Essay on UNCTAD-III

The beginning of 1970s witnessed far-reaching changes in international trade and economy. With Britain’s entry into the European Common Market, GATT’s new drive to enlarge markets, GS.P. Of UNCTAD, S.D.R.s constituting a new shape of world monetary system, a new era in trade and international relations of developed and developing countries has started. UNCTAD-III amongst these sought to pen a novel chapter on various problems of trade and economic relations between developed and developing nations.

UNCTAD-III meeting was held at Santiago in Chile from 13^th April to 7st May, 1972. 120 member nations participated in this meeting, of which 96 were developing countries, forming the so- called “Group of 77.” At this meeting, these underdeveloped nations vehemently attacked the developed world for their unsympathetic attitude towards helping the poorer nations through trade.

Attention was drawn to the fact that, while the world trade had grown considerably during the last decade, the trade of the developing nations rose at a slower rate than that of the developed countries.

The developed countries’ exports amounted to 67 per cent of the world exports in 1960, which again increased to 71 per cent in 1970, whereas, during the same period, the export share of the developing countries declined from 21 per cent to 18 per cent – that too mainly consisting of primary products. Furthermore, during the decade 1960-70, while the intra-Community trade registered a fourfold rise, S.E. Asia’s share of the E.E.C. market dropped from 3 to 1.6 per cent and the total share of developing nations reduced from 22 per cent to 15.9 per cent.

At the Santiago session, many important issues were discussed. Some of the notable issues were: (i) continuance of foreign aid; (ii) low-rated unconditional loans; (iii) some reliefs in debt burden; (iv) shipping freights problem; (v) a link between the S.D.R.’s and development finance. As such the resolution of UNCTAD-III finally incorporated key issues like: (a) transfer to technology (b) international monetary reform, (c) general preferences, (d) reform of the UNCTAD machinery, and (e) an international code of conduct for Liner Conferences.

From the point of view of developed countries, UNCTAD-III was a successful event; as on a number of key issues, developing countries could reach a compromise. From the viewpoint of” developing countries, however, UNCTAD-III was a big failure. For, comparing the draft resolutions on the very issues tabled by the Group of 77, the results of compromise revealed nothing very encouraging. Due to indifference of the developed nations, the Group of 77 did not succeed in establishing institutional links between UNCTAD, on the one hand, and the I.M.F. and GATT, on the other. Yet, there is some hope for monetary reform as a result of Santiago meeting.

The developed nations were forced to concede at last that a link between the S.D.R.s and finance for development purposes should be taken into account in any reform of the international monetary system. Such “link” would increase the foreign exchange of poor countries without any direct cost to the rich countries. Moreover, the poor world would like to spend their S.D.R’s mainly in the developed world, thus, benefiting them.

But there are vital questions like: (i) How will the “link” work? (ii) Should there be an overhaul of the world’s monetary system first to reduce the dominance of the rich nations? On such questions, there was a lot of disagreement or varying opinions. Some countries desired for direct allotment of the S.D.R.s to the reserves.

Some, including India, desired for tying S.D.R.s specifically to development projects which could be accomplished by handing over the S.D.R.s to the International Development Agency. While others preferred S.D.R.s to be used for additional development finance without their being tied to specific projects.

A major issue which was raised at the Santiago conference was that of the problem of changes in shipping freights. It was estimated that 1/3 of total deficit in the balance of payments of L.D.C.s was due to high shipping freights. Further, at present, the rich nations own 92 per cent of the world’s merchant marine, when nearly 2/3 of weight originate from the developing countries.

This definitely imposes a drain on their (L.D.C.s) foreign exchange resources and puts up the cost of their imports and exports. There has been a positive gain on the subject of shipping at the Santiago session as the greatest triumph has been over the agreement reached on an international code of conduct.

In particular, the UNCTAD Director of the committee on invisibles sounded a warning that if such a code was not formulated and honoured, there would be pressure for national regulations. The fundamental objectives of such an international code were:

(i) Promotion of world trade, and

(ii) A new structure of world shipping in which the merchant marine of the developing countries would play an increasing and substantial role.

It is also to be ensured that the future freight rates are consistent with the trade objectives of developing countries and Liner Conferences should consult shippers, shipping organisations and the governments concerned, before taking any decision. It was also stressed that the Conference practices should not involve any discrimination against the trade and shipping interests of the developing countries.

Regarding the code of conduct, the developed countries, however, favoured the principle of self-discipline and self-regulation, but the developing countries emphasised enactment of legislation in support of the code of conduct.

Ultimately, it was decided in the resolution that a preparatory committee should be set up to study and recommend on the points of disagreement and evolve a code of conduct for submission to the General Assembly of UNCTAD. Further, it is also accepted that by 1980, the developing nations should at least own 10 per cent of the total world dead weight tonnage (DWT).

The conference also specified that there should be a minimum interval of two years between freight hikes and that freight rates should be at as low a level as commercially feasible.

A notable achievement of UNCTAD-III has been that the governments of the developed nations agreed unanimously, in principle, on the necessity of shipping conferences providing the relevant financial data while making a demand for revision in freight rates. There was also a consensus on the necessity in freight rates. There was also a consensus on the necessity of arbitration in cases of disputes between shippers and shipping lines, but compulsory arbitration was, however, ruled out by the developed nations.

In fine, though, the urgent demands of the developing countries have been denied, there is some hope of getting some benefits as an outcome of UNCTAD-III. For instance, most European countries have accepted that General Scheme of Preferences and others will have to accept the new realities ultimately on account of the pressure of the Group of 77. Of course, there is an early need for greater unity and cohesion among the Group of 77 and a strong determination to keep up the pressure to win ultimately. Failure of UNCTAD-III should not discourage developing countries; it should rather bring them more closely together to solve their intricate trade problems. The zeal of collective bargaining will brighten its colour one day. UNCTAD has failed but UNCTAD must succeed.