FULL MARKET ACCESS FOR DEVELOPING COUNTRIES CALLED FOR AS ECONOMIC AND SOCIAL COUNCIL CONCLUDES DIALOGUE ON WORLD ECONOMY

6 July 1998

Press Release
ECOSOC/5763

FULL MARKET ACCESS FOR DEVELOPING COUNTRIES CALLED FOR AS ECONOMIC AND SOCIAL COUNCIL CONCLUDES DIALOGUE ON WORLD ECONOMY

19980706 Council Begins High-Level Ministerial Segment Of 1988 Substantive Session, Focusing on Market Access

The international community must discourage marginalization and ensure that all countries benefited from the multilateral trading systems, the Deputy Director-General of the World Trade Organization (WTO) told the Economic and Social Council this afternoon, as it concluded its high-level policy dialogue on developments in the global economy.

Anwarul Hoda went on to say that developing countries should establish frameworks to fostered development and investment, while trading partners must guarantee developing countries full market access. Market access must be accompanied by efforts to build institutional and human capacities. Trade policy currently encompassed other issues and concerns, such as investment and competition policy, the environment and development.

Deputy Secretary-General Louise Fréchette said improving coordination among the United Nations financial institutions was a priority. Coordination must be achieved in partnership with Member States, placing borrowing or receiving countries in the driver's seat, at the field level.

The Vice-President of the World Bank, Mark Malloch Brown, and the Special Representative of the International Monetary Fund (IMF), Justin Zulu, also addressed the Council during the policy dialogue.

This afternoon, as the Council began its high-level ministerial segment, the Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), Rubens Ricupero, said the international community should encourage subregional agreements that enabled developing countries to improve their efficiency and to compete in the world market. Trade liberalization initiatives should be accompanied by measures to ensure the equitable distribution of benefits among countries, as well as among different social groups within countries.

Also speaking during the high-level segment focusing on developments since the close of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), the representative of Indonesia said market access must be

Economic and Social Council - 1a - Press Release ECOSOC/5763 13th Meeting (PM) 6 July 1998

assured if the majority of the world's people were to benefit from the international trading system. Speaking on behalf of the "Group of 77" developing countries and China, he said the Uruguay Round remained substantially incomplete, and many key areas of particular interest to developing countries were unimplemented. The Economic and Social Council should seek to strengthen the capacities of developing countries to implement their obligations under the Uruguay Round. The liberalization of trade was an international challenge and necessitated a global commitment.

The representative of the European Commission, speaking on behalf of the European Union, said transparency was an essential dimension to the relationship between trade and sustainable development. At a time of rapid change and uncertainty, it was necessary to engage in an open discussion and dialogue with all groups of civil society in order to build up support for an open multilateral trading system.

The Council will meet again at 10 a.m. on Tuesday, 7 July, to continue its high-level ministerial meeting on market access.

Council Work Programme

The Economic and Social Council met this afternoon to continue its high- level policy dialogue on important developments in the world economy and international economic cooperation. Scheduled to participate in the dialogue are the Chairman of the Executive Board and Managing Director of the International Monetary Fund (IMF), Michel Camdessus, the President of the World Bank, the Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), and the Deputy Director-General of the World Trade Organization (WTO). (For background on the Council's substantive session, see Press Release ECOSOC/5760 of 2 July.)

Policy Dialogue on Developments in World Economy

ANWARUL HODA, Deputy Director-General of the World Trade Organization (WTO), said the fiftieth anniversary of the multilateral trading system six weeks ago demonstrated the virtual consensus throughout every region on the validity of open trade and economic integration under the rule of law. It also showed broad support for the basic goals of international economic policy, and recognized that open markets offered the only viable path to development and growth. Participants also acknowledged that the multilateral trading system could no longer be viewed in isolation from other policy issues and concerns.

He said that, more and more, the ground rules provided by the WTO reached across, into and around other issues and concerns -- from investment and competition policy, to environmental, development, health and social policies. The various challenges needed to be faced as pieces of a larger policy that demanded broader and more integrated solutions. In terms of future trade, it meant that the agenda must be broader and more ambitious than anything the post-war architects could have envisaged. It had to reflect that trade policy was no longer just about trade.

He said the joint study on market access prepared by the WTO and UNCTAD, demonstrated very clearly the significant progress made over the last 50 years in removing national trade barriers, and in integrating the developing world into the global economy. Developing countries, which now represented 80 per cent of the world's trading system, reflected the emergence of Latin America, Asia and Africa as important trading powers in their own right. Perhaps most significant of all was the establishment of improved binding mechanisms for settling trade disputes. Even the smallest country could now look to the WTO in defence of its interests on the basis of shared and enforceable rules.

Significant progress had been made, he continued, but much more needed to be done. Significant tariff barriers remained which affected developing countries. A variety of non-tariff measures continued to restrict exports from developing countries, and national and international product standards

Economic and Social Council - 3 - Press Release ECOSOC/5763 13th Meeting (PM) 6 July 1998

were difficult to meet, leading to reduced exports opportunities for least developed countries. In the field of trade in services, while a valuable beginning had been made, much scope remained for further liberalization. The task today was to build upon the international framework of rules and institutions established 50 years ago in order to meet the challenges and reap the benefits of globalization.

Exchange of Views

In response to a question about enhancing the public's understanding about the multilateral trading system, Mr. HODA said the WTO had a set of rules governing which of its documents could be distributed to the public. WTO members were currently reviewing those rules, so more documents could be distributed more quickly. That was one way WTO members were doing something to enhance understanding of the organization. The WTO had also held seminars and symposia with non-governmental bodies to explain its operations. WTO members were also exploring ways to make it more transparent.

RUBENS RICUPERO, Secretary-General of UNCTAD, said that although much had been said about assisting transition economies to enter the trading system, the total success after seven years of efforts was negligible. The only transitional economy which had succeeded to accession had been Mongolia. All others were still engaged in negotiations which had proved to be very complicated. More and more was being demanded from those transitional economies and that placed additional burdens on countries that were tying to reconstruct their infrastructures. It was also a problem for the 48 least developed countries, of which at least 20 were still not members of the WTO.

Responding to a question on why work was not being done by UNCTAD on core labour standards, he said it was because members had not agreed with that mandate. The agency's work programme depended on the consensus of its membership, and some member countries had not wanted to establish a link between core labour standards and trade. Developing countries were reluctant to discuss those two subjects in the same framework because of the core problem of competition. Most, if not all, trade questions related to competition. Most developing countries knew what they did not want but not what they wanted, he continued. Their trade agendas were based on defensive strategies. Many developing countries did not have the capacity to formulate trade strategies. Others relied on two or three commodities, greatly limiting their trade interests. If strategies were purely defensive, countries would not go very far. The UNCTAD was trying to help those States develop a positive agenda by helping them develop and identify practical areas. Developing countries required macroeconomic stability, sound infrastructure and the establishment of market economies based on sound enterprise.

Responding to several questions, MARK MALLOCH BROWN, Vice-President of the World Bank, said development was not simply a matter of market access. It

Economic and Social Council - 4 - Press Release ECOSOC/5763 13th Meeting (PM) 6 July 1998

should also include establishing institutional and human infrastructure. The Bank was more sceptical about regional trading agreements, which might be necessary political arrangements, but which also exacted costs that were often downplayed. Regarding core labour standards, he said the Bank deferred to the International Labour Organization (ILO) on labour rights to avoid duplication. The Bank recognized that its central relevance was in its lending work, and it did not want to introduce a new conditionality to bank lending.

In response to a comment about partnership between United Nations bodies, he said the Bank's primary partnership was with the borrowing country. Its partnerships with the IMF and the United Nations only drove the quality of their combined programme with the borrowing country. The whole point of laying out an agenda for partnerships was to ensure that everyone could buy into it. The Bank believed that partnerships should lighten the burden of the borrowing country, and that all organizations should play a supporting role without duplication. The Bank took the issue of coordination seriously, understanding that borrowing countries got much great value from cooperative efforts than when it worked alone.

Joining the dialogue, LOUISE FRÉCHETTE, Deputy-Secretary-General of the United Nations, said improving coordination throughout the United Nations system was a priority of the Secretary-General. There was tremendous good will in making the system work more cooperatively. Coordination must be achieved in partnership with Member States at the field level. The borrowing or receiving country should be in the driver's seat.

In response to a question about the interests of countries with economies in transition, JUSTIN ZULU, Special Representative of the International Monetary Fund (IMF), said 83 countries had established programmes with the Fund, including countries in transition and most of the developing countries. Those countries were provided an opportunity to strengthen their financial and economic institutions, which should then be used to formulate and implement economic policy.

The IMF was becoming increasingly focused on social policies, he said. The Fund had stressed the importance of that segment, along with macroeconomic stability, more and more. In the budgetary field, the IMF had stressed additional outlays in health care, education and basic social services. Those areas were critical in strengthening the situation in recipient countries. The Fund also stressed the importance of economic distribution, as equity considerations had been proven to strengthen economic growth.

Regarding core labour standards, he said the IMF had worked closely with ILO to produce joint papers. One of the Fund's objectives was to create employment, and the two organizations were working to strengthen their common objectives. There was no contradiction in the work of the two bodies.

Economic and Social Council - 5 - Press Release ECOSOC/5763 13th Meeting (PM) 6 July 1998

Responding to the question on the problem of the least developed countries acceding to the WTO, Mr. HODA said while accession involved bilateral programmes, there was a certain amount of sympathy for the least developed countries in the WTO secretariat. Affirmative action in their favour must go beyond liberalized market access. Improved access needed to be accompanied by actions to help least developed countries overcome their domestic production constraints and create export activity.

There should be no pessimism over the future of least developed countries, since a number of them had achieved success and others could probably do the same, he continued. High levels of tariffs and tariff escalation showed, however, that certain efforts were far from being over. That issue was highlighted in the joint WTO/UNCTAD report before the Council. He said the problems for transitional economies hinged on bilateral market access negotiations. That was a very important part of the accession procedures, and transitional economies needed to discuss the issue with their relevant trading partners.

Commenting on specific action taken by specialized agencies with regard to least developed countries, he said that the first step had been the preparation of needs assessments by 39 least developed countries. The next step in the follow-up to the recommendations of the high-level meeting of least developed countries would involve consultations with other multilateral agencies and with other bilateral donors.

Responding to questions about trade and tariffs, Mr. RICUPERO said UNCTAD was working on new ways of dealing with special trade deferential treatment. Tariffs had caused special deferential treatment to lose its old appeal.

Regarding biodiversity, he noted that UNCTAD had undertaken two projects to give concrete economic content to the Convention on Biological Diversity and the United Nations Framework Convention on Climate Change. The UNCTAD was trying to build a coalition between non-governmental organizations, countries, indigenous communities and industry to give practical meaning to the Convention on Biodiveristy. It was not easy work because some of the environmentalists were mistrustful of working with members of the private sector. Issues concerning the intellectual property of indigenous rights would have to be discussed in another forum because UNCTAD only operated in the practical field.

He went on to stress that the need for additional resources would soon become tangible. Two years ago, the WTO and UNCTAD started a project for least developed countries and other countries in Africa which was already operational. Missions had been sent to countries, and the needs of eight countries had been assessed. Yet, there were currently no funds to extend the project.

Economic and Social Council - 6 - Press Release ECOSOC/5763 13th Meeting (PM) 6 July 1998

Mr. ZULU said payments liberalization and capital account liberalization should be viewed as vehicles for trade liberalization. The capacity to act on other issues was a prerequisite for succeeding in trade liberalization. There should be no dispute over the speed at which countries should liberalize, and the Fund did not have the power to push them to liberalize. That authority had been taken over by the need to join globalization. It would be in the interest of each country to determine the pace with which it could join the global world economy.

JUAN SOMAVIA (Chile), Council President, at the close of the policy dialogue, said the discussion had been useful and its meaning would continue to deepen in the future.

High-Level Segment

Mr. RICUPERO, introducing the report prepared by UNCTAD and the WTO on market access, said the Council had initiated the process that resulted in the establishment of the General Agreement on Trade and Tariffs (GATT) in 1949, and its successor, the WTO, in 1994.

The UNCTAD and WTO report on market access: developments since the Uruguay Round, implications, opportunities and challenges, in particular for the developing countries and the least developed among them, in the context of globalization and liberalization (document E/1998/55), states that the Uruguay Round had contributed to improvements in access to markets for trade in both goods and services. Those improvements included a substantial reduction in tariffs on industrial products and an important increase in the proportion of imports entering the major industrial countries free of duty. Yet, the report states that significant trade barriers still impeded the exports of developing countries. Many sectors of export of interest to developing countries were subject to tariff peaks in the market of the major trading countries, as well as in other developing countries.

That multilateral trading system had made an important contribution to world economic progress by promoting the liberalization and expansion of international trade and by providing a framework for the conduct of international trade reforms. The report was a demonstration of the collaborative and complementary relationship between UNCTAD and the WTO. Their joint activities included technical cooperation activities in support of developing WTO members, and a series of activities for the benefit of least developed countries. The common goal of the two secretariats was the effective integration of developing countries into the open multilateral trading system established after the creation of the WTO.

He cited the need for developing countries to participate in the ongoing process of implementing WTO agreements, and prepare negotiating agendas to protect their trade and development interests in the forthcoming multilateral

Economic and Social Council - 7 - Press Release ECOSOC/5763 13th Meeting (PM) 6 July 1998

negotiating round. Those agenda should reflect countries' trade problems and propose concrete negotiating objectives. In addition, developing countries and their enterprises needed to continue to expand their supply capacity and competitiveness to take advantage of the gains from market access improvements.

Trade liberalization initiatives should be accompanied by a package of measures, he said. Those measures should help to ensure the equitable distribution of benefits from trade liberalization among countries, as well as among different social groups within countries. In addition, measures and policies to alleviate poverty and protect the environment should complement liberalization initiatives. The international community should support investment policies to encourage transfer of technology, channel investment into priority areas, reduce the debt burden, and streamline trade. It should also encourage subregional agreements that enabled developing countries to improve their efficiency and to compete in the world market.

MAKARIM WIBISONO (Indonesia), speaking on behalf of the "Group of 77" developing countries and China, said the Uruguay Round had resulted in a more open, rule-based and predictable multilateral trading system and improvements in conditions of market access. Yet, tariffs and other traditional barriers to market access remained an issue in a wide range of sectors, many of which were of particular interest to the developing countries, as well as the least developed countries. Market access must be assured if the majority of the world's people in those countries were to benefit from the international trading system. To that end, the Group of 77 and China called on the developed countries to fully implement the commitments undertaken in the Uruguay Round. In identifying the obstacles faced by developing countries in market access, the Council should seek to strengthen the capacities of developing countries to implement their obligations under the Uruguay Round.

Yet, the Uruguay Round remained substantially incomplete, and many key areas of particular interest to developing countries were unimplemented, he said. Those included such crucial areas as exports of particular importance to the developing countries, including those sectors where substantial tariff liberalization had been achieved, as well as sectors characterized by dynamic export growth. In the Uruguay Round, certain countries offered only small tariff reductions or none at all for some sensitive products. In addition, not all developing countries were able to take advantage of the trading opportunities available in the globalized world economy.

He urged UNCTAD and the WTO to continue to provide technical assistance to developing countries, in particular, those burdened with chronic external debt problems. The Group was also dissatisfied with the progress made in the application of the provisions on special and differential treatments for developing countries. In addition, problems were created when countries violated the spirit of the Uruguay Round. Therefore, developed importing countries should fully integrate the textile and clothing sector and avoid

Economic and Social Council - 8 - Press Release ECOSOC/5763 13th Meeting (PM) 6 July 1998

abusing the anti-dumping provisions. Members of the WTO should reject the use of discriminatory trade action and the extraterritorial application of national legislation among developing countries. The Group of 77 and China also rejected the use of any protectionist measures.

Countries wishing to accede to the WTO agreements should not be asked for higher levels of commitment beyond those made by current WTO member countries, he said. Trade could serve as an effective instrument in the management of globalization. Yet, trade must minimize all negative aspects and maximize the benefits to be shared equitably by all. That was the most important challenge of the WTO in the near future. The liberalization of trade was an international challenge and necessitated a global commitment.

Sir LEON BRITTAN, Vice-President of the European Commission, on behalf of the European Union, said the liberalization of trade and investment regimes was essential for economic growth and development. The integration of developing countries into the world trading system was one of the primary objectives of the Union's development policies. As a consequence of that approach, the Union granted preferential access to its market to almost all the exports of developing countries. It was also convinced that in order to promote enhanced social and environmental protection, there was a need to rely on positive incentives and avoid the risk that differences in standards between developed and developing countries could be used as a pretext for protectionist measures.

He said that at the Uruguay round developing countries, for the first time, actively participated in multilateral trade liberalization. The Union considered that full implementation of the commitments from the Uruguay round was essential for the credibility of the multilateral trading system. It was also ready to provide technical assistance to developing countries experiencing difficulties in the process of implementation. An important conclusion of the joint WTO)/UNCTAD report was that there was still substantial scope in all countries for expanding market access on the basis of mutually beneficial multilateral trade liberalization. Despite the achievements of the Uruguay round, significant tariff and non-tariff obstacles to trade remained in many sectors.

He said comprehensive trade liberalization was in the interest of all countries. The present session of the Economic and Social Council should give particular attention to the situation of the least developed countries, as well as to implications for the trading system of the number of Asian countries recently affected by financial crisis. The European Community had taken important steps to enhance market access for those countries. It called upon the developed and more advanced developing nations to open their markets to products from the least developed countries in a comparable way. Of central importance to the least developed was a domestic policy framework that included transparent and accountable governance, investment in basic social

Economic and Social Council - 9 - Press Release ECOSOC/5763 13th Meeting (PM) 6 July 1998

services, upgrading physical infrastructure, openness to trade and investment and fostering entrepreneurship. Efforts by the least developed countries also required the increased support of the international community with a particular focus on capacity-building.

He said trade policy had an important role to play in the common endeavour to restore stability and growth in those developing countries in Asia affected by financial difficulties. He was convinced that the best signal that the international community could give about its confidence in the economic recovery of Asia would be a clear commitment to pursue further comprehensive trade and investment liberalization. Such a commitment would send the right signal to traders and investors and provide the best possible antidotes to any possible emergence of protectionist pressures. The Asian crisis also showed that trade policy could no longer be divorced from macroeconomic and other policies. The crisis also illustrated the need to promote greater coherence in global economic policy-making.

He said that another essential dimension of the relationship between trade and sustainable development was transparency. At a time of rapid change and uncertainty, it was more necessary than ever to engage in an open discussion and dialogue with all groups of civil society in order to build up support for an open multilateral trading system. All of the organizations of civil society should be considered key stakeholders in the domestic process of trade policy formulation.

Mr. HODA said he was gratified by the cooperation between the WTO and UNCTAD in the preparation of the report on market access. The document illustrated that important policy challenges remained in the area of market access. Regional agreements had played an important role in the opening of markets in the past few years. They could continue to help developing countries develop and diversify their market bases. Yet, the parties to those agreements must continue their efforts to liberalize in a fully multilateral context. Regional trade liberalization must supplement and not supplant multilateral trade liberalization.

The international community must ensure that all countries benefited from a multilateral trading system and discourage marginalization in an ever- changing globalized world, he said. For the developing countries, the challenge was to develop frameworks that fostered development and investment. Trading partners must also guarantee developing countries full market access. In addition, industrialized countries should consider granting unilateral duty-free treatment to developing countries on a preferential basis.

Affirmative action for the least developed countries must go beyond market access in order to ensure that the current situation was changed, he added. Market access must be accompanied by efforts to build institutional and human capacities. The international community must provide increased,

Economic and Social Council - 10 - Press Release ECOSOC/5763 13th Meeting (PM) 6 July 1998

better coordinated and better focused technical cooperation to enhance the trading systems of developing countries. New market access negotiations could be, and hopefully would be, to the benefit of all countries.

The representative of the Democratic People's Republic of Korea, on a point of order, objected to an earlier speaker's use of the word Korea to describe his country and the Republic of Korea. He said that was a very sensitive issue and one of which the United Nations was aware.

* *** *