ASIAN FINANCIAL CRISIS IS FIRMLY LOCATED IN PRIVATE SECTOR, REVOLVING AROUND MARKET, NOT GOVERNMENT FAILURE, SAYS UNCTAD SECRETARY-GENERAL

10 November 1997

Press Release
GA/EF/2790

ASIAN FINANCIAL CRISIS IS FIRMLY LOCATED IN PRIVATE SECTOR, REVOLVING AROUND MARKET, NOT GOVERNMENT FAILURE, SAYS UNCTAD SECRETARY-GENERAL

19971110 Addressing Economic and Financial Committee, Rubens Ricupero Says Financial Crisis Will Mean Slowdown in World Growth

The Asian financial crisis was firmly located in the private sector and revolved around market, rather than government failure, the Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), Rubens Ricupero, told the Second Committee (Economic and Financial) this morning as it began its consideration of trade and development issues.

No one was immune from the effects of actions taken or not taken in another country or on the other side of the globe, he said. For the first time, a crisis originating in the developing world had had a profound impact on capital markets of the North. The Asian financial crisis would mean a slowdown in world growth, perhaps by as much as one percentage point. Yet the immediate danger was the overreaction by policy-makers. An unduly heavy- handed macroeconomic response could set back reform efforts in developing countries for the foreseeable future.

The World Trade Organization (WTO) should enhance market access for developing countries, particularly least developed countries, the representative of Singapore said. Speaking on behalf of the Association of South-East Asian Nations (ASEAN), he said all applicants should be brought expeditiously into the WTO system. The ASEAN reaffirmed its commitment to the primacy of the multilateral trading system, to the principle of open regionalism and to ensuring that regional trade agreements were complementary and consistent with WTO rules.

The representative of India said the fast pace of financial liberalization had de-linked finance from international trade and investment. Higher interest rates, restrictive monetary policies, and emphasis on liquidity and quick gains had undermined the long-term commitment to

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investment in the creation of productive assets. The countries of the South must translate rising profits into investment at a sufficient pace in order to reduce inequalities. Policies to manage profits, integration and distribution needed further refinement.

Over-protection had some pitfalls, but the total absence of protection for the weak in a liberalized economy led to gross distortions, the representative of Ghana said. There must be selective protection measures in favour of economic operators in African countries, combined with financial support and access to relevant technologies. Preferential arrangements should be strengthened to create a level playing field for all countries.

The representative of Uruguay, speaking on behalf of the Southern Common Market (MERCOSUR) said the future development of international trade would be achieved in the context of multilateral negotiations. Liberalizing and strengthening the multilateral trading system must go hand-in-hand with regional integration partnerships. The MERCOSUR countries condemned unilateral actions that were contrary to the rules and spirit of the multilateral trading system.

Statements were also made by the United Republic of Tanzania (on behalf of the "Group of 77" developing countries and China), Ukraine, Russian Federation, Tunisia, Cuba, and Paraguay (on behalf of the Rio Group). A representative of the European Community also addressed the Committee.

The President of the Trade and Development Board, Goce Petreski (The former Yugoslav Republic of Macedonia); the Director of the Microeconomic and Social Analysis Division, Department of Economic and Social Affairs, Michiko Yamashita; and the Minister for Commerce and Industry of Bangladesh and Coordinator of the 48 least developed countries in the United Nations, Tofail Ahmed, made introductory statements.

The Committee will meet again at 3 p.m. today to continue its consideration of trade and development.

Committee Work Programme

The Second Committee (Economic and Financial) met this morning to take up trade and development, under its consideration of "macroeconomic policy questions".

The Committee has before it two reports of the Trade and Development Board of the United Nations Conference on Trade and Development (UNCTAD) (document A/52/15, Parts I and II). Those reports refer to the Board's fifteenth executive session (Part I) and its forty-fourth session (Part II).

At its fifteenth executive session (Geneva, 27 June) the Board took note of and endorsed the agreed conclusions resulting from the first sessions of the new UNCTAD Commissions on Trade in Goods and Services and Commodities; on Investment, Technology and Related Financial Issues; and on Enterprise, Business Facilitation and Development. The report also contains a statement by UNCTAD's Secretary-General on preparations for a meeting with actors in development. That meeting, under the "Partners for Development" initiative, is planned to be held for four working days in November 1998, and its theme will be "Markets and development". The city of Lyon, France, has expressed interest in hosting the meeting.

The report on the Board's forty-fourth session (Geneva, 13-23 October), reviews its deliberations on policies to be pursued for maximizing the opportunities for growth and development for all in a globalizing economy. The deliberations focused on the impact of globalization on the socio-economic situation and competitiveness of the developing countries and on the specific problems of Africa and the least developed countries. Among the session's conclusions was a recommendation to the Assembly that a third United Nations Conference on the LDCs be held at the end of this decade and that UNCTAD be entrusted with the responsibility of preparing and organizing for this conference.

The Secretary-General's report on economic measures as a means of political and economic coercion against developing countries (document A/52/459) was prepared in response to General Assembly resolution 50/96 of 20 December 1995. That resolution expressed concern that the use of coercive economic measures had adversely affected the economy and development efforts of developing countries, and had a general negative impact on international economic cooperation and worldwide efforts to move towards a non- discriminatory and open trading system.

Also by that resolution, the Assembly requested the Secretary-General to continue to monitor the imposition of such measures and to prepare possible methodologies or criteria for evaluating their impact on the affected countries, including the impact on trade and development. The Secretary- General, in a note verbale dated 26 March, invited the Governments of all

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States to provide their views or any other relevant information on the issue. The report contains a summary of responses received as at 15 September from 12 Member States -- Australia, Belarus, Bolivia, Burkina Faso, Cuba, Ecuador, Estonia, Gambia, Iran, Iraq, Mexico and Venezuela as well as from the observer for the Holy See. The report also reviews relevant actions taken by United Nations bodies.

Summarizing replies received from States, the report says the Government of Cuba stated that unilateral coercive measures were punitive actions used by certain States, by virtue of their predominant position in the world economy, to impose their political will by force and to subvert the political, economic and social system of other States. Those measures were contrary to such fundamental principles of international law as the sovereign equality of States and non-intervention and non-interference in the internal affairs of sovereign States. Also, such measures blatantly contradict the purposes and principles of the Charter of the United Nations and infringe upon the norms and principles set forth in various international instruments.

Since recovering its full independence in 1959, Cuba has been subjected to all manner of coercive measures, the reply goes on. The clearest expression of that increasingly aggressive conduct is the permanent economic, commercial and financial blockade unilaterally imposed against Cuba for almost four decades by the Government of the United States, involving an endless list of various types of coercive economic measures. In 1995, the blockade caused the Cuban economy a loss of more than $260 million merely through the loss of the United States preferential market for sugar. Additional freight costs incurred in obtaining supplies for the health sector totalled $2.7 million, while those incurred in purchasing foodstuffs and in obtaining essential chemicals for agriculture amounted to more than $46 million and over $6 million respectively. The "exceptional" terms on which Cuba is forced to conduct most of its trade, because of the so-called "Cuban risk" arising from those measures, are also increasing.

The Government of Iran stated in its reply that despite the international community's recognition of the urgent need for the creation of a favourable and conducive international economic and financial environment, a positive investment climate and an open, rule-based, equitable, secure, non- discriminatory, transparent and predictable multilateral trading system, and despite the emergence of a new international environment, the United States regrettably continues to apply unilateral actions, including the continued promulgation and application of laws and regulations whose extraterritorial impact severely affect the sovereignty of other States and the legitimate interests of their peoples.

It is evident to the Government of Iran, the reply goes on, that those and other forms of coercive economic measures, which are imposed on target countries for political purposes, go against the provisions of the Charter of the United Nations, as well as the principles of international law and freedom

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of trade and investment embodied in various international instruments and documents, including those establishing the World Trade Organization. The United Nations is well placed to address the multifaceted issue of unilateral coercive economic measures and its negative effects on all countries and on the world economy as a whole, it adds.

According to the Government of Iraq, the report goes on, the constant attempts seen at the present time to marginalize developing countries and isolate them economically by withholding advanced technology from them and by preventing them from developing their human resources and scientific expertise in the area of technology for development and from exploiting their natural resources to the full extent are an indication of the disregard of the developed countries for the will of the international community, as represented by the United Nations and as expressed in the declarations and statements on that issue, and are in violation of the principles and rules of international law.

The complete economic embargo that has been maintained against Iraq for over seven years has done much to deny it the opportunity to keep pace with the changing requirements of sustainable development and even to carry out the threat (made by the United States Secretary of State to the Iraqi Minister for Foreign Affairs at Geneva on 9 January 1991) to return Iraq to a pre- industrial stage of development, the reply goes on. The policies involving sanctions, coercive measures, trade restrictions and other such measures that are being adopted by developed countries on all kinds of pretexts demonstrate the determination of those countries to deprive developing countries of the opportunity for development and economic and human advancement.

In its reply, the Commission on Human Rights calls on all States to refrain from adopting or implementing unilateral measures not in accordance with international law and the United Nations Charter, in particular, those of a coercive nature with extraterritorial effects which created obstacles to trade relations among States. The Commission endorses and reaffirms the criteria of the Working Group on the Right to Development which has declared coercive measures obstacles to the implementation of the Declaration of the Right to Development.

The Holy See considers it to be legitimate for the international community to resort to economic sanctions when confronted with a specific Government that has acted in a manner that places world peace in danger, its reply states. However, the Holy See holds that there are several conditions that must accompany the imposition of such sanctions, namely, sanctions may not be a means of warfare or punishment of a people; sanctions should be a temporary means of exerting pressure on governments whose choices threaten international peace; sanctions must be proportionate to the goals they hope to achieve; and sanctions must always be accompanied by a dialogue between the parties involved.

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Pope John Paul II, the reply continues, has stated that the embargo, clearly defined by law, is an instrument that needs to be used with great discernment and it must be subjected to strict legal and ethical criteria. It is always imperative to foresee the humanitarian consequences of sanctions, without failing to respect the just proportion that such measures should have in relation to the very evil that they are meant to remedy.

According to the report, the former Department for Economic and Social Information and Policy Analysis convened in New York from 30 June to 1 July an ad hoc expert group meeting on economic measures as a means of political and economic coercion against developing countries. The purpose of the meeting was to solicit the views of internationally renowned experts on key conceptual issues related to the imposition of coercive economic measures, in particular possible methodologies for evaluating the impact of such measures on the affected countries, with a view to formulating agreed conclusions. The main findings of the meeting are summarized in the report. They address conceptual issues, legal issues, impact assessment, and institutional issues and follow- up.

On the issue of extraterritoriality, the report goes on, as the most recent cases in point, the expert group discussed the legality of extraterritorial aspects of the Cuban Liberty and Democratic Solidarity Act of 1996 (also known as the Helms-Burton Act or Libertad Act) and the Iran and Libya Sanctions Act of 1996 (also known as the D'Amato Law), both passed into law of the United States. It was noted that in both cases the extraterritorial scope of the enacted measures is not merely incidental to the enforcement of the primary boycotts, but indeed constitutes a deliberate effort to influence economic behaviour in third States. The expert group agreed that extraterritorial application of those United States laws was irreconcilable with basic norms and principles of international law and was inconsistent with the spirit of the World Trade Organization Agreement.

Concerning the impact of coercive economic measures on trade and development, the report states they should be viewed and assessed in the context of current trends towards globalization and interdependence in the world economy. In view of the growing economic interdependence among countries, the imposition of negative economic measures entails adverse consequences or costs for both the sender and the target States, as well as various "spill-over" effects on third-party countries that are geographically and economically contiguous to the target State, thus distorting normal patterns of economic relations on an international scale. At the same time, the globalization of markets provides broader opportunities for redeployment of external trade, finance and labour, thus increasing the capacity of a target country for adjustment to external shocks such as coercive economic measures. Nevertheless, damaging economic and social effects of such measures conflict with internationally accepted goals to promote economic development, social progress and better standards of living.

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The Committee also has before it the Secretary-General's note transmitting a report on specific actions related to the particular needs and problems of landlocked developing countries (document A/52/329). The report states that there was a fundamental change under way in the orientation of both landlocked and transit countries, as well as in the donor community, in addressing the transit problem. The challenges of that new orientation would have to be met with a much greater sense of priority and innovation.

The establishment of a commercially conducive transit policy environment remains at the centre of all efforts to further improve transit transportation systems, the report states. High transport costs remain the major barrier as they erode the competitive edge of landlocked developing countries in world trade. Therefore, the international community should seek ways to reduce high transportation costs by establishing a stable transit framework, mutually agreed between landlocked and coastal countries, which will reduce various bottlenecks, transit costs and logistical distortions.

Regarding bilateral, subregional and international legal frameworks, the report states that current efforts to strengthen mechanisms for a more effective implementation of the agreements and arrangements should be further reinforced. In particular, Governments should be encouraged to simplify, modernize and harmonize their customs procedures which would improve their effectiveness and facilitate transport and trade.

The limited capacity of the landlocked and transit countries to maintain and develop infrastructural facilities requires further donor assistance, which should include the continued provision of equipment in the various areas of the transit transport sector. Donors and the United Nations Development Programme (UNDP) are invited to support national efforts to establish technical units within the subregional organizations. The UNCTAD should continue to liaise closely with the subregional intergovernmental organizations in its endeavours, the report stresses. International organizations, regional commissions and United Nations agencies dealing with the development of transport and communications should also include transit transport activities in their future work programmes.

The report also details other activities in the field including: the review of the Northern Corridor Transit Agreement; Automated System of Customs Data Entry, Control and Management; Advanced Cargo Information System; Central Asian External Trade and Transit Initiative; rebuilding the Silk Road; and an expert meeting on information technology.

In addition, the report contains information provided by several landlocked and transit developing countries, other developing countries and developed countries, as well as international and intergovernmental organizations, on activities related to the improvement of transit transport systems.

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Statements

RUBENS RICUPERO, Secretary-General of United Nations Conference on Trade and Development, said the Asian financial crisis had proved more contagious than earlier crises and not only to other emerging markets as it was in Latin America two years ago. For the first time, a crisis originating in the developing world had had a profound impact on capital markets of the North. That was, without doubt, one of the unanticipated consequences of globalization. Also, the crisis was firmly located in the private sector and revolved around market, rather than government failure.

Explaining that in today's world no one was immune from the effects of actions taken or not taken in another country or indeed on the other side of the globe, he said the immediate impact of the Asian financial crisis had been a sharp downward revision of growth prospects in Asia. In light of the greater presence of those economies in the world, that must also mean a slowdown in world growth, perhaps by as much as one percentage point. Elsewhere in the developing world, interest rate hikes, in an effort to defend currencies, would almost certainly slow growth. The immediate danger, however, was one of overreaction by policy-makers. Reform efforts in many developing countries over the past decade had raised growth prospects to levels unseen in the past 20 years. An unduly heavy-handed macroeconomic response could set those efforts back for the foreseeable future.

Medium-term prospects, he said, would also depend on how the outcome of the crisis reverberated across the international economy. Many of the Asian economies had responded to the crisis with competitive devaluations, in an effort to boost export growth. However, much of their trade was with each other and the impact of devaluations for regional growth dynamics were uncertain. Still, there was little doubt that international competition would increase, putting downward pressure on prices of tradeable goods and giving rise to renewed adjustment problems for many developing countries. Western Europe and Japan, whose recoveries had been unduly dependent on exports, were likely to face the greatest problems in the North. Japan's large trade and investment in other parts of Asia must give real cause for concern in light of its weak domestic growth.

GOCE PETRESKI (The former Yugoslav Republic of Macedonia), President of the Trade and Development Board, said the implementation of the ministerial decisions of the ninth session of the United Nations Conference on Trade and Development (Midrand, South Africa, May 1996) had led to the reorganization of activities in UNCTAD which had contributed to the renaissance of the organization. The comprehensive changes in the intergovernmental machinery and the streamlining of the activities of the secretariat had improved the quality of output of the organization. The use of electronic communication systems, including video-conferencing facilities, had now become part of the daily routine in the organization's activities.

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At its forty-fourth session, the Board had discussed the "interdependence and global economic issues from a trade and development perspective, income distribution and growth in a global context", he said. In its conclusions, the Board had expressed concern that the challenge for policy-makers was the income gap, which, despite growing prosperity, was widening. Certain aspects of globalization might have contributed to that tendency. However, the forces behind widening income disparities were complex and their emergence in many cases might have preceded the recent acceleration of inequality. There were social and political limits to growing inequality. If pushed too far, income disparities could provoke a backlash, generating instability and triggering populist policies and protectionist tendencies which nullified the economic gains of closer integration.

One part of the informal discussion of the high-level segment was a discussion, with the participation of panellists, on electronic commerce, he said. The UNCTAD had asserted itself as a leading authority on that subject. The panellists showed in detail that the main reasons for using electronic commerce were that it allowed a significant reduction in the time that elapsed between order and delivery, and the cost of sending an electronic message was less than the cost involved in a traditional postal system. In the long run, one clear outcome of the growth of electronic commerce would be the need for greater international cooperation on regulatory issues, because "cyperspace" transcended the traditional boundaries of nation States.

MICHIKO YAMASHITA, Director, Microeconomic and Social Analysis Division, Department of Economic and Social Affairs, introduced the Secretary-General's report on "economic measures as a means of political and economic coercion against developing countries" (document A/52/459). She said the impact of coercive measures on the target State principally depended on the size and type of trade, financial or communication links affected by such measures. Restrictions on international trade or capital flows typically resulted in a less efficient allocation of resources and lower national income in the affected States, but could also cause or exacerbate broader economic and social problems, such as inflation and unemployment, and undermine the economy's growth potential.

She said an expert group on key conceptual issues related to the imposition of coercive measures had expressed deep concern about the potential adverse effects of coercive economic measures on the structure of international relations, particularly in the area of trade and development. The importance of international cooperation, including multilateral and bilateral negotiations on contentious issues and of positive economic measures that involved adequate incentives and rewarded systems to induce policy changes, when warranted, was a more rational and viable alternative to unilateral coercive economic measures in most cases. The problem raised by the imposition of coercive economic measures deserved increased attention by the international community and multilateral bodies.

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TOFAIL AHMED, Minister for Commerce and Industry of Bangladesh and Coordinator of the 48 least developed countries in the United Nations, said calls for global assistance and support by the least developed countries had received only promises and words, rather than deeds. There had been little progress in the implementation of the Paris Declaration and Programme of Action for the Least Developed Countries. Their official development assistance (ODA) had fallen sharply, their share of foreign direct investment had also dropped and their external debt burden exceeded $20 billion last year. Those statistics justified the apprehensions of the least developed countries that they were being increasingly marginalized.

He mentioned five major factors as being responsible for the marginalization of the least developed countries, including the structural characteristics in the world economy whereby capital tended to concentrate in countries with a more highly skilled workforce and sound infrastructures, rather than in countries where wages were lowest: declining commodity prices for the main exports of least developed countries and their inability to reduce their debt stock through export earnings; the economic policies of some least developed countries themselves which at times failed to give sufficient incentives to exporters, farmers and the private sector in general; more fundamental institutional and social problems afflicting many of those countries, particularly the erosion of the state structures necessary to support a modern economy and in some countries their near-collapse amid civil strife; and non-economic factors, such as the presence of indiscriminately planted landmines and devastations wreaked by civil strife which often compounded the problem. Those problems must be comprehensively addressed. There was need for more ODA, greater market access and enhanced foreign direct investment.

J. KISIRI (United Republic of Tanzania), speaking on behalf of the "Group of 77" developing countries and China, said there was a critical need for an equitable, secure, non-discriminatory and predictable multilateral trading system in order to ensure the total integration of the developing countries in that system. That would enhance the trade and development possibilities of those countries and increase their share of international trade. Developed countries should avoid all forms of protectionist tendencies and implement international trade liberalization measures. The trade policy reforms being undertaken by developing countries would be frustrated unless the developed countries took positive structural adjustment measures to provide larger export possibilities. The developing countries also should be provided with technical and other forms of assistance.

The commodity-dependent economies, which included most of the African and least developed countries, suffered from the excess instability and fluctuations in commodity prices in international markets, he said. Because of exogenous factors, such as declining prices, substantial volume increases did not always translate into comparable export earnings from commodities. Therefore, there was a need for commodity support measures, through, among

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others, fulfilling the objectives of the Common Fund for Commodities and strengthening its operations. Some major countries had withdrawn from the Fund, including one in the last month, despite the continuing instability and decline of many commodity prices faced by developing countries. Those withdrawals could put unnecessary additional pressure on efforts to establish stable and predictable policies and to improve the functioning of commodity markets.

The UNCTAD should continue its role as the principal forum of the United Nations for the integrated treatment of development and the interlinked areas of trade, finance, technology, investment and sustainable development, he said. The UNCTAD should conduct macroeconomic analysis, including aspects of globalization and its impact on developing countries. The effective participation of developing countries in global negotiations was essential to secure their interests, and UNCTAD's role in supporting developing countries' trade and development negotiations should be strengthened. The tenth session of UNCTAD, to be held in Bangkok, Thailand, in 2000, would provide a good opportunity to advance global partnership for trade and economic cooperation.

JOSEPH CUNNANE, a representative of the European Community, said the European Union was the largest single market for the export of goods from least developed countries and that the Community imported more agricultural products, more manufactured goods, including a large amount of textiles and clothing, than other major markets. The Community also imported more from the least developed countries in relation to its population and its gross domestic product (GDP) than other major markets. In June, the Community decided to extend the most favourable market access conditions, which up to now had been granted to its partners in the Lome Convention, to all least developed countries as from 1 January 1998.

Calling on other countries to open their markets to the least developed countries, he said improved market access was a cornerstone of any effective policy to integrate least developed countries in the world trading system and to ensure their participation in international trade and investment flows. Other measures were also needed that could help the least developed countries produce more exportable goods in order to take advantage of the access they enjoyed. Stability and sound economic policies were also important in influencing exports and growth. Without such policies, least developed countries would not attract the private sector, thereby perpetuating their exclusion from international investment flows.

VOLODYMYR RESHETNYAK (Ukraine) said the completion of the Uruguay Round and the establishment of the World Trade Organization had opened new opportunities for the development of international cooperation. They were also an incentive for fruitful partnerships in the interests of stability, global development and the further liberalization of world trade. The establishment of an open, non-discriminatory, law-based, fair, predictable and

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transparent multilateral trading system should constitute an integral part of the new partnership for development.

His Government considered the future membership of Ukraine in the World Trade Organization (WTO) as an important factor that would ensure the success of its ongoing economic reforms, he said. It was also the main condition to overcome the trade isolation of Ukraine. In that context, more purposeful measures could be taken to facilitate the developing countries and countries with economies in transition in the process of their accession to the WTO. Technical assistance in the establishment and development of services was also of great importance to those countries. The UNCTAD could also play a more important role in training the national staff in the field of external trade and related fields.

The adoption, at the last session of the Trade and Development Board, of the "technical cooperation strategy", was an example of UNCTAD's improved effectiveness, he said. Its role was also of great importance in the context of the decisions of the nineteenth special session of the General Assembly regarding the relationship between trade and the environment. The UNCTAD should continue its activities to improve trade regulations and standards, taking into account ecological requirements, in close cooperation with the Committee on Trade and Environment of the WTO, the Commission on Sustainable Development, the United Nations Environment Programme (UNEP), the Organisation for Economic Cooperation and Development (OECD) and relevant regional organizations.

YURY N. ISAKOV (Russian Federation) said the interdependence of national markets of goods, services, capital and manpower had acquired new dimensions in the age of globalization. The interrelationship between trade and development posed new challenges for the UNCTAD. Its role and responsibility as a United Nations system focal point in that field was increasing. Russia supported the UNCTAD initiative to hold next autumn in Lyon (France), the "Partners for Development" meeting with the participation of governments, private sector and non-governmental organizations. If not properly managed, the process of globalization could seriously impair development, especially of the most vulnerable countries.

He said Russia was in the process of transforming its economy and that priority was being given to integrating it into the world economy and the multilateral trading system. Among the country's reform measures, he cited the fact that Russia's system of regulating foreign economic relations corresponded with international criteria as well as with the rules and standards of the WTO. Russia was ahead of many WTO member countries which still used such restrictions in respect of Russian export, and its domestic market was open to all countries. All of those should facilitate Russia's joining the WTO. The existence of "residual" discriminatory elements in trade regimes of leading trading powers, applied to transition economies, was inadmissible in the process of globalization and liberalization of international trade, and created serious obstacles in their progress towards democracy and a market economy.

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JACK WILMOT (Ghana) said Africa's share in global trade was still marginal, due largely to the fact that the continent was relatively uncompetitive in the world economy. While over-protection had some pitfalls, the total absence of protection for the weak in a liberalized economy led to gross distortions. There must be selective protection measures in favour of economic operators in African countries, combined with financial support and access to relevant technologies. After all, even in developed economies like the United States, Japan and the European Union, selective protection measures were instituted for the benefit of vulnerable economic operators. His Government called for the strengthening of preferential arrangements, such as the Lome Convention, which would help create a level playing field for all countries.

Regional integration could facilitate the exploitation of economies of scale and create an economic space that was more competitive, stable and attractive to foreign investors, he said. Given their small markets, developing countries, particularly African countries, needed to strengthen their efforts to achieve subregional and regional integration in order to realize economies of scale and to increase trade. To complement Africa's efforts, the international community should remove non-tariff barriers, end the misuse of anti-dumping measures and countervailing duties, and grant massive debt relief and increased official development assistance to enhance the capacity of African countries to invest in physical and social infrastructure. Developed countries should also facilitate the transfer of technology and encourage investment flows to Africa for sustainable economic development, in general, and industrialization and export diversification, in particular.

JORGE PEREZ OTERMIN (Uruguay), speaking on behalf of the member countries of Southern Common Market (MERCOSUR), said any debate of international economic issues should be equitable and bear in mind the interest of developing countries. The recent progress in MERCOSUR's subregion was due to the reduction of tariff barriers, negotiations on a common external tariff, and the opening of markets to other countries and trade associations. The MERCOSUR was a means and not an end and was not incompatible with universalism and globalization. It was a launch pad designed to integrate its member countries into a globalized economic world. The member countries of MERCOSUR had established a political consultation mechanism which would expedite the exchange of macroeconomic information and would help avoid the adoption of measures that restricted trade flows in the region.

Priority attention must be paid to the evaluation and implementation of the various agreements produced during the Uruguay Round, particularly those relating to agriculture, market access and trade defence machinery, he said. That exercise should concentrate on working out an agenda that would cover all issues in the context of ongoing negotiations. The countries of MERCOSUR also attached importance to the evaluation undertaken by the Agricultural Committee

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of WTO, which should lead to new negotiations to reduce subsidies and protection for agricultural products.

The MERCOSUR believed that development of international trade in the years ahead would be achieved in the context of multilateral negotiations, he said. Liberalizing and strengthening of the multilateral trading system must go hand-in-hand with regional integration partnerships. The MERCOSUR condemned unilateral actions that were contrary to the rules and spirit of the multilateral trading system.

ABDERRAZAK AZAIEZ (Tunisia) said the results of UNCTAD IX confirmed that the fundamental principles underlying the establishment of UNCTAD were as valid now as they were 30 years ago. The UNCTAD was still the body of the United Nations whose final object was to broaden the potential of Member States in order to develop their own wealth. In addition, UNCTAD emphasized the organic relationship between trade and development.

Future cooperation between UNCTAD and WTO should be based on the complementarity of the two organizations, he said. Therefore, UNCTAD would be able to continue its work toward the full integration of developing countries into the international trading system, while relying on the assistance of WTO. To help developing countries benefit from investment and increase trade, the two organizations should promote multi-sectoral cooperation and use practical approaches and action-oriented measures. They should also regard the environment as a fundamental given in present and future trade activities and give priority attention to the specific problems facing developing countries that were net food product importers.

Developed countries should avoid any tendency toward protectionism in any form and should apply measures to liberalize international trade, he said. Emphasis should be placed on finding the necessary balance between the implementation of the Marrakesh Agreements in the context of the Uruguay Round and the consideration of new questions. A balance must also be struck between the interests of developing and developed countries and the large and small member countries of WTO.

SAT MAHAJAN (India) said the fast pace of financial liberalization had de-linked finance from international trade and investment. Higher interest rates, caused by restrictive monetary policies, and the premium that global finance placed on liquidity and quick gains had undermined the long-term commitment to investment in the creation of productive assets. The greater exit options enjoyed by capital, combined with slow demand growth and the excess supply of labour, had been instrumental in raising global profits without encouraging investment. The challenge for the South was to translate rising profits into investment at a sufficient pace in order to reduce inequalities. While much had already been done, policy efforts to manage profits, integration and distribution needed further refinement.

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Globalization was often occurring at a tremendous cost to developing countries, particularly the least developed countries, he said. Since the early 1970s, the least developed countries had suffered a cumulative decline of 50 per cent in terms of trade, while developing countries as a whole suffered a cumulative terms of trade loss amounting to $290 billion between 1981 and 1991. Much of that fall could be attributed to the decline in real commodity prices, which in 1990 was 45 per cent lower than in 1980. Yet the fall was not confined to commodities, since terms of trade for manufactured goods also fell by 35 per cent from 1970 to 1991.

Tariff escalation was another major area of concern, he said. It involved the practice of setting high tariffs on processed goods rather than on raw materials. That locked developing countries into volatile commodity export markets, where real prices were declining, and obstructed ways for them to add value to their exports. While successive General Agreement on Tariffs and Trade (GATT) agreements had reduced tariff barriers, the resort to non- tariff barriers -- quotas, anti-dumping measures and "voluntary export restraints" -- had increased manifoldly.

MIRTHA HORMILLA CASTRO (Cuba) said there had been an upsurge of coercive economic measures targeted at developing countries in the post-cold war world. Notwithstanding numerous resolutions adopted by the General Assembly and other United Nations bodies at various meetings and conferences calling for the elimination of all unilateral coercive measures, the United States Government continued to launch a crusade against many developing countries. Such measures clearly violated international law.

She said the population of the countries either under the threat of or under the imposition of United States' unilateral coercive economic measures accounted for over 40 per cent of the world. Some of those measures were said to be taken in defence of human rights. Coercive economic measures hurt not only developing countries but the developed countries as well. A European Union report about United States trade and investment barriers had expressed concern about the extraterritoriality and unilateralism of some laws and policies of the United States. The financial and economic blockade against Cuba by the Government of the United States must be eliminated. Cuba hoped the Committee would adopt a resolution to be introduced under the item being debated calling for the elimination of coercive economic measures.

KWOK FOOK SENG (Singapore), speaking on behalf of the Association of South-East Asian Nations (ASEAN), said to generate sustained economic growth, there was an urgent need for substantial reduction of tariff and other barriers to trade as well as the elimination of discriminatory and protectionist practices in international trade relations. The UNCTAD could contribute meaningfully to the continuing process of trade liberalization by ensuring that opportunities were opened for developing countries, in particular the least developed countries, to play an active role in the world economy.

Second Committee - 15 - Press Release GA/EF/2790 34th Meeting (AM) 10 November 1997

While stressing the importance of the Common Fund for Commodities in supporting the development efforts of the developing countries, he said ASEAN was concerned about the withdrawal from the Fund by one of its major contributors. The WTO should enhance market access for developing countries, particularly least developed countries. ASEAN was promoting itself as a single investment region through joint investment promotion efforts. The ASEAN Investment Area aimed at creating a more transparent, more efficient and congenial investment environment within the region. He stressed the need to bring applicants expeditiously into the WTO system. The ASEAN reaffirmed its commitment to the primacy of the multilateral trading system, to the principle of open regionalism and to ensuring that regional trade agreements were complementary and consistent with WTO rules.

LUIS JOSE GONZALEZ (Paraguay), speaking on behalf of the member countries of the Rio Group, said the WTO was the fundamental basis for a multilateral trading system which was open, non-discriminatory, safe, transparent, and predictable. Special attention should be given to the work being done in evaluating and implementing the diverse agreements which resulted from the Uruguay Round, particularly in the fields of agriculture, access to markets and the use of trade defence mechanisms. The mechanism for finding solutions to trade controversies within the WTO was also important. It would assure the impartial settlement of differences according to the norms of the organization's multilateral agreements.

For the member countries of the Rio Group, the liberalization of international trade was a high priority objective in international economic relations, he said. Trade should continue to be liberalized in developed and developing countries. That should come about through the substantial reduction of tariffs and other trade barriers, particularly non-tariff barriers. Discriminatory and protectionist practices in international economic relations should also be eliminated. In addition, once tariff barriers were reduced in international trade, they should not be replaced by a barrage of non-tariff protectionist measures, either through the use of compensatory rights or anti-dumping rights, or through discriminatory technical regulations.

Open regional integration schemes were also valuable in the process of multilateral trade liberalization, he said. Those promoted the expansion of trade and investments in a manner that was compatible with the objectives and principles of the WTO. The UNCTAD must continue to develop technical cooperation activities so developing countries could adequately take advantage of the new opportunities created through the implementation of the Uruguay Round agreements.

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