UN SECRETARY-GENERAL ADDRESSES ECONOMIC AND SOCIAL COUNCIL AT BEGINNING OF SUBSTANTIVE 2003 SESSION

UN SECRETARY-GENERAL ADDRESSES ECONOMIC AND SOCIAL COUNCIL AT

BEGINNING OF SUBSTANTIVE 2003 SESSION

High-level Policy Dialogue Held with Four

Executive Heads of International Trade and Finance Institutions

(Reissued as received.)

GENEVA, 30 June (UN Information Service) -- United Nations Secretary-General Kofi Annan told the Economic and Social Council (ECOSOC) as it began its 2003 substantive session this morning that if there was one place where all concerns came together; where the needs were the greatest and the suffering most acute; and which could be called the locus of global poverty, it was the world’s rural areas.

Mr. Annan said that rural development was rightly the theme of the high-level segment of ECOSOC since three quarters of the world’s poorest people – defined as those living on $1 or less per day -- lived in rural areas.  Some 900 million such people drew their meagre livelihoods from agriculture and other rural activities and they were on the frontlines of drought, desertification, and environmental degradation. 

Among other steps which needed to be taken to ensure rural development and empower these resourceful and resilient individuals, developed countries would need to allow agricultural products from developing countries to reach their markets, unimpeded by direct or disguised barriers such as subsidies, the Secretary-General said.

Mr. Annan said the over-riding task of the international community must be to stimulate economic growth.  As a central United Nations agency for development policy and policy coherence, the Economic and Social Council must ensure that the United System brought all its capacities to bear on these challenges -– in an integrated fashion, and working in concert with the full range of partners. 

The President of the Economic and Social Council, Gert Rosenthal, opened the four-week session by stressing the need for members of the United Nations and their multilateral partners to jointly reflect upon the state of the world economy in terms of development. 

Rubens Ricupero, Secretary-General of the United Nations Conference on Trade and Development, told the Council that distress and misery characterized small-scale agriculture even in the world’s wealthiest countries.  He stressed that agricultural subsidies were not reaching their desired goal and must therefore be abandoned altogether, or replaced by something more effective.

Mamphela Ramphele, Managing Director of the World Bank, said that rural areas needed to be addressed in their entirety, with a multidisciplinary approach dealing with poverty, social and gender equality, local economic development, natural resources management, good governance and effective delivery of services to poor people.

Fransisco Thompson-Flores, Deputy Director-General of the World Trade Organization, said that the Doha Development Agenda had placed development issues and concerns of developing countries at the heart of its negotiations.  The contribution of the multilateral trading system, both to rural development and to the Millennium Development Goals generally, resided in the successful conclusion of the Doha Agenda. 

Reinhard H. Munzberg, delivering a speech on behalf of Horst Kohler, Managing Director of the International Monetary Fund, said that as the world economy continued to face uncertainty, restoring confidence and growth required vigorous efforts by all countries to address their own weaknesses as well as global economic risks.  Emerging markets and developing countries needed to stay the course in strengthening economic policies and institutions to take full advantage of the opportunities of the global marketplace. 

In an interactive segment following the high-level policy dialogue, ECOSOC heard from representatives of Brazil, Pakistan, Benin, Russian Federation, Uganda, Peru, Luxembourg, and Nepal.  Representatives of the European Community and a non-governmental organization, the Third World Network, also participated in the dialogue.

The Council also addressed organizational matters this morning, adopting its agenda and programme of work.  The ECOSOC will reconvene this afternoon at 2.45 p.m. to launch the opening of the high-level segment and hold four simultaneous round tables. 

Statements

GERT ROSENTHAL, President of the Economic and Social Council (ECOSOC), said that the Council provided members of the United Nations and their main multilateral partners in the economic and social sectors with an opportunity to jointly reflect upon the state of the world economy in terms of development.  In this sense, today’s dialogue was taking place against the backdrop of a disappointing global economic environment in which, despite supportive macroeconomic policies in the major economies, the global economic rebound remained anemic.  Few developing countries were expected to return to their desirable longer-term growth rates before 2004.  Thus, the Millennium Development Goals were beginning to look unattainable within the time frame originally proposed.

This realization should not lead to despair, he said, but to a renewed, concerted and sustained effort in each participant’s domain of competence to meet the challenges ahead.  This morning’s discussion, as well as the High-Level Segment of the Economic and Social Council to follow, should contribute to the effort to meet the broad commitments made in the Millennium Declaration and the more detailed proposals agreed on in Doha, Monterrey and Johannesburg.

KOFI ANNAN, Secretary-General of the United Nations, said it might not be true that 'a rising tide lifts all boats'.  But it was certainly true that, in bad weather, the weakest boats were the most vulnerable.  It was therefore bad news for developing countries that, contrary to expectations, the world economy had yet to recover from its slowdown in 2001, which had been its largest setback in a decade.  More than 30 developing countries had actually seen their per capita income drop in each of the past two years, and few could now expect to enjoy adequate growth again before the end of 2004.  The risk of deflation, the spread of disease, rising unemployment in some countries, overcapacity in several sectors, and lingering geopolitical concerns were combining to undermine confidence, hinder investment and, as ever, made the lives of the poor that much bleaker.

In the face of these threats, the over-riding task of the international community must be to stimulate economic growth, the Secretary-General said.  But over the long term, combating poverty and achieving the Millennium Development Goals required more than that.  One could not afford to lose sight of the agenda, universally agreed at Doha, Monterrey and Johannesburg, to tackle more fundamental development challenges. Those conferences had defined a new global partnership for development.  They had provided clear strategies for bringing real vigour to the development process and for deploying resources -- domestic and foreign, human and financial, existing and new -- where they could have the greatest impact.  The challenge now was not to decide what to do, but rather, simply, to do it.

Mr. Annan said that if major strides had been made towards linking financing and development, much remained to be done to make it easier for poor countries to improve their situation through trade.  The programme agreed to in Doha was more than just another round of trade negotiations.  It aimed to eliminate the unfair competition faced by farmers and producers in poor countries, and to open developed-country markets to developing-country goods –- especially agricultural products.  It sought to give poor people better access to life-saving medicines, while preserving the incentives for medical research.  In the broadest sense, it could provide a powerful engine of growth, thus facilitating the attainment of the Millennium Development Goals.

Yet success was by no means assured and there were only 10 weeks left before the ministerial meeting in Cancún, the Secretary-General said.  Key deadlines had been missed.  The time had come for all parties to show more flexibility, and give priority to the global interest.  It was not too late to avoid a setback for economic development.

Of course, even a successful outcome on trade would not mean that developing countries could manage without aid and debt relief.  This was especially true of the least developed countries.  Galvanizing development and seizing new trading opportunities depended on technologies, transport, capital, and much else.  Developed countries and aid agencies could make an important contribution here, not by doing the heavy lifting -- that was the responsibility of developing countries themselves -- but by helping to build the infrastructure, develop the human resource base and adopt sound policies. 

For poor countries to achieve 'take-off', two doors must be opened:  the door to markets in the developed world, and the door in developing countries that internal barriers too often keep closed, stifling the entrepreneurial energies of their people.

The long and troubling decline in aid appeared to have been halted, the Secretary-General continued.  But aid flows were still at the mercy of recession and spending cuts in some key OECD economies.  Moreover, even if the commitments made in Monterrey were to be fulfilled, the international community would still be far short of what was required to meet the Development Goals, $100 billion per year was what was required. 

Mr. Annan said that if there was one place where all these concerns come together; where the needs were the greatest and the suffering most acute; and which could be called the locus of global poverty, it was the world’s rural areas.  Rural development was rightly the theme of this high-level segment.  In those rural areas lived three quarters of the world’s poorest people -– defined as those living on $1 or less per day.  Some 900 million such people drew their meagre livelihoods from agriculture and other rural activities.  They were on the frontlines of drought, desertification, and environmental degradation.  They were the farmers –- women above all -- whose hard labour was undermined by protectionism, meagre infrastructure and, increasingly, the spread of AIDS.

The Secretary-General encouraged members to address the needs of these men, women and children, and there would be real hope of achieving the Millennium Development Goals.   If these resourceful and resilient individuals were empowered, they would show the international community how to fight poverty and hunger.  Rural development entailed more investment in agricultural research and in developing higher yield crops adapted to local conditions.  And it required efficient water management, resulting in 'more crop per drop'.  It involved increasing non-farm income and employment, so that the rural poor were less vulnerable to crop failures and other calamities.  It meant secure land tenure and, in some places, land reform.  It meant a new green revolution:  more productive farming, more sustainably pursued.  It meant focusing on the least developed countries, in accordance with the Brussels plan of action.  And it would require developed countries to allow agricultural products from developing countries to reach their markets, unimpeded by direct or disguised barriers such as subsidies.

All this could happen only with a real commitment to bring rural development back to the centre of the development agenda.  After a sharp decline in support for agriculture and rural development over the past decade, it had now been realized that they were central to the entire development agenda.   Nowhere would the commitment of the United Nations be put to the test more than in Africa, where food insecurity and AIDS were working in vicious tandem to thwart the continent’s rural development.

As a central United Nations body for development policy and policy coherence, the Secretary-General said that the Economic and Social Council must ensure that the United Nationssystem brought all its capacities to bear on these challenges –- in an integrated fashion, and working in concert with the full range of partners.  With that aim in view, the Secretary-General wished all possible success in the deliberations of the Economic and Social Council. 

RUBENS RICUPERO, Secretary-General of the United Nations Conference on Trade and Development, said distress and misery characterized small-scale agriculture even in the world’s wealthiest countries.  Over the past 15 years, as subsidies had expanded relentlessly, small farmers had become poorer and poorer in relation to the rest of the population, almost so much that they were now a vanishing species.  He stressed that if the most forceful moral and political justification for subsidies was that they were needed to save the peasants, then the facts demonstrated they were not achieving their purpose.  They must therefore be abandoned altogether, or replaced by something more effective. 

Farm subsidies had a perverse effect, he continued.  Not only did they cruelly fail to help the poor in the North, they also seriously harmed poor peasants in the South.  As a result, the topic of this session of the Council -– promoting an integrated approach to rural development in developing countries -– could only be achieved if a central element of this integrated approach was the prompt elimination of the external constraints that presently made it an absolute impossibility.  The evil generated by misdirected welfare policy was by no means limited to its failure to help its hypothetical beneficiaries.  In more than one sense, poor-country farmers were financing the social welfare doled out to rich-country farmers.  First, even if subsidies were given to products domestically consumed, and even if such subsidies were decoupled from production or prices, as the European Commission proposed to do, they were still of necessity linked to high market access barriers.  Consequently they limited markets for exports from developing countries. 

Secondly, whenever subsidized went into the world market, they drove prices down, creating volatility in prices and hurting developing countries’ exporters.  Agricultural support in OECD economies insulated producers from world price changes, shifting the burden of adjustment to the poor.  This instability was the cause of fiscal and balance-of payment problems.  Thirdly, many of the subsidies in the European Union and the United States went to products exported to the world market -– such as dairy products, beef, poultry, wheat, soya, sugar and cotton -– taking significant market shares away from more efficient producers in developing countries.  Fourthly, as subsidized foodstuffs from rich nations entered the markets of the poor, they competed unfairly with local producers, who were often driven out of business altogether.  They thus created an artificial dependency on foreign suppliers and aggravated the problem of food security in times when food aid disappeared and prices went up.  One must praise the courage and determination of the European Union Commissioner for Agriculture and his colleagues in moving away from production and price-linked subsidies. This recent decision represented an encouraging change in the right direction. 

MAMPHELA RAMPHELE, Managing Director of the World Bank, said that the slow pace of global growth and current geopolitics were fundamental issues affecting the question of poverty and development in today’s world; the poverty agenda remained the primary point of urgency.  Given the international community’s rich experience on development, it was important to recognize that the challenge to policy was to help release and guide forces of change in economic structures and social life.  The two-pillar approach to development strategy, which had been adopted, encompassed the creation of a good investment climate and the empowerment of and investment in poor people.

Poverty had many dimensions in addition to low income, she said, among which were illiteracy, ill health, gender inequality and environmental degradation. Thus, economic growth was essential but not enough to achieve the Millennium Development Goals; the two-pillar approach dealt with some of the more systemic and global issues of high intergovernmental priority.  Among the country-based obstacles to implementing the normative framework of the United Nations conferences and summits were:  unequal access; resources that did not actually reach poor people; low quality and a lack of incentives for providers; and lack of demand. 

The key thrusts in implementing rural development and poverty reduction, Ms. Ramphele said, were to raise the profile of rural development in national policy, including raising the voice of the rural poor in national planning processes, to scale-up innovations and successful investments in rural development and to improve the impact of World Bank operations in rural areas.  Rural areas needed to be addressed in their entirety, with a multidisciplinary approach to dealing with poverty, social and gender equality, local economic development, natural resources management, good governance and effective delivery of services to poor people.

FRANSISCO THOMPSON-FLORES, Deputy Director-General of the World Trade Organization (WTO), said the Doha negotiations were extensive and covered implementation, agriculture, services, market access for non-agricultural products, intellectual property, WTO rules, dispute settlement, and trade and environment.  There were new issues being looked into as well.  The entire agenda had placed development issues and concerns of developing countries at the heart of the negotiations.  The negotiations were ambitious and were about locking in the tremendous gain of past rounds and making new gains.  They were about improving trade conditions and market access opportunities, especially for poor countries.  They were about ensuring predictability, so vital for the global business community.  Finally, they were about refining, clarifying and strengthening the rules that governed trading relations between States. 

All regions of the world were now experiencing economic uncertainty and slow economic growth.  After an average rate of trade growth in the 1990s of 6.7 per cent, global trade had experienced a one per cent decline in 2001 and grew just 2.5 per cent in 2002.  Early indications suggested growth in trade volume for 2003 would be little or no better than 2002.  The weak global economy urgently needed the stimulus that significant further liberalization of world trade could bring.  Successful conclusions of the Round were thus key to reviving the world economy.  Negotiations were underway in all areas of the Doha agenda and progress was being made across the board.  In some areas, services for example, the mood was positive and the level of engagement very high.  Other encouraging signs included full engagement in the negotiations from almost all Members, developed and developing alike; tabling of ambitious proposals in many areas of the negotiations; clear evidence from senior officials and capitals along with growing support for initiatives to draw them even more fully into the process; and growing activism and involvement of Trade Ministers. 

However, fundamental concerns remained and one could not gloss over missed deadlines on important issues.  To date, Members had been unable to agree on a system to enable access to essential medicines for poor countries lacking capacity to manufacture such drugs themselves; on special and differential treatment for developing countries’ and on how to respond to outstanding concerns of developing countries with regard to the implementation of the Uruguay Round agreements.  At the present time, more than a dozen issues remained outstanding for action before or at Cancun.  The challenge for the membership was to determine which of these issues needed to be advanced, and progress them significantly, and for issues still outstanding, prepare them thoroughly and present them to Ministers in Cancun in a clear and operational manner.  The contribution of the multilateral trading system, both to rural development and to the Millennium Development Goals generally, resided in the successful conclusion of the Doha Development Agenda negotiations. 

REINHARD MUNZBERG, delivering a speech on behalf of HORST KOHLER, Managing Director of the International Monetary Fund (IMF), said that as the world economy continued to face uncertainty, restoring confidence and growth to the world economy required vigorous efforts by all countries to address their own weaknesses as well as global economic risks.  While advanced economies needed to raise the medium-term growth potential, emerging markets and developing countries needed to stay the course in strengthening economic policies and institutions to take full advantage of the opportunities of the global marketplace.  Moreover, in a world of growing economic and political interdependence, restoring confidence also required the credible demonstration of international cooperation.

While the sustained implementation of good policies in low-income countries was bearing fruit and while the Heavily Indebted Poor Countries (HIPC) Debt Initiativewas proving effective in a growing number of countries, although progress had been slower than desired, the sobering reality was that maintaining even the current relatively good performance of poverty reduction strategies would not suffice to halve poverty by 2015.  Sound domestic policies in developing countries needed to be matched by more support from the international community.  Furthermore, a critical contribution to poverty alleviation lay in strengthening international trade by improving market access for developing country exports and reducing trade-distorting subsidies in the advanced economies.

The IMF remained fully committed to helping implement the Monterrey Consensus and assisting its members alleviate poverty, he said, in which respect the key operational vehicle was the Poverty Reduction Strategy Paper.  The IMF would continue to concentrate on the establishment of a framework for sound macroeconomic policies and institutions and to provide assistance for capacity building through technical assistance and training.  In the medium-term, the Fund would further tailor its assistance to the evolving challenges facing low-income countries.

Interactive Dialogue

In a subsequent interactive dialogue, the representative of Brazil expressed concern about development indicators lacking dynamism.  Last year, 33 of 95 developing countries had seen their output per capita decrease.  If trends continued along these lines, the Millennium Development Goals would remain unattainable.  Brazil had followed sound economic policies and had given high priority to social initiatives.  The Government had launched a programme entitled “zero hunger”, a national effort to eradicate poverty.  However, in an interdependent world, no country could address issues of development on their own. 

The representative of Pakistan referred to the statement made by the Secretary-General of the United Nations Conference on Trade and Development (UNCTAD) on the nature of agricultural subsidies, noting that subsidies had been seen as necessary to preserve a rural way of life.  Yet this way of life was disappearing despite subsidies.  He also asked for elaboration on the decision by the European Union Commissioner to move away from production and price-linked subsidies. 

The representative of the European Community said that the European Union had long been accused of being the main obstacle to progress on the Doha Round because of agricultural subsidies.  As such subsidies had declined, the emphasis of criticism had shifted to domestic subsidies and their trade-distorting effects.  However, such subsidies had now been terminated.  In this area, the world community had spoken and the European Union had listened and acted.  To the extent that there had been a negative impact to the Union’s agricultural subsidies, they had most affected the poorest countries.  For this reason, the Union had launched the “Everything But Arms” initiative.

The representative of Benin said that the leitmotif of the preceding statements had dwelt on the difficulties still faced by developing countries due to asymmetries and imbalances in world trade.  The work of ECOSOC and other forums should concentrate upon reaching consensual solutions to right the imbalances of current multilateral trade.

The representative of the Russian Federation said that the implementation of such macroeconomic policies as espoused by the Bretton Woods institutions was accompanied by high social costs, and should thus be accompanied by the necessary support to undertake them.  The United Nations specialized agencies should elaborate recommendations taking all Member States’ views into consideration.

The representative of Uganda said that social development had been recognized as a key element of rural development, to which effect, Uganda had developed, among other efforts, a programme of universal primary education.  Moreover, the HIV infection rate had also been reduced from 30 per cent to 6.1 per cent.  Yet, Ugandan youth continued to suffer from the difficulty of finding employment and were easily lured into dangerous alternatives.  Market imbalances also remained a serious challenge.

The representative of Peru said that a real effort had been made to address the problems faced by developing countries and it was now time for real action on the part of financial institutions and the members of the international community.  In this respect, resources, which were becoming increasingly scarce, would be increasingly necessary. 

The representative of Luxembourg said that the statements made this morning had merit in putting to the forefront issues related to agriculture.  Clear concern had been demonstrated over the continued decline in agricultural prices in developing countries, which led to continued impoverishment.  This phenomenon needed to be addressed comprehensively and solutions needed to be found if poverty was to be reduced, as did issues such as the productivity of the South vis-à-vis the North, access to northern markets and access to markets in developing countries themselves. 

The representative of Nepal said that the need for reform and liberalization had been underlined, yet it often seemed that developing countries accepted the prescriptions of international financial institutions in the hope of doing better while the developed countries that developed such prescriptions then changed their own policies, leaving the financial institutions unable to fulfill their promises of support.  This had led to a credibility gap between the prescriptions of financial institutions and their ability to deliver.

Response of the Panel

Mr. Ricupero said that many of the concerns raised revolved around the regressive character of agricultural subsidies.  Given the trend toward increasing farm size in the developed world, the most important argument in defence of subsidies was that they protected small farmers in developed countries.  However, 80 per cent of subsidy payments went to only 20 per cent of farmers.  Thus, the extent to which subsidies to protect small farmers were effective needed to be reconsidered and more effective protection undertaken.  And if subsidies did not do their job in protecting small farmers, then one must conclude that they remained to protect the market share in agricultural trade of the developed world.  Also of concern was the issue of productivism –- productivity increases for their own sake – within the developed world, which had led to crises such as mad cow disease and the collapse of world coffee prices and the issue of market accessibility for developing countries.

Ms. Ramphele said that the political will necessary to implement those agreements, which had already been made, needed to be supported through the advocacy of the United Nations.  Moreover, policy reforms needed to be owned by nations; policy reform prescriptions were unsustainable because of the high costs they incurred.  A set of policy reforms was needed, which were not imposed from outside.  Much more was known now than 10 years ago about how to promote development.  For this reason, the international community needed to move beyond the Washington Consensus’ focus on microeconomic policies to take into account changes necessary at the systemic level.  Finally, on the issue of youth and unemployment, the World Bank had recognized the gap in its own strategies and was on the point of finalizing a new strategy designed to give youth the hope of achieving a better life than their parents.  This focused on helping countries to identify rural development as a key element for growth.

Mr. Thompson-Flores said that the process of negotiation undertaken at Doha needed to be successful.  The conclusion of a new agreement on international trade might not be sufficient to ensure the continued growth of the world economy, but it was necessary for it.  In this light, decisions such as that of the European Union to end subsidies were to be applauded.  Regarding coordination between the institutions and authorities dealing with finance, trade and development, it was necessary at both national and international levels, he said.

Mr. Munzberg said that the International Monetary Fund had been cooperating for many years with United Nations bodies in progressing the international economic architecture both on national and international economic policy levels.  Progress had been made but an ongoing commitment and increased cooperation was required to ensure success of the Monterrey process and the Millennium Development Goals.  Complementarity between the United Nations and the Fund was needed when assisting Member States in the implementation of appropriate economic policies.  

A representative of the non-governmental organization Third World Network congratulated the Economic and Social Council for choosing to dedicate much of this session to agriculture and rural livelihoods.  After many years, the problems and double standards within the WTO agreements presented obstacles and constraints for developing countries, prevented their access to developed countries and access to the market, and threatened the livelihoods of small farmers.  The choice of developed countries to subsidize and protect their own agriculture sectors, at the expense of developing countries, further threatened their chances of economic development and eradication of poverty. 

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