Allow me first of all to express my personal gratitude, and the gratitude of all UNCTAD staff, to our friend, Ambassador Tzantchev of Bulgaria, for the devotion, guidance and friendship he evinced during his term as President of the Board. It gives me pleasure to see that we will be able to continue to count on him as Vice-President. I also wish to congratulate Ambassador Sha for his nomination as President of this Board at this crucial time, as we begin preparations for the next general conference of UNCTAD in Brazil. It is very fitting that Ambassador Sha should be chosen by his Group, not only because of his remarkable personal qualities - which include, as we have already seen, his sense of humour and his capacity for firm guidance - but also because in many ways China embodies the ideal of UNCTAD, which is to use trade exports and the productive sector as instruments for development. There is no better example of successful development over the past 20 years than China, and I think it is an excellent omen to have someone like Ambassador Sha chairing our deliberations at this time. China is playing a growing role, not only with its pragmatic attitude to trade matters but also because it is compensating for the weakness of the world economy in many areas and because it is a major source of import demand for many countries, not just in Asia but elsewhere as well. Your choice of President is thus extremely fortunate.
Let me try to sum up in a few remarks how I see this session of the Board. In the next few days, we will of course have the opportunity to speak in greater depth about the different items on our agenda. I would just like to say at the outset that I hope this session will be a forward-looking one, not only in considering the current situation of the world trading system but also in looking at how we can use this forum of the General Assembly to promote better understanding among the various constituencies and to build consensus with a practical end in sight - namely, a concrete outcome for UNCTAD XI in Brazil. Such an outcome should fulfil the agenda we have set ourselves of fostering coherence between global processes and national development strategies, with an emphasis on the link between trade negotiations and the productive sector. I consider this to be at the heart of our debates over the next few days. We should start as always from the current, concrete international situation, particularly as it affects economics, trade and development. I don´t have much to add to what the Trade and Development Report, the World Investment Report and other UNCTAD reports have said in this respect, but I would sum up the overall content of those reports and of the reports of other international economic organizations by quoting from the Bank for International Settlements in Basel. In a recent statement, the Bank said the overwhelming feeling was one of economic disappointment, given how much had been made of the economic stimuli adopted in some areas of the world. That economic disappointment, the Bank said, is even more surprising, because if we look at early forecasts for 2001, 2002 and 2003, we can see that for three years running, the forecasts have not been matched reality, and performance was lower than had been expected.
We are now seeing some signs that are more encouraging; but they are limited to two major areas of the world, the US economy and Asia in general. There are some indications in other areas, but they are not of the same level of significance. In the US we have now an increasing body of evidence that the economy is starting to pick up, but here again, some of the signs are contradictory: we cannot be sure yet whether they announce strong recovery, as they are accompanied by the aggravation of macroeconomic disequilibria among the large industrial countries. In particular, there is the increasingly serious imbalance in saving rates between the US and the rest of the industrial world, which expresses itself in the budgetary deficit - still growing - and also in the very serious gap in the current account. Right now the US economy requires $2.7 billion a day from external flows in order to close its current account gap, and this is something that should be of concern, because sooner or later, those disequilibria will have to be redressed, and of course we have to make sure that this process of redressing is conducted smoothly, and in such a way as to avoid aggravating the situation of the world economy.
I could sum up the consensus of all the major economic analysts in this respect with three recent quotes. One is from UNCTAD´s Trade and Development Report, 2003, which has concluded that only coordinated expansionary policies among the leading economies can bring about an orderly rebalancing of economic relations. This is based on a conviction shared by many economic analysts that the global economy is suffering from weak global demand and that global demand has to be stimulated, not only in the US or in Asia but in all the major sources of economic growth and import demand. This is why the Report concludes that we need coordinated expansionary policies, and that a sustainable expansion of trade and capital flows now depends on the rapid recovery of the world economy as a whole, not just a few areas. In order to show that this is by no means an isolated assessment, allow me to cite two independent sources that cannot possibly be suspected of having the same outlook as UNCTAD in all areas. First there was a recent column by Martin Wolf in the Financial Times, entitled "Funding America´s recovery is a very dangerous game", in which the respected columnist says that "a smooth global adjustment … would require a sizeable strengthening of demand in relation to potential output in all the world´s significant economies, including not least Asia outside Japan". He ends by saying that stronger growth of demand is "no less an imperative in the Euro zone, particularly Germany".
Another independent source I recently came across was Oxford Analytica, which concluded that "the agenda for growth adopted by the G7 Finance Ministers in Dubai has not captured the imagination of financial markets. This may be for the good, given the questions over appropriateness of the cures envisaged to address the deficiency in global non-US growth. Without a resumption in domestic demand growth in its trading partners, there is a risk that Washington will seek unilateral means to reduce its external deficit".
I wanted to read those assessments to you not because I personally agree with everything they say, but just to underline the fact that everybody agrees we need stronger global demand if there is to be a smooth transition towards more growth in the world economy with a lowering of the pressures that we are now facing.
Having addressed in this way the state of the world economy as I see it, I would like to turn briefly to perspectives in the trade arena. I am not going to speak about Cancún, because we will have an opportunity to discuss this matter later in our meeting, when we discuss future developments of the Doha agenda. Here I would like just to express my wish that in this debate we follow the wise advice of our President, who said that "the Doha Agenda has to go on, as there is still a long way to go before the objectives of the Doha meeting can be achieved. All of us should, with a new sense of urgency and determination, united, and upholding our confidence, work together to forward the new round of multilateral trade negotiations and the multilateral trade system, so as to reflect concerns and development demands in a balanced manner". I think this should serve as a guide, and I hope that in our own agenda - which of course does not in any way interfere with the agenda in the WTO - we will find enough matter to provide some positive encouragement to the progress we all wish for. In this respect I would like to draw your attention to some areas that we are going to discuss here in our meeting which are not on the Doha negotiations agenda, but which, if well conducted and if we are able to show some reasonable degree of consensus, could be instrumental in creating a favourable environment for those negotiations. I don´t want to be exhaustive but just to mention to you two areas. One, of course, is commodities, and another is concerns about the erosion of preferences, particularly from countries that face much greater difficulty in adapting to international trade. Especially with regard to the first point, we will have the opportunity later in the meeting to at least begin discussing the report of the meeting of eminent persons that UNCTAD brought together, in accordance with a General Assembly resolution, to discuss the plight of commodities and come up with a few ideas that could be addressed here at the Board and then by the Assembly at its current session. I am confident that the experts came up with a balanced set of recommendations, some of which could already begin to be implemented, and if that happened I am sure that developing countries taking part in trade negotiations would find this an additional reason to be encouraged to participate with renewed determination.
Turning finally to the panorama of world trade - not so much to the negotiations, but to what is happening in world trade - I would like to underscore the extremely positive encouragement that is coming from Asia, which I think sets a positive tone for this meeting. A recent forecast by the Asian Development Bank, cited in an editorial in the Financial Times, was probably the only one to confirm the high growth that had been predicted for an important region of the world, and which not only confirmed that high growth but also went further, making a more optimistic prediction for next year. The Asian Development Bank has shown that the 41 developing economies in Asia - which is a very sizeable number - are growing this year by an average 5.3 per cent; and some of them, such as China, are growing by 7.8 per cent. This is the best news in the world economy and is something that should lift everyone´s spirits, as is the bank´s prediction that next year, the region as a whole is set to grow by 6.1 per cent - its average for the entire decade of the 1990s. This really is very encouraging news not only because of the number, but because it is happening in a region that at the beginning of the year was facing the SARS epidemic, which according to the Asian Development Bank cost it 0.6 per cent in GDP. Despite the setback from the SARS epidemic, despite the uncertainty created by the Iraq war and despite concerns over the geostrategic situation, this region was again able to grow at a very rapid pace, and it did so in the face of slow growth in the major markets of the world economy.
This is why I chose Asia as the centrepiece of my remarks this morning: because of the resilience of the Asian economy, which is becoming increasingly resistant to shocks from the outside world. Of course, we should not exaggerate; we all know that several of the large economies in Asia, including China, have also benefited from the import demand of the US, for example, which demonstrates the interdependence of the world. But at the same time, this region was able to set an example, first, because it has sound macroeconomic fundamentals and can stimulate internal development; secondly, it has experienced a constant strengthening in intra-Asian trade, and right now China has become one of the major sources of imports from other Asian countries. This year China became the first market for South Korea, a role previously played by the US. The Asian Development Bank´s report shows that for many Asian countries, exports to China have doubled - and I must say that the same applies to my country, Brazil, Argentina and other countries outside the region. China already represents this engine of growth - although this is not to discount other problems relating to currency adjustment, accumulation of reserves; as you know, UNCTAD has always maintained that no one can deal with the trade system in isolation from the currency and financial systems. Unfortunately we are still a long way from the much-commented but poorly practised coherence between the monetary and financial system and the trade system. This goes beyond our agenda, but one should never forget that the trade system alone - even in a positive performance like that of Asia - cannot solve the problems of the economic system.
I would like to conclude by extracting from these examples the central lesson for all of us - a lesson that has been a constant inspiration for UNCTAD since its inception - and that is the idea of the growing interdependence between developed and developing countries. Allow me to underscore this by mentioning that in 2001 - which was not the best of years - developing countries relied on developed economies´ markets for about 57 per cent of their exports. That is very high, but it is already down from 69 per cent in 1980, which means that we are rebalancing the picture somewhat. But that same year, developing countries accounted for 48 per cent of Japanese exports, around 43 percent of exports from the US and 34 per cent of exports from the European Union, excluding the EU´s intra-trade. Needless to say, the economic fate of different regions and countries is more intertwined than ever.
This is what we would like to have as a basis as we prepare for our eleventh conference in Brazil: interdependence, but with the strengthening of developing countries as a source of imports and growth; not just interdependence, but also the idea that we should foster trade negotiations, addressing areas like commodities and others that have not been receiving enough attention, and preparing ourselves for an open debate on such subjects as the links between trade and poverty, trade and gender and trade and culture, all of which will be part of our preparations and which we will have the opportunity to address in the future. And taking into account another overall concern for us all, namely, the need to devote more attention to the development of the productive sector. Those of you who have been listening to me over the years know that I personally feel that sometimes we have oversold the value of trade negotiations, in the sense that of course they are extremely important, but that the most they can achieve when they are successful is to create export opportunities. In order to take advantage of those opportunities, we need in fact to have a supply capability to provide the market with goods and services. I would suggest that one of the reasons the Asian countries have been successful is that they developed their supply capability better than other regions - and this, by the way, is why they generally have a more proactive attitude in trade negotiations; they feel they can face the competition on better terms. These are just some of the ideas that might help guide us in the days ahead.