TRADE NEGOTIATIONS, INTEGRATING POOREST COUNTRIES INTO GLOBAL ECONOMY FOCUS OF THEMATIC SESSION AT BRUSSELS CONFERENCE

Third UN Conference on LDCs
17 May 2001 - AM





BRUSSELS, 17 May -- As the Third United Nations Conference on Least Developed Countries continued this morning in Brussels, an interactive session on “International Trade, Commodities and Services/Tourism” discussed improving those countries’ participation in international trade and facilitating their integration into the global economy, with a focus on the World Trade Organization (WTO) and the current round of multilateral trade negotiations.

One of the session’s co-Chairs, Iddi Simba, Minister for Industry and Trade of the United Republic of Tanzania, said that while most least developed countries (LDCs) were just beginning to comprehend the real issues of past international trade agreements, the developed world was advocating a new round of multilateral trade negotiations. He asked, though, what was the alternative. Even if the countries went along with the new round, what was the advantage for the LDCs? If new arrangements were adopted, what were the implications for the LDCs at this stage?

In response to those questions, the Director-General of the WTO, Mike Moore, said that the aim of the fourth WTO Ministerial Conference, which would be held in Doha, Qatar, in November, was to launch a new set of trade negotiations that were wider in scope and would take into account the needs of developing countries. No new round could start or conclude without the interests of the developing countries occupying a key slot. Developing countries had won and, although their victory had been hard fought, their interests were now at the centre of the WTO agenda. “All of our members sit on our council and all have the power of the veto”, he said. “I urge LDCs and developing countries to use that power not to stop a negotiation, but to start one.”

Summarizing the morning’s discussion on international trade, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD) Rubens Ricupero said three points had emerged: trade was a powerful tool for development; there was a critical need for a fair balanced rules-based multilateral trading system, which did not exist as yet; and a new trade round was welcome, if it could redress the current imbalances in the system. “We need to build confidence, trust and justice in trade”, he said.

The meeting’s other co-Chair, Poul Nielson, Commissioner for Development and Humanitarian Aid, European Commission, drew attention to the fluctuation of commodity markets, saying that it should also be a central theme of discussion. Since many commodity prices, except petroleum, were in a permanent decline, was commodity trade a viable development strategy? Could it work without being complemented by an increase in traditional agricultural production? Was technological leapfrogging a realistic strategy for LDCs?

On the issue of tourism, several panellists highlighted the importance of tourism for development and mentioned the Canary Islands Declaration, the product of a high-level meeting on tourism in LDCs in March. The Declaration was being submitted to the Conference in the hope that all stakeholders would approve commercial, economic and social measures to strengthen tourism in the LDCs. Among the measures needed to develop the tourist industry, the speakers cited the promotion of coherent transport systems, developing infrastructures and strengthening people’s professional skills.

Other panellists at today’s session were: Pascal Lamy, Commissioner for Trade, European Commission; Ould Nany, Minister for Economic Affairs and Development of Mauritania; Rolf Boehnke, Managing Director, Common Fund for Commodities; Salvador Namburete, Deputy Minister of Industry and Commerce of Mozambique; Rafael Rodriguez-Ponga, Secretary General, Agency for International Cooperation of Spain; A.B. Yoda of Burkina Faso; and Francesco Frangiali, Secretary-General, World Tourism Organization.

At 3 p.m. today, the Conference will hold a thematic interactive session on energy.



Thematic Session

Background Materials

A book prepared by the World Tourism Organization and the United Nations Conference on Trade and Development (UNCTAD), entitled Tourism in the Least Developed Countries, was published for the Conference, the product of the High-Level Meeting on Tourism and Development in Least Developed Countries (LDCs), held in Maspalomas Gran Canaria, Spain, 26-29 March 2001. At some 400 pages, the book brings together background notes prepared for the Meeting, papers submitted by invited experts, monographs presented by 29 countries and the Canary Islands Declaration.

In a foreword, UNCTAD’s Secretary-General, Rubens Ricupero, says that services, in general, and tourism, in particular, are increasingly viewed as the best opportunity and the most viable option for the sustainable economic and social development of the LDCs. Tourism is already the leading service export sector in 24 LDCs and the first source of foreign currency exchange earnings in seven of them. If properly incorporated into development strategies, he says, tourism could be a “cornerstone of new productive systems aimed more generally at eradicating poverty and integrating the LDCs into the global economy”.

The Canary Islands Declaration, adopted at the conclusion of the Meeting, underscores the importance of tourism and the comparative advantages enjoyed by most LDCs. It also addresses the obstacles they face in promoting tourism development, such as deficiencies in physical infrastructure and telecommunications, as well as the lack of any comprehensive reference in the previous two programmes of action for the LDCs to tourism as a “potential engine of economic development”, as well as insufficient recognition of this importance in the draft programme of action under consideration for the current Conference.

The Declaration submits a plan of action to support tourism development, based on: strengthening the capacity of governments to develop sustainable tourism; developing entrepreneurial capacity and managerial skill; promoting synergies between transport and tourism policies; and increasing national capacities to use the multilateral trade framework. It also asks for the insertion of a section on sustainable tourism in the programme of action for the LDCs 2001-2010, which states, in part, that “International tourism is one of the few economic sectors through which LDCs have managed to increase their participation in the global economy.” It goes on to suggest specific actions to be taken by countries and development partners, in order to make tourism a priority for socio-economic development.

Opening Statements

The co-Chair of the session, IDDI SIMBA, Minister for Industry and Trade of the United Republic of Tanzania, said that over the past two decades the United Nations had convened two conferences to agree on the means of facilitating the consequences of globalization through multilateral agreements. In the meantime, the number of LDCs had grown. Even as the international community was stumbling to implement the decisions of the second LDC Conference, the World Trade Organization (WTO) had come into being, giving new momentum to the twin forces of globalization and liberalization.

While most LDCs were just beginning to understand the real issues, he continued, the developed world seemed to be advocating a new round of multilateral trade negotiations. Poor countries were asking if the world was ready for that and, if not, what the alternative was. Even if the countries went along with the new round, what was in it for the LDCs? If any new arrangements were adopted, what were the implications for the LDCs at this stage? Those were the questions he wanted to address today.

Had the implementation of trade arrangements created a new crisis? he asked. A flow of cheap export goods had weakened domestic markets, and the competitiveness of domestic industries was weakening. Could the multilateral trading system intervene to help? The LDCs were also still struggling with lengthy negotiations on regional cooperation. Unfortunately, progress had been slow. He was aware that, despite the recent expansion of trade flows, the share LDCs had in that trade was shrinking, because they often depended on single commodities. Their capacities were also restrained by the fluctuating prices on world markets.

As an example, he spoke about his country’s fish exports to the European Union, which were subject to strict standards and regulations. Not many LDCs had in place the necessary data bases, which were needed for participation in the European markets. Assistance from international organizations, however, including the United Nations Industrial Development Organization (UNIDO), had made a big difference for his country. With assistance, LDCs could enter the world markets. While in Europe, the avocado was treated as an exotic fruit, in his country it was considered a gift of nature to be enjoyed by birds and people. That situation could be turned to the advantage of poor countries.

It was also necessary to further develop the service industry and tourism in the LDCs, he said. At present, the balance was heavily skewed, in favour of countries from which tourists came -- and not of those they visited. It was important to see what could be done to address that situation.

POUL NIELSON, Commissioner for Development and Humanitarian Aid, European Commission and co-Chair, said that in many LDCs there was a perception that the Uruguay Round Agreements had not been implemented. He had a number of questions. First, “how do we bridge the negotiation gap between the strongly articulated trading policies of the major trading blocks and the scattered coalitions of developing countries”? How could LDCs become participants in the WTO instead of spectators? How could improved market access be turned into real trade flows? Also, how did one promote more investment in LDCs, when it was known that investments and trade went hand in hand?

Beyond commodities and agricultural raw exports, did LDCs produce anything that developed countries cared to buy? he asked. What were the priorities that LDCs should give to world trade and regional trade, respectively? He said the question of the fluctuation of commodity markets should also be a central theme in the discussions. Since many commodity prices were in a permanent decline, except petroleum, was commodity trade then a viable development strategy? Could it work without being complemented by an organic growth in traditional agricultural production? Was technological leapfrogging a realistic strategy for LDCs?

He said tourism was risky business. Bringing the wealthy to sunny beaches was a volatile venture. Tour operators from the North enjoyed great flexibility in shifting among preferred destinations in the South. Such shifting was necessary, in what was almost a fashion industry. How did LDCs choose between targeting high-priced tourism, which offered fewer visitors, or going after the cheaper mass tourism product, with all the negative environmental consequences? Least developed countries needed strong regulatory frameworks to strike a balance between preserving and, at the same time, allowing access to a vulnerable natural environment or wildlife habitat. Maybe some lessons could be drawn from Bhutan, which had a well defined tourism policy.

International Trade

Mike Moore, Director General, World Trade Organization (WTO), said this was a crucial year for the multilateral trading system. In November, there would be a fourth WTO Ministerial Conference, in Doha, Qatar. The aim was to launch a new set of multilateral trade negotiations that were wider in scope and would take into account the needs of developing countries, which now comprised four out of five of his organization’s membership. The WTO was not the General Agreement on Tariff and Trade (GATT). No new round could, therefore, start or conclude without the interests of the developing countries occupying a key slot. Developing countries had won, and although their victory had been hard fought, their interests were now at the centre of the WTO agenda.

He said the world had benefited from world trade more than anything else and individual countries had gained a great deal from more open trade. Developing countries with open economies, for example, had grown six times faster than those with closed economies. Yet, while trade liberalization was essential for growth and development, it was not enough. A new WTO round would do little for a nation if it was torn apart by strife, where its export revenue was being spent on arms or where there was an absence of good governance. It was also of little benefit to those countries whose lack of domestic capacity or infrastructure prevented them from taking advantage of the world trade environment.

He said there had been significant improvement in market access opportunities for LDCs. The average non-weighted tariff applied by major industrial countries to LDCs exports had fallen from 10.6 per cent in 1997 to 6.9 per cent today. Up to 30 countries, including Canada, the United States, the European Union and Japan, had also made strong steps to improve access by poorer nations. Yet, that was not enough, even though it showed that members of the WTO had either gotten or were getting the message. More could be done through a wider set of negotiations, rather than by knocking at the door one by one. There were compelling reasons to do to do something more than just talk.

Least developed countries needed increased, focused and sustained technical assistance and capacity-building, he said. International agencies had delivered a redesigned Integrated Framework for Trade-Related Technical Assistance. That would help LDCs mainstream trade into their national development plans and strategies for poverty eradication. Trade-related technical assistance and capacity-building would be delivered in coherent manner, rather than in the stand-alone fashion of the past. He said another deliverable was the outcome of the first joint seminar of six core agencies of the Integrated Framework on “Mainstreaming Trade into Development Plans” that was held in January. It demonstrated the rationale and techniques for mainstreaming trade into development plans and poverty-reduction strategy papers.

He said WTO trade policy review mechanisms had been improved. There were expanded training and policy courses, while there were now reference centres connecting LDCs to the WTO on the Internet in every capital. He said that if it was felt that the status quo was unjust, then that point should be argued, especially when one considered that the status quo was just yesterday’s compromise. Knocking on doors would not achieve the desired result, and developing countries were realizing that. The problem of those countries was not globalization, but marginalization.

“History is grim master, and we were all victims of it”, he said. Many countries were lured by a seductive demon of hope -- Marxist economics. That was followed by the cold war, which gave leaders grim leverage. During that era, there was no shortage of donors, and debts mounted. Poor people in developing countries, however, now had a new form of leverage -- the WTO, an organization whose members had equal powers because it operated on the basis of consensus. “All of our members sit on our council and all have the power of the veto”, he said. “I urge LDCs and developing countries to use that power not to stop a negotiation, but to start one”, he said. Unless those countries had confidence that their issues were being addressed in a meaningful way, no new round would conclude.

He said cutting barriers to trade in agriculture, manufacturing and services by a third would boost the world economy by $613 billion. That was equivalent to adding an economy the size of Canada to the world. Doing away with all trade barriers would boost the world economy by nearly $1.9 trillion -- the equivalent of adding two more Chinas to the world economy. Now was the time to move from words of support for a new round to making the compromises needed to launch one. The world economy needed the confidence a new WTO round would give. “If we are happy with the status quo and comfortable with the injustices brought by compromises, then let us continue to nibble at the edges of change”, he said. “But if we want real change, then let us start a balanced, wider set of negotiations.”

PASCAL LAMY, Commissioner for Trade, European Commission, said the policy in development strategy could be an ongoing discussion. However, that was not what the participants had come to discuss here today. Trade was not necessarily a case where one side won and the other lost. It was important for the LDCs to open their markets in a controlled fashion. When organizing their trade policy, the developed countries needed to put their money where their mouth was. Also, a strong multilateral system was needed to determine a set of ground rules to address the current imbalances.

Turning to specific measures, he mentioned the “All but Arms” initiative, which provided duty- and quota-free access for all products originating in the LDCs, with the exception of arms, saying that it had become possible largely due to the Conference. It was not enough to just open market access, however; it was also important to take advantage of that opportunity. The concerns of the LDCs regarding standards and rules needed to be looked into. The European Union was prepared to join multilateral initiatives not to use anti-dumping measures against the LDCs. The Union was also continuing its technical assistance programme.

Regional integration remained one of the main conditions of liberalization, he said. Continuing, he also noted the need to ensure the LDCs better access to essential pharmaceuticals, in order to combat communicable diseases. Specific measures were being discussed in that respect. On the new negotiation round, he said that the Conference was taking place along with the Organization for Economic Cooperation and Development (OECD) Ministerial Meeting in Paris, which was also discussing the concerns of the developing countries. It was important to take their concerns into account. By being clearer about the European trade policy, the Union could ensure the opening of trade policy if governed by collective rules, including, but not restricted to, the WTO rules. That was the basic direction to follow.

OULD NANY, Minister for Economic Affairs and Development of Mauritania, said that this decade should be put under the flag of trying to reverse some of the effects of globalization on LDCs. It was necessary to realize the difference in the development levels of various countries and to increase the well-being of the LDCs. Sometimes those countries had little to offer for world markets, and assistance from industrialized countries could lead to significant results.

One thing was very clear: it was very difficult to overcome the technical and administrative policy barriers that stood in the way of LDCs, but it was really important to do it, he said. Another important element was the need for the developed world to bring the levels of official development assistance (ODA) back to reasonable levels. The conditions of trade for the LDCs were not acceptable in their present state. There had been many opportunities for cooperation, and the LDCs themselves had been doing everything possible to improve their capacity. Now, multilateral organizations needed to take measures to allow the LDCs to participate in world trade.

In the subsequent dialogue, the speaker said a successful conclusion of new trade negotiations was possible if the negotiations were driven not by narrow interests, but by a broader development perspective. The LDCs had much to gain from a new round of negotiations. As the weakest, they had a special interest in the rule-driven system, provided those tools took their interests into account.

Also mentioned was a study of the consequences of the extension of duty- and quota-free market access to all LDCs, which showed that such an approach would significantly increase the share of LDCs in trade. The possible negative effects of such an extension on other developing countries would be negligible. The representative of Canada, advocating an integrated trade framework and stating support for the new round of trade negotiations, announced a contribution of
$1 million to the integrated trust fund.

Another speaker stressed the great potential of the industrial sector in solving LDC problems. It must be noted that the requirements and standards of international trade presented a serious problem for the LDC and a relevant infrastructure needed to be built to help exporters meet those standards.

Commodities

Rubens Ricupero, Secretary-General of UNCTAD, said the commodity sector was the backbone of the LDCs: for 32 of them it represented 50 per cent of their exports, and for 22 others it represented 80 per cent. Despite that fact, those countries had experienced serious losses of market share in areas where they had previously enjoyed advantages. That was one of the tragic stories of the last 25 years. In addition, LDCs were importing $9 billion in commodities, while only exporting $6 million plus of their own products.

He said that while no one was advocating a return to the old system that had governed commodity policies, no one could deny that the void created had not been filled by a substantial replacement. What then should be done with commodities? There was no single bullet to kill the tiger. A multifaceted approach was needed to deal with crises, supply, horizontal and vertical diversification, and trade negotiations.

He said commodity prices could not be fixed, and collapsing prices were the result of increased productivity. As diversification was being attempted by so many, why were multilateral and regional banks still financing projects in coffee, when there was glut in that market? Was there any rationale behind that? There was scope for improvement in trade negotiations, to enhance the quality of commodity exports.

Rolf Boehnke, Managing Director, Common Fund for Commodities, said there was a close link between commodity dependency and debt. Many of the commodity-dependent LDCs were heavily in debt. Debt relief could positively impact development efforts, while commodities could help build capacities and infrastructures.

He said some common points identified by LDCs were the need for: quality assurance and safety standards; safe harvesting measures; marketing; development and financing; and strategic partnerships. The Fund had also urged the stronger commodity traders to come forward with projects that would enable LDCs to achieve synergies. The LDCs also wanted the points he had just raised to become “deliverables” of the Conference.

SALVADOR NAMBURETE, Deputy Minister of Industry and Commerce of Mozambique, said assistance to commodity-trading States was declining, despite the fact that preferential access to markets had been provided to LDCs. Even when there were other advantages because of a variety of constraints and difficulties, LDCs were unable to make use of any leverage.

He said that in the area of research and development there was a need for capacity-building. It was also necessary to diversify into non-traditional commodities. Special and differential treatment, and technical and financial support, were also needed to enhance the productive capacities of LDCs. The right climate for foreign investment also had to be created. Newer and more stringent measures in favour of LDCs were required in any further multilateral trade negotiations. Least developed countries wanted to expand their trade and upgrade their industries, so that they could develop well diversified economies.

In the discussion that followed, an LDC representative said the question of commodities was of the utmost importance. Lower than expected levels of direct financial investment were coming in, and countries wanted to benefit from preferential trading conditions to enjoy better access to markets, effectively diversify production and reduce the level of poverty. Countries also needed assistance in meeting the international standards of trade.

Several speakers shared their national experiences, stressing restructuring and other difficulties and the problems with armed conflicts in some LDCs. They called for international assistance in strengthening national capacity and developing the industry of the LDCs. It was pointed out that the price of many primary products had fallen, causing serious imbalances in many economies, while the prices of other commodities, including oil, had increased. Adequate policy controls were needed to correct that imbalance.

A speaker said that countries could not concentrate exclusively on access to international markets. It was also necessary to develop national and regional markets. Without export, it was difficult to pay for imports. Access to modern agricultural technology and credit were also emphasized. Without advanced technologies and fertilizers, farmers caused deforestation in search of new lands. Measures were needed to prioritze small- and medium-scale farming, taking into account environmental concerns.

Another speaker pointed out that the United Nations Environment Programme (UNEP) and UNCTAD had recently created a task force to provide assistance in overcoming the inequities in market access, while taking into account environmental and development concerns.

Tourism

RAFAEL RODRIGUEZ-PONGA, Secretary-General of the Agency for International Cooperation of Spain, said that tourism could significantly contribute to the development of the LDCs. The Canary Islands Declaration was being submitted to the Conference in the hope that the commercial, economic and social arguments in favour of strengthening the LDCs’ tourism sector would be met with a positive response by all the stakeholders.

The attention attached to the tourism sector at the Conference was a novel phenomenon, he said. An inventory of projects had been introduced in order to develop tourism in the LDCs. The promotion of coherent transport systems, developing infrastructures and the strengthening of the professional skills of people responsible for tourism were among the possible measures. Currently, the LDCs represented a small percentage of world tourism, but they were interested in developing that sector. A great diversity of situations in the LDCs meant that measures should be specific for each country, taking into account the interests of local communities.

The national governments in the LDCs needed to attach due importance to the tourism industry, and the international community needed to provide the required assistance in strengthening the national capacities and formulating policies on tourism. Respect for the rule of law, citizenship and other cultures were needed in order for tourism to flourish. Trade, crafts and environmental issues went hand in hand with tourism. Spain was providing support to LDCs in their efforts to promote tourism.

A.B. YODA (Burkina Faso) expressed hope that the action plan launched at the Canary Island meeting would soon be launched. Tourism had become an essential sector in all the LDCs, for which it represented a way to break out of poverty and marginalization. Financial and technical support were needed to develop that industry.

FRANCESCO FRANGIALI, Secretary-General, World Tourism Organization, said that tourism was already a second source of income for the LDCS. The rate of growth of tourism in those countries had been higher than the world average, and no other sector had seen such an advance. His organization’s studies forecast a tripling of tourism in the near future. Today, the economy of countries like the Maldives and Cambodia were based on tourism earnings. Investments in accommodations infrastructure and transportation were needed to further develop tourism. Tourism created jobs and provided opportunities to poor populations. It also made it possible to pay for imports and reduce the burden of debt.

During the following discussion, a speaker said that it was time to diversify LDCs’ economies and develop tourism. The action plan drawn up in the Canary Islands needed to be implemented. The strategic guidelines provided by the plan needed to receive special attention from the international community, especially since tourism had never before been among the development priorities.

One speaker called for the discussion on the issue of commodities to be put back on the international trade agenda and for the establishment of a common fund. It was also stressed that tourism presented avenues for diversification. An appeal was, therefore, made that developed partners assist LDCs to develop their tourism products, since they presented great opportunities for poverty reduction.

Mr. BOEHNKE said a Common Fund for Commodities had been established by the United Nations.

Mr. LAMY said the members of the European Commission were aware that non-implementation of the Uruguay Round Agreements had caused difficulties to a number of developing countries, particularly the LDCs. That issue was now up for discussion in the European Union.

He said the dispute settlement mechanism was complex and fraught with procedure, as guarantees had to be given to all parties. Nevertheless, it constituted progress. It would not do now for developing countries to ask to backtrack on it.

Concluding Remarks

In his concluding remarks, Mr. SIMBA said he could not help but draw the conclusion, after the number of interventions today and after various conversations in corridors, that there was a coordinated position on behalf of the developed world vis-à-vis another trade round. The LDCs, however, were more open-minded and were not coordinated. He had seen many rounds before, and had even been part and parcel of them. Yet, the position of LDCs in all aspects of their development was worsening. Could one draw a distinction between the trade rounds and what happened in the poor countries?

He said the impression he was getting was that the range of position ran from going for one more round and throwing into it all the failures of the past, in the hope that there would be some kind of magic this time around to resolve problems, or not going along with it. That was just an impression. Perhaps the existing negotiating machinery might collapse, or not produce the kind of results hoped for.

Regarding international trade, he said the developing countries were are not as homogeneous a group as the Western European States, the United States or the rest of the developed world. That made it difficult for LDCs to take advantage of opportunities presented by market access.

Mr. RICUPERO said three points had emerged from today’s discussion. One, trade was powerful tool for development. Two, there was a critical need for a fair balanced rules-based multilateral trading system, which did not exist as yet. Third, new trade round was welcome, if it redressed the current imbalances in the system.

He said he was heartened to hear a call today for trade negotiations to be based on economic structural differences. Also, a concrete policy that should emerge from this conference should be the provision of technical assistance. “We need to build confidence, trust and justice in trade”, he said. If that was not allowed to happen, there would be no peace.

Mr. Nielson said it was difficult to conclude, because what needed to be done for LDCs was not just to conclude, but also to make sure that a fresh start was possible. He was pleased that quite a share of the work being done was support for technical assistance. The key areas raised today that demanded action were trade and development; market access for LDCs; measures to help countries make use of opportunities; an open rules-based stable, non-discriminatory multilateral trading system; accession by LDCs to the WTO; and the need for new round of trade negotiations to comprehensively address the interests of LDCs.



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