UNCTAD Commission debates trade policy, commodities, services

Developing countries put forward their positions and requests on a wide range of trade development issues at the start of this week's meeting of UNCTAD's Commission on Trade in Goods and Services and Commodities (6-10 Feb).

Among the issues debated at the opening plenary session on 6 February were the WTO's Doha negotiations, commodities, services, market access and competitiveness and trade and environment, which are the key agenda items of the Commission's 10th session.

Significant points made by many delegations included the critical need to address the commodity problem through international action, to deal with the obstacles placed by non tariff barriers (NTBs) to developing countries' exports, and to recognize that liberalization both in trade and in services does not necessarily lead to growth, but carries risks.

The need to be cautious through proper pacing and sequencing was especially brought out in relation to services liberalization within the context of the WTO services negotiations.

In his opening statement, UNCTAD Secretary General Supachai Panitchpakdi announced he had set up a Group of Eminent Persons on Non-Tariff Barriers to mobilize international and regional organizations and national focal points in developing countries to improve data collection and analysis on NTBs.

"Along with tariff peaks and tariff escalation, NTBs remain important concerns for developing countries and require negotiating solutions when assessing potential development gains from trade," he said.

[The UNCTAD plan for work on NTBs will be seen as useful by developing countries as NTBs is supposed to be a vital issue in the WTO's negotiations on non agricultural market access (NAMA). As developed countries have relatively low industrial tariffs (except for some key products exported by developing countries), NTBs have become more important obstacles to the latter's market access.

[However, there is hardly any progress on NTBs within the NAMA negotiations, in contrast to the talks on tariff reduction. A major constraint to developing countries' move on NTBs is the lack of information and preparation.]

On services, Supachai said that developing countries have increased their share in global services exports to 23%. However, just 12 developing countries account for over 70% of that trade, suggesting that the majority have not yet tapped into their services export potential.

The role of services in development has been recognized, he said, but seeking to further these objectives has raised concerns among different stakeholders and even caused conflict. The challenge is even greater when developing countries embark on trade liberalization while seeking to maximize gains. "Trade liberalisation alone will not guarantee that the services needed for development will automatically emerge in developing countries," he said.

Emerging from UNCTAD's assessment of trade in services is "the importance of pacing and sequencing of reforms and the impact of regulatory frameworks on the final outcomes. The overall external environment may also determine the development outcome of these reforms."

The Group of 77 and China, represented by Pakistan's Ambassador, Masood Khan, said the WTO's Hong Kong Ministerial brought into focus "the daunting challenge" to conclude the Round by December and realizing its development dimension.

The Group welcomed the "aid for trade" initiative but warned that "it seems to carry a trade liberalisation focus." It stressed that the programme must be designed and implemented in a manner that ensures a development orientation, which would depend on the discussions in the proposed WTO Task Force.

It stressed the need to equip aid for trade with substantial resources that include a large grant component to support "supply and productive capacity building, adjustment and technological and physical infrastructure development." It said a High Level Dialogue is essential in this regard.

On commodities, the G77 and China said agreement is needed on how the international community can support developing countries in areas such as integrating local producers in international supply chains, innovative financing and risk management, and diversification.

The G77 and China welcomed the setting up of the Eminent Persons' Group on NTBs, saying that these barriers are a new form of protectionism that is harder to detect. The NTBs include anti-dumping measures, new technical standards, new safety regulations, changed sanitary requirements and more exacting procedures for import licensing and customs clearance. As tariffs decline, the surge in NTBs becomes a rising market access concern.

On services, the G77 said governments face the challenge of realigning multidimensional objectives during liberalization. Limited experience makes it extremely difficult for policy makers in developing countries to assess their options. Assessment of services trade is important to help governments in the design, pace and sequencing of services liberalisation, but lack of adequate, reliable and internationally harmonized data at sectoral level makes it difficult to undertake sound assessment.

Services negotiations need to adhere to development friendly provisions in GATS, said the G77, emphasizing also the importance of Mode 4 (movement of persons) liberalisation.

On the post-Doha follow up, the G77 and China said that "ensuring policy space for developing countries to promote a development-oriented growth of agricultural, industrial and services carries utmost importance."

It added that the imperative of striking a deal in Hong Kong provided the rationale for lack of specificity. The Geneva process will now fill in the blanks with technical details, and UNCTAD through its research must lend a development orientation to this ambiguity, said the G77. UNCTAD must play a catalytic role by elaborating options to maximize development gains from the Round and must continue to provide development impact assessments regarding different modalities and schedules that are tabled.

The Asian Group and China, represented by Sri Lankan Ambassador Sarala Fernando, very much supported the revival of commodities as a major development topic, and urged that the session identify appropriate commodity policies as a development tool.

It praised UNCTAD's work on market access including with regard to the WTO negotiations but especially on developing countries' role in new and dynamic sectors of world trade. It also welcomed UNCTAD's work on trade and environment (especially with regard to the WTO negotiations on this). It attached great importance on the TRIPS/CBD relation and wanted progress on requiring disclosure (during patent applications) of information on source of origin of biological resources and traditional knowledge.

The Asia Group wanted UNCTAD's work to be strengthened in the context of the upcoming Mid Term Review of UNCTAD XI so that the outcomes of the Sao Paulo session can be implemented, "including operationalising meaningfully the concept of policy space."

It reiterated the importance of the Mid-term review and the need to raise UNCTAD's profile. Doing otherwise would have an unfavourable outcome to developing and developed countries.

The GRULAC (Latin American and Caribbean group), represented by Guatemala, wanted UNCTAD to assist developing countries formulate development policies that overcome poverty. Despite liberalization reforms, Latin American countries had not solved problems of poverty and income distribution. This assistance is very important to assess policy proposals on trade, development, openness and poverty reduction.

On commodities, GRULAC said fluctuating prices and dependence on commodities made countries vulnerable to the weather and the whims of markets, with serious effects. Developed countries were protecting their sectors, for example through subsidies and tariffs as well as tighter standards, that undermined the developing countries. UNCTAD should assist countries to diversify their production and address risks, price volatility and production chains.

The Africa Group, represented by Zimbabwe, identified commodity dependence as a major problem. On liberalisation measures, it said this must be done in correspondence with the supply capacity in Africa.

On services, it said liberalization does not automatically bring about benefits, there must be conditions in place. It called on trading partners in WTO not to try to change the structure of the services agreement (GATS) or to deny the developing countries of the development flexibilities in GATS. It regretted that UNCTAD had dissolved its branch on insurance as this affected UNCTAD's assistance to African countries on insurance and requested that the branch be revived.

The LDC Group, represented by Benin, said the end of the WTO's multi-fibre arrangement had adversely affected the LDCs, with the number of textile factories there being "reduced spectacularly". Although the nominal export earnings of LDCs trebled in the 1990s, they suffered chronic trade deficits of up to 10% of GNP. LDCs exported more commodities but got less for them as price declines continue to stifle the LDCs.

The experience of LDCs proved that liberalization of trade alone does not lead to growth, as they lack infrastructure and institutional capacity. The LDCs need to develop their commodity sector first, requiring international action to address low and fluctuating prices and then to go up the value chain. On cotton, the WTO's Hong Kong decision did not deal with the important aspects of domestic support and on a mechanism to address income shortfalls due to the low cotton prices.

The European Union, represented by Austria, stressed its commitment to make UNCTAD an effective organization benefiting all developing countries. It said the ongoing reform efforts should in no way diminish the status of UNCTAD, but instead ensure its efficiency and effectiveness. "We hope the coming weeks mark a turning point in the way we approach our shared goals."

The EU said the work of the three UNCTAD Commissions are building blocks of UNCTAD's work and this work will be reviewed and evaluated during the Mid Term Review that will take UNCTAD forward in coming years. On commodities, it said UNCTAD should expand its analysis on policy implications. The solutions to the commodity issue must be implemented as part of national development strategies.

The Solomon Islands said that it was very worried about the discussions in the WTO on fisheries as the proposed disciplines on fishery subsidies would jeopardize the Pacific Islands' fishery sector. It also asked for improvement for access for the export of labour (including doctors and nurses and sportsmen) from the Pacific Islands.

In an afternoon session on UNCTAD's trade and development index, the Benin Minister of Industry and Trade, Massiyatou Lauriano, said that the liberalization exercise had promoted imports while it should have promoted both exports and imports. "The reality is that international trade is scandalously unequal and Benin like other LDCs have chronic trade deficits."

She added that exports can cover only 65% of the value of imports, and the deficits had to be financed by aid inflows. Poor export earnings go hand in hand with debt, accompanied by a drop in GNP in some LDCs.

"We need to increase our exports. International trade must reduce poverty without ambiguous or impoverishing effects. Products should be diversified so that LDCs move from raw produce to local processing."

Indonesian Ambassador Makarim Wibisono, referring to services, said the main challenges for developing countries are to strengthen domestic supply capacity, maximizing their growth contribution and reconciling economic , social and development considerations. The global framework on services should allow developing countries to open up the sector at a pace that addresses their development levels. Services liberalization must be undertaken in the context of required changes in domestic institutions and regulations.

He thanked UNCTAD for its assistance to developing countries in the WTO negotiations, especially on the issue of environmental goods. UNCTAD had enabled developing countries to build up their negotiating capacity.