In a speech kicking off the general debate, Ricupero cited the writings from a variety of political philosophers, current and past, to make the point about the great uncertainties facing global society, to underscore the need to temper the savage globalization of unfettered and footloose capital, with interdependence and mutuality of interest of nations and peoples.

In this current situation, UNCTAD's role as a knowledge-based and consensus-building organization lay in helping developing countries to build institutions and skills to formulate trade, investment and economic policies, and negotiate with their partners to take the best advantage of concessions resulting from negotiations. In an obvious response to the EC Commissioner Pascal Lamy, who somewhat scornfully explained to the media in Brussels that he was not going to Bangkok because it was not a "trade event", Ricupero asserted UNCTAD's right and duty to play a role in evolving a trading system that would ensure equitable and balanced sharing of benefits.

Without being so specific, in effect, Ricupero underscored a fundamental fact of international law, namely, that the UN Charter and its obligations override, prospectively and retrospectively, all other international treaties and rights and obligations arising out of them, not only of UN member-states but all states. "UNCTAD, as the UN General Assembly body with a mandate to promote development through trade, has a legitimate role to play," said Ricupero.

Underscoring the need for equitable and balanced sharing of benefits of the trading system and to close the gap separating the rich and the extremely poor nations and within nations, and changes needed in the trading system, Ricupero said the Prebisch vision of an international trade organization of greater scope than GATT came to pass when the WTO saw the light of the day, with the support of developing countries which had been persuaded of their interest in defending a rules-based, multilateral system embodied in an institution, not a contract of provisional application.

But the WTO was not possessed in the same degree, of all the characteristics that Prebisch had in mind. "Such an organization should ideally provide the predictability and security of the rule of law, alongside an equitable and balanced sharing in the benefits of the system in order to close the gap that separates the very rich from the extremely poor.

"There is certainly considerable scope for improvement in all these areas, and UNCTAD, as the UN General Assembly body with a mandate to promote development through trade, has a legitimate role to play in this respect. It is an enterprise that has to be carried out by all countries together, not in some Utopian, ideal, alternative system that does not exist in dreams, but from the inside of the only existing, real-world system, always imperfect, always perfectible, like all of us human beings and institutions."

Citing Emmanuel Levinas for the view that the democracies had actually lost by the collapse of communism, Ricupero said that society on the move had to have a sense of direction, give meaning to politics and economy. And this sense of direction could only come from overcoming poverty and building a better world. And this had to start with an assessment of where they were.

Referring to the Asian success stories and the financial shock that struck this part of the world, beginning with Thailand, Ricupero noted that Asia had now come out of the crisis and was back on the world stage, thanks to its resilience, hard toil, suffering and cooperation of the international community. It showed the continued validity and the virtues of Asian exploits -- high savings, sound macroeconomics, investment in human resources, export orientation, public-private sector partnership.

But the experience also showed that while these were necessary conditions for development, they were not sufficient. A valuable lesson had been learnt by all -- progress in development would not necessarily make one less vulnerable to external shocks. "It may lessen the pain, shorten the trial, but will not provide total protection. The reason paradoxically is the same that made success possible for Asia, integration into the world economy." It was because of integration that the Asian countries also became victims of whims and caprices, of the herd behaviour of financial markets.

Interdependence, in other words, was here to stay, and it worked both ways, with more interdependence meaning higher risks too, because they are weaker, more vulnerable and need more protection. In doing a stock-taking exercise of what went right and what went wrong and why, and what was missing from the original approach, some of the answers were obvious: the environment and how it conditions the sustainability of development, the quality of growth, income distribution, poverty reduction, role of women, institution building, human development. These were a few of the dimensions that have to be integrated into a fresh paradigm.

And as for the challenges ahead, they lay in the taming of short-term capital volatility, broadening the supply-side basis away from dependence on a few commodities, incorporating technology in an age when development would depend more on knowledge than other factors. There was a need to avoid the extremes, the mutually excluding dichotomies -- state vs market, price stability vs economic expansion, labour flexibility or job protection, regulation vs free enterprise, foreign or national capital, integration against autarchy. These are false problems. Instead they should focus on real challenges of the present, focusing on facts and empirical evidence, not on ideology.

There was also the need for coherence - between external environment and domestic policies, as well as inside each of these two poles. The South-east Asia could be a case-study of a problem that started in the financial sector spreading to the currency and then bringing trade markets tumbling worldwide. "Would it have been possible to treat the financial and monetary trouble with policies that, instead of forcing the affected countries to repress imports, could have helped them to recover through exports, keeping the level of import demand high?... Would it have been possible to implement policies to make finance, currency and trade more coherent with each other?"

This also applies to domestic policies. And citizens of the developing world should have no quarrel with the notion that efficient governments, human and social rights, strong investment in human resources, education and health, and a healthy environment were all indispensable components of any worthwhile and sustainable development.

"It is true," Ricupero added, "that sometimes these goals have been politically instrumentalized or used in a biased and selective fashion to discriminate or impose unreasonable conditionalities. They are no less desirable or decisive because of this." If globalization had a deeper meaning, it was in the awareness of the universality of democratic and human rights values, that they don't belong to a particular culture or group of countries, that they constitute the basis for world ethic promoting dialogue, understanding and cooperation.

Notwithstanding this truth, Ricupero stressed, the world remained a highly heterogeneous and imbalanced place and countries found themselves at extremely different vantage points as they attempted to achieve coherence or promote universal aspirations. This could not be lost sight of. "Complexity lies at the heart of development and required flexibility, gradualism, adaptability, diversity of policies and therapies, and appropriate sequencing of reforms.

"This is why there can be no immutable set of recipes, no infallible or dogmatic paradigms or consigns". Politics, as De Gaspari, the father of the Italian Republic said, is patience. "Likewise, development is patience."

Underscoring the need for solidarity, and noting in particular the predicament of the LDCs, and the talk that the problem could be better dealt with by a level playing field and eliminating price-distorting mechanisms and creating equal opportunity for all, Ricupero asked: "Is it really serious to pretend that equal opportunities will suffice when people and countries start from astronomically distant starting points." Should we not recognize that the game of competition... not only requires clear rules and impartial arbiters, but training, preparation as well." Countries have affirmative programs to enable long-deprived and under-privileged minorities actual, and not hypothetical, equality of providing the needy, "the unequal with specific, differential opportunities to learn how to compete, how to produce, how to trade. This was a work of patience that could take generations.

This was why UNCTAD never talked of globalization without interdependence. "There is an arrogant strain of globalization that exclusively underlines the unfettered, unlimited power of footloose capital, and is only concerned with the search for profit...interdependence highlights mutuality of interest..." It drew attention to the links binding together the enterprise with its workers and local communities, producers and consumers at the domestic level; suppliers and importers of commodities, emerging economies offering potential for fast growth and providers of capital and technology from mature economies, internationally.

Ricupero cited data from the UNCTAD Trade and Development Report showing that despite the results of the Tokyo and Uruguay Rounds, the average trade deficit of developing countries in the nineties was 3 percentage points of GDP higher than in the seventies, while economic growth was 2 percentage points lower. And far from meeting or exceeding the 5 percent growth target, many countries even failed to reach the 3 percent annual rate.

While there were many reasons, "there is no denying that a significant part of the blame has to be laid on the imbalanced way in which trade liberalization has proceeded." As Prof Harold James wrote in an IMF publication, the trading system had been allowed to succeed because of the deliberate choice of excluding agriculture and textiles and clothing. After 53 years of existence, the system has been unable to cope fully with the need to integrate these two central sectors for developing countries.

For years, UNCTAD's had been a lone voice in drawing attention to these problems. Before Seattle both UK Minister Clare Short and WTO DG Mike Moore had spoken of need for a "development round". More recently, in January, the UK Chancellor of Exchequer, Gordon Brown, had said the test for trade talks would be "whether developing countries benefit... to make progress in the WTO, it has to reflect the needs and views of developing countries, and enable them to participate fully in the discussions and have ownership of the final agreement."

There remained the daunting task of translating all these into actions. And UNCTAD, as a knowledge-based consensus-building organization should assist developing countries to build the institutions and skills to formulate trade, investment and economic policies in general, and negotiate successfully with their partners.

But being able to negotiate effectively would not be enough when you have nothing to negotiate. And for many developing countries, the problem was not only one of market access, but supply as well. For countries depending on one or two commodities to earn 70% of foreign exchange, one had to look beyond trade negotiations to solve their problems.

It was a fact that the beginning of a century, of the millennium, has been accompanied by a pervasive anxiety and anguish about globalization and the perceived threat to a world of human values and the possibility of a rich and meaningful life. And this perhaps had something to do with the return of extremist political movements, even in the absence of historical causes viewed as responsible for their first appearance in the 1930s.

Meeting in Asia, "it is the duty of governments, of international organizations, working hand in hand in this Bangkok conference to provide common people, here in Asia, in developed and developing countries alike, but especially in the poorest parts of the world, to provide them with realistic, credible, practical reasons to hope for a future that will be better than the cemetery of utopias and illusions that we left behind." (SUNS4606)

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

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