Ladies and Gentlemen,
The full text of my statement will be circulated later. However, may I ask that you also consider the passages I cannot cover in this oral presentation, but which appear in that text, as an integral part of my remarks to you today. I will attempt to highlight some of the points that seem to me to represent the framework or setting for today´s session and for the remaining sessions of the Commission this week.
You know that we are starting a year with many significant dates for international trade. Of course, for us in UNCTAD the most important is the 11th United Nations Conference on Trade and Development, which will take place in Brazil in June, when we will also be commemorating the 40 years of our organization´s existence. But the commemoration, as you know, extends to the existence of the G77 and China as well, and at the same time it marks the conclusion of the first decade since the establishment of the WTO and of the Uruguay Round. Hopefully this year will also be the last year of the textile quotas, marking the end of four decades of managed trade in that sector -- but even looking ahead, we know that this will be a decisive year in trying to revive the trade negotiations on the Doha agenda. We are all very aware that we don´t have much time; this spring may in fact be the last practical opportunity to revive those talks, at least this year. At the same time an important regional initiative, the negotiations on a free trade area of the Americas, are also scheduled to conclude this year, as is the Doha Round of trade negotiations.
So you see, the calendar is very complex. Some of its dates are evocative of moments in the past, and others anticipate events in the near future. I see the work of the Commission, and of UNCTAD´s conference in Brazil, as being closely linked to all those events, because our conference will have an agenda that can make a significant contribution to an issue that has been at the heart of many of the difficulties plaguing international trade negotiations over the past 12 years or so, since the Mid-term Review of the Uruguay Round broke down in Montreal in December 1988, and that is how to establish a satisfactory link between trade and development.
In that respect, the agenda of the next conference, especially the item on assuring development gains from trade negotiations, will provide us with an opportunity to make a constructive contribution to strengthening this link, which presided over the founding of UNCTAD 40 years ago. It will also provide us with an opportunity to go back to the inspiration of 1964, which was a vision inspired by fundamental civilizational values and ethical considerations, informed by a universal quest for the betterment of the human condition, which in our days is mainly expressed through the priorities set in the Millennium Development Goals, especially those related to poverty reduction.
This is, in my opinion, the broad picture or context surrounding the preparations for both this Commission meeting and for the conference in Brazil. But in order to address those extremely central concerns, we must start from the here and now and consider what is actually happening in the field of trade, the reality of international trade, and what we can see when we look at trade is that after a period of anaemic growth and even decline, international trade seems to be rebounding, from 3 per cent in 2002 to something like 4.7 per cent last year, which was in reality an increase of 13 per cent in dollar terms. Now according to our UNCTAD estimates, prospects are good that international trade could increase by 7 per cent in 2004, and we are already seeing some signs in that direction.
Apart from the role of some major developed countries in this recovery - I would mention the US and Japan in particular - it is important to highlight the role of developing countries, which had a robust 9 per cent growth in trade. We know that much of this was the consequence of the increased import demand in developing countries and, to a lesser extent, transition countries. China led Asia´s very impressive trade growth with a 30 per cent increase, but success in export performance was by no means limited to China and some other Asian countries. In Latin America and the Caribbean, for example, significant export growth was widespread last year, with only a few remarkable exceptions. As a result, the region as a whole had an impressive trade surplus and, for the first time in 50 years, posted a small surplus in the current account. But in order to highlight the centrality of the overarching theme of UNCTAD XI - that is, the need to ensure coherence among different elements of the economic system - I would like to draw your attention to a disturbing trend. Despite the positive contribution made by trade to the current account, together with the remittances of emigrant workers, Latin America and the Caribbean experienced in 2003 another year of net transfer of financial resources to the industrialized North. Last year, that net transfer totalled US$ 29 billion, whereas in the previous year it had been US$ 41 billion. According to ECLAC´s Preliminary Assessment of the Economy of Latin America and the Caribbean, 2003 was the fifth consecutive year of net financial transfers, with an accumulated result of transfers amounting to 5 per cent of the production of goods and services. Last year, the net transfer accounted for 7 per cent of all exports of goods and services. This is happening not only in Latin America and the Caribbean but throughout the developing world, several years after the Monterrey Conference on Financing for Development, which stressed the role of trade as a major source of development financing. Indeed, trade is fulfilling this promise, but other indispensable components, particularly in the financial system, are still missing. The implications of the situation are enormous, as they continue to work in a direction that nullifies the contribution of trade and leads to the current panorama where the poor are financing the deficits of the North.
I have no doubt that, in the right circumstances, UNCTAD XI could seek to identify all the problems that should be settled in order to create the conditions for making something of the next few decades in world trade that would really belong to developing countries. As I said, the signs are there for everyone to see: for instance, their share in world trade is increasing steadily. Some of them are already becoming regional growth dynamos, with a global presence. Last year for the first time ever, the United States imported more goods from developing countries than from developed ones, while its exports to developing countries increased to over 40 per cent of the total value of its exports. Some developing countries have the potential to become powerhouses of economic activity the way Europe, the US and later Japan did in the 20th century. The Chinese example of a hungry importer and vigorous exporter enjoying rapid and sustained growth may be replicated on a smaller scale elsewhere. And this points to the global importance of what Dr. Raúl Prebisch tried to achieve here at UNCTAD: the interdependence between the growth of developing countries through building productive capacity and creating purchasing power, and their contribution to spreading global prosperity and expanding markets.
We address this question in a similar spirit of interdependence and solidarity. And it is in just such a spirit of complementarity that I would like to refer to something that the President of Brazil, Luis Inacio Lula da Silva, only two weeks ago here in the Palais des Nations called the new "trade geography", which is the increasing role of South-South regional and subregional economic cooperation. You know that the growth of South-South trade, at 10 per cent a year, has been double that of world trade and now accounts for 43 per cent of the total trade of developing countries. This could well be described as a silent transformation, one which is further underlined by many other factors. Moves are under way to have special interregional South-South arrangements among interested countries, and we at UNCTAD would like to contribute to that goal by seeking to revitalize the GSTP, or Global System of Trade Preferences among Developing Countries, that was set up many years ago. I was present in Belgrade when we finally concluded the negotiations on the GSTP, and I hope that it may provide the structures and mechanisms for better South-South cooperation - not, as I said, as an alternative to trade and economic cooperation with the industrial North, but as a useful complement that will also help create more purchasing power in the developing world.
Turning to the Doha negotiations, I think it is no secret to say that there is a perception that they have been suffering from a sort of development deficit, and we believe that UNCTAD, as a consensus-building forum, can help offset that deficit. This is why we fully support the Doha negotiations, by focusing the work of this Commission and its bodies in a practical and balanced manner on the expected gains for developing countries, but of course also minimizing the potential losses and dealing with adjustment costs. We believe in that respect that the Brazil conference can send positive signals on the successful conclusions of the negotiations and that in the post-Cancún period, UNCTAD should be considered as a constructive and important partner in this endeavour. Doing so could help restore the faith of all countries, especially the developing ones, in the viability of the multilateral trading system.
I also want to remind you, as we go about promoting and reinforcing the multilateral trading system, that at the same time we should not lose sight of the wealth of regional and subregional processes enfolding before our eyes. Although many of those processes can add value to our common goal of reinforcing the multilateral trading system, we have to be attentive to promoting their coherence with that system. I believe that UNCTAD is well placed to provide a strategic perspective on the interface between the multilateral and regional processes and to help the developing countries cope with the multitude of changes involved in all those initiatives.
Here again, because of the complexity of the challenges and the need for developing countries to rationalize their behaviour in various forums, it is imperative to address the diversity of situations, challenges, regional initiatives and, of course, national capabilities. Here is where we focus our efforts in promoting the concept of diversity and policy space, not as something negative or defensive, but as efforts that should be based on sound analysis and experience-sharing and that should target capacity-building, trying to shed light on what is required in terms of multilateral rules to accommodate the specificities of development needs and of the space that is required by countries at different stages of development.
You know how many of those challenges are now converging in the trade area; let me just list them very quickly. We have the information technology revolution, but at the same time I have just referred a few moments ago, when discussing Latin America, to negative trends like the volatility of financial flows and the very sharp exchange rate fluctuations that send tremors across international markets. On the one hand we have global enterprises tending to shift their businesses to maximize profits, and on the other hand, developing countries trying to improve their cost-quality, competitive labour supply in order to provide services in developed economies - not only in low-tech manufacturing fields but also in high-tech services and in research and development through outsourcing. Some of these factors raise prospects of realizing the development gains from trade, while others fuel anxieties in rich and poor countries alike about the cost-benefit equation of globalization. It is exactly because we need to analyse those different challenges that UNCTAD can be helpful in trying to anticipate, map out and present alternative scenarios to ensure that their implications for development are holistically understood and addressed in the context of global governance, and not merely in shaping trade rules.
Here I would like to open a special chapter to address a problem that in my opinion is going to grow and eventually to dominate trade discussions in the years to come. This is the concern about outsourcing, but outsourcing also as a window for development.
I refer of course to the outsourcing of services - ITES, BPOs and e-commerce services - by developed-country enterprises to developing countries. A heated debate is under way as to how this fits into free trade theory and the accepted trade liberalization paradigm, whether or not it is leading to a job exodus from developed to developing countries, what the cost-benefit is to both groups, whether protectionist government intervention is needed, whether it will work and, finally, how this can be dealt with in the WTO and in other trade negotiations.
We at UNCTAD have been monitoring this phenomenon and have noted its evolution from a largely intra-OECD one to include a new dimension, a North-South dimension. The global outsourcing spend last year was estimated at $320 billion and is projected to reach $585 billion by 2005 and $827 billion by 2008. Offshoring is a rapidly growing segment of this, and despite much excitement about its significance to North-South trade, the share in this business of even such frontline countries as India is small - only 3 per cent right now; fears of a big wave of offshoring to poor countries swallowing up rich-country, high-skilled jobs appear misplaced. On the other hand, this does constitute a dynamic new area and a big window of opportunity for assuring instant and durable development gains to developing countries through international trade, winning converts to globalization and creating tangible and additional stakes for poor countries in the trading system. And as you are certainly aware, those gains are by no means restricted to countries that have made impressive progress in technology, as is the case of India. You know that a growing number of developing countries, including some least developed countries - Cambodia is a good example - but also some countries in the Caribbean, have been making gains from outsourcing in services, so it should be seen as something broader than it is generally presented as being.
I have no doubt that offshoring is a legitimate part of global trade liberalization. It enables developing countries to leverage their comparative advantage - abundant, competitive labour and a lower-cost environment. I can do no better than to quote the British Trade Secretary, Mrs. Patricia Hewitt, on what she called the "myth" behind the offshoring fears in the UK, its biggest beneficiary, in order to address both this issue and the cost-benefit argument: "We cannot argue liberalization abroad and practise protectionism at home. However strong the short-term costs appear to be, the long-term costs are greater - for consumers and for jobs" - and, may I add, for the economy in general. Despite some attempts at provoking government measures, I do not think that this process is amenable to government control or that it will be driven by market forces. In any case, these services are already covered by the GATS under Mode 1 and are also related to Modes 3 and 4 as they pertain to investment. In order to ensure predictability, developing countries should, as part of the GATS negotiations, actively seek binding multilateral commitments in this mode so that they can pre-empt or render invalid any protectionist action.
Having covered these issues, I would like to remind you that we have to pay more attention to the need to maximize gains from the integration of the cross-cutting themes of trade and poverty, trade and gender, and trade and the creative industries into trade negotiations, which is at the centre of UNCTAD´s concerns for the coming conference. I would like also to highlight the importance we attach to environmental requirements and their implications for market access, the definition and scope of environmental goods, traditional knowledge, and environment-related dynamic sectors, such as biotrade and renewable energy, in the follow-up to Johannesburg. In light of what happened at Cancún, I would like also to reiterate the importance of our continuous work on trade and competition and trade and investment. These are areas where UNCTAD has built up considerable expertise and where we have useful contributions to make.
At the same time, UNCTAD will continue to work on building trade-related development benchmarks that can help us refine some key parameters and output based on objective quantitative indicators and normative analysis. I cannot omit from my statement the central interest that UNCTAD has expressed since its inception in commodities in general. We need to look at innovative policy mixes in this area, including both market-based instruments and ex-ante and contingency support systems, and national and international government and corporate actions, which could revive the development prospects of commodities-based economies. Here I would like to remind you of the Eminent Persons Group report and the need to carry out what we started in this area.
Allow me also to flag the work we will continue to undertake on market access, on the need to help developing countries in their concerns about preferential margins and preferential erosion, the problem of subsidies and the continuous and integrated work we have been doing on services in general. You know that over the past few years, we have examined different services sectors one by one from a technical perspective, and in that context, one of our most recent contributions has been the attempt to achieve commercially meaningful market access for temporary movement of natural persons, Mode 4 of the GAT. It is, as you can see, very difficult to address all these important subjects, and I have by no means addressed them all. We will try to do so, as we have been attempting to do in close cooperation with other organizations that deal with those matters.
Let me just say in conclusion that the mandate and the mission of UNCTAD remain as valid today as they were when Dr. Prebisch helped to establish this organization, announcing that it would contribute to a new trade strategy with development as the goal. This is what we have in mind as we open this Commission, and I wish you very fruitful work in the days ahead.