Trade and Development

Statement by Mrs. Chandresh Kumari, Member of Parliament on November 12, 1999 in the Second Committee (Economic and Financial)

Mr.Chairman,

My delegation wishes to associate itself with the statement by the Chairman of the G-77 & China. We have read the Trade and Development Report issued by UNCTAD with interest, as also Secretary General’s report on this item. Our deliberations are taking place against the backdrop of the WTO Ministerial meeting in Seattle, thereby providing us with a significant opportunity to undertake an assessment of the impact of trade liberalisation, as exemplified in the Uruguay Round Agreements, not only in generating world growth and expansion, but also the extent to which benefits of this have been equitably distributed among developing and developed countries. During the 90s, we have been witness to widespread and rapid trade liberalisation, particularly in developing countries, undertaken not only in the context of multilateral trade negotiations, but also as part of the conditionality attached to structural adjustment and stabilisation programmes. However, it is becoming apparent that there has been a significant asymmetry in the nature of trade liberalisation between developing and developed countries. The developed countries’ commitments to trade liberalisation as well as actual implementation has been far more cautious and gradual than the approach adopted by many developing countries. The consequences of this are increasingly clear. On the one hand, for most developing countries, the expansion of imports has not been matched, as a general rule, by a corresponding increase in exports. Indeed, the average trade deficits in the 90s for developing countries have, by and large, been higher than in the 1970s by almost 3% of GDP, while the average growth rates have been lower by 2%. To cite only one example, Latin American exports to Europe have grown by only 29% in the 90s whereas Europe’s exports to that region have risen by 164% in the same period.

Developing countries do not question the intrinsic potential of trade as a powerful ingredient of growth. We attach importance to the various rounds of trade liberalisation that have taken place, particularly the consensus that has emerged from them on the need for security and predictability which a rule-based system should provide. Indeed, many developing countries are today more committed, in letter and in spirit, to a rule-based multilateral trading system than major developed trading partners, for whom unilateralism is always an alternative and a temptation.

There is talk of a new Round. Whatever shape it may take, if it is to be meaningful, it must be a Development Round, which addresses the concerns of developing countries in terms of the imbalances and restraints to which their export growth, and thereby potential for development, are subject.

Priority concerns are fourfold: First, the Uruguay Round and its implementation process has done little to improve market access for goods and services of substantive interest to developing countries. Market access studies carried out jointly by UNCTAD and WTO show that, even if all the Uruguay Round concessions are fully implemented by the industrialised countries, significant tarriff barriers in the form of high tariff peaks exceeding 12%, but in some cases reaching 300% and above continue to affect the agricultural and industrial products of interest to developing countries, such as metals, textiles, clothing, leather, rubber products, wood products and furniture. Unless these tariff barriers are removed, as a priority, by industrial countries, trade liberalisation will not gain credibility or widespread political support in developing countries.

Abuse of anti-dumping actions and other trade contingency measures also compromise benefits from trade liberalisation. We need to remind ourselves that the respective WTO Agreements provide for special regard and exploration of constructive remedies before applying anti-dumping duties to developing country exports’.

As an example, on textiles and clothing, items of crucial importance to the exports of many developing countries, it will be at least 2005 before quantitative restrictions are completely removed. Today, developing countries are thus being deprived of the opportunities which had been available to the developed countries more than a century ago, when the textiles and clothing sector was a critical stepping stone in their industrialisation process.

Second, WTO rules and regimes in new disciplines such as the protection of Intellectual Property Rights have been unbalanced. A high premium has been placed on industrial innovation and patenting; little has been done to afford the same protection to bio-diversity and traditional and indigenous knowledge that constitutes the base for the bio-technological revolution in agriculture and pharmaceuticals. Much of this technology is often derived from biogenetic resources and indigenous traditional knowledge in developing countries. The 1999 Human Development Report estimates that if just a 2% royalty were charged on genetic resources that had been developed in the South, in terms of indigenous or traditional knowledge, developed countries would owe more than US$ 300 million for farmers’ crop seeds and more than US$ 5 billion for medicinal plants. This is a conservative estimate.

There are several concrete examples of bio-piracy, one of which we can cite from my own country’s experience. In 1995, two researchers from a University Medical Centre were granted a US patent for using turmeric to heal wounds. The healing properties of turmeric are documented in our classical texts and it has been used for thousands of years by ancient healers. Our documentary evidence ensured that we were successful in having the patent repealed but others may not be as fortunate, particularly where indigenous knowledge is enshrined in oral traditions.

Discussions on this complex and far reaching problem are carried out in several contexts. Developing countries often realise too late that concessions they may agree to in one forum or an issue are not being matched by a similar concern or equal treatment on items of interest to them. This is why it is imperative that the General Assembly look at this problem in all its aspects and provide some direction.

At the same time, we also need to fashion a viable international technological architecture that rewards and encourages innovation and technological advance, but not at the cost of marginalising the poorest and most vulnerable or enhancing disparities between nations. We need to examine the inequities of a system where over 54,000 patents were filed in 1997 with WIPO and where industrial countries hold 97% of all patents worldwide. It has been further estimated that more than 80% of patents granted in developing countries belong to residents of industrial countries. It should be a matter of global concern that the high cost of technology, through such regimes, is now serving not only to impede further innovation and technological progress with a greater local or national relevance in certain key sectors, but that further research and technological innovations are now hostage to the concerns of a few. Ironically at a time when we, here in the UN, have, to cite only one example, agreed on basic health care as an international priority, the cost of pharmaceuticals governed by such IPR regimes is spiralling, with incalculable human costs. Moreover, studies suggest that the technological innovation leading to patents in the chemical and pharmaceutical industry and the margin of profits has meant that further research and development is focussed not on the major health risks facing the world, but on cosmetic drugs or slow ripening tomatoes. Only 2% of health related research is devoted to pneumonia, diarrhoeal diseases and tuberculosis, although these account for 18% of the global diseases burden. We need to address these issues in a holistic manner if trade in the new millennium is to usher in greater economic prosperity, particularly for developing countries.

Third, a balance needs to be struck between the desirability of seeking a common and uniform set of rules, privileges and obligations applicable to all members of WTO and the inescapable and hard fact that developing country members of WTO are at very different stages of development. Any development oriented round, which is a crucial necessity, must explicitly take up the question of adapting obligations and timing of their implementation to the needs and capacities of developing countries. Specifically, the concept of special and differential treatment that several Uruguay Round and earlier Round Agreements had paid lip service to, needs to be strengthened and given meaning. Indeed, India has tabled a paper entitled `Concerns regarding implementation of provisions relating to differential and more favourable treatment of developing and least developed countries in various WTO Agreements’ for consideration in WTO. Specifically, the areas that need to be addressed include reinforcement of `best endeavour’ clauses, review of transition periods complemented with adequate differential thresholds which are based on measurable development parameters and identified exemptions based on specific criteria relating to the level of development, improved market access for developing countries, transfer of technology at fair and reasonable costs, improvement in quality focus and funding of technical assistance extended, and improvement of food security situation of developing countries, etc.

The fourth area of concern is trade in services, where it is crucial to ensure that the flexibility of the architecture envisaged in GATS remains intact. Effective implementation of Article IV of GATS should be a priority. This provides for substantive cooperation to enhance participation of developing countries in trade and services through negotiated commitment, access to information networks, distribution channels and technology. It is also crucial to address the restrictions imposed on the movement of natural persons. GATS has provided a framework whereby liberalisation of commercial presence/investment can and should play a comparable role for movement of natural persons. Commitments relating to the mode of supply and of movement of natural persons need to become sector and category specific and economic needs tests need to be removed or specific criteria scheduled for their use. Similarly, far more needs to be done to operationalise provisions for facilitated access to mutual recognition agreements concluded between developed and developing countries in the area of recognition of professional qualifications. Similarly, agreements amongst developed countries facilitating movement of natural persons should be extended to networks, distribution channels, etc.

Over and above these specific concerns relating to the Uruguay Round Agreements, recent trends, particularly in the wake of the South East Asian financial crisis, have also brought into focus related issues of concern that we need to address in a comprehensive manner. Firstly, the global economy continues to be characterized by macroeconomic imbalances of great magnitude among the three largest economies, with Japan and Europe posting surpluses of around US$ 10 billion each in 1998 and the US having a deficit of US$ 250 billion. An UNCTAD study which has analysed this indicates that while Japan and Europe are continuing to grow through exports and are contributing little to absorb the costs of balance of payments adjustments, in Asia and in Latin America, particularly in the aftermath of the financial crisis, the US has become a ‘market of last resort’. The ballooning trade deficit in 1999 is inevitably paralleled by a protectionist backlash, which is manifest in, to cite only one example, protectionism in products like steel and oil through the return of the so-called Voluntary Export Restrictions Agreements. The resurgence of such `managed trade’ is and should be an issue of great concern to us. The second worrying trend is the long term impact of the recent financial crisis. An analysis of the adjustments in current account balances undertaken in the aftermath of the crisis suggested that this has been undertaken by the worst possible means: not through a virtuous cycle of export expansion leading to market growth, but through a vicious cycle of import repression, generating losses in export values because of the combined inflationary effects of demand contraction, excess supply and currency devaluations. The sharp cutdown in imports in the affected Asian countries by almost 1/3rd and in Japan by 10% has meant that cumulatively trade growth collapsed from almost 10% in 1997 to 3.7% last year. Studies suggest that the same pattern is now being reproduced in Latin America. This has brought into focus the need to address issues of `coherence’ between the international financial, monetary and trade systems in a comprehensive manner. The third trend of concern is what is being called `grandfather protectionism’ of a new variety, i.e. concerns that regarding environment and labour conditions would inexorably serve the cause of further protectionism.

This is only a brief reflection of the palette of concerns of developing countries. Many of these issues would certainly be addressed in the WTO Ministerial meeting but we in the UN also have a responsibility to send a clear signal on the need to mainstream the concerns of developing countries and to ensure that any future trade discussions centerstage development concerns. An enlightened mutual self interest that would lead to an opening of markets in areas of interest to developing countries, where they have competitive advantages, including in traditionally low resource sectors, could lead to annual exports that would be a sizable multiple of the capital flows received by developing countries in the 1990s and would have a significant impact on their efforts to generate employment and eradicate poverty. There would also be significant benefits for developed countries with a strong Southern demand for capital good and intermediaries. Growth in these sectors could in turn ease the transition in developed countries away from traditional sectors. Moreover, the easing of pressure on developing countries to attract financial flows at any cost would certainly bring a greater degree of stability to global financial markets, with abundant benefits for the investment climate in the North. The `rising tide lifts all boats' approach is not an easy path but bold leadership, purposeful cooperation and empathy can centrestage this approach, generating benefits for all.