Discuss the role UNCTAD’s have played in restrict­ing international economic relations


The end of the Second World War brought about an end to the policy of Colonialism on the part of the imperialist powers. It was in fifties that the Asian countries attained independence and in sixties the African countries.

Consequently, Colonialism in the sense of direct foreign rule has to come in end almost in the entire world except in a few dark spots in South Africa. Still, this is only political independence that the countries of Asia and Africa got.

They did not get economic independence. In the economic field, these countries still continue to be dependent upon the developed nations of the West.

Causes for UNCTAD’s:

The newly born countries were faced with an international economic system that encouraged their dependence upon the highly developed countries of the world.


For development, they needed the capital and technology, and in return provided raw-materials to the developed countries. This system has worked to the benefit to the developed countries in many ways.

Firstly, the terms of trade between the developed and developing countries are designed in such a way as to benefit the developed nations. In contrast to the prices of the raw-materials exported from the develop­ing countries, the prices of the manufactured goods exported by the developed countries are fixed at a very high level.

And this creates a high imbalance in trade relations giving rise to fill this gap of balance of payments. Consequently the nations of the Northern hemisphere are becoming richer while those of the Southern hemisphere poorer.


Secondly, certain monopolist firms of the U.S., Western Europe and Japan, known as the Multinational Corporations which operate in the developing countries are making gigantic profits by pumping out the capital into their own countries of origin.

In this way, these three hundred monopolist firms are exploiting the resources of the developing countries themselves. A major portion of the exports of the developing countries are produced by these multinationals.

In this way, pursuing a policy of neo-Colonialism, the international monopolists infringe upon the sovereignty of the Third World countries and seek to gain control over their natural resources, impose unequal agreements on them, and impede the development of their independent national economies.

Thirdly, the developed countries have established certain preferential blocks such as European Common Market, COMECON etc. which not only protect member countries at home but also shelter large overseas market against competition from the Third World countries.


Fourthly, the already existing institutions such as the International Bank for Reconstruction and Development, and the International Mone­tary Fund, could be of no avail to the developing countries as their machinery and working is loaded in favour of the developed countries.

Whatever aid is given by the World Bank, does not serve any purpose due to a low rate of economic growth and a high level of unemployment in the deve­loping countries.

Consequently, the international economic system based on exchange depreciation, preferential trade blocs and discriminatory restrictive devi­ces have brought about virtual destruction of the economies of the Third World countries. The problem of balance of payment of the Third World Countries, is getting difficult.

Their industries are not in a position to hold in competition with the well-established industries on the deve­loped countries. Certain changes in the Articles of the GATT (General Agreement on Trade and Tariff), the working practices of the I.M.F. (International Monetary Fund), and in the lending practices of the World Bank have been made from time to time to ease the problem. Still, the gap between the incomes of the Third World and the developed countries is becoming wider.


Aim of UNCTAD’s. It was with a view to finding out ways and means to bring an end to this inequality between the developed and deve­loping, countries that the United Nations called a conference of both categories of countries in 1964.

So, the meeting came to be known as UNCTAD (United Nations Conference Trade and Development). It was at the first UNCTAD held at Geneva in 1964 that the Third World coun­tries tried to struggle for equality in international economic order by foregoing a link between the countries of Asia, Africa and Latin America.

Accordingly, they formed a sort of International Trade Union which later on came to be known as “the Group of 77”. This group made similar demands at the subsequent sessions of the UNCTAD held in New Delhi in 1968, at Santiago (Chile) in 1972, at Nairobi in 1976, and at Manila in 1979. Their demand included a greater share of world’s wealth, and a more equitable, just distribution and utilisation of the resources of the world.

The idea underlying these UNCTAD’s is to make efforts for the reorganization of international economic relations on the basis of the principles of sovereign equality and co-operation of all States regardless of their socio-economic system with a view to removing discriminatory practices from international economic exchanges.


The developed countries are to be encouraged to deploy their resources as equal partners in the world. The developing countries are to receive a greater share of world s wealth and more equitable, just distribution and utilisation of the resources of the world.

The effects of the various UNCTAD’s to achieve various ends is discussed as under. These ends are :

(a) Formulation of Progressive Principles:

These conferences have underlined certain basic fundamental and progressive principles on the basis of which equitable economic relations can be established between the countries of the Northern and Southern hemisphere.

The UNCTAD— 4A documents certain a number of such principles. The first (general) principle says: “Economic relations between countries, including trade relations shall be based on respect for the principle of sovereign equality of States, self-determination of peoples and non-interference in the internal affairs of other countries.”

This principle stresses on the sovereign equality and non-interference in the internal affairs of other countries as the only basis for the expansion of equal and mutually beneficial commer­cial and economic relations between all States.

The sovereign equality of States entitles every State to dispose of her own economic resources and to secure effective control over her economy including the right to nationalize.

This principle was also specified in the Third UNCTAD held in 1972 at Santiago whereby it was resolved that “Every country has the sovereign right freely to trade with other countries and freely to dispose of its natural resources in the interest of the economic development and well- being of its people.”

Unquestionably, the right to nationalize and establish control over foreign-owned property is the basic condition for abolishing the exploitative foundations of the capitalist system.

The Fourteenth Principle of UNCTAD-64 aims at blocking the attempts of big monopolies as Multinational Corporations to retain their privileges in the sphere of international trade and finances and exploita­tion of the natural resources of the Third World countries.

The principle says: “Complete decolonization, in compliance with the United Nation Declaration on the granting independence to colonial countries and people and the liquidation of the remnants of colonialism in all its forms, is a necessary condition for economic development and the exercise of sove­reign rights over natural resources”.

These principles were further developed and consolidated in the declaration about the establishment of a New International Economic Order, adopted at the sixth special session of the U.N. General Assembly held in April, 1974.

There is no denying the fact that the principles of UNCTAD—64 had a great influence upon the elaboration of the Charter of Economic Rights and Duties of States that was adopted by the U.N. General Assembly in December, 1974.

(b) Peaceful Co existence:

In fact the UNCTAD principles govern­ing International Trade Relations and Trade Policies are based on the principle of peaceful co-existence.

Peaceful co-existence means the deve­lopment and expansion of economic co-operation on the basis of complete equality and mutual benefit, equal rights, mutual understanding and trust between states, consideration of each others interest, non-interference in each others’ internal affairs, recognition of the right of each State to solve independently all issues relating to its own country, and strict respect for the sovereignty and territorial integrity of all other countries.

The great importance of mutually beneficial co-operation among all countries is stressed in the sixth principle of UNCTAD-64 which calls on States “to co-operate in the creation of such conditions of trade that would promote the general “expansion and diversification of trade between all countries, whether at similar levels of development or having different social system”.

The principle of peaceful co-existence was further developed and consolidation in a number of other important international acts and documents regulating economic relations. The Charter of Economic Rights and Duties of States proclaims this principle in particular as one of the main foundations for building mutual economic relation between States.

(c) Rejection of Most-favored nation Treatment:

Most- favored nation treatment refers to the trade relations between two or more countries that have concluded a treaty pledging to grant to each other in their mutual trade the same rights, privileges and concessions they grant or will grant in future to the other.

The most-favored nation principle is widely applied in international economic relations and figures in most trade and economic agreements. Examples of such treatment and offered by the GATT, EEC and COMECON (Council for Mutual Economic Assistance).

COMECON is an Association of East European Communist countries while EEC is an association of Western European counties such as France, Great Britain, West Germany etc.

Eighth principle of the UNCTAD-64 prohibits most-favored nation treatment that goes against the trading interests of other countries. It reads : “International trade should be conducted to mutual advantage not on the basis of most-favored nation treatment, and should be free from measures detrimental to the trading interests of other countries.”

The EEC inflicts big damage on the interests of the developing countries of Asia, Africa and Latin America. Its practice shows a patent departure from the essence and meaning of the most-favored nation UNCTAD principle.

Such measures are in direct conflict with the Ninth principle of UNCTAD-64 which says that the economic unification of any two or more countries should be carried out in such a way as not to hurt or unfavorably affect the expansion of their imports from the Third World countries.

(d) Common Fund:

At the UNCTAD-IV held at Nairobi in 1976, achievement in two fields was marked integrated commodity Pro­gramme and creation of common fund for easing the debt burden of the developing countries.

This conference laid down a time bound pro­gramme on commodity negotiations within an integrated framework. The developed countries gave a broad acceptance of this programme.

On the creation of a common fund for easing debts burdens, the developed countries showed their willingness to go to a preparatory conference to discuss its objectives and modalities.

Dr. P.C. Alexander, Secretary Foreign Trade and Deputy leader of the Indian Delegation, commenting on the outcome of UNCTAD-IV said that even the decision of the developed countries to negotiate “on the common fund without prior acceptance of this mechanism was a significant advance from the original position which was one of resistance to the idea I.S. Chadda who played an active part in negotiations at Nairobi said that the resolution represented “the first concrete measure towards new international econo­mic order”.

Actual Performance of the Developed Nations at UNCTAD-V. However, the actual performance on the part of the deve­loped nations is quite disheartening. The debate at the UNCTAD-V showed that in spite of strong denunciation of Protectionism by the deve­loping countries, the developed countries made a strong defence of the multilateral trade obligation packages.

West Germany’s Economic Minister, Lraf Lambsdoroff, sought to play down the central theme of restructuring the world economy by saying that UNCTAD-V should concentrate more on issues of immediate importance rather than the whole range of economic policy.

Actually, Protectionism is playing hell with the Third World. In the year 1979-80, the developing countries, exclu­ding the OPEC, are running a combined payments deficit of 540 billion dollars.

There was a great deal of discussion, but little evidence of positive action. Even the old commitment of prevailing 0 7 per cent of the Gross National Product by the developed nations to the developing nations, as provided in the UN resolution was not re-affirmed.

West Germany pro­mised to increase the amount of poor aid level. But indicated that the amount of increase would not be enough to reach the UN target of 0.7 per cent of GNP and added that “we are doing our best to come close to it.”

The foreign debt of the recipient countries, according to IMF estimates, now comes to nearly 30 per cent of their gross national pro­duction, and is therefore difficult to repay. No developed country dare say that it would write off the amount of loan as was done by Spain sometime ago.

No developed country was prepared to revise the terms of trade which are favoured to them. By pricing their products at a disproportiona­tely high level in relation to the prices of raw-materials and primary products, the industrialised nations have been fleecing the developing countries. This big swindle has refused in neutralizing the benefit of the foreign aid received by the developing nations.

No concrete proposal for restructuring the World Bank and IMF was made. Both these institutions need to be restructured to enable the developing countries to have an effective say in their working.

The World Bank needs to enlarge the area of its soft loan assistance. The IMF should increase the S.D.R’s (Special Drawing Rights) available to the developing countries.

The only achievement of the Manila Conference is the establishment of a commodity fund designed to reduce fluctuations in the prices of Third World products. But here also the picture is far from reassuring as the U.S.A. remained reluctant to extend its whole-hearted support to the Idea.


The efforts for the establishment of a New Inter­national Economic Order are not going to succeed unless and until it is recognized that the real are issues such as much political as economic.

The search for a New International Economic Order can only succeeded if it is recognized that it would also mean a new political order. The issues pertain as much to the sharing of power between the strong and the weak as to a sharing of prosperity between the rich and the poor.

It is not the lack of economic wisdom but that of political will which is preventing progress.

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