Jul 27, 1985

GSTP CRUCIAL FOR THIRD WORLD, AND BENEFICIAL TO WORLD.

GENEVA, JULY 25 (IFDA/CHAKRAVARTHI RAGHAVAN) – The GSTP is of singular importance in south-south relations and in building confidence among Third World nations, and, in longer-term, would have beneficial impact on the world economy and Industrial countries too.-

This assessment was given Thursday at New Delhi by the Deputy Secretary-General and officer-in-charge of the UN Conference on Trade and Development, Alistair McIntyre.-

McIntyre was speaking at the Conference of Third World Trade Ministers, which began in New Delhi Thursday. A copy of his speech was made available here by the UNCTAD secretariat.-

Putting the global System of Trade Preferences (GSTP) in perspective, the UNCTAD official said that to accelerate their development under conditions of structural change in the world economy, the Third World countries had to increase the efficiency and growth in their tradeable sectors.-

For this they required access to Industrial country markets.-

But whether for agricultural or manufactured goods, the Third World countries were facing a plethora of protectionist measures in the industrial markets.-

In this situation, actions by the Third World to establish the GSTP was thus a contribution to the "overall process of trade liberalisation", and would provide for each participating country greater access in the markets of its partner states.-

"Even if an open-trading system is re-established by the major trading countries, there would still remain a need for special efforts to increase trade among developing countries", McIntyre stressed.-

So whether in the immediate context of protectionist measures in the north, or in the longer-term perspective of development needs, "the GSTP is of fundamental importance".-

South-south trade had made impressive gains in the 1970's, though this had not so far been maintained in the 1980's.-

Despite the resilience shown by south-south trade in the 70's, it still remained "a relatively weak link" in the network of world trade, accounting for barely nine percent of total value.-

Third World countries had so far "merely scratched the surface of the vast potential for increasing trade among themselves".-

But in the current economic environment, "spontaneous forces alone cannot be relied upon for realising the full potential of south-south trade", and direct policy actions by governments to promote the trade were required.-

The GSTP was "a crucial starting point" in this.-

Negotiations to accommodate the very different interests among the participants would be complex and it was essential to take note of the economic effects and negotiating elements.-

"In general", McIntyre said, "governments need to be sensitive to the value of the GSTP both in economic and political terms".-

"In one way or another, GSTP has assumed a singular importance in south-south relations ... the GSTP is the single-proposal that has matured to the stage of actual and concrete negotiations".-

"The implementation of GSTP would have a marked impact on the whole area of economic cooperation among developing countries (ECDC), and give substance to the concept of collective self-reliance".-

At a time when Third World countries were experiencing slow growth, stagnation and reversals, and shouldering immense burdens of adjustment at great economic and social cost, "the GSTP can be a turning point in building confidence, in taking developing countries back to a path of momentum, of steady growth and of accelerated development".-

"The crucial challenge that lies ahead is to start the actual negotiations as soon as possible".-

While it was a daunting challenge, a successful outcome held out the real prospect that, besides giving specific content to ECDC, the GSTP could add a completely new dimension to the global strategy for development.-

It was hence necessary for governments to "organise" themselves for conducting the negotiations, submit lists of products of interest to the UNCTAD secretariat, and after further technical work on then by the secretariat, submit promptly definitive request and offer lists for negotiations.-

Underlining the global dimensions of GSTP, McIntyre said it should not be seen as merely an effort in global import substitution by the Third World.-

For individual Third World countries, it would be part of a strategy for export diversification - in products and destination of exports.-

Through the expansion of intra-trade and helping to reverse the stagnation in the development process, the GSTP was bound to have an impact in the longer term on the world economy as a whole and on that of Industrial countries, giving a momentum to their own exports and other economic relations with the Third World.-

It should thus be seen as a major programme of benefit to the International Community.-

Analysing some of the complexities involved, McIntyre said that of the present south-south trade, some 50 percent was on energy products, while another one-quarter each was of manufactures and primary products.-

UNCTAD’s trade data shows that to make GSTP effective, some form of across-the-board liberalisation was thus needed, since in all product categories the potentital for trade expansion was substantial.-

There was considerable scope for intra-trade in foods items like sugar, meat, vegetable oils and fats; in raw materials like jute, hard fibres, cotton, copper and iron ore; in intermediates like steel; in petrochemicals where a number of countries had installed capacity; and in capital goods like engineering goods, ships and other transport equipment.-

UNCTAD projections and simulations also showed the possibility of a substantial growth in south-south trade if there was an across-the-board trade liberalisation.-

A uniform 20 percent reduction in tariffs could result in an increase in exports of the order of an annual three billions, or five percent the present value of south-south trade.-

And apart from direct trade benefits, it would also increase levels of domestic economic activity in trade-related sectors like transport, finance and insurance, as also production activities in export sectors.-

However UNCTAD projections also showed that a uniform linear percentage cut in tariffs would not yield the best results for the Third World as a whole, in view of the very significant differences among them in their nominal tariff rates.-

A uniform cut could skew the distribution of benefits and costs among the GSTP participants.-

The solution would appear to lie in establishing preferences by broad product categories and also on specific items on a product-by-product basis.-

While this would greatly increase the complexity of the negotiations, "realistically, this is probably inevitable".-

In view of the extensive use of non-tariff barriers in south-south trade, tariff cut alone would not yield substantial results either.-

Though adding to the complexities of the negotiations, the barriers also would have to be tackled.-

Initial efforts in this area could focus on "standstill" in barriers on imports from the Third World countries concerned (in GSTP negotiations), negotiation for codes on individual non-tariff measures, and specific procedures for extending preferences under non-tariff barriers.-

The UNCTAD official said that simulations in UNCTAD showed that because of disparities in trade regimes and production structures of individual countries, implementation of GSTP could lead to adverse movements in trade balances of some countries.-

A deliberately designed overall package of tariff and non-tariff measures could ensure that such risks would be small.-

Nevertheless it was necessary to address the questions of trade financing, through a prompt and detailed study at expert level, in order to overcome liquidity problems.-

Also, measures should be taken to enable disadvantaged countries to strengthen their export capabilities to take advantage of the GSTP.-

As regards any possible impact of GSTP on existing sub-regional and regional groupings, McIntyre noted that GSTP was envisaged only as "a partial preferential trade arrangement" and at least initially did not involve complete trade liberalisation among participants.-

Thus subregional and regional groupings could adopt several measures to strengthen their own arrangements, and GSTP itself could be a powerful stimulus for subregional and regional economic integration.-