Essay on the Recommendations Made by UNCTAD-I

UNCTAD’s action programme and priorities have been laid down in the various recommendations adopted by the first Conference in 1964. It was realised that, the prime responsibility for the economic advance of developing countries lay on their shoulders only.

Nevertheless, foreign trade and international economic relations of these countries were to be considered as crucial factors determining the pace of their economic growth. For this, the Conference laid down a host of principles, policies and recommendations to bring about basic changes in the set up and working of trade relations between advanced and poor nations.

The main purpose of the recommendations made by the Conference was to adopt a new international division of labour and make the external sector conducive to the developing countries.

As such, the Conference made a standstill recommendation to the developed nations not to erect further tariff walls and other barriers to the import of products of export interest to developing nations. Further, the developed nations were recommended to progressively reduce the existing trade barriers and allow the flow of exports from the developing nations without insisting on reciprocity of concessions.

It also recommended to the developing countries, some positive measures of export promotion. Particularly, the Conference suggested the recognition of international commodity agreements as an integral part of international trade policies which aimed at securing remunerative, equitable and stable prices for the developing nations.

The conference further realised that, the developing nations must progressively diversify their economies (from primary producing to industrial) and develop new lines of manufactured exports. Appreciating the difficulties of developing countries in this respect, the Conference adopted certain guidelines for the elimination of tariffs and such other barriers in respect of manufactured exports from these countries.

The Conference also recommended that each developed nation should transfer annually at least one per cent of its income to developing countries by way of foreign aid.

The Conference also put forward a number of recommendations to improve the invisible trade of developing countries through development of shipping, tourism, etc.

Out of these laudable recommendations of UNCTAD, nothing was, however, substantially translated into practice. Though there has been some progress in the matter of international trade arrangements and a notion is created among the rich nations for giving tariff preference to the poor countries in the Western markets, no action for the same has been taken so far.

There has been a lot of disagreement prevailing among the rich countries in giving generalised preferences to the poor nations. Especially, the French preference for a selective approach and for market allocations, the current preferential arrangements with the Commonwealth and ECM, have been posing serious impediments, in this matter. Under the recent Kennedy Round, the principle of preferential entry for less developed countries was adopted but nothing was put into practice.

The only benefit of UNCTAD that was realised in the Kennedy Round was the acceptance of the principle of non-reciprocity in tariff negotiations. But unfortunately, the tariff cuts applicable to items of direct export interest to less developed countries have been meagre compared to those meant for the products of primary export interest to advanced nations.

Moreover, tariffs have been reinforced by severe non-tariff barriers in advanced countries for many products of export interest to developing countries. Particularly, the effective protection of processing in developed nations remains a major obstable to access for manufactured export from developing nations.

Likewise, regarding foreign aid programme, only a few advanced nations have implemented the one per cent target (as laid down by UNCTAD) for development assistance. In 1966, for instance, only 0.62 per cent of the GNP of developed countries was transferred (in the form of aid) to poor nations. Moreover, aid is given on hard terms and conditions so that, poor countries are burdened with high debt-servicing charges.

In short, the first UNCTAD Conference programmes made very slow progress in concrete action.

5. Problems and measures of economic integration and trade development among developing nations.

6. Special measures for economic and social upliftment of the last developed among the developing nations.

7. General review of the work and functions of UNCTAD.

During the New Delhi round of UNCTAD, several aspects of trade preferences and concessions were discussed. The conference reaffirmed that for prosperity as a whole, a generalised, non- reciprocal and non-discriminatory system of preferences in favour of the less developed countries should be implemented as soon as possible which would assist them in increasing their export earnings and so contribute to accelerate the rate of their economic growth.

It has been realised by the developed countries that if export earnings of developing nations decline, their external purchasing power reduces; hence, their importing capacity, as a result the exports of developed nations to these countries will fall and the world trade may experience a down turn.

To avoid this misfortune, it becomes inevitable that export earnings of the developing nations should be augmented through liberalisation policy adopted by the developed nations. Tariff and non-tariff barriers should be removed and a more free trade is to be encouraged by the developed nations. Further, to enhance and maintain world prosperity, developed nations should also give, necessary technological and financial assistance to developing countries for their rapid economic expansion.

The final resolution of the conference, therefore, stressed that a mutually acceptable system of generalised, non-reciprocal and non-discriminatory preferences beneficial to the developing countries should be immediately established. It is popularly known as the Generalised Scheme of Preferences (GD.P). The objective of such a system of preferences has been:

1. To increase export earnings of the less developed nations.

2. To promote their industrialisation, and

3. To accelerate their rates of economic growth.

To meet this end, the conference established a Special Committee on preferences as a subsidiary organ of the Trade and Development Board, which was to pay special attention to this matter.

Further, during the conference, the developed nations reaffirmed their desire to transfer at least one per cent of their GNP resources to the developing countries through their aid programmes. The developed countries also agreed to provide concessional terms of official lending and to liberalise the terms of international lending and finance. The delegates of the socialist nations in the conference, however, favoured the stimulation of export earnings by the developing countries rather than aid concessions by the developed nations.

The conference adopted a Charter of Development which would offer permanent protection against economic deterioration of developed nations and increased opportunities of development for the developing nations.

In regard to commodity agreements it was decided that, the conference should be reconvened before June 1968 to evolve an international agreement on cocoa. Similarly, it was laid down that the Sugar Agreement should come into operation before January 1969. In case of other commodities, however, the conference suggested that this matter be studied further.

The less developed nations, however, urged at the conference that the advanced countries should remove all trade barriers in their markets to the entry of poor nations’ commodities in primary, processed or semi-processed forms. But no due attention was paid to this plea.

The conference did not deal with the possibilities of agreed solution to the problem of prices, trade liberalisation and increased access to the markets of advanced countries for the primary products exported by the less developed nations. The resolution of the conference merely asked the Trade and Development Board to follow the activities of existing commodity groups with a view to promoting international cooperation in this matter.

The conference, however, urged that the socialist countries should expand and diversify their trade with the developing countries by according special preferences to the products of these countries. The permanent machinery of UNCTAD was entrusted with the responsibility of promoting trade relations between socialist and developing nations.

The conference also stressed the need for trade expansion and economic integration among the developing countries. Thus, under the skeleton of UNCTAD, the ‘Declaration of Intent’ by the poor nations was matched by the ‘Declaration of Support’ by the rich nations.

The rich nations declared support to the integrated endeavours of development of poor nations by rendering them financial and technological help. Similarly, the poor nations consented for the mutual economic integration and trade expansion among them. The conference, however, entrusted the work of dealing with certain unsettled issues in this regard to a subsidiary body of the Trade and Development Board.

It may, however, be said that the New Delhi session of UNCTAD could not make any significant achievements and concluded with disillusionment writ large all over. Most of the problems facing the conference remained unsolved, as there was no consensus on them.

Some European countries have, however, given some concessions and facilities under the G.S.P. especially to exports of manufactured and semi-finished goods produced by the less developed countries. But, the U.S. has not done anything in this matter as yet. On the contrary in 1971, when the U.S. imposed a 10% surcharge on her imports in order to save the dollar from crisis, the developing nations’ exports to the U.S. had to suffer to that extent.

And even though, after devaluation of the dollar, this surcharge was removed, the purchasing power of foreign exchange reserves of the developing nations had declined at least by $50 crores as a result of dollar devaluation.

Similarly, though, the E.C.M. countries rendered some facilities to the developing countries under the GS.P., it did not serve any good purpose under the import quota system adopted by them. As a result, no fair and free trade possibilities remained open for the developing countries in the European Common Market. It is also feared that, the problem will be aggravated further by Britain’s official entry into the E.C.M. by January, 1973.

Further, at the first meeting of UNCTAD, it was decided that, since poverty anywhere was danger to prosperity everywhere, rich nations should use at least 1 % of their national income for aid to the developing countries. But, this has not been successfully implemented. In 1961, the aid was 0.96% of G.N.P. of developed nations. It, however, declined to 0.74% in 1970.

In short, UNCTAD-II, though hopeful, had remained unsuccessful in achieving its goal.