SUNS4509 Thursday 16 September 1999

Marrakech 14 Sep (Martin Khor) -- The World Trade Organization's forthcoming Seattle Ministerial Conference should focus on a process of Three Rs -- "Review, Repair and Reform" of the WTO, the Chairman of the Group of 77 said here Tuesday.

Mr Clement Rohee, Foreign Minister of Guyana (the current chair of the Group of 77 at the UN in New York), said any new round of trade negotiations should set right the existing imbalance. Developing countries should not be expected to "pay" for this by agreeing to negotiate new issues.

Rohee was speaking, as Chairman of the G77, at the opening panel session of the Ninth Ministerial Conference of the G77 being held here (14-16 September).

In a broad-ranging review of recent trends in globalisation and development, Rohee said the international trading system is central to globalisation. The functioning of the WTO must thus be responsive and sensitive to the development needs of all its developing members.

And what does the developing world require from the multilateral trade system, Rohee asked?

"First, the developing world wants full implementation of existing liberalisation commitments. In this regard, many developing countries suggest that the Seattle Conference should be a time to initiate a process of "Review, Repair and Reform" (the Three Rs)."

"The issue for any new round of negotiations is that of righting an existing imbalance. This should not become something developing countries are expected to "pay" for in negotiations on new issues.

"Second, the provisions for special and differential treatment must be emphasised in recognition of the disadvantages faced by many developing countries by virtue of their low level of development. In the WTO context,future special and differential treatment should be based on specific development criteria instead of arbitrarily defined transition periods."

Noting that advanced forms of knowledge and technology have emerged, Rohee said a collective agenda for the South in science and technology should call for "revisiting and amendment of the TRIPS regime of the WTO in order to make the global IPRs regime more sensitive to and supportive of development."

Noting that the G77 meeting is being held against a background of great uncertainty for the developing world, Rohee said: "Over the last two decades there has been a gradual but definite displacement of the collective concerns of the South from the international policy agenda.

This process of displacement has occurred in the context of two developments: the ideological and political ascendency of economic neo-liberalism (with its emphasis on the role of unfettered markets in the allocation of national and global resources) and the acceleratedpace of globalisation which has itself been increasingly underpinned by a market liberalising logic."

Globalisation, Rohee added, continues to have a profound impact on most developing economies. The key decision-makers (of globalization) are concentrated in a few major industrial countries, often in the hands of a few major corporations and individuals. National governments are increasingly marginalised as economic sovereignty is redefined and market forces become ascendant.

"For most developing countries the globalisation process of rapid trade, financial and investment liberalisation has not fully lived up to its promise despite the adoption by them of profound structural reforms and macroeconomic measures.

"Attempts to respond to the demands of the western-driven market- based globalisation process, on the basis of individual capacities, have only served to atomise the developing world whilst making countries ever more vulnerable to pressures from the most powerful players in the international order, whether these be states or Transnational Corporations.

"The current global agenda is almost bereft of the concerns of the South."

Rohee stressed three important tasks of the G77:strengthening the G77 as a central forum to advocate growth, social development and strategic integration of the developing countries in the global economy; renew and consolidate South-South cooperation; and identify a broad and pragmatic programme of work for UNCTAD to support these.

He added that the absence of a Secretariat is a major constraint of the G77. The G77 should take steps to strengthen its analytical capability through institutional arrangements. It should also use the facilities available in appropriate institutions such as the South Centre and the Third World Network.

At the same session, WTO Director-General Mike Moore, in what was billed by his press office as 'the first speech as Director- General,' told the delegates: "I am your servant and will do my best to shape the WTO so it can help make the next century a century of persuasion unlike so much of this century which often was a century of coercion."

He said he would assist participants get the most balanced outcome from new negotiations, advocate benefits to great and modest nations, and promised to reshape the WTO to reflect the reality of its membership and their needs. In practice, he said, this would involve five measures.

First, to ensure trade liberalisation brings real benefits to all, especially developing countries, particularly in
agriculture, processed foods and textiles.

Second, to ensure that rules are developed in a way that developing countries can use them.

Third, to ensure that rules and procedures for "contingent" protection are applied fairly and that such measures don't become a substitute for old-fashioned protectionist barriers.

Fourth, to ensure that access to the dispute settlement mechanisms is available on an equitable basis.

Fifth, to ensure that information about the WTO is available to all members, including the most vulnerable.

The deputy trade minister of South Africa, Ms L.B. Hendricks said that the industrialisation of the South had to be based on establishing industries which make use of natural resources. Such nature-based industries still exist in the North, and should be considered grandfather industries.

The comparative advantage in the industries that are agriculture- based and resource-based now lies with the South. Thus the countries of the North should undergo structural changes. It is not viable that these grandfather industries remain prominent in the North. Otherwise the South's prospects to industrialise would
be foreclosed.

She stressed that structural change is needed in the North, and what is needed is not "a hand-out system, but a structural system where the North gives the South access to its market."

In an afternoon Roundtable on Development Challenges in the 21^st Century, UNCTAD Secretary-General Rubens Ricupero said a few years ago, it was thought private inflows alone could provide the South's financial needs. Another exaggeration was in relation to FDI -- that it would grow so fast that it would easily compensate for decrease in ODA.

"We now know this is not true. FDI is highly concentrated in a few countries, for example China Brazil and Mexico alone account for 50% of FDI in recent years. Last year of the total FDI that went to developing countries, less than one percent went to the 48 LDCs, the countries that are more in need.

"We should try to look at the picture of financing for development in a comprehensive way, to focus on all possible ways to finance development.The starting point is that most of the investment has to come from domestic sources. In most countries over 80 percent of finance is from domestic sources.

As for financing from abroad, "infrastructure finance will have to be by multilateral banks. ODA is also impossible to replace at this stage. It has GONE DOWN but we must react against this tendency. As for debt relief, the criteria applied and funds provided are so far insufficient."

Ricupero also spoke of the doubts that had arisen over the effects of developing countries' integration in the world economy.

This was because the recent financial crisis had hit the most integrated developing countries. Mexico and South Korea that had just graduated to the OECD were among the countries most directly affected.

"This is a paradox. If development is a process that supposedly reduces vulnerability of countries to external shocks, how come South Korea or Mexico and others so advanced in integration were so severely affected?

"My conclusion is not that integration is a dead end. Much depends on the quality of your integration, the appropriate sequencing of your integration, the way you deal with that."

Ricupero noted those countries affected were exactly the countries that were more successful in trade. Some of the Asian countries that were successful in exports of manufactured goods, did not prove so successful in financial integration. He said it showed that "the only thing in common between trade and financial integration is the name integration."

"Integration into the world financial market is something different from integration in the trade system. It is delicate and few countries succeed fully.

"When you hear that all counties should have full convertibility in the capital account (this is a goal in the IMF), you must remember full convertibility was only reached quite recently in developed countries. As late as 1983, only 3 countries had full convertibility (US, UK and Switzerland).

"Even Germany and Japan reached it later andFrance and Italy only in 1990. It is very difficult to have total mobility in the capital account as this requires many conditions including political and economic stability."

Ricupero said it was now clear that short term capital will always prove highly volatile. However one should be wary about artificial distinctions. It is not enough to distinguish between long and short term capital. Long-term capital can also prove dangerous as sometimes it adds to the volatility.