SOLUTION TO DEBT PROBLEMS NEED TRADE LIBERALISATION.

Jul 31, 1984

SOLUTION TO DEBT PROBLEMS NEED TRADE LIBERALISATION.

GENEVA, JULY 27 (IFDA/CHAKRAVARTHI RAGHAVAN) – Viable, long-term solutions to Third World debt problems require, in addition to capital flows, a substantial expansion of export earning capacity through trade liberalisation, the GATT secretariat has said.-

In an introduction to the annual report on GATT activities in 1983, the secretariat says that 1983 saw progress as well as problems in work aimed at trade liberalisation.-

While the improved economic climate in 1983 might have been expected to encourage positive actions in line with the political commitments made at the 1982 Ministerial meeting, "the reality was less auspicious".-

Tensions between the U.S.A. and the European Economic Community were "more marked than ever" with major difficulties in the steel and agricultural sectors, followed by concern over the possibility of new restrictions affecting additional industrial and agricultural products.-

While these tensions added to existing strains in the GATT trading system, there was evidence that the leaders of the major industrial powers recognised the need to control and reverse the drift away from policies consistent with GATT principles, the secretariat adds.-

The frustrations felt by the Third World at the failure of industrialised countries to match economic recovery by measures to liberalise trade were particularly marked in the textiles sectors.-

The GATT Textile Surveillance body (TSB) which oversees the operation of the Multifibre Arrangement (MFA), the secretariat underlined, had commented in its report on the "somewhat more severe" implementation of the protocol of extension of the MFA that came into effect in 1981.-

Textiles and clothing exports accounted in 1982 for 24.2 percent of total manufactured exports, and 14 percent of total merchandise exports, of the Third World countries.-

The TSB had concluded that "on the basis of notifications reviewed in 1982 and 1983, the overall picture is one of a somewhat more severe implementation of the arrangement".-

There had been "more frequent" recourse to "unilateral measures" under article three of the MFA, the TSB had said.-

A number of bilateral agreements (for restraints), with previously unrestrained countries, had been concluded.-

The coverage in terms of products under restraint had increased.-

There were more cases of "growth and flexibility" at levels lower than those set out in annex B of the MFA, and there were a few cases of no growth or flexibility being granted.-

Agreements concluded with large suppliers were again more restrictive, the TSB had added.-

"The need to ease restrictions placed on the exports of developing countries has been specially pressing in the context of debt problems", the GATT secretariat points out.-

"A number of most indebted countries have turned around their trading accounts in a remarkable way, but serious problems of debt management remain".-

"The improvement in the trade accounts of a number of indebted countries has been achieved largely through a severe reduction in imports, though in some countries export expansion is also beginning to make a contribution".-

"However, a viable long-term solution for the debt problems of developing countries", the GATT secretariat underlines, "will require, in addition to maintenance of capital flows at the necessary levels, a substantial expansion of their export earning capacity which can take place only on the basis of a new process of trade liberalisation".-

On this latter issue, the secretariat appears to be implicitly endorsing the viewpoint of the U.S. and Japan for a new multilateral round, rather than the collective position of the Third World for implementation of past commitments at such liberalisation before consideration is given to the idea of launching any new round.-

The secretariat says: "as the year ended, ideas were being voiced about the possibility of a new round of multilateral trade negotiations".-

"In the first part of 1984 the importance of strong commitment to the complete and timely implementation of the work programme adopted by Ministers in 1982 became increasingly evident – not only because the issues covered by the work programme are important in themselves but also because many of them would be likely to figure in any new multilateral round".-