unctad.org | Trade and Development Commission, 2nd session
Statement by Mr. Supachai Panitchpakdi, Secretary-General of UNCTAD
Trade and Development Commission, 2nd session

03 May 2010

Mr. Chairman,
Distinguished Delegates,
Ladies and Gentlemen:

I congratulate you, Ambassador Arturo Hernández Basave, on your election to the Chair and wish you every success in steering this Commission to a successful closure. You can count on the secretariat´s full support for your work in the week ahead.

As the world economy has begun to register a fragile recovery, the developing countries - in fact, all countries - will have to contend with twin problems on the trade front. These are recovering the trade losses suffered during the crisis, and effectively addressing trade policy challenges in the post-crisis period.

Let me cite some of the key numbers that have come to illustrate the extent of the crisis. World GDP growth declined by 2.2% last year, and trade contracted by about 12%, the largest such slump in many decades. Global unemployment, according to the ILO, exceeded 200 million in 2009, and remittances, which in recent years have become the economic backbone of many countries, have fallen.

Today, some form of recovery appears to be under way. The decline bottomed out during the third quarter of 2009. For 2010, the UN is projecting a 5.4% rise in global trade. This is much lower than the annual 6-to-11% average growth of the pre-crisis years. The WTO, in turn, is predicting a more optimistic rebound - a 9.5% expansion in trade. But this recovery is fragile, and varies considerably across and within countries.

What is the best way forward? How do we ensure a sustained global recovery that follows sustainable development paths?

I raise these questions because moving out of a crisis of such magnitude offers a rare historical chance for change, a momentum for reform, and an opportunity for a new trade agenda adapted to the new realities. As the great economist JK Galbraith famously said, "[ideas] yield not to the attack of other ideas, but […] to the massive onslaught of circumstance[s] with which they cannot contend".

In this spirit, and where trade is concerned, this will mean reviewing trade-related policies and measures in the post-crisis context and assessing their implications for trade and economic growth of developing countries. It will also mean keeping under constant review the key global governance issues, in particular the coherence between the international trading, financial and monetary systems. It will require, moreover, exploring further the link between trade, investment, productive capacity and growth and how that growth is translated into concrete outcomes such as poverty reduction and economic development. The implications for development of non-tariff measures and climate change mitigation will also have to be monitored, as will key trends in such areas as South-South cooperation and the role of the private sector in trade and development.

In considering way forward, we should first of all accept that business as usual is certainly not an option. We in the secretariat have been trying to work on the concept of new development paths that deploy broad policy tools by which governments can bolster inclusive development. One essential ingredient - as UNCTAD has consistently said - is to reorient international trade, financial and monetary cooperation towards more equitable, sustainable and coherent global governance systems. These new approaches should also draw on crisis recovery strategies applied by developed countries and some emerging economies.

In the UNCTAD report on successful mitigation strategies, we note that such strategies have comprised immediate and targeted interventions, including massive countercyclical government stimulus packages totalling about $2.6 trillion. These packages have rescued the financial sector; supported the automotive industry, among other distressed sectors; saved jobs; and provided relief to exporters, including through trade financing. However, while these packages have undoubtedly helped to contain the recession in some countries, it is vital that they are not seen as, or transformed into, permanent policy features with possible negative implications for the competitiveness of developing countries unable to finance such large stimulus packages.

Turning to the new development paths I mentioned earlier: In order to be successful, the new approaches must give high priority to the development of productive capacities. UNCTAD has long advocated the primacy of such capacities in the development process, and the experience of many countries, including such successful regions as South-East Asia has proved us right. In most, if not all, developing countries, and especially LDCs, the key to economic resilience lies in strengthening and diversifying productive capacities in agriculture, manufactures and services - particularly in sectors that increase value addition and create jobs. For landlocked and transit developing countries in particular, such capacities must involve improving trade-related infrastructure. This includes transport and trade facilitation, trade logistics, and meeting product standards. Many of these issues have been discussed this year by UNCTAD expert meetings and you will have the opportunity in this Commission to consider the policy implications.

Recent successful experiences have also shown that sustainable development paths require that the countries concerned develop their own best-fit policy frameworks and institutions. Such policies must be based on pragmatic approaches, continuous experimentation, sequencing and calibration of reforms to local conditions and development goals, with certainly a key role for the State. Here at UNCTAD, over the years we have tried to identify which policies work best for a given sector in which the comparative advantage of a specific country lies. In this spirit, we have, for example, been assisting Rwanda with its trade and competition policies; Nepal, Uganda and Kyrgyzstan, on services policies; Mozambique and Zambia, on creative industry policies; and Lesotho and other African countries, on their participation in new and dynamic sectors of world trade.

Ladies and Gentlemen:

With the global economy rebounding, the focus of global and national policies is shifting from concerns with stabilization to making the recovery sustainable. Reducing global imbalances will be a key preoccupation of policymakers in the major deficit and surplus economies. This will have potential trade policy implications for developing countries.

Domestic demand in the US is expected to grow sluggishly; therefore, import growth is likely to be slow. In other words, unlike in the case of earlier crises and recovery, the US and other major economies are unlikely to continue to play the role of the importer of last resorts. As deficit countries, they will be under pressure to improve their export earnings. Developing countries will thus have to think seriously about how best to diversify export products and export destinations in order to adjust to these new cicumstances. New sources of external demand will have to be found in emerging economies of the South and in transition economies. This is not unrealistic, given that many developing countries have performed relatively better and survived the crisis with less damage than in previous recessions.

In looking forward, therefore, it is crucial that the developing countries participating in the São Paulo Round of GSTP negotiations rise up to the challenge of concluding the negotiations by the end of September, as agreed by their Ministers last December. Furthermore, protectionist actions will have to be resisted by all countries. The trade and investment policy response to the global recession has so far been relatively muted, according to the recent UNCTAD-OECD-WTO report on G20 trade and investment measures. However, vigilance is essential. In the coming years, such actions as non-tariff measures in the area of market access will constitute a major policy challenge. Both subtle and not-so-subtle "NTMs", which are being erected under various legitimate guises (such as protection of health and environment), affect trade as much as tariffs, and in some cases even more so. Yet their implications on trade flows, export-led growth and social welfare in general are at the moment poorly understood.

To address these problems, in 2006, I convened a Group of Eminent Persons on Non-tariff Barriers. Its main purpose was to discuss definition, classification, collection and quantification of non-tariff measures so as to identify data requirements, and consequently to facilitate the understanding of the implications of NTMs. To carry out the Group´s technical work, a multi-agency support team was also set up, comprising experts from UNCTAD, the FAO, IMF, the International Trade Centre, OECD, UNIDO, the World Bank and the WTO.

Today, after several years of hard work, I am pleased to share with you two main results of these multi-agency activities led by UNCTAD: an updated comprehensive classification of NTMs designed for data collection, and a multi-year, multi-organizational effort on data collection, capacity-building and open-access provision of non-tariff measures.

New development paths must not ignore the urgency of building a less carbon-intensive economy. This requires enhancing policy coherence between trade, development and climate change. UNCTAD will continue to play an important role in this area, especially in highlighting the nexus between trade and climate change and the implications for developing countries. UNCTAD can in particular help countries formulate policies to foster the structural transformation needed to minimize the carbon intensity of economic activity but without restricting trade and hampering growth. In recent studies, UNCTAD has shown that in the long term, a less carbon-intensive economy can lead to job creation, poverty alleviation and development, including food and energy security and trade.

Admittedly, all of this is a tall order requiring significant resources. The post-Copenhagen effort to raise $100 billion to help developing countries is a step in the right direction, but in the current budgetary climate, the outcome is uncertain. We are hopeful that developed countries will live up to their commitments, but equally important is the need to address the governance structure for deploying these resources effectively.

More broadly, strengthening global governance and the coherence between the trading, financial and monetary systems is a necessity, as we at UNCTAD have long insisted. Efforts to reform the Bretton Woods institutions and the active role of the G20 are a step in this direction. Integrating the Southern perspective more explicitly into the G20´s outcomes on reform of global governance systems and other critical decision-making will reflect recognition of the role of developing countries and of new realities in the world economy. The imperative of fostering a more inclusive governance mechanism for global economic policymaking, however, calls for global solutions through the G-192 and the United Nations, given the multiplicity of interests and levels of development among countries.

The realization of the commitment in the Millennium Declaration and MDG-8 to an open, equitable, rule-based, predictable and non-discriminatory multilateral trading system remains a challenge. There are worrying signs of shifts away from multilateralism in favour of preferential trade agreements. Bilateral and regional free trade agreements have proliferated, with about 226 operational agreements (more than half of which have come into effect since 2000). They cover beyond-the-border issues and WTP plus obligations with implications for policy space. In this respect, the international trading system has become a jigsaw puzzle with multilateral, plurilateral, and bilateral agreements crowding the landscape and making it practically impossible for countries to navigate. On average, during the period 2002-2009, one new preferential trade agreement came into force every month.

The Doha Round, which was intended to bring tangible development benefits, is at a stalemate. We must all ensure that the complex nature of the negotiations does not derail us from the main objectives or lead us to a loss of faith or credibility in the multilateral trading system. We need the conclusion of the Round so that it can fulfil its development promise and keep the system open and fair.

In looking beyond Doha, some are putting forward the case of variable geometry and plurilateral agreements as a way by which countries that are ready to undertake commitments can proceed, with others joining in when they are ready. This is certainly one way of moving ahead. But its implications for developing countries and the MFN principle of non-discrimination will need to be seriously considered.

In conclusion, let me recall that UNCTAD, at its very first conference some 45 years ago, called for a "modified international division of labour". Ever since then, we have invested our intellectual resources in articulating new development paths that suit the historical experiences and contemporary conditions of developing countries.

Our approach has been to stay ahead of the curve and strike a pragmatic balance between the roles of policy and market, while recognizing the different starting points and comparative advantages of each developing country, and their right to calibrate their own policy options for growth and development.

Today, we have before us the experience of the emerging developing countries that now act as true engines of global growth, higher productivity and efficiency. They have substantially modified and continue to modify the international division of labour. Their success lay not in a blind adherence to market fundamentalism, but rather in a prudent trade, industrial and macroeconomic policy mix that gradually created a dynamic and more open trade and investment nexus.

We also have before us an important lesson from the crisis: It is that the market, contrary to conventional wisdom, does not have a near-miraculous capacity for self-regulation and correction. The countercyclical policies and actions during the crisis have confirmed the case for a balanced role for market and policy interventions.

Economic events of the past four decades attest to the continued validity of UNCTAD´s fundamental policy premises.

The emerging policy environment appears more propitious for our ideas and policy suggestions. For us, this opportunity is also a call to action. We will spare no efforts in responding to this call.

Thank you very much.



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