SAO PAULO
Diplomats from the developing world expressed a guarded optimism in Sao Paulo in mid June regarding the future of trade liberalization and the Doha Round of agreements made in 2001. The mood at the 11th meeting of the United Nations Conference on Trade & Development was generally upbeat according to attendees, suggesting that global trade talks were underway once more after stalling in successive World Trade Organization meetings in both Geneva and Cancun last year. http://www.wto.org/english/thewto_e/minist_e/min01_e/agriculture
The Geneva-based UNCTAD serves as a policy research body for trade negotiators in 192 member nations.
The end result of the week long meeting was the launching of new negotiations to broaden and deepen the scope of import and export tariffs and barriers on trade deals between countries of the Southern Hemisphere.
South-South trade is no longer the mere dream that it was some 40 years ago. The share of developing countries in total trade is about 32%, compared to 20% several years ago. Forty-one percent of developing countries’ total exports go to other developing countries.
In 2003, the US and Japan imported more goods and services from the developing world than they imported from developed countries. Trade among Southern nations is inhibited only because of inadequate banking and insurance facilities and trade restrictions, among other things.[1]
Western support: Often misguided or not enough.
There were signs at the event that the United States and European Union are finally bowing to pressures to reduce agricultural subsidies to domestic farmers and lower trade barriers to imported food products from the developing world – the key issue among commodity driven nations in the South.
Meanwhile, commodity prices are expected to fall more this year, hurting exporters of coffee and other food items. Prices for such goods are based on supply and demand and set by investors on the Chicago Board of Trade.
Overall, UNCTAD revealed that the developing world’s success is largely on account of a small number of countries, most of them in East Asia, who have been able to export their goods and services while increasing per capita income. External debt burden has never really been a problem for the Asian countries - the exact opposite situation in Latin America and Africa, where imports have tended to be greater than exports, leading to debt and crises. Asia also used a fixed exchange rate, which UNCTAD recognized as being beneficial to their development. They have also used capital controls and intervention in the currency markets, in order to achieve competitiveness, unlike most of Latin America (Chile uses capital controls), who worry about keeping inflation under control and rely on a policy of high interest rates to assure foreign investors about their fiscal seriousness.
Then there was privatization and government reforms to shrink the State and make room for market efficiencies. But, this “sound policy approach” had the opposite effect – “it directly lowered profits and profit expectations of domestic companies,” according to a background paper produced by UNCTAD [2].
The Western tradition of foreign aid also isn’t what it used to be, policy makers said in Sao Paulo. It either comes with policy restrictions favoring foreign corporations and banks, as is the case with the Millennium Challenge Account in the United States, or it has been drastically reduced. Official development assistance has gone down from a high of 56 billion in 1990 to 49.5 billion in 2001, the most recent year for data, according to the UNCTAD report Development and Globalization: Facts and Figures 2004. http://www.unctadxi.org/templates/Event____70.aspx?selected=doc
Export or bust? Think again.
During General Debates and Thematic Presentations on trade and investment strategies, the vast majority of State officials, from Cambodia to India, to Venezuela, to every single African representative, said that increased exports and further implanting into the world economy had no direct link to poverty reduction in their countries.
Nevertheless, the conference eulogized globalization for helping some countries benefit from trade, investment and technology flows and said in their final document, The Spirit of Sao Paulo, that these nations were winning the struggle against poverty. http://www.unctad.org/en/docs/tdl382_en.pdf
Civil society representatives totally castigated UNCTAD members in a speech on June 17th, criticizing the world body for acknowledging globalization as a tool to eradicate poverty. “The majority of foreign capital is not complemented in the medium term to national savings, but is rather one of the more obvious forms of resource transfers,” a civil society representative said in a panel discussion. “The model of export led growth does not lead to development but rather to increasing impoverishment.”
They may have a point, and Brazil serves as the perfect example. In the last four years, the country has nearly doubled its exports, from 8.9% of GDP to 15.3% of GDP, according to Central Bank numbers [3]. Last year, the economy grew 0.2% and this year it has grown 2.7% thus far, while unemployment continues to break records, at 13.1% nationally and over 20% in Sao Paulo, the largest city in Latin America and the economic heartbeat of Brazil. Thirty three percent of the population lives on less than $2 a day, and 46.7% do not eat three meals a day, according to a landmark study released in May by the Brazilian Institute of Demographics (IBGE). [4]
The future begins in July.
Supachai Panitchpakdi, the Director General of the World Trade Organization said that July was a key date for the future of trade, as member states meet in Geneva to discuss the technicalities on agricultural and service issues. Both topics have led to an impasse between the rich and emerging market nations. Panitchpakdi said that if no progress was made on that front this month, “it will be back to square one.” The organization has faced a credibility gap as diplomats and insiders have come forward denouncing the Organization as running a rigged game.
It recently won kudos, however, among critics, for awarding Brazil in its cotton subsidy case against the U.S., suggesting there is political will, for the time being, to give the developing world their due. The U.S. is expected to challenge the decision.
Panitchpakdi said if negotiators could not agree to new frameworks on trade, “the law of the jungle will prevail. The losers, every time, will be the poorer, developing countries.”
Although U.N. Secretary General Kofi Annan said in a press conference he was “seeing signs” that the U.S. and E.U. agreed to work out their differences on agricultural subsidies and trade barriers, parallel discussions taking place the same week between Mercosul negotiators and the E.U. reveal the total opposite.
It’s easy to sum up why. For starters, the E.U. wants Brazil, Argentina, Uruguay and Paraguay to open up their government services sector to foreign corporations. Mercosul wants the E.U. to lower import quotas on certain commodities, but the E.U. isn’t giving them what they want. So Mercosul is also holding back on services liberalization.
“It’s quite unfair to ask poor countries to open up as way to pay back rich countries for opening their markets,” says Carlos Lopes, Resident Coordinator of the U.N. Development Program in Brasilia. Lopes attended UNCTAD XI. “Stats prove that there is only a handful of countries that benefit from the rich countries opening their markets. When you talk about trade in services, you’re getting into government procurements and that has not been very successful since the Singapore trade talks.”
Government procurements are public services, including sectors like wastewater treatment, water services, inmate services, road maintenance and school management - to name a few. Essentially, Northern countries that dominate the service industry would like access to lucrative, steady, government contracts currently available only to domestic suppliers or to state and municipal governments in Mercosul.
The problem here is that many least-developed countries, the so-called LDC nations, do not have a diversified enough economy to negotiate with rich nations, or even among their poorer counterparts.
UNCTAD Secretary General, Rubens Ricupero, said these countries must do what they can to rely less on a single product as the sole source of national export income. Ricupero says it can be done. For instance, back in the 1950s, coffee constituted 73% of Brazil’s export income. Today, coffee represents a mere 3 percent. However, Ricupero did not mention that much of Brazil’s early development was thanks to state managed corporations like Petrobras, Embraer, National Steel and Vale do Rio Doce in a closed economy. Today, open markets and strict loan agreements with international financial institutions ask (if not outright require) countries to cut government spending and privatize State assets. It is safe to say that Embraer – a multinational, aerospace corporation – would not exist today if it did not have government debt and support in its infancy. If the aerospace market were open to global competition at the time, Lockheed Martin and Boeing would be here instead.
Attendees recognized the importance of State intervention, but gone are the days when the federal government acts as the central planner. The government’s role is more complicated, and judging by poverty data in Latin America and Africa, the lack of a national vision persists.
According to UNICEF data published in June, 226 million people in Latin America live on less than $2 a day. That’s the equivalent of roughly all Brazil and Argentina living below the poverty line. Forty million children work in major urban centers to sustain their families and 23 million went from middle classes to poor in the last 6 years.
If the U.N. wants to maintain its Millennium Development Goal to reduce poverty by 50% by 2015, they are facing an increasingly daunting task.
Brazil and its cohorts of like-minded nations have some reason to celebrate, of course. Never before has the developing world played such a role in trade talks. They were always a side bar. Now they are a main concern, if not a thorn in the side of Washington, London and E.U. negotiators.
The WTO meeting this month will best gauge where negotiators stand on the technicalities of trade barriers and agricultural subsidy removal. Everyone knows there are no easy answers. But many high officials forget there comes a time when it is simply too late. The sense of urgency is there, but the movement to change it is slow. History of market manipulation and disastrous economic policies are quickly forgotten or explained away, as if no institution or group of nations on Earth were even remotely interested in controlling the cash flow of world economies. Surely everyone is playing fair. As long as this persists, fair trade is dead in the water.
The time is up for millions of people who will never leave the confines of poverty, either because they are part of an indigenous culture with no interest in modernity (and are happy with that) or are perpetually unemployed, unskilled and undereducated. How humanity will treat this growing excluded class is fairly clear: We are trying hard…sometimes. The results are mixed, only positive on a case-by-case basis. Nobody should be satisfied.
NOTES ON THE MARGIN/SIDEBAR:
q “The majority of developing countries still have to finance their development through debt, not trade. The road towards development via exports is possible, but it is difficult and the door is too narrow for most developing countries to survive on exports.” – Rubens Ricupero, UNCTAD Secretary General, Opening Plenary, UNCTAD XI, June 14.
q Ireland’s Trade Minister Tom Kitt said that the EU is considering a new generalized system of preferences for least developed nations and called on “the better off” developed countries to do the same.
q “You can’t achieve the Millennium Development Goals without eliminating farm subsidies. It’s core business. Poor countries know that opening markets is not enough.” -- Eveline Herfkens, UN Secretary-General's Executive Coordinator for the Millennium Campaign, high level debate on Trade and Poverty, UNCTAD XI, June 14.
q “Globalization is not a synonym for development. It’s not a substitute. But it can be an instrument for development, so long as its benefits can be divided among everybody.” – Luiz Inacio Lula da Silva, President of Brazil, Speech of June 14.
q From the Group of 77 Ministerial Declaration published on June 12:
http://www.unctadxi.org/templates/Event____34.aspx?selected=doc
Line 22 states that nations should have the rights to be flexible when it comes to national development when dealing with international policy making organizations. Line 35 called for the elimination of all trade sanctions against developing countries and Line 36 said, “We recognize the severe negative impact of foreign occupation on efforts towards sustainable development and poverty eradication….”
q “The multilateral trading system is at a crossroad…and the crucial role for UNCTAD is to remain relevant at this moment,” -- Altaf Hossain Choudry, Minister of Commerce, Bangladesh, General Debate, June 14.
q “We’re attempting to agree on frameworks over the next few weeks and reinvigorate the Doha Agenda. We are for UNCTAD strengthening its partnership with the IMF, World Bank and the WTO. But it needs to operate by its own mandate and avoid doing what other institutions are doing. We need institutions that are focused firmly on their core mandate.” – Michael O’Brien, Minister of State for Trade & Investments, United Kingdom, Assuring Development Gains for International Trading System & Trade Negotiations, First Session, June 16.
===============================================================================
1. From the UNCTAD XI Forum on Regionalism and South-South Cooperation: The case of India and Mercosul, June 13.
2. From the UNCTAD paper, “Economic Development and Capital Accumulation: Recent Experience and Policy Implications.”
3. “Ajuste Externo e Resistencia a Choques: A Economia Brasileira em 2004”, Banco Central do Brasil, May 28, 2004. External Adjustments and Shock Proofing: The Brazilian Economy in 2004, trans.
4. “Meio Brasil perto da fome” by Flavio Oliveira, Luciana Rodrigues & Leticia Lins, O Globo, p. 23, May 20, 1994. Half of Brazil Malnourished, trans.
Ken Rapoza
U.N. OBSERVER & International Report Brazil Bureau Chief
Please also see:
United Nations Conference on Trade and Development http://www.unctad.org
UNCTAD XI http://www.unctadxi.org/templates/Startpage____4.aspx
World Trade Organisation http://www.wto.org
Lessons Learned on Trade and Sustainable Development
http://www.iisd.org/publications/publication.asp?pno=631
Diplomats from the developing world expressed a guarded optimism in Sao Paulo in mid June regarding the future of trade liberalization and the Doha Round of agreements made in 2001. The mood at the 11th meeting of the United Nations Conference on Trade & Development was generally upbeat according to attendees, suggesting that global trade talks were underway once more after stalling in successive World Trade Organization meetings in both Geneva and Cancun last year. http://www.wto.org/english/thewto_e/minist_e/min01_e/agriculture
The Geneva-based UNCTAD serves as a policy research body for trade negotiators in 192 member nations.
The end result of the week long meeting was the launching of new negotiations to broaden and deepen the scope of import and export tariffs and barriers on trade deals between countries of the Southern Hemisphere.
South-South trade is no longer the mere dream that it was some 40 years ago. The share of developing countries in total trade is about 32%, compared to 20% several years ago. Forty-one percent of developing countries’ total exports go to other developing countries.
In 2003, the US and Japan imported more goods and services from the developing world than they imported from developed countries. Trade among Southern nations is inhibited only because of inadequate banking and insurance facilities and trade restrictions, among other things.[1]
Western support: Often misguided or not enough.
There were signs at the event that the United States and European Union are finally bowing to pressures to reduce agricultural subsidies to domestic farmers and lower trade barriers to imported food products from the developing world – the key issue among commodity driven nations in the South.
Meanwhile, commodity prices are expected to fall more this year, hurting exporters of coffee and other food items. Prices for such goods are based on supply and demand and set by investors on the Chicago Board of Trade.
Overall, UNCTAD revealed that the developing world’s success is largely on account of a small number of countries, most of them in East Asia, who have been able to export their goods and services while increasing per capita income. External debt burden has never really been a problem for the Asian countries - the exact opposite situation in Latin America and Africa, where imports have tended to be greater than exports, leading to debt and crises. Asia also used a fixed exchange rate, which UNCTAD recognized as being beneficial to their development. They have also used capital controls and intervention in the currency markets, in order to achieve competitiveness, unlike most of Latin America (Chile uses capital controls), who worry about keeping inflation under control and rely on a policy of high interest rates to assure foreign investors about their fiscal seriousness.
Then there was privatization and government reforms to shrink the State and make room for market efficiencies. But, this “sound policy approach” had the opposite effect – “it directly lowered profits and profit expectations of domestic companies,” according to a background paper produced by UNCTAD [2].
The Western tradition of foreign aid also isn’t what it used to be, policy makers said in Sao Paulo. It either comes with policy restrictions favoring foreign corporations and banks, as is the case with the Millennium Challenge Account in the United States, or it has been drastically reduced. Official development assistance has gone down from a high of 56 billion in 1990 to 49.5 billion in 2001, the most recent year for data, according to the UNCTAD report Development and Globalization: Facts and Figures 2004. http://www.unctadxi.org/templates/Event____70.aspx?selected=doc
Export or bust? Think again.
During General Debates and Thematic Presentations on trade and investment strategies, the vast majority of State officials, from Cambodia to India, to Venezuela, to every single African representative, said that increased exports and further implanting into the world economy had no direct link to poverty reduction in their countries.
Nevertheless, the conference eulogized globalization for helping some countries benefit from trade, investment and technology flows and said in their final document, The Spirit of Sao Paulo, that these nations were winning the struggle against poverty. http://www.unctad.org/en/docs/tdl382_en.pdf
Civil society representatives totally castigated UNCTAD members in a speech on June 17th, criticizing the world body for acknowledging globalization as a tool to eradicate poverty. “The majority of foreign capital is not complemented in the medium term to national savings, but is rather one of the more obvious forms of resource transfers,” a civil society representative said in a panel discussion. “The model of export led growth does not lead to development but rather to increasing impoverishment.”
They may have a point, and Brazil serves as the perfect example. In the last four years, the country has nearly doubled its exports, from 8.9% of GDP to 15.3% of GDP, according to Central Bank numbers [3]. Last year, the economy grew 0.2% and this year it has grown 2.7% thus far, while unemployment continues to break records, at 13.1% nationally and over 20% in Sao Paulo, the largest city in Latin America and the economic heartbeat of Brazil. Thirty three percent of the population lives on less than $2 a day, and 46.7% do not eat three meals a day, according to a landmark study released in May by the Brazilian Institute of Demographics (IBGE). [4]
The future begins in July.
Supachai Panitchpakdi, the Director General of the World Trade Organization said that July was a key date for the future of trade, as member states meet in Geneva to discuss the technicalities on agricultural and service issues. Both topics have led to an impasse between the rich and emerging market nations. Panitchpakdi said that if no progress was made on that front this month, “it will be back to square one.” The organization has faced a credibility gap as diplomats and insiders have come forward denouncing the Organization as running a rigged game.
It recently won kudos, however, among critics, for awarding Brazil in its cotton subsidy case against the U.S., suggesting there is political will, for the time being, to give the developing world their due. The U.S. is expected to challenge the decision.
Panitchpakdi said if negotiators could not agree to new frameworks on trade, “the law of the jungle will prevail. The losers, every time, will be the poorer, developing countries.”
Although U.N. Secretary General Kofi Annan said in a press conference he was “seeing signs” that the U.S. and E.U. agreed to work out their differences on agricultural subsidies and trade barriers, parallel discussions taking place the same week between Mercosul negotiators and the E.U. reveal the total opposite.
It’s easy to sum up why. For starters, the E.U. wants Brazil, Argentina, Uruguay and Paraguay to open up their government services sector to foreign corporations. Mercosul wants the E.U. to lower import quotas on certain commodities, but the E.U. isn’t giving them what they want. So Mercosul is also holding back on services liberalization.
“It’s quite unfair to ask poor countries to open up as way to pay back rich countries for opening their markets,” says Carlos Lopes, Resident Coordinator of the U.N. Development Program in Brasilia. Lopes attended UNCTAD XI. “Stats prove that there is only a handful of countries that benefit from the rich countries opening their markets. When you talk about trade in services, you’re getting into government procurements and that has not been very successful since the Singapore trade talks.”
Government procurements are public services, including sectors like wastewater treatment, water services, inmate services, road maintenance and school management - to name a few. Essentially, Northern countries that dominate the service industry would like access to lucrative, steady, government contracts currently available only to domestic suppliers or to state and municipal governments in Mercosul.
The problem here is that many least-developed countries, the so-called LDC nations, do not have a diversified enough economy to negotiate with rich nations, or even among their poorer counterparts.
UNCTAD Secretary General, Rubens Ricupero, said these countries must do what they can to rely less on a single product as the sole source of national export income. Ricupero says it can be done. For instance, back in the 1950s, coffee constituted 73% of Brazil’s export income. Today, coffee represents a mere 3 percent. However, Ricupero did not mention that much of Brazil’s early development was thanks to state managed corporations like Petrobras, Embraer, National Steel and Vale do Rio Doce in a closed economy. Today, open markets and strict loan agreements with international financial institutions ask (if not outright require) countries to cut government spending and privatize State assets. It is safe to say that Embraer – a multinational, aerospace corporation – would not exist today if it did not have government debt and support in its infancy. If the aerospace market were open to global competition at the time, Lockheed Martin and Boeing would be here instead.
Attendees recognized the importance of State intervention, but gone are the days when the federal government acts as the central planner. The government’s role is more complicated, and judging by poverty data in Latin America and Africa, the lack of a national vision persists.
According to UNICEF data published in June, 226 million people in Latin America live on less than $2 a day. That’s the equivalent of roughly all Brazil and Argentina living below the poverty line. Forty million children work in major urban centers to sustain their families and 23 million went from middle classes to poor in the last 6 years.
If the U.N. wants to maintain its Millennium Development Goal to reduce poverty by 50% by 2015, they are facing an increasingly daunting task.
Brazil and its cohorts of like-minded nations have some reason to celebrate, of course. Never before has the developing world played such a role in trade talks. They were always a side bar. Now they are a main concern, if not a thorn in the side of Washington, London and E.U. negotiators.
The WTO meeting this month will best gauge where negotiators stand on the technicalities of trade barriers and agricultural subsidy removal. Everyone knows there are no easy answers. But many high officials forget there comes a time when it is simply too late. The sense of urgency is there, but the movement to change it is slow. History of market manipulation and disastrous economic policies are quickly forgotten or explained away, as if no institution or group of nations on Earth were even remotely interested in controlling the cash flow of world economies. Surely everyone is playing fair. As long as this persists, fair trade is dead in the water.
The time is up for millions of people who will never leave the confines of poverty, either because they are part of an indigenous culture with no interest in modernity (and are happy with that) or are perpetually unemployed, unskilled and undereducated. How humanity will treat this growing excluded class is fairly clear: We are trying hard…sometimes. The results are mixed, only positive on a case-by-case basis. Nobody should be satisfied.
NOTES ON THE MARGIN/SIDEBAR:
q “The majority of developing countries still have to finance their development through debt, not trade. The road towards development via exports is possible, but it is difficult and the door is too narrow for most developing countries to survive on exports.” – Rubens Ricupero, UNCTAD Secretary General, Opening Plenary, UNCTAD XI, June 14.
q Ireland’s Trade Minister Tom Kitt said that the EU is considering a new generalized system of preferences for least developed nations and called on “the better off” developed countries to do the same.
q “You can’t achieve the Millennium Development Goals without eliminating farm subsidies. It’s core business. Poor countries know that opening markets is not enough.” -- Eveline Herfkens, UN Secretary-General's Executive Coordinator for the Millennium Campaign, high level debate on Trade and Poverty, UNCTAD XI, June 14.
q “Globalization is not a synonym for development. It’s not a substitute. But it can be an instrument for development, so long as its benefits can be divided among everybody.” – Luiz Inacio Lula da Silva, President of Brazil, Speech of June 14.
q From the Group of 77 Ministerial Declaration published on June 12:
http://www.unctadxi.org/templates/Event____34.aspx?selected=doc
Line 22 states that nations should have the rights to be flexible when it comes to national development when dealing with international policy making organizations. Line 35 called for the elimination of all trade sanctions against developing countries and Line 36 said, “We recognize the severe negative impact of foreign occupation on efforts towards sustainable development and poverty eradication….”
q “The multilateral trading system is at a crossroad…and the crucial role for UNCTAD is to remain relevant at this moment,” -- Altaf Hossain Choudry, Minister of Commerce, Bangladesh, General Debate, June 14.
q “We’re attempting to agree on frameworks over the next few weeks and reinvigorate the Doha Agenda. We are for UNCTAD strengthening its partnership with the IMF, World Bank and the WTO. But it needs to operate by its own mandate and avoid doing what other institutions are doing. We need institutions that are focused firmly on their core mandate.” – Michael O’Brien, Minister of State for Trade & Investments, United Kingdom, Assuring Development Gains for International Trading System & Trade Negotiations, First Session, June 16.
===============================================================================
1. From the UNCTAD XI Forum on Regionalism and South-South Cooperation: The case of India and Mercosul, June 13.
2. From the UNCTAD paper, “Economic Development and Capital Accumulation: Recent Experience and Policy Implications.”
3. “Ajuste Externo e Resistencia a Choques: A Economia Brasileira em 2004”, Banco Central do Brasil, May 28, 2004. External Adjustments and Shock Proofing: The Brazilian Economy in 2004, trans.
4. “Meio Brasil perto da fome” by Flavio Oliveira, Luciana Rodrigues & Leticia Lins, O Globo, p. 23, May 20, 1994. Half of Brazil Malnourished, trans.
Ken Rapoza
U.N. OBSERVER & International Report Brazil Bureau Chief
Please also see:
United Nations Conference on Trade and Development http://www.unctad.org
UNCTAD XI http://www.unctadxi.org/templates/Startpage____4.aspx
World Trade Organisation http://www.wto.org
Lessons Learned on Trade and Sustainable Development
http://www.iisd.org/publications/publication.asp?pno=631