Fifty-seventh General Assembly

Second Committee

30^th Meeting (PM)

MULTILATERAL APPROACH STILL HIGHLY REGARDED IN INTERNATIONAL TRADE,

SECOND COMMITTEE TOLD, AS IT BEGINS DEBATE ON TRADE AND DEVELOPMENT

UNCTAD Secretary-General Warns Trend Towards Bilateral Free

Trade Agreements Could Be Stumbling Block to Multilateral Negotiations

International trade was one of the few sectors where the multilateral approach continued to be held in high regard by almost all nations, Rubens Ricupero, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), told the Second Committee (Economic and Financial) this afternoon, as it took up its agenda item on trade and development.

International trade was a positive exception to the current tendency of using unilateral solutions to international problems, he said.  He noted, however, the growing trend for countries to seek bilateral free trade agreements, which were usually presented as building blocks to meaningful trade liberalization.  Those agreements could become stumbling blocks, he warned, if they leaned towards specific, preferential rules that were difficult to incorporate into multilateral negotiations.  That kind of approach attacked the heart of the trading system.

Singapore's representative pointed out that billions of dollars and millions of jobs had been lost due to hypocrisy and protectionism in the international trading system.  Agriculture was the backbone of most developing countries, yet massive subsidies in the developed world undercut developing countries and forced even the most efficient producers out of the market.

Quoting World Bank estimates, she said that abolishing all trade barriers could boost global income by $2.8 trillion and lift 320 million people out of poverty by 2015.  Eliminating all tariff and non-tariff barriers, he added, could result in gains for developing countries of $182 billion in the services sector, $162 billion in manufacturing and $32 billion in agriculture.

Venezuela’s representative, speaking on behalf of the “Group of 77” developing countries and China, noted that developing countries had integrated rapidly into the world trading system, but benefits had fallen far short of expectations.  Citing restrictions in developed markets as a prime reason for that, he stressed that improved access to northern markets was vital in combating poverty and reaching the agreed development goals.

Speaking on behalf of the European Union, Denmark’s representative said that market access alone could not spur development and reduce poverty.  He stressed that sound domestic policies were also needed as part of country-owned poverty reduction strategies, which should include trade policy and programmes for trade development.  The key elements of a wider strategy were trade-related technical assistance and capacity-building to reduce supply-side constraints and help countries participate in trade negotiations.

Other speakers at this afternoon’s meeting were the representatives of Cuba, Russian Federation, Libya and Mexico.

The Committee will meet again at 10 a.m., Tuesday, 12 November, to continue its consideration of trade and development.

Background

The Second Committee (Economic and Financial) met this afternoon to take up macroeconomic policy questions, focusing on trade and development.

The Committee had before it a report of the Secretary-General, in collaboration with the United Nations Conference on Trade and Development (UNCTAD), on international trade and development (document A/57/376).  The report notes that developing nations are active in World Trade Organization (WTO) negotiations, but many lack the technical expertise and resources to analyse varying positions, develop ideas and put them in negotiating language.

The report says that the work programme adopted at the Fourth Ministerial Conference of the WTO (Doha, November 2001) puts developing countries' concerns into the WTO's regular agenda and work plan and set 1 January 2005 as the deadline for a "single undertaking" of the outcome of negotiations.   Progress has been evident since negotiations in services and agriculture began in 2000 under the "built-in" agenda agreed to at the end of the Uruguay Round in 1995.  However, advancement is slow elsewhere due to technical difficulties, a burdensome meeting agenda, divergent positions and negotiators' reluctance to reveal positions until a consensus on themes is reached, and recent policy initiatives by some industrialized WTO members have also thwarted progress.

The WTO negotiations' success is essential for putting the global economic recovery on track, the report states.  The Conference in Doha could be key to restoring confidence in the world economy.  World export growth, dulled by weakened demand for information and communication technology-related products, particularly in major industrialized nations, slowed to less than 1 per cent in 2001, down from 11 per cent a year earlier.  The events of 11 September further exacerbated the downturn, restraining international trade growth in merchandise and services such as tourism and shipping.

Gradual economic recovery should spur global trade growth in the region of

3 per cent this year, mediocre by historical standards according to report.  Export growth of many developing countries in Asia and Latin America will be lackluster, due to weakened import demand in major industrialized countries and increased international transport and insurance costs.  African nations should recover slowly, thanks to increased debt relief, an increase in official development (ODA) and preferential trade status for exports through the European Union's "Everything but Arms" initiative and the United States African Growth and Opportunity Act.  The international prices of some primary commodities are recovering, but most of those prices will stay in the range of their historical low.

The report asserts that achieving an equitable balance will be crucial and will depend largely on efforts to ease WTO's potential negative effects on developing nations through differential market access, favourable transition periods, technical assistance and social safety net provisions.  The resolution of outstanding agricultural issues in implementing the Uruguay Round will be a determining factor, as well.

The Committee had before it a report of the Trade and Development Board on its twenty-eighth executive session in Geneva in March (document A/57/15

(Part I)), and a report of the Trade and Development Board on its nineteenth special session in Bangkok in April (document A/57/15 (Part II)).

Statements

RUBENS RICUPERO, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), introduced the reports before the Committee and said international trade was one of the few areas of international relations where the multilateral approach had continued to be held in high regard by almost all nations.  International trade was a positive exception to the current tendency of using unilateral solutions to international problems.  For example, multilateral negotiations in Geneva had continued and many nations, even powerful ones, had shown flexibility in those negotiations.  However, the international community must also be realistic and recognize two basic threats to the multilateral trading system.  Those were the proliferation of regional agreements and the danger that countries would not deliver on promises made at Doha on the development agenda.

There was a growing trend for countries to seek bilateral free trade agreements, he continued, which were usually presented as building blocks for meaningful trade liberalization.  But, those agreements could become stumbling blocks, if they consisted of specific, preferential rules that were difficult to incorporate into multilateral negotiations.  That kind of approach was a serious danger to multilateral arrangements, because it attacked the heart of the trading system.

Until 1985, he said, there were a few countries that would never have considered the possibility of going against the multilateral approach.  Now, several countries, even nations like Japan or Singapore who had previously resisted the bilateral trend, were seeking or signing regional agreements.  The problem was whether those regional agreements were increasing the degree of openness or liberalization in the system, or creating preferential treatment.  The latter was often the case, since regional agreements usually discriminated against non-members and only the signatories benefited from trade liberalization.

It was in the interest of all, he said, to have harmonized and balanced trade liberalization.  Liberalization could not be selective, because each country would then only liberalize products that had a competitive advantage.  The United Nations must redouble its efforts to move negotiations ahead in that respect.

VICENTE VALLENILLA (Venezuela), speaking on behalf of the “Group of 77” developing countries and China, said developing countries had integrated rapidly into the world trading system over the past three decades, but benefits had fallen far short of expectations.  For almost all developing countries, imports had expanded faster than exports, resulting in a deterioration of the trade balance.  Also, the promising expansion in world trade was not directly linked to economic growth or greater economic convergence.  While the developed countries share of world income had increased from less than 73 per cent in 1980 to 77 per cent in 1999, that of developing countries had stagnated at around 20 per cent.

Why had the developing countries not benefited from increased trade? he asked.  One reason was that developed world’s markets of export interest to the developing countries continued to be restricted.  Improved access to northern markets remained a most important issue for combating poverty and reaching the agreed development goals and targets.

He said that giving real substance to the development-related provisions of the Doha Declaration would restore confidence in the multilateral trading system.  In addition, the possibility of accession to the WTO should be made more reachable for the least developed countries.  Since regional integration was an important component for the development of developing countries, regional economic integration processes should not be undermined by negotiations that aimed to clarify and improve the rules of regional trade agreements.

Finally, he said, technical assistance and capacity-building for developing countries in the post-Doha process was essential.  The UNCTAD should provide analytical and technical support to realize the development dimension.  The UNCTAD support, through its demand-driven technical cooperation programme, was critical to helping developing countries participate in the post-Doha process and address the supply-side issues to revitalize and diversify their productive sectors. 

DITTE JUUL-JORGENSEN (Denmark), speaking on behalf of the European Union and associated countries, reaffirmed the commitments the region had made in the Doha Ministerial Declaration, notably in terms of improving market access for developing country products, particularly for those of the least developed countries.  Further, in recognizing the importance of market access for the integration of developing countries in the world economy, the Union provided preferential market access for developing country exports.  That was in the form of duty-free and quota-free access for the least developed countries, as well as through bilateral and regional agreements.  As a result, developing countries’ exports to the Union had increased 15 per cent a year since 1995 and represented 42 per cent of total Union imports in 2000.

While trade was important to development and poverty reduction, however, market access alone was not sufficient to bring about improvement, he said.  For trade to support development and reduce poverty, it must be backed by sound domestic policies, as part of country-owned poverty reduction strategies.  Trade policy and programmes for trade development should be part of those strategies.  External support was often necessary.  The multilateral trading system, in the form of the broad WTO agenda agreed by ministers in Doha, was an important part of international development. 

Finally, she said, trade-related technical assistance and capacity-building to reduce supply-side constraints and help countries participate in trade negotiations were key elements in a wider strategy.  In September, the European Commission had spelled out its suggested way of going forward to deliver on its Doha and Monterrey trade capacity-building commitments.  The Union’s trade and development ministers would follow up by adopting an ambitious trade and development strategy in the next weeks.  The international community at large should support the WTO development agenda, in its framework of assisting developing countries in benefiting from the opportunities of trade liberalization.

ORLANDO REQUEIJO GUAL (Cuba) said that trade was a catalyst for development, and stressed that the role of the United Nations in trade should be strengthened. Developing countries were asked to constantly open up their markets, but more and more protectionist measures were seen every day from developed nations.  For example, subsidies to cotton producers in the United States were threatening cotton producers in Africa.

He said that compliance with commitments made at the WTO meeting in Doha could contribute to rectifying imbalances in the multilateral trading system, as well as to development.  However, there was a clear lack of seriousness from developed nations in complying with those commitments, especially regarding differential treatment, textile and agricultural subsidies and restrictions on intellectual property.  It was important for UNCTAD to help prepare developing countries to play an effective and participatory role in trade negotiations.  The UNCTAD should be maintained and strengthened by granting it needed human and financial resources.

YURIY ISAKOV (Russian Federation) said that access to a fair market share was the most important component for development.  The WTO policies should be implemented in a fair, equitable and non-discriminatory manner, particularly in removing obstacles to membership in the WTO.  The quality of membership -- not the speed with which it was granted -- was important.  The new round of talks had yielded positive outcomes.  Reviewing those results in such areas as services and anti-dumping, he favourably highlighted in particular the rules of procedure for resolving disputes within the WTO.

He stressed, however, that UNCTAD was the main coordinating body of the United Nations system in terms of trade and development.  It galvanized the flows of trade and promoted the elements vital to global trade, such as technology transfer.  Technical cooperation was vital for the least developed countries and countries in transition.

SUSAN GOH (Singapore) said the continued barrier to imports, particularly agricultural products and textiles, were not simply minor sins of hypocrisy on the part of developed countries.  While hypocrisy could easily be regarded as a part and parcel of everyday existence, such hypocrisy in international trade carried with it serious implications for the economic and social well-being of millions of people, especially in the developing world.  Billions of dollars and millions of jobs were lost because of protectionist measures.  For example, agriculture was the backbone of most developing countries, yet massive agricultural support in the developed world undercut developing countries and forced even the most efficient producers out of the market.

It was telling that the three major conferences held over the past year all referred to the importance of trade liberalization as a tool for development and as a source of finance for development, she continued.  A freer and more stable trading environment would provide a powerful tool that catalyzed job creation, reduced poverty, enhanced vibrancy and the attractiveness of markets.  Freer trade, underpinned by the WTO principles of non-discrimination and national treatment, could help drive the world economy out of its current downturn.

According to World Bank estimates, she added, abolishing all trade barriers could boost global income by $2.8 trillion and lift 320 million people out of poverty by 2015.  Eliminating all tariff and non-tariff barriers could result in gains for developing countries of $182 billion in the services sector,

$162 billion in manufacturing and $32 billion in agriculture.  The International Monetary Fund and the World Bank had estimated that reaching seven of the United Nations Millennium Development Goals -– in health, education, poverty and other

areas -– would require $54 billion annually, just one third the estimate of developing countries gains from trade liberalization.  A 50 per cent decrease in protectionist measures could boost developing countries incomes by about

$150 billion a year –- three times current aid flows.  The return to developing countries from agricultural trade liberalization would be eight times all the debt relief granted by the developed world, thus far.

It was precisely those immense benefits from trade liberalization that made efforts to implement the Doha Development Agenda so vital as a source of finance for development. The international community must put together its collective wisdom inn seeking genuine market access for the goods and services of all, especially those from developing countries.

JABER ALI RAMADAN (Libya) said trade was the most important component of development strategy.  The multilateral, open trading system was key.  The United Nations should remain at the centre of all policies dealing with global trade.  The weakened international trading system would regain its strength only modestly, and already the decline in trade had affected developing countries most severely, especially in Africa.  Among other effects, transportation costs had risen and the trade practices of developed countries made the situation more difficult for the developing countries.  Unilateral measures, such as sanctions, had further exacerbated the situation.

Facilitating the access of developing countries to the WTO was one way of opening up their access to the global market, he said.  All parties should remain faithful to the commitments they had made to development.  A number of meetings at the ministerial level would be held during the upcoming year, including one in Kazakhstan.  They would deal with aspects of bridging the information gap through the use of information and communication technologies.

CARLOS VALERA (Mexico) stressed that protectionist measures which distorted international trade should be eliminated.  It was important to ensure equitable market access, eliminate subsidies and support developing countries in human and technical capacity-building.  Progress at recent conferences must lead to systematic action that created more balance in trade favouring developing countries, especially the least developed.  Achieving that balance was vital in meeting the Millennium Development Goals.

It was important to eliminate agricultural subsidies and aid measures that distorted trade, because it was unfair for producers, particularly in developing countries, he said.  Developed countries with high incomes spent five times more in subsidies to farmers than they provided in development aid.  The WTO meeting next year in Cancún, Mexico, would be an ideal opportunity to confront protectionist threats and clarify developed nations’ efforts to implement the development agenda.

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