UNCTAD: Trade and Development Report 2006

UNCTAD: Trade and Development Report 2006
Remarks by Ann Low
First Secretary
U.S. Mission to the United Nations

September 28, 2006

The United States welcomes all work done as part of the vital task of increasingour collective understanding of the factors that shape trade policy and its role in promoting economic growth and reduction ofpoverty.

We also have an enduring commitment to those international institutions which were created and charged with achieving our shared purpose – to strengthen the global economy and to lay the basis for broader prosperity -- particularly the rules-based multilateral trading system and the pursuit of multilateral trade liberalization through the GATT and its successor, the WTO.

Therefore, it is with regret that we note that several of the recommendations in the Trade and Development Report run counter to the foundations of sound economic andtrade policy, as well as research of other international organizations dedicated to promoting growth and actual successful experiences of developing countries.

Specifically, while the report recognizes the dangers and difficulties of states picking industries to promote and the likelihood that protection creates special interest groups that will oppose trade opening, it goes on to recommends protection. Infant industry policies have been tried in many countries and they have failed. UNCTAD’s research should reflect those experiences.

I was glad to hear the Director’s clarification that states should not pick industries and his emphasis on recent global growth. We would suggest that reforms of the 1990’s, including an emphasis on sound economic policies and good governance are paying off. We would like to echo the EU’s concerns regarding the Report’s treatment of governance.

Regarding the proposal for multilateral governance on the financial side to address global current account imbalances, we would suggest instead looking at the flip side of the equation. The US is running a large capital account surplus reflecting a favorable business environment with high output and productivity growth. We believe in private sector led growth and strongly encourage efforts to improve investment environments worldwide, which will help address these imbalances.

The report deals with policy space for developing countries as an aggregate and tries to operationalize the concept. Given the wide variety of developing countries and international agreements, the concept of policy space as an aggregate is not useful. Moreover, it can be harmful since it implies that all developing countries want to opt out of their international commitments. Such perceptions are not in anyone’s interest.

We were also disappointed to see trade issues presented through a dichotomy of North and South, which is simply at odds with the economic reality of modern global trade. Commercial interests and prospects for trade are hardly homogenous among the developing countries, and barriers to trade among developing countries are significant. We would have liked to see more discussion of how UNCTAD could promote greater trade among developing countries.

We note the singular focus on industrial goods of this report -- and very little about the importance of infrastructure services liberalization in any development strategy. Given that the service sector is growing faster in developing countries as a percentage of GDP than in developed countries, accounting for over 50 percent of new jobs in Latin America, the Caribbean, and East Asia, and recommendations from UNCTAD experts on the sector’s importance, it would have been a useful area to cover.

We note the emphasis in the report on remittances, but caution that as the report states, the statistics are not very reliable and therefore may cover work that is not trade in services. Furthermore, the multilateral setting of a trade negotiation is simply not the place to try to solve the complicated issues related to international migration and labor. The GATS does not cover all work, but only service suppliers. There is every reason to expect that legal temporary entry for service suppliers represents only a small fraction of remittance flow.

Regarding, the section on Flexible Support Policies, from our perspective, the use of subsidies will make it even harder for the vast majority of resource poor developing countries to compete for investment with the most globally competitive developing countries that have deep pockets. Rather than advocating flexible support policies, UNCTAD should be calling for stricter disciplines on subsidies, so that investment does not simply follow easy access to capital, but is instead based upon a country's inherent comparative advantages.

In the TDR’s treatment of subsidies, we would have liked to see recognition of the negative effect of fisheries subsidies. The world's remaining fisheries stocks are overwhelmingly found in developing country waters and the high seas, as waters near industrialized countries and East Asia have been dramatically depleted by highly subsidized fleets. Effective disciplines on fisheries subsidies have been recognized by many countries as a win for trade, a win for development and a win for the environment.

Regarding TRIPS, we are concerned that this report appears to advocate very strong positions that are unsupportable. The report also mischaracterizes the Intellectual Property Rights provisions of US bilateral and multilateral trade agreements as being harmful for development. These negotiated agreements provide broad flexibility for our Free Trade Agreement partners to develop strong IP systems while taking into account their varied national interests.

On TRIMs, we would like to echo the remarks made by WTO Director General Lamy debating the TDR's recommendations on allowing developing countries to impose TRIMs, contrary to their WTO obligations.
- Clearly the Trade and Development Report has been successful in prompting discussion of important policy issues. In that light, we thank the Secretariat for its work.