Friday, August 28, 2009

United Nations Conference on Trade and Development (UNCTAD), its Aims and Objectives

The United Nations Conference on Trade and Development (UNCTAD) was established in 1964 following the growing dissatisfaction with the operation of such international institutions as the IMF and GATT. These institutions favoured the developed countries and failed to tackle the special trade and development problem of the less developed countries.

The UNCTAD expected to perform the following functions as laid down by the UN General Assembly.

1. To promote international trade between countries with different socio-economic systems, especially for accelerating the economic development of less developed countries.

2. To formulate principle and policies of international trade and related problems of economic development.

3. To make proposals for putting the social principles and policies into effect and to take such other steps this may be relevant towards the end.

4. Generally, to review and facilitate the coordination of activities other institutions with in the UN system in filed of international trade and related problems of economic development.

5. To be available as a centre for harmonious trade related development policies of governments and regional economic groupings.

Objectives and Achievements of UNCTAD:

UNCTAD is supposed to fulfil the following objectives which have been evolved gradually of the various conferences: (1) Trade in primary commodities (2) Trade in manufactured goods (3) Development financing (4) Technology transfer (5) Economic cooperation among developing countries.

We discuss below the extent to which UNCTAD has been successful in achieving these objectives.

1. Trade in Primary Commodities: The UNCTAD has been in international commodity arrangements since its inception. Less developed countries want to expand, the market for their traditional exports of primary commodities. Developed countries place restrictions on the exports of the latter in such forms as licensing, quotas, tarrifs, health and packaging regulations etc and provide subsidies to domestic producers. Such trade restrictions tend to be higher for processed products than for unprocessed. Besides, exports from less developed countries have been subject to wide fluctuations. Consequently there has been continued deterioration in the terms of trade of primary products of the less developed countries in relation to the export of manufactured products from the developed countries. Since UNCTAD II, the less developed countries have been insisting on International Commodity Arrangement (ICA) to stabilise the prices and market for their exports of primary products. The agreements seek: (1) to stabilise the price of the commodity concerned so as to reduce price fluctuations and the resulting stability in the economies of the less developed countries. (2) To increase its price to compensate for past worsening the terms of trade of less developed countries.

All UNCTAD IV in 1976 it was proposed to have an Integrated Programme for commodities (IPC) and to create a common fund for buffer stock financing. The proposal was to negotiate international commodity agreements to stabilize the prices of 18 commodities, ten of which were to be included in the initial buffer stock scheme. This programme led to the international commodity agreements on only cocoa (1981) and rubber (1980). UNCTAD VI in 1983 also emphasised the importance of negotiating ICA for ten commodities of the five agreements on commodities-coffee, cocoa, sugar, tin and rubber only that for rubber is still in operation.

UNCTAD VII has a subsidiary committee on commodities and the UNCTAD VIII setup standing Committee on Commodities for making recommendations to TDB. The UNCTAD proposed for a $6 billion Common Fund in 1976 to create and finance international buffer stock of ten storable commodities. It was at UNCTAD VII that the Common Fund for commodities under the ICP became operational after number of countries ratified it or expressed their intensions to do so. New pledge announced at UNCTAD VII raised its total pledged capital to 66.9 percent of the $4.7 billion fund allowing it to become operational.

2. Trade in Manufactured Goods (GSP): Less developed countries have strongly urged the developed countries to give them tarrif preferences on their manufactured and semi manufactured goods. A UNCTAD I the G-77 urged the developed countries to grant a Generalised System of Preferences (GSP) to the export of such good to the developed countries. It was at UNCTAD II in 1968 that all members unanimously agreed for the early establishment of a mutually acceptable system of generalised, non-reciprocal and non-discriminatory preferences. The objectives specified for GSP were (a) to increase the export earnings of less developed countries (b) to promote their industrialisation and (c) to accelerate their growth rate.

Under the GSP, most manufactured and semi-manufactured goods from less developed countries to developed countries enjoy tarrif reductions or exemptions from custom duties. A majority of developed countries grant duty free treatment for all or most products eligible for GSP. The US, Sweden, Norway and Finland give completely duty free treatment under their GSP schemes. Japan and Switzerland allow generally duty free treatment with varying rates of duty up to 50 percent lower than under MIN for individual products from less developed countries. The EEC also gives duty free treatment for al industrial products eligible for GSP.

During 1970s constant efforts were made to expand the coverage of the GSP. But in the wake of global recession, rising protectionism and other obstacles in the way of increased access to international markets, the less developed countries experienced as severe set back in their exports of manufactured and semi-manufactured products during 1980-82. Again in 1983-84 slower growth in developed countries and in world trade reduced the growth rate of exports of less developed countries due to fall in international commodity prices. However there has been a moderate recovery in export prices of manufacturers of less developed countries since 1985.

3. Development Finance: Right from the UNCTAD III less developed countries have been voicing their concern over the growing problems of their balance of payments deficits and indebtedness. The UNCTAD II held at Santiago in May 1972 passed a resolution asking the IMF to work out a scheme for the link-up of Special Drawing Rights (SDR) with development finance. This was essential because the SDRs had been linked with individual members quotas in IMF. Since the quotas of less developed countries were small they received very small share of SDRs. The UNCTAD III was also called upon to provide for close examination and to recommend appropriate remedial measures.

The UNCTAD IV held in May 1976 also failed to solve the debt and development finance problem of less developed countries. It passed three resolutions in this connection. The first deals with the debt problem of less developed countries and asked the developed countries to convert DDA debt into grants and establish a frame work within which future debt problem could be solved. The second related to an effective system of international financial cooperation which suggested a number of measures to improve the working of the IMF in relation to less developed countries. The third resolution concerned the establishment of multilateral guarantee facility.

The UNCTAD V held at Manila In 1979 passed a number of resolutions concerned with finance and debt problems of less developed countries. It asked the IMF to examine the over all size of its quotas in relation to the magnitude of world trade and balance of payments deficits of its members and to increase the quota of less developed countries.

The UNCTAD VI held in 1983 and UNCTAD VII held in 1987 relating to development finance, debt rescheduling conversion of loans into grants of the less developed countries.

UNCTAD VIII held in 1992 had on its agenda “resources for development”. It appointed adhoc working groups to deal with investment and capital flows, non-debt creating finance for development and new mechanism for increasing investment and financial flows to developing countries.

4. Technology Transfer: It was at the UNCTAD at Nairobi in 1976 that the resolution was passed for measures which would strengthen the technological capability of less developed countries. It was pointed out that better research facilities, training programmes and establishment of local and regional centres for technology transfer would serve the purpose.

The UNCTAD VI emphasised upon the need for transfer of technology to developing countries in order to promote their speedy and self reliant development. Policy formulation related with the transfer and development of technology varies from country to country. Therefore an international code of conduct on the transfer of technology has been under negotiation in UNCTAD. The code of conduct will provide important elements for the design and development of national policies for technology transfer. The UNCTAD has simply laid down the broad principles for transfer of publicly funded technologies at the inter-governmental level. It may facilitate the process of technology transfer by freer access to sources of information cutting down barriers to freer flow of technology etc.

5. Economic Co-operation among Developing Countries: UNCTAD II held at New Delhi in 1968 emphasised for the first time the need for promoting international cooperation and self reliance among the developing countries. UNCTAD VI held at Belgrade in 1983 again emphasised the need for cooperative efforts among less developed countries through widening the scope of preferential trading arrangements harmonizing industrial development programmes through infrastructural facilities particularly in respect of shipping services and simple payment mechanism under common clearing system. The first step towards economic cooperation among developing countries was taken at the ministerial meeting of G-77 held at New York in October 1982 when it decided to launch Global System of Tarrif preference (GSTP).

UNCTAD VII also stressed other importance of economic cooperation. UNCTAD VIII which setup new Standing Committee on Economic Cooperation among developing countries to study and report on all facts of cooperation toe the TDB. UNCTAD is a form where developing countries can meet, discuss and formulate plans for regional economic cooperation.

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