IMBALANCES CAST SHADOW OVER WORLD’S ECONOMIC RECOVERY, UNDER-SECRETARY-GENERAL TELLS SECOND COMMITTEE AT START OF GENERAL DEBATE

Fifty-eighth General Assembly

Second Committee

2^nd Meeting (PM)

IMBALANCES CAST SHADOW OVER WORLD’S ECONOMIC RECOVERY, UNDER-SECRETARY-GENERAL

TELLS SECOND COMMITTEE AT START OF GENERAL DEBATE

While global economic recovery was expected to solidify and broaden by 2004, significant macroeconomic imbalances cast a shadow over medium-term growth, José Antonio Ocampo, Under-Secretary-General for Economic and Social Affairs, said this afternoon as the Second Committee (Economic and Financial) began its general debate.

Pointing in particular to the excessive dependence of world economic growth on one country, he noted that the recent setback in the World Trade Organization (WTO) negotiations at Cancún, Mexico, had also generated uncertainty about future prospects.  Moreover, developing countries had remained vulnerable to external events, particularly with the spread of globalization.

He stressed that in making globalization a positive force, the international community must overcome asymmetries in the current global system.  Such asymmetries included the macroeconomic vulnerability of developing countries to external shocks, and the concentration of technical innovation -– a major driver of development -- in industrialized countries.

Similarly, Pakistan’s representative observed that the overall global economic situation, according to the United Nations Conference on Trade and Development (UNCTAD) Trade and Development Report 2003, remained precarious, with a widening deflationary gap created by too many goods chasing too few buyers and too many workers chasing too few jobs.  Global trade had grown less than

2 per cent in 2002, a far cry from the average 7 per cent annual growth rate of the 1990s.

Economic and trade performance in the developing world was poor, he said.  After peaking in 2000, net global capital flows had nose-dived; foreign direct investment, mostly concentrated in 10 developing countries, had dropped

75 per cent; portfolio investment and commercial bank loans had declined considerably; and terrorism and instability had exacerbated the overall situation.  Stimulating growth in developing countries was vital, requiring the political will to meet official development assistance (ODA) targets, greater debt write-off and capacity-building for production and trade growth.

Brazil’s representative also noted that the economic outlook for the rest of 2003 and 2004 failed to warrant hopes for strong growth and significant poverty reduction.  While positive forces in some developed economies were spurring global recovery, a broader base would be needed to sustain recovery over the medium term. For that to occur, international cooperation for development must be revitalized and global economic asymmetries addressed.

The implementation of commitments made at Doha, Monterrey and Johannesburg in 2001 and 2002, especially those emerging from Doha, had been disappointing, he continued.  Two years ago at Doha, States had agreed to substantially improve market access, phase out export subsidies and substantially reduce domestic support in agriculture.  Domestic and export subsidies in developed countries depressed prices and incomes throughout the world and cut into export earnings.

Speaking on behalf of the “Group of 77” developing countries and China, Morocco’s representative said that World Bank development indicators for 2003 showed that poverty could be halved by 2015 if wealthy countries removed trade barriers and increased ODA.  Noting that protectionism in the North impeded the exports of poor countries, notably cotton, textiles, clothing, some finished goods, and other highly labour-intensive exports, he stressed that wealthy nations advocating market-based economies must practise what they preached.

Other speakers stressed the importance of reviving the Doha round of trade talks that collapsed last month during the fifth ministerial meeting of the WTO at Cancún.  Several also emphasized the need to assess the integrated follow-up to major United Nations conferences, and intensify the Organization’s efforts to achieve sustainable development.

Also speaking this afternoon were the representatives of Italy (on behalf of the European Union, as well as acceding and associated States), New Zealand (on behalf of the Pacific Island Forum Group), Japan, Russian Federation, Egypt and China.

The Second Committee will meet again at 10 a.m. tomorrow, Tuesday, 7 October, to continue its general debate.

Statements

JOSE ANTONIO OCAMPO, Under-Secretary-General for Economic and Social Affairs, said the Committee’s session was beginning at a time when the world economic recovery was gaining traction.  The economic effects of geopolitical uncertainties and the SARS epidemic had abated and emerging data indicated improvements in an increasing number of countries.  In the absence of new shocks, recovery was expected to solidify and broaden in 2004.  For the short-term, the outlook seemed promising, but significant global macroeconomic imbalances cast a shadow over medium-term prospects, particularly the excessive reliance of world economic growth on one country.  The recent setback in the World Trade Organization (WTO) negotiations also generated a sense of uncertainty about future prospects, he added.

Developing countries had remained vulnerable to external events, particularly with globalization, he continued.  In turning globalization into a positive force, a major aim of the international community should be to overcome three types of asymmetries characterizing the current global system.  The first was the macroeconomic vulnerability of developing countries to external shocks, and their limited ability to cope with such shocks; the second was the concentration of technical innovation -- the major driving force of development -- in industrialized countries; and the third asymmetry was the contrast between the high degree of capital mobility and the limited international mobility of labour, especially among low-skilled workers.

He said the first asymmetry should be addressed through a comprehensive approach, such as that provided by the Monterrey Consensus.  An essential element of that approach should be that developing countries take appropriate action at the national level.  To the extent that the flow of technology largely took place through trade, the second asymmetry was linked primarily with the functioning of the world trading system.  Developing countries, for their part, must adopt domestic measures that would promote active participation in world trade and enhance their capacities for absorbing new technologies.

The agenda for the Doha round of trade negotiations had captured a number of vital changes that would enable developing countries to benefit from trade opportunities, he said.  The failure to make tangible progress at the WTO ministerial meeting in Cancún was, therefore, a setback not only to the global trading system but to global development.  However, there were positive aspects of the Cancún meeting, including the unprecedented participation of developing countries in negotiations.  The Doha negotiations must be continued as expeditiously as possible to build on positive development.  It was vital to ensure that steps forward were not lost when the process continued.  However, success required that future discussions be recognized not just as another round of negotiations on mutual concessions, but rather as a universal effort to ensure that opportunities for development were greatly increased and the international trading system made more equitable.

The third asymmetry was between international flows of labour and capital, he went on.  International migration had emerged as an important dimension of globalization, not only for countries with abundant labour, but also for the receiving countries that directly benefited from immigrant labour.  About

175 million people, or 3 per cent of the world population, currently lived outside their country of birth.  Their most visible contribution to their countries of origin were financial remittances, which were second in quantity only to flows of foreign direct investment, and much larger than official development assistance (ODA) flows.  Migration must be given greater prominence on the international agenda, and considered a complement to international negotiations on trade and the mobility of capital.  Enhanced international cooperation was at the core of efforts to implement the agreed development agenda, he concluded.  Enhanced international cooperation could be pursued both by building strong institutions for a better global order and by setting up a network of global, regional and national institutions, which would complement efforts at all levels.

MOHAMED BENNOUNA (Morocco), speaking on behalf of the “Group of 77” developing countries, said the international community must pool efforts to move United Nations reform forward.  That was an exciting challenge and the Group of 77 was committed to dealing with it pragmatically.  United Nations economic forecasts showed improvements, in some developing countries, although they were slowed by worsening imbalances, slower economic growth, entrenched socio-economic problems and great instability.  In 2002, those countries had witnessed a decline in inward capital flows, a doubling of negative transfer and protracted debt.  International trade was stagnant, protectionism was on the rise, and commodity-exporting countries continued to suffer from market instabilities and declining commodity prices.

World Bank development indicators for 2003 revealed that poverty could be halved by 2015 if wealthy countries removed trade barriers and increased ODA, he said.  Protectionism in the North impeded the exports of poor countries, notably cotton, textiles, clothing, some finished goods, and other highly labour-intensive exports.  Wealthy nations that advocated market-based economies must practise what they preached; their failure to do so had been clearly illustrated during the failed fourth round of the World Trade Organization (WTO).  If economic growth in Africa remained the same, more people would fall into poverty, their number rising from 350 million in 1999 to an estimated 402 million in 2015.

Stressing the importance of integrated and comprehensive follow-up to the International Conference on Financing for Development, he said that in June, the Group of 77 had adopted a resolution to ensure that follow-up focused on indicators, evaluation and monitoring so as to gradually adjust strategies to developmental progress.  The Economic and Social Council had been charged with that process, with a view to the 2005 comprehensive assessment of the 2000 Millennium Declaration.

MARCELLO SPATAFORA (Italy), speaking on behalf of the European Union as well as acceding and associated States, said the Millennium Declaration was the overarching policy framework for economic and social work in the United Nations, while the Millennium and other internationally agreed goals provided clear objectives in the economic, social and environmental areas.  The international community must ensure that the implementation of those goals was on track and supported by the efforts of all States and other stakeholders.

In the General Assembly’s last session, as well as in activities of the Economic and Social Council, he recalled, more and more attention had been paid to implementing commitments made by Member States.  A positive process had been launched last spring with work by the ad hoc working group of the Assembly on the integrated and coordinated follow-up to the outcomes of major United Nations conferences and summits in the economic and social fields.  The initiative launched by the Secretary-General in his report on the follow-up to the Millennium Declaration, as well as his opening remarks at the outset of the Assembly’s general debate were clear signs that the need for change was growing.

DON MACKAY (New Zealand), speaking on behalf of the Pacific Islands Forum Group, lamented the lack of progress at the Cancún WTO meeting.  Noting that the Forum had taken useful steps to expand members’ trading opportunities, he urged Member States to re-commit themselves to the Doha development round.  Participation in regional or global trade systems created challenges for many Pacific island countries with small economies, and it was hoped that the Doha round would make it easier for them to reap the benefits of world trade.

He said Pacific island countries -– all greatly affected by extreme weather changes, climate variability and rising sea levels -– had taken steps to mitigate climate change and meet their Kyoto targets, as stated in their August 2003 Communiqué Forum.  Urgent action was needed, particularly by major emitters, to reduce greenhouse gas emissions, he said, underscoring the need to maintain well-funded programmes to address extreme weather and climate changes through the Global Environment Facility and Type II World Summit on Sustainable Development Partnership Initiatives.

YOSHIYUKI MOTOMURA (Japan) said his country was still struggling to recover economically, and felt it should review both its internal and external policies.  Recently, the Government had revised the ODA charter to enhance the strategic value, flexibility, transparency and efficiency of ODA.  The revision also aimed to encourage wide public participation and deeper understanding of Japan’s ODA policies, both within the country and abroad.

African development continued to be a central issue for the international community, he said.  The Government of Japan had redoubled its efforts in that area, with the Tokyo International Conference on African Development continuing to serve as a framework for the concrete assistance provided by Japan, principally in the economic and development fields.  Other major areas were sustainable development and disaster reduction.  Education was another key issue -– one that Japan emphasized as a means of promoting sustainable development.

YURIY ISAKOV (Russian Federation) said that following the Monterrey appeal for development funding, his country had stepped up its ODA contributions, particularly for African and least developed countries.  In the past three years, the Russian Federation had cancelled $27.2 billion of developing-country debt, bringing its average annual contribution of development assistance to 1.7 per cent of gross domestic product (GDP).  Last year, Russia became a World Food Programme (WFP) donor and had given generously to the Global Fund to Fight HIV/AIDS, Tuberculosis and Malaria.  Russia had also slashed tariffs for many developing countries.

He urged the Committee not to be discouraged by the disappointing outcome of the recent WTO Ministerial Conference and called for greater efforts to conclude the trade talks through constructive compromise.  The talks should focus on development, but also secure stable, non-discriminatory access to world commodities and services for all countries, including economies in transition poised to join the WTO.

AMR ABOUL ATTA (Egypt) said development and the eradication of poverty were common humanitarian, moral and political responsibilities, noting that world summits and conferences over the past few years had been vital in carrying development forward.  However, some parts of the world could not achieve all the Millennium goals by 2015 and would need support and assistance from the international community.  Global summits should be followed up with additional efforts to correct deficiencies in development.

He said the recent WTO meeting in Cancún had shown that developed countries were not interested in responding to the needs of developing countries, particularly in the field of agriculture.  That unresponsiveness meant that developing countries would continue to face obstacles in exporting their products.  The failure in Cancún reflected not only a breakdown in international trade negotiations, but also the sizeable gap between developed and developing countries.  Developed countries must make positive efforts in the future to meet the needs of developing countries, and achieve balance in the multilateral trading system.

MUNIR AKRAM (Pakistan) said that despite some signs of recovery, the overall global economic situation, according to the United Nations Conference on Trade and Development (UNCTAD) Trade and Development Report 2003, remained precarious, with a widening deflationary gap created by deficit global demand and too many goods chasing too few buyers and too many workers chasing too few jobs.  Policy decisions and actions by major countries and international finance and trade institutions had failed to take measures to stimulate economic growth, expand trade access and opportunities in developing countries.  Global trade had grown less than 2 per cent in 2002, a far cry from the average 7 per cent annual growth rate of the 1990s.

Economic and trade performance in the developing world was poor, he said. After peaking in 2000, net global capital flows had nose-dived; foreign direct investment, mostly concentrated in 10 developing countries, had dropped 75 per cent; portfolio investment and commercial bank loans had declined considerably; and terrorism and instability had exacerbated the situation overall.  Stimulating growth in those nations was essential and required the political will to meet ODA targets, greater debt write-off and capacity-building for production and trade growth in developing nations.

He went on to say that the failed Doha round could be revived through an urgent, bold exercise of political will on the part of major trading partners.  That revival would require a commitment to stay the course on development goals, a complete and irrevocable phase-out of all textile quotas by the end of 2004; a resolution of outstanding implementation issues; and the elimination or substantial reduction of tariff peaks and escalation.  Moreover, all must agree to transparent and democratic decision-making in the WTO, with draft decisions emanating from delegations, not chairpersons, and open negotiations without recourse to “green room” procedures.

RONALDO MOTA SARDENBERG (Brazil), noting that the international economic environment had not been conducive to development over the past two years, said the economic outlook for the remainder of 2003 and 2004, although somewhat improved, did not seem to warrant hopes for strong growth and significant poverty reduction.  As a result, prospects for achieving the Millennium goals were becoming more and more elusive.  While positive forces in some developed economies were imparting momentum to global recovery, a broader base would be necessary to sustain recovery over the medium term.  For that to occur, it would be necessary to revitalize international cooperation for development and address global economic asymmetries.

Implementation of commitments made at Doha, Monterrey and Johannesburg in 2001 and 2002, especially those emerging from Doha, had been disappointing, he said.  Two years ago at Doha, States had agreed to launch a round of trade negotiations that would put development at the centre of the agenda.  They had decided to address most important unfinished business of the Uruguay Round -– that of substantially improving market access, phasing out export subsidies and substantially reducing distorting domestic support in agriculture.  Domestic and export subsidies in developed countries depressed prices and incomes throughout the world and cut into export earnings.

Expressing regret at the absence of an agreement at Cancún, he said it had become clear that consensus would require results that were balanced and faithful to the Doha mandate.  Consensus could not be imposed through pre-cooked deals that disregarded previous commitments and ignored the legitimate aspirations of the majority of the world’s population.  Trade must be a tool not only to create wealth but also to distribute it in a more equitable way.  Brazil hoped the alliance of those countries supporting free trade would prevail in producing a successful outcome of the Doha Round.  Deliberations in the Second Committee could help give political impetus to that process.

ZHANG YISHAN (China) said the international community should draw lessons from the failure of the Cancún ministerial meeting, take decisive actions, look at trade from a development perspective, minimize distortions and unfairness in the multilateral trade system, and open markets further while enhancing South-South cooperation and North-South exchanges.

He said developing countries must strengthen cooperation and coordination among themselves to become more competitive.  On the other hand, developed countries must make good on their obligations to actively promote economic growth and support developing countries with ODA, technology transfer, debt relief and fair and preferential trade access.

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