Page 1

UNITED NATIONS CONFERENCE ON TRADE AND

DEVELOPMENT

GLOBALIZATION, COMPETITION, COMPETITIVENESS

AND DEVELOPMENT

High-level segment of the

44th session of the Trade

and Development Board

23 October 1997

UNITED NATIONS

New York and Geneva, 1998

Notes

The designations employed and the presentations of the material do

not imply the expression of any opinion whatsoever on the part of the

Secretariat of the United Nations concerning the legal status of any

country, territory, city or area or of its authorities, or concerning the

delimitation of its frontiers or boundaries.

The accounts of the statements made at the high-level segment were

compiled on the basis of transcriptions of original statements and

interpretations. They were prepared under the sole responsibility of the

UNCTAD secretariat.

TD/B/44/20

iii

PREFACE

The rapidly increasing economic interdependence of countries

which has characterised the globalization phenomenon over the past

decade has been nowhere better manifested than in the growing

participation of the developing countries in international trade and capital

flows - thus improving the global division of labour and allocation of

savings and investment. Sound and stable macroeconomic policies and

outward-oriented trade policies have been important country-level

factors in this change. But globalization is driven by enterprises seeking

profits wherever they can earn them in a ruthless competitive drive which

ignores borders and seeks to exploit all available sources of

competitiveness - be they labour costs, capital costs, raw material costs,

locational advantages, the presence of partner firms or other factors - in

whatever markets they choose to compete. And although exposure to the

competitive pressures of international trade and the influx of foreign

direct investment may well be stimuli to improved competitiveness,

Governments everywhere have recognised that, in creating the conditions

for enterprises to compete at home and abroad, they must at the same

time bear broader social and economic objectives firmly in mind.

It was to address this policy conundrum that UNCTAD organised

the High-level Segment of the Trade and Development Board, of which

the present volume provides a comprehensive account. The morning

session was devoted to a discussion on how competitiveness is achieved,

the role of competition law and policy therein, and the consequences of

the search for competitiveness, both on employment and growth and on

development, particularly that of countries already marginalised in the

global economy or facing the risk thereof. The reader will form his or

her own judgment on how successfully we met our objectives, but for my

part I believe that the debate was rich and rewarding, with a strong

emphasis on the importance of domestic policies, including competition

policies, in making globalization beneficial for all.

As the Moderator of the Segment, Minister Jan Pronk of the Netherlands,

put it, participation in the world economy is a necessary, but not

sufficient, condition for sustainable human development of a whole

society.

A key to international competitiveness will be the ability of various

players to benefit from greater efficiency in their trade practices, in

particular through lower transaction costs. This is an area in which the

advent of new technologies and planetary networks such as the Internet

can radically affect the relative advantages of countries and enterprises.

iv

In this respect, the emergence of electronic commerce represents a major

challenge, as well as an unprecedented source of opportunities, for

developing countries and their enterprises, and the afternoon session

focused on this new challenge.

Since several proposals (emanating from the United States, the

European Union, Japan and the OECD respectively) have now been

tabled for a "global framework for electronic commerce", it is important

to promote understanding of such proposals among developing countries

and economies in transition and to contribute to the rapid production of

a positive global agenda on electronic commerce and its impact on trade

and development.

This is an important and multifaceted endeavour, which includes

policy, economic, regulatory and technical aspects. A productive and

action-oriented reflection on electronic commerce will require the

mobilization of civil society, including Governments, the business sector,

non-governmental organizations and academia.

The launching of "Partners for Development" and the

announcement, made at this High-level Segment of the Trade and

Development Board, that the first meeting will be held in Lyon, France,

from 8 to 13 November 1998 therefore fits in perfectly with the debates

of the High-level Segment. With its long history, cultural wealth and

openness to international cooperation, Lyon is the ideal place to

inaugurate a new way of working in the economic and social sector of

the United Nations, a way that will show confidence in the imagination

and resourcefulness of all parts of our societies. This, to my mind, is a

most exciting way for the United Nations and for UNCTAD to move into

the third millennium.

Rubens Ricupero

Secretary-General of UNCTAD

v

CONTENTS

Page

Introduction ...........................................................

1

Part one: Globalization, competition,

competitiveness and development .......................

3

1. Opening address ..............................................

3

2. Reports on the discussions of the

Trade and Development Board .......................

8

3. Presentations by panellists ..............................

17

4. Follow-up discussions .....................................

42

Part two: The future of competition

A perspective on electronic commerce ...............

73

1. Presentations by panellists ................................

73

2. Follow-up discussions ....................................... 90

Part three: Partners for Development ..............

119

Globalization, competition, competitiveness and development

1

INTRODUCTION

The ninth session of the United Nations Conference on Trade and

Development, held in Midrand, South Africa, from 27 April to 11 May

1996, adopted “A Partnership for Growth and Development” and the

“Midrand Declaration”.

According to “A Partnership for Growth and Development”, the

regular session of the Trade and Development Board should include “a

segment ... to deal with a substantive policy item with a view to

attracting high-level participation. Personalities from the public,

private/business and academic sectors in areas related to UNCTAD’s

work should be invited to attend.” The forty-fourth regular session of

the Board was held from 13 to 23 October 1997, and the high-level

segment was held on the last day of the session. The theme selected for

the high-level segment was “Globalization, competition, competitiveness

and development”. The morning session of the segment was devoted to

a panel discussion on the selected theme, while the first part of the

afternoon session was devoted to a panel discussion on a related topic,

namely “The future of competition: A perspective on electronic

commerce”. Accounts of these two panel discussions are provided in

parts one and two respectively of this publication.

The “Midrand Declaration” states that “the Secretary-General of

UNCTAD will convene a meeting with actors in development to advise

him on how to enhance the participation of civil society in UNCTAD to

build a lasting partnership for development between non-governmental

actors and UNCTAD”. The first meeting of Partners for Development

will centre on the theme “Markets and development”, and it will take

place in Lyon, France, in November 1998. Preparations for the meeting

were launched at the second part of the afternoon session, and the

statements made in connection with the launching are reflected in part

three of this publication.

The afternoon session of the high-level segment was held jointly

with the Second Committee of the General Assembly in New York using

videoconferencing facilities, thus constituting the first ever United

Nations joint intergovernmental meeting between Geneva and New York.

Globalization, competition, competitiveness and development

2

Part One

GLOBALIZATION, COMPETITION, COMPETITIVENESS

AND DEVELOPMENT

1. Opening address

Mr. Rubens Ricupero, Secretary-General of UNCTAD

I would like to explain why we chose for the High-level Segment

this subject of the relationship between globalization, competition,

competitiveness and economic development. Last year, we had as the

main subject of the Segment the problem of investment, and particularly

efforts to arrive at a multilateral framework for investment. This year,

we are taking up another central problem of globalization, which is

competition, because as you know the principal driving force in the

globalization process today is precisely the search of enterprises for

profits worldwide, and in that search firms now have to pursue strategies

which allow them to exploit all available sources of competitiveness on

whatever markets they choose to compete. This, of course, has been

made possible on the one hand by advances in technological progress,

which have greatly increased the scope of the international division of

labour and factor mobility, and on the other by the liberalization of world

trade in the course of the various rounds of multilateral trade

negotiations.

But in its widest sense competition also means the survival of the

fittest, and indeed it has been said that competition kills competition.

Competition is such a systemic issue that one can say it is at the heart

of the discussion not only of the problem of globalization but also of the

trade problematique in general. There has always been broad

recognition of the need for government intervention to maintain markets

which are structurally and operationally competitive. If globalization and

liberalization are to lead to competitiveness and development, they

evidently need to be accompanied by appropriate competition policies

and laws to prevent a situation in which the elimination of tariff and non-

tariff restrictions on trade is negated by firm-imposed barriers to

competition or by government-imposed distortions of free competitive

Globalization, competition, competitiveness and development

3

markets.

If it is true, as many economists argue, that competition will

normally generate static efficiency gains in the short run, Governments

will nevertheless still need to decide what types of market structures are

best suited to their economies in order to obtain dynamic efficiency gains

in the long term. Similar issues arise at the global level in connection

with, for example, the protection of intellectual property rights.

Competition policy and laws thus need to take into account the specific

development features and constraints of countries at different levels of

development so as to be compatible with domestic policy objectives and

instruments.

At the global level, the rapidly increasing economic

interdependence of countries has been nowhere better manifested than in

the growing participation of the developing countries in international

trade and capital flows, thus improving the global division of labour and

allocation of savings and investment. As this year's Trade and

Development Report pointed out, among the asymmetries of

globalization is the fact that the liberalization of the world economy has

not proceeded in an entirely balanced way. For example, trade

liberalization has proceeded more slowly in products where developing

countries are more competitive. By contrast, many restrictions have

been removed on the freedom of movement of capital, where

industrialized countries have a comparative advantage.

Globalization has also spawned the perception that differences in

industrial policies can create distortions in trade and therefore that these

policies should be brought under multilateral or regional disciplines.

And the increased mobility of productive resources has led to this

concern being extended to broader social, fiscal and environmental

issues. Thus, many policy-makers tend towards the view that by not

adhering to or not effectively enforcing international norms, countries are

creating unfair competitive advantages for themselves in attracting

investment and competing in international trade.

As you know, one argument that is frequently raised is that, as a

direct result of the Uruguay Round, particularly in areas like norms,

subsidies, and the problems of trade-related investment measures

(TRIMs), the scope for freedom in the industrial and trade policies of

government has been narrowed, and you no longer have available as

tools for development the kind of policies that were used in the 1950s or

Globalization, competition, competitiveness and development

4

in the 1960s and 1970s by Asian and Latin American countries.

This confluence of factors has led all countries to seek operational

policies which could ensure that they benefit from the efficiency gains

that a liberal trade and investment regime, coupled with deregulation and

privatization, can offer, while at the same time ensuring that their broader

social and economic objectives are not compromised. The challenge

facing all of us is therefore to design policies that permit a liberalization

of trade and investment while preserving the ability to pursue these

broader goals. This may call for a broader concept of competition

policy and laws at the national level and stronger international

cooperation than has been the case so far.

It is with this background in mind that we in the UNCTAD

secretariat have designed this morning's part of the High-level Segment.

To keep the discussion within manageable proportions,

Globalization, competition, competitiveness and development

5

we have suggested that this morning's session concentrate on four rather

closely related questions.

The first question is how have some developing countries

succeeded in achieving competitiveness in specific sectors or industries,

and what policies were conducive to success? In particular, was

exposure to international competition sufficient, or were active policies

for the promotion of competitiveness also necessary?

The second question concerns precisely the role of competition law

and policies. What role have such policies played in establishing the

necessary conditions for the successful integration of developing

countries and economies in transition into global markets?

The third question is to what extent has success in achieving

international competitiveness had positive consequences for

employment, growth and development? Experiences in this regard differ

considerably from country to country, and I anticipate a lively debate on

this key policy question.

The fourth question for debate and reflection today is to what extent

has the risk of marginalization facing the least developed countries and

other structurally weak or vulnerable economies been increased by the

process of globalization? If it has, the natural follow-up question to pose

is: what can such countries do to accelerate their growth and

development?

This afternoon, we shall turn to a new challenge facing competition

and competitiveness in international trade as a result of the advent of

electronic commerce. We shall try to concentrate on a dimension that

has been remarkably absent from the debate on electronic commerce,

namely the development dimension. Many of the proposals that have

been made could indeed be considered positive ones in terms of the

development process in developing countries. However, in the absence

of development-specific thinking and analysis of the various options at

hand, it remains difficult for these countries to express active support for

a positive agenda on global electronic commerce. Today's discussions

offer a timely opportunity to begin to fill this gap.

You know that the advent of electronic commerce constitutes a

challenge to traditional thinking about competition and competitiveness

in international trade. In many respects, the strategies followed by

Globalization, competition, competitiveness and development

6

organizations and enterprises prefigure the ways in which competitive

and sometimes anti-competitive behaviour will shape global markets in

the years to come.

For small players, including many developing countries, especially

the least developed ones, and more generally small and medium-sized

enterprises, electronic commerce offers unprecedented ways of

competing in foreign and international markets. At the same time, the

simple fact that electronic commerce cannot take place in the absence of

minimal telecommunications infrastructure raises direct questions of

access for such smaller players, as well as for entire regions, such as

Africa. This of course is the problem of connectivity.

From a policy point of view, electronic commerce is still largely

uncharted territory. For some of its most active participants, this is an

asset, since it will allow a rapid development of international electronic

trade flows with a minimum of legal, regulatory and fiscal obstacles.

Others, on the contrary, consider that electronic commerce will not yield

its full benefits unless some rules of the game are established to make

it a truly global instrument for economic growth and development.

Some of the main policy issues to be addressed in the afternoon

will be in terms of access - how can electronic commerce be rendered

accessible to all, and in particular to the less advanced regions of the

planet? How can decreasing costs in telecommunications be better

geared to LDCs' participation? On the question of trade negotiations -

how should the multilateral process aimed at further trade liberalization

deal with electronic commerce? With regard to competition laws - how

should existing regulations on competition be amended to take account

of the advent of electronic commerce? And on the question of

governance - how can global infrastructure for electronic commerce such

as the Internet be adequately governed without hampering the expansion

and development of electronic commerce, especially in the less

developed parts of the world?

2. Reports on the discussions of the

Trade and Development Board

Ambassador Anthony Hill, Permanent Representative of Jamaica,

Globalization, competition, competitiveness and development

7

presenting the Board's debate on interdependence

My report is going to be extremely brief. The Board's agreed

conclusions on interdependence are to be found in nine short

paragraphs , and I will therefore restrict myself to highlighting some of

1/

the main points.

The first question is, as the point of departure given by

Mr. Ricupero, to what extent has competitiveness and the search for

competitiveness affected employment, growth and distribution of income

in developing countries?

I would like to dispose of the first item of competitiveness. I share

the view that competitiveness defined as a situation in which nations

compete may become a dangerous obsession, and perhaps already has.

I believe, however, that there can be competitiveness and competition

among firms within sectors.

There are three issues that I would like to highlight. The first is

analysis. The analysis of the Trade and Development Report and all of

the comments thereon pointed to the fact that it is important to have

sound theory as a precondition for sound policy and that empirical

evidence should always guide that policy. And therefore when the

agreed conclusions speak about income disparities, they refer to the

impact that income inequality has on policy. If policy and theory are not

soundly based, this could lead to unsound reactions through trade

protectionism.

The second main issue is national policy, which focuses on income

distribution within economies, across economies and even within certain

skilled professions. I think it has been known for some time that there

is growing income disparity, and yet the response so far has merely been

to formulate policies along the lines of sound macro-economic policy

and the like, instead of, for example, looking at what the Dutch have

done, which is to make the trade-off between what Mr. Ruud Lubbers

calls the three Js - jobs, jobs and jobs. Perhaps now is the time that,

internationally, we should look at the question of employment on a

global scale.

I would like to turn to international policy. The Secretary-General

of the United Nations has indicated that part of his reform programme is

an agenda for development. I think it is important that the multilateral

Globalization, competition, competitiveness and development

8

institutions, i.e. the UN and the specialized agencies, the WTO and the

Bretton Woods institutions, revisit the development dimension.

I think those are the three points to be made. I have had the chance

to read some of the writings of some of the panellists, and I am sure that

some of these points will emerge in the discussion. I would like to end

on a philosophical note and refer to the philosopher and poet, Robert

Browning, who said: "That life succeeds in that it seems to fail is a

paradox which comforts while it mocks". And we are truly living in a

world of paradox.

Ambassador Agnes Yahan Aggrey-Orleans, Permanent

Representative of Ghana, presenting the Board's debate on Africa

The broad aim of the discussion was to consider, in the context of

globalization, the prospects for Africa in terms of becoming competitive

in international markets and integrating more fully into the world

economy. The specific economic problems of Africa and the more

general issue of development policies aimed at faster and sustainable

economic growth were considered. Competitiveness was seen as playing

an important role in this respect.

There was broad agreement that the term "competitiveness" is often

used in different senses. While the term does not have much meaning

when applied to countries or regions, it has relevance at the level of the

sector and of the firm. In another sense, competitiveness refers to the

factors which determine the locational behaviour of internationally

mobile firms. A narrow focus on factor prices as a determinant of

competitiveness was rejected, and a variety of intangible factors, such

as product quality, the capacity for timely delivery, etc., were

highlighted. Transaction costs, in particular transportation costs within

countries and across borders, also have a decisive impact on both

competition and the competitiveness of individual suppliers.

Appropriate policies with regard to the real exchange rate constitute an

important element in managing the link between investment and exports.

High transportation and transaction costs in relation to the value of

tradeable goods were considered a major reason for the loss of

international market shares of African exporters and also for the

extremely low level of intra-regional trade in Africa. These costs result

from an underdeveloped physical infrastructure. But the political, legal,

Globalization, competition, competitiveness and development

9

institutional and social infrastructure, sound exchange-rate management,

and the quality of governance are also important factors influencing a

country's ability to expand trade and to attract FDI. Moreover, for

countries to succeed in international markets, it is essential to have well

functioning local markets and domestic economic networks. This is not

the case in a number of African countries. Another factor in Africa's

poor export performance is insufficient international marketing efforts.

While the importance of macroeconomic and exogenous factors was

emphasized by a number of speakers, there was broad agreement that

country experiences differ considerably within Africa. Hence, there can

be no common explanation for the loss of the share of African exporters

in world markets. Explanations have to be sought at the country and

product level. There was also broad agreement on the need for greater

investment in and better management of infrastructure, especially in the

areas of transportation and telecommunications, and a strengthening of

domestic markets and local entrepreneurship in African countries.

Supply-side constraints were perceived as the greatest obstacle to higher

exports from Africa, although some contended that these constraints

could only be addressed in relation to specific products. Measures to

improve the investment climate were recognized as central to the policy

agenda, though these should be defined not simply in relation to FDI but

also, perhaps more importantly, in relation to domestic savings and

capital accumulation. In many countries, increased investment also

requires support by the international community.

African countries should identify those products for which there is

both a supply potential and the likelihood of rising international demand,

and target such sectors accordingly. However, there was not complete

agreement as to which sectors should be given priority. The suggestion

was advanced on the one hand that Africa should concentrate its export

efforts on sectors where it has a natural comparative advantage, such as

the primary sector and tourism. It was argued on the other hand that

countries should seek to develop dynamic comparative advantages in

new

Globalization, competition, competitiveness and development

10

areas, as diversification into non-traditional sectors holds out the greatest

potential for gains in the medium and longer term.

Strengthened regional cooperation and intra-regional trade were

considered to be important elements of an African development strategy.

Trade with neighbouring countries is often easier to expand and offers

opportunities for firms to learn how to compete globally. In this context,

there was an inconclusive discussion about the potential role of growth

poles in Africa.

With respect to policy options of African Governments in the

context of globalization, it was argued that, despite the limitations

resulting from the WTO, active trade policies will remain important,

especially for the least developed countries. National policy choices

continue to be crucial, especially with regard to import and capital-

account regimes. Moreover, developing countries should not

underestimate their potential for influencing the international framework

for trade and financial relations. This requires intensified cooperation

amongst them with a view to arriving at common positions in

international negotiations on the relevant rules. The forthcoming

negotiations on Lomé V will be a test of the leverage that developing

countries possess against the background of the constraints resulting

from WTO rules.

The debate also extended to UNCTAD's contribution to

development in Africa. UNCTAD's technical assistance programmes,

especially in the areas of trade efficiency, trade facilitation and

communication, were considered important elements which should be

strengthened further. UNCTAD was also called upon to strengthen its

support for South-South cooperation. While UNCTAD's research on

successful development experiences in East Asia could provide possible

lessons for African countries, the experience of Northern African

countries in expanding their non-traditional sectors should also be

studied. UNCTAD should focus on the specific implications for African

countries of globalization and increased international competition.

However, the debate ought to be based on a study of specific country

situations and experiences.

With respect to the crucial issue of infrastructure development,

work in UNCTAD should focus on its international dimension.

UNCTAD also has a unique capacity to analyze the potential

contribution of FDI, including FDI from the more advanced developing

Globalization, competition, competitiveness and development

11

countries, to development in Africa. Moreover, UNCTAD should

examine the experiences of African countries with regard to their trade

policies, make proposals on how to develop new dynamic export sectors,

and identify the remaining scope for industrial and trade policies

following the conclusion of the Uruguay Round.

Ambassador Daniel Bernard, Permanent Representative of France,

presenting the Board's debate on LDCs

The Sessional Committee on LDCs which I had the honour to chair

during the Trade and Development Board focused its discussions mainly

on agriculture, working on the basis of the Least Developed Countries

1997 Report.

I would like briefly to reflect here some of the main points which

emerged. I will begin by making four broad points in relation to

agricultural development in LDCs and implications of globalization on

competitiveness of LDCs' agriculture, before proceeding to four more

specific points relevant for the LDCs and their development partners.

For the LDCs, perhaps more than any other group of countries,

agriculture is of crucial importance for development. The comparative

advantage of many LDCs lies in agriculture. Hence enhancing the

integration of LDCs into the world economy is dependent upon their

developing competitive agricultural sectors.

Second, until relatively recently, agriculture was for the most part

a sector of secondary importance in the evolution of the multilateral

trading system. With the Uruguay Round Agreement on agriculture,

together with liberalisation in many countries, agriculture, like other

tradeable sectors, must now adapt to a much more competitive

international economic environment, characterised by, inter alia, an

erosion of trade preferences which LDCs previously enjoyed in some of

their main export markets. If agricultural producers, in LDCs as

elsewhere, are to improve market shares, competitiveness is crucial.

Third, experience in many countries of the world has demonstrated

that the development of competitive agricultural sectors does not

necessarily benefit all of the poor, and may make some of them worse

off. A crucial issue for most of the LDCs is to ensure that smallholder

Globalization, competition, competitiveness and development

12

farmers, including women farmers, who dominate agriculture in many

countries, can benefit from expanding market opportunities. This

requires careful design of policy reforms to ensure that access to

resources, in particularly land, is not made more inequitable and that

attention is devoted to alleviating the constraints faced by this group of

farmers. The same is true, for example, in trying to maintain a balance

between export crops and food crops.

And lastly, there is a great deal of diversity in terms of the agro-

ecological conditions both between LDCs and within individual

countries. Consequently it is clear that the design of policy interventions

must be sensitive to the specifics of each country.

I will now move on to four more specific issues pertinent to the

design of agricultural policy reforms in LDCs, for the development

partners of LDCs, and for the multilateral trading system which were

raised by a number of delegations. I will organise my remarks around

four issues: firstly, the design of reforms, including sequencing;

secondly, the need to address supply side issues; thirdly, the social

implications of agricultural reform; and fourthly, the international trading

environment facing LDCs.

On the design of reforms, delegates recognised that appropriate

macroeconomic and trade policies are essential for the development of

competitive agricultural sectors in LDCs. Although LDCs have

implemented major policy reforms in this area, there was some concern

about policy slippage.

Several delegates drew attention to the need for appropriate

sequencing and timing of agricultural marketing reforms, to ensure that

the private sector is in a position to take over the services previously

provided by the public sector without any loss of access to these

services by farmers, and that a public sector monopoly is not replaced

by a private sector monopoly.

Some participants also emphasized the close and complex linkages

between different aspects of reform. For example, the elimination of

certain agricultural taxes by definition reduces fiscal income and leads

to cuts in subsidies, resulting in the need for a gradual liberalization of

prices and the privatization of marketing channels.

With regard secondly to supply side constraints, a number of

Globalization, competition, competitiveness and development

13

speakers stressed that pricing and marketing reforms alone are not

sufficient to bring about the development of an internationally

competitive agricultural sector in LDCs, because farmers in these

countries face a whole range of supply side constraints on increasing

productivity and output. Alleviating these constraints requires action in

terms of rehabilitating and expanding the physical infrastructure,

especially rural road networks and storage facilities for crops; enhancing

credit supplies for small farmers, including both seasonal credit and

longer-term loans; expanding research and agricultural extension

activities, especially to develop and disseminate appropriate high-yield

varieties and other improved farm technologies appropriate to the

environment and socio-economic structures in individual LDCs; R & D

should be extended to crops which have so far attracted little attention,

such as drought-resistant cereals grown on marginal arid lands such as

the Sahel, as well as to non-traditional export crops; R & D and

extension services should also assist small-holder farmers to adopt more

effective soil and water management techniques. Action is also required

in terms of enhancing human resource development, which is essential

for raising productivity in rural areas, with investment in primary

education receiving priority; rectifying deficiencies in marketing

infrastructure to reduce marketing margins and give farmers a greater

share in the final consumer price of their output; and facilitating access

to inputs and reducing their cost.

Participants cautioned that implementing sectoral and institutional

reforms such as the ones outlined is much more difficult than

implementing macroeconomic reforms. The international community has

an essential role in assisting LDCs to implement reforms through

technical assistance programmes, as envisaged in the Marrakesh

Ministerial Decision in Favour of Least Developed Countries. The role

of the state in the implementation of these reforms was seen as crucial.

Thirdly, with respect to the social implications of reforms,

according to a number of observers, the development of commercial

agriculture has not always benefited the poor. A key issue is access to

resources, particularly land. It was stressed that the social impact of

reform should be given much greater priority than has previously been

the case.

Fourthly and lastly, with regard to the international environment,

there are a number of issues of concern to LDCs, not least the

unsustainable levels of debt of many of the LDCs. The Uruguay Round

Globalization, competition, competitiveness and development

14

Agreement has gone some way towards liberalising international trade in

agriculture, and LDCs have been given special and differential treatment

to safeguard their interests. Nevertheless, there are still a number of

issues giving rise to concern in LDCs which warrant attention from the

international community. These include the possibility that global

agricultural liberalisation could lead to greater fluctuations in cereal

prices to the detriment of food security in net food-importing LDCs, at

a time when food stocks and food aid are being reduced. Another

concern is that, although there are exemptions and special provisions for

LDCs under the Uruguay Round Agreement in regard to support for

farmers, particularly subsidies for inputs, aid in respect of investment

and diversification and the maintenance of some production subsidies,

it was pointed that these provisions may not be very relevant to LDCs

as in several cases conditionality associated with reform programmes

negotiated with donors already preclude such policies. Another source

of concern lies in the fact that joint work carried out by UNCTAD and

WTO has revealed that liberalisation has not yet removed all the high

tariffs facing LDCs in product lines, such as processed foods, in which

LDCs' comparative advantage is likely to lie. Finally, the difficulties

which LDCs face in complying with health and safety standards with

regard to food products is another barrier to export growth, particularly

since these standards have not been harmonized.

3. Presentations by panellists

Mr. Jan Pronk, Minister for Development Cooperation of the

Netherlands, Moderator of the High-level Segment

I have asked the panellists to take the floor in a somewhat different

order from the questions which were put forward by Mr. Ricupero. The

first question is going to be addressed by Mr. Lizana - how did some

countries become successes stories on the global market? Was it just

the exposure to international competition, or was it also policy-made?

Mr. Pedro Lizana, former Chairman, Society of Industrial

Development, Chilean Federation of Industry

First, it is a great honour to have been invited here: I feel a little out

of place, since I trained as an economist but have been in the business

Globalization, competition, competitiveness and development

15

world for many years, not only leading the Chilean Federation of Industry

but also, for four years, the Latin American Federation. So I would like

to combine the two viewpoints, of an erstwhile economist and an

economist who has lapsed into business. As an economist, I wish to

point out that in Chile’s case, the basic economic principles taken into

account as the country reformed to join the world economic system and

hasten its development were the same ones that govern the world at

large. There is nothing new here, no miracle, but I would like to put on

record that the principle I consider the most important for an economy

joining the world economic system is what I have called a quest for truth

in pricing. Closed, half-open and imperfect economies have a great

many false prices, deceitful prices which lead to a skewed allocation of

resources, and one has to believe that prices on the world market are

closer to the truth than domestic prices when economies are not part of

the world economic system. The first approach taken was, obviously,

to open the economy to foreign trade, gradually lowering tariffs, and it

took five years to reach what I call a more or less appropriate level of

10 per cent - less on average, I would say. But at the same time that

tariffs came down, an effort was made to offset this and, again, to arrive

at a truthful price for foreign exchange, lowering the exchange rate or

allowing it to fall as tariffs declined. At bottom, in a high-tariff economy

you can be sure that the people paying for the resulting low exchange

rate are the exporters, and when you make the exchange rate truthful,

exporting becomes an altogether more dynamic undertaking. The other

principle I regard as basic is fiscal and monetary balance - cutting or

adjusting the State’s share of the economy to between 15 and 20 per cent

of output and no more, because for businessmen and the community

generally the State is a burden whose costs they have to shoulder in

order to compete abroad, and it can be more or less efficient. The other

change that was very important was the change in the pension system

from pay-as-you-go to a funded system.

Another point concerns privatization of businesses that the state can

do without, which is a large proportion, and by privatize I mean not only

sell businesses and concessions to the private sector - I don’t care much

about the prescription followed, you can have lots of prescriptions - but

also, and especially, that in many areas the state should contract services

out. This is much faster and more flexible. Even if you take it to an

extreme - for example the prison services - the delivery of goods and

materials can be contracted out; school meals can be contracted out, and

many other things; for example, if you have a state company supplying

drinking water, it can contract out network installation and meter

Globalization, competition, competitiveness and development

16

installation and meter-reading; there are lots of services that can be

contracted out, and this slims down the State and makes it more efficient.

This is where modernizing the national finances is very important. To

begin with, of course, the first thing that was done was to free prices, and

there were only a few markets left where there was no competition, such

as basic electricity services, where there is a regulatory system based on

marginal production costs as if it were a competitive market.

And the last, very important, very basic point is to get the labour

market to function. Why do I say get it to function? Because there was

intervention in our labour markets, too, allowing monopoly organizations

of both employers and workers to grow up. And this is what is vital:

wage negotiations must be conducted at the individual business level, not

with groups of businesses or groups of workers. To take a very

straightforward example, if petrol-station workers negotiate wages across

the sector with the oil companies, it is easy for the oil companies to pass

on the increase in wage costs to prices. You have one monopoly

teaming up with another monopoly, and it is the community that pays.

This occurs in all sector-wide negotiations, in the metals industry or

whatever. Though our system permits sector-wide negotiations, it does

not require them, and negotiations basically take place at the individual

business level. This, I think, is a very important aspect that is normally

overlooked or ignored.

What were the main results of this very active economic model

being adopted around the world? The first was a rise in visible

unemployment, instead of hidden underemployment. Then, at the same

time, there was an initial fall in earnings, because with the reallocation

of all these resources among sectors and with businesses closing or

moving onto reduced working time, it takes a while to develop new

investments and soak up the unemployed. A great many industrial

ventures closed, of course, because they could not compete. Normally

such adjustment periods occur in economies suffering from high

monetary imbalance, a very high inflation rate. Then, of course, there

was a big rise in real interest rates, which I would say persists to this

day, largely on account of anti-inflationary policy, another thing, I think,

which is extremely valuable at a time when an economy is adjusting or

being made more truthful.

I think the public has to begin to understand what a market economy

is. The community must get it into their heads that progress depends on

business's own efforts, not on legislation or government action. Until

Globalization, competition, competitiveness and development

17

people believe in themselves and their own entrepreneurship, they will

always be looking for special treatment from the authorities.

Another thing I think is very valuable is decentralized labour

training systems. Normally, the orientation of a country's training system

is decided on by the authorities, and some authorities are not capable of

doing that. The people who hire labour are the ones who can say what

sort of skills they need. So what we did was set up a system of

subsidies that diminish in proportion to the wage scale and are tax-

deductible, so the businessman decides what skills

Globalization, competition, competitiveness and development

18

are needed, and there are centres on the market that offer these training

arrangements.

The other thing I think is vital is to encourage business

specialization. What happens in closed economies is that businesses

tend to do a bit of everything and not specialize, and just as the division

of human labour has brought about a clear increase in productivity, the

division of labour among businesses is very important - increasing

subcontracting among businesses. A business should do only what it

thinks it really needs to do, and contract the rest out elsewhere. I have

always given as an example Toyota, a very modern firm, which

subcontracts, or buys in, 70 per cent of the car. And today you have the

case of a car manufacturer buying engines installed in the bodywork, and

that makes for very large gains in productivity, because each small

business concentrates on one specific task or part of the process. So I

would make an effort to encourage subcontracting.

When these truthful prices make the country attractive, an interest

in foreign investment develops, and foreign investment is a potent way

of making up for a country’s inability to finance its own investment. But

there is a danger, and I am one of the few in Chile to draw attention to it.

As a fervent partisan of foreign investment, I fear that countries, like

people, cannot digest very large quantities of food, and a country has

only so much capacity to absorb investment. In a country with, as in

Chile’s case, some 35 billion dollars in foreign trade and output of nearly

twice that or a little more, the unexpected arrival of 10 or 20 billion

dollars in foreign investment can knock the entire economy for six.

There are limits that no one has yet mapped out, but in Chile’s case a

surplus of foreign investment has resulted in such a fall in the exchange

rate that the competitiveness of the entire export manufacturing sector is

in serious trouble. We are victims of our own success. This is very

important to bear in mind before putting forward any limit or solution.

The other thing that clouds political action in a country opening up

to the outside world or joining the world economic system is concern

over income distribution, which to my mind is an outdated concept. We

should be concerned with the distribution of wealth-generating capacity.

The poor are not poor because incomes are badly distributed. The poor

are poor because they have less wealth-generating capacity, and if you

look at the question from this angle it occurs to me immediately what has

to be done. Their wealth-generating capacity has to be increased and

subsidized. The other very important thing to watch, of course, is that

Globalization, competition, competitiveness and development

19

countries at this stage of development, when they join the world

economic system, need their infrastructure to develop almost as fast as,

or even faster than, the countries themselves. But the prejudices we run

into here! The chief one we find is opposition to giving the private

sector the opportunity to invest in these areas by means of concessions

over or ownership of ports and highways. In this case, I would say, good

infrastructure you have to pay for is preferable to bad infrastructure you

don’t, because at least in the one case the people who benefit pay,

whereas the “free” infrastructure hurts everybody.

The other thing that has to be watched is unfair foreign competition.

As I said at the beginning, and I would like this to be my main message,

when I was talking about truth in pricing, we have to be on our guard

against false signals from the outside. Some countries still subsidize

exports heavily, some practise non-market-economy prices and offer

goods at below the cost of the raw materials; you have to watch out for

these things if you do not want some industrial sectors to be killed off by

wrong pricing.

And lastly, it is important to promote exports through good

information, market information, and foreign trips by businessmen. If

you were to look at how Chile joined the world economic system, you

would see that, 10 or 20 years ago, it was exporting to 10 or 20

countries; now it exports to over 120. If you look at the number of

products over the years, there were about 300 then and 4,000 today. The

number of businesses has risen in the same proportion. I would say it is

very valuable for the Government and the business world to join forces

in a campaign of trade visits and missions around the world. This is a

very practical approach. Even if negotiations do not take place on every

trip, contacts are made that will allow negotiations to proceed. This is

a first insight I should like to offer you in particular.

Moderator

Mr. Lizana, may I ask you one question. You referred to the rather

unavoidable consequences of opening up, resulting in a short-term drop

in employment, the closing of less competitive industries or shops. In

the transitionary adjustment period, how was that accepted socially and

politically, for instance by the labour unions? Was that explicitly dealt

with? Could you elaborate on that?

Globalization, competition, competitiveness and development

20

Mr. Pedro Lizana

There is no very widespread public resistance insofar as workers

and unions see that their incomes depend on business; if things go badly

for business, they realize that they will go badly for them, too. Today -

or rather over the past 10 years, I should say -there has been less social

unrest in the jobs sector in Chile than ever before. We were all afraid

that, as we moved from authoritarian to more democratic government,

there might be social upheaval. Even union membership has fallen, and

wage increases in non-unionized sectors have even been larger than in the

unionized ones because there has been a great change-around. People

have more faith in business than in pressure from other groups on the

Government or on groups of businesses. So I would say it is very

important for the public to be introduced to economic concepts, for

people to understand that how they get on depends on how they work and

the business they work for, not on political favours or group pressures.

Moderator

We now go to the second question. The first question was: is

exposure to competition sufficient for success, or is success also policy-

made? Mr. Lizana said exposure to competition is necessary but you

also need policies in order to influence the conditions under which

exposure to competition can help your economy. This implies

competition policy, and as a matter of fact Mr. Lizana referred to

competition problems, for instance in investment.

This brings me now to the second panellist, Mr. Souty, who will

take up the following question: what has been the role of competition law

and competition policies in establishing the necessary conditions for

successful integration into global markets?

Mr. François Souty, Rapporteur Permanent, Competition Council,

France

I would like first of all to thank the Secretary-General of UNCTAD

for the importance accorded recently in UNCTAD to competition law

and policy. Last September, in a discussion on investment and

competition, we saw a consensus emerge among the panellists, though

not yet among all member States, on the usefulness of having investment

Globalization, competition, competitiveness and development

21

liberalization policies accompanied by the introduction of competition

law and policy.

In this connection, I would like to emphasize, in my capacity as a

member of a competition authority and academic, that competition law

and policy serve a basic objective, namely economic progress, and

therefore development and growth. The concept of economic progress

is often difficult to define in itself, and competition law and policy can

perhaps help us to find ways forward towards a definition.

To follow on from what has been said by my predecessors this

morning, I would say that competition policy serves four goals.

The first goal is to seek to attain a level of economic performance

which is desirable for individual firms and which ensures the

performance of the economy as a whole. It is through opportunities for

the growth and prosperity of individual firms that an economy as a whole

prospers, and it is through these opportunities and this prosperity that a

growing number of economies are currently integrating into the world

economy. The World Investment Report published in September

showed, for example, that in recent years more than 35 countries have

introduced competition legislation and that the underlying trend

accompanying world growth is mirrored in many countries introducing

competition law and policy.

The second objective of competition law and policy is to seek to

identify and preserve competitive processes in the relevant sectors of the

economy in order to contribute to the overall performance of that

economy. This point was made several times this morning by a previous

speaker in connection with agriculture, and others have said the same

thing in other fora. The inefficiency of regulated public services (often

inefficient in the least developed countries, and sometimes relatively so

in the advanced countries as well) seriously hinders overall collective

performance. It is not so much a question of public or private ownership

of the means of production as of the structure and objectives within the

framework of which ownership is exercised or in relation to which

economic actors are regulated.

This having been said, the creation of competitive economic

structures may make it possible to resolve the ownership question quite

quickly through the privatization of public enterprises under satisfactory

conditions and to use the income from privatizations to achieve a better

Globalization, competition, competitiveness and development

22

overall economic performance from which the State could benefit.

The third objective served by competition law and policy is the

formulation and guarantee of transparent and non-discriminatory rules of

good conduct and fair competition in business. When you talk about fair

competition, some people are particularly fearful of the actions of

transnationals, which are held responsible for a whole series of more or

less predatory strategies that are not in the interests of consumers, not

only in the least developed countries but also in the developed countries.

This having been said, fair or unfair competition does not depend on

transnational or multinational corporations alone; a private operator in a

dominant position in a given country will also be tempted to exploit his

economic position in that market. What I would like to say in this

connection is that the less a market is legally structured by a competition

system while at the same time being inward-looking, the more tempting

it is for certain national or foreign economic actors to seek monopolistic

strategies that are to the detriment of the overall performance of the

economy in question and to the detriment of consumers, the largest group

in these economies.

The fourth objective of competition law and policy is to prevent

undue growth of the largest public or private economic actors. Such

growth is generally measured in terms of distribution, and competition

law and policy aims to achieve a balance in the distribution of market

power, taken in the broad sense. Historically, whether in Europe, the

United States or even Japan, this last goal has sometimes been used to

justify the enactment of competition law and policy. Such policy has

sometimes even been likened to “populism”. However, once this

“primitive” assessment has been left behind, it can be seen that the

decentralization of economic power is the very essence of a competitive

economy. What competition policy will seek to do from this point of

view will be to preserve the mobility and freedom of entry and exit of

economic operators and guarantee economic competition in the markets

concerned.

The developing countries often face economic problems

encountered by the industrialized societies several decades ago. To get

themselves out of these difficulties then, these industrialized societies

introduced competition laws and policies which made it possible to

establish a solid economic base that allowed their enterprises and

companies to flourish, while expanding opportunities for world trade and

economic integration. Looking at the indicators before us, the least

Globalization, competition, competitiveness and development

23

developed countries have to reflect on the methods used by their

advanced partners in order to stimulate their own growth. These

methods include the creation of a system of economic competition

designed to stimulate market forces and to create wealth. It is in the

interest of everybody, developed countries, less developed countries and

the others, precisely to seek the conditions for the establishment of

competition legislation that meets their aspirations in respect of the

creation of such wealth. This does not mean that competition law and

policy should not take into account on the one hand the structural

characteristics of less developed markets and on the other the legal and

cultural traditions of the countries in question. The case of the European

Union, in which 15 different sets of national legislation and Community

law coexist, demonstrates at least one thing, namely the very large degree

of flexibility and room for manoeuvre that is likely to exist around a

number of common, harmonized or convergent legal and economic

principles.

All this will produce an effective legal system and microeconomic

policy only if two conditions are met. On the one hand, at the level of

States or regional groups, and perhaps one day at a still higher level,

competition law and policy should be implemented by independent

authorities. On the other hand, the process should be under the control

of a common law judge, i.e. the entire procedure for the implementation

of competition law should be subject to the executive constraints of

macroeconomic administration. On this last point, I think that it is for the

executive and legislative power to define the framework for the system

of economic freedom and for the courts to apply it.

Moderator

Thank you very much for outlining the aims of competition policy

and how competition policy could help countries to take advantage of

globalization and to avoid the disadvantages. In that connection, your

fourth aim was to avoid undue growth of the already competitive. Could

you outline the criteria as to who should decide what is "undue"?

Mr. François Souty

I did indeed refer to inequitable or rather undue growth. What is

needed is to prevent the seizure or creation of supra-competitive market

Globalization, competition, competitiveness and development

24

power by economic actors whose exercise of market power is not subject

to any limit. It is in this sense that we can speak of the role of

competition law and policy in contributing to equity and economic

freedom. It is a matter of safeguarding economic freedom and preventing

its confiscation by public or private economic actors. Of course, there

is another type of behaviour which naturally seeks coordination among

economic actors, and a central characteristic of competition law and

policy is to seek out the anti-competitive aspects of such coordination.

In our jargon, we speak of competition activities and anti-competitive

agreements, and these horizontal and vertical agreements have to be

examined in relation to the overall rules established to preserve

economic freedom and competition.

Globalization, competition, competitiveness and development

25

Moderator

The third question refers not so much to the "ins", i.e. countries that

are success cases on the global markets, but to the ones not yet in, i.e.

the "outs". There have always been the "ins" and the "outs" in the world

economy, the richer countries and the poorer countries, for instance. The

question is: does the modern process of globalization widen the gap

between the "ins" and the "outs", is it more difficult to become a partner

in the world economy due to the process of the globalization, and if so

what can you do about it?

Mr. Dharam Ghai, Director-General, United Nations Research

Institute for Social Development (UNRISD)

I will be talking about globalization and marginalization, about

some of the factors that underline these processes, and more importantly

about what can be done to reverse these trends.

I would like to start with a few distinctions. First, when we talk

about marginalization, it can refer to many things. It can refer to the fact

that some countries have not participated in the benefits of growth

generated by globalization or have benefited less than some other

countries, or it can mean that they are totally unaffected, untouched by

the process of globalization, or thirdly that they are absolutely worse off

because of the process of globalization.

Another distinction is between countries and individuals; this has

already come up, and while I will be talking about a large group of

countries, I think it is important to remember that in the end we are

talking about people and social groups. It is quite possible for a country

to benefit enormously from the expansion of world economic integration

but for major groups of people to be worse off, at least in the short to

medium run, as a result of these processes.

The third distinction I would like to make is this: we talk of

economic and social policies, but of course these are closely

interdependent, and it is necessary to take a comprehensive and holistic

view of the development process and of the policies concerned.

There seems to be general agreement that what are called least

developed or vulnerable countries have been marginalized in one of the

three senses that I referred to earlier on. The reasons for this are not

difficult to enumerate. The first is that many of these countries enjoyed

Globalization, competition, competitiveness and development

26

certain trade and other benefits, and the processes of liberalization have

resulted in the erosion of these benefits. So they have not got anything

new.

Secondly, some of these countries, and this is related to the first

point, already enjoyed more or less free access to important industrial

markets, and therefore these rounds of liberalization have not brought

anything new to them.

The third point relates to the trade structure that most of these

countries have. Their major exports are minerals and agricultural

products, whereas the dynamic sectors have been manufacturing and to

some extent services. Thus, because of their trade structure, i.e. the

dominance of minerals and agricultural exports, they have not benefited

from the new dynamics created by globalization.

The last point is that the countries concerned have been bypassed

by more intensified flows of investment, private capital and technology,

and this in turn is due to reasons that have been mentioned by previous

speakers. But one such reason which has not received adequate

attention, perhaps, is the most important, and that is the question of the

political and social instability, violence and conflict found in many of the

least developed countries. The second question of limited markets has

been talked about, as have poor infrastructure and poor endowment in

human resources or skills.

It is clear that, if countries can overcome these barriers, and they

are indeed extremely significant barriers, then globalization opens up

enormous opportunities for very rapid growth. This is because, in

principle, in theory and in the medium to long run, globalization by

definition removes the constraints of markets, finance, savings, capital

and technology. It becomes a question rather of which countries are able

to attract these from outside sources.

So my policy framework for overcoming these problems flows

directly from this analysis. I think the first fundamental issue for many

least developed and vulnerable countries is the question of political

stability, of rule of law and order, of questions of democratic

participation, legitimacy, representation and accountability, in other

words what has been called governance, but which hides many different

things.

Globalization, competition, competitiveness and development

27

There are some countries which are now in the process of

recovering from the devastation of war; they are in the process of what

is called reconstruction of war-torn societies or of strengthening peace-

building. It is very important that these processes succeed, otherwise it

is very difficult to talk of any kind of economic development. At the

moment, there have been two problems in this process; one is that the

emergency reconstruction and development phases tend to be separated

and differentiated, whereas it is generally recognized that we have to

look at them together in an integrated way, though how to do that is more

difficult. And secondly, there are many actors at the national and

international level, but often they go about the process in their own way

and they have their own interests, and therefore you have to find ways

and means through which you can create the possibility of dialogue and

discussion among different internal social actors and between internal

actors and international actors, who play very important roles in the

processes of reconstruction and development.

The second major area I would like to emphasize is that of regional

cooperation and integration, which has also been mentioned. I think most

people would agree that one of the best avenues for the resolution of the

problems of the least developed countries is through more enhanced

regional cooperation and integration, and here some of the more

developed developing countries or the better endowed among them have

a critical role to play. In the case of South Asia, there is SAARC, in the

case of South-East Asia there is ASEAN, and in Southern Asia there is

SADEC. In Latin America, there is the Andean group and many other

regional groupings. It is important that economic cooperation takes the

form not only of removal of trade barriers, but also of strengthening of

infrastructure, power, transportation, communications, training and

education and other kinds of cooperation among developing countries,

but as I mentioned, the more advanced of the developing countries have

a particularly important role to play in these regional groupings.

My fourth point relates to the creation of a niche by different

countries. I don't think one can generalize on this, but I think it is

important not to be too pessimistic; it is important not to think that there

are no possibilities for least developed countries, since I think the

process of globalization does open up opportunities, and it is a question

of developing them, exploiting them, and intensifying or enhancing

dynamic comparative advantage. This can be done in many areas - in

crafts, in music, in the field of tourism, in the field of horticulture, and in

Globalization, competition, competitiveness and development

28

the field of processing of special raw materials and agricultural and

mineral products. So there are many existing possibilities, as well as

new possibilities which will be opened up by the process of

globalization.

My last point is we must remember that, in the end, what we are

talking about is human and social development. The processes of

economic growth are important insofar as they lead to reduction and

elimination of absolute poverty, elimination of illiteracy, reduction of

infant mortality and malnutrition, increase of life expectancy, better

health facilities, access to basic education, health and water, and gender

equality. These are the central objectives of development. The

processes of globalization have resulted in marginalization in this

important sense that many people have not benefited from these services.

So I would like to make a proposal for an ambitious global accelerated

programme for human development to comprise the areas that I have

mentioned. In this regard, it is important to stress that it is not necessary

for countries to have a per capita income of 10,000 dollars to achieve

these basic objectives, which are high life expectancy, low infant

mortality, complete adult literacy, elimination of child malnutrition, low

total mortality and basic primary and health education. The research

conducted in my own institute and elsewhere has indicated that it is

possible for countries with a per capita income as low as 224 dollars a

year to have some social indicators amazingly close to those of

industrialized countries. So we don't have to wait for three generations

before some of these major social deprivations can be attacked. In this

regard, we have all kinds of fora at the moment in the world, and I would

like to propose, at the risk of creating yet another one, that the time has

come to establish what I might call a global world solidarity forum or a

world solidarity foundation. The basic objective of this forum will be

to promote action, thinking and policies on accelerated human

development in the sense I have talked about, and thus it will have a

number of functions. One would be to learn from these policies that I

have mentioned, and this could be the basis for very successful South-

South cooperation.

Secondly, this forum could provide an avenue for policy dialogue

on major issues on which there is disagreement, like drugs, for example,

which represent a major social problem. A lot of countries have tried

different experiments, and it would be useful to have a forum like this

which could create the possibility of dialogue on these contested issues.

Globalization, competition, competitiveness and development

29

Globalization, competition, competitiveness and development

30

Thirdly, it would be useful to have a forum where some of the

emerging problems can be tackled, for example the whole range of social

effects of globalization and its implications for employment, poverty,

minimum wages, working conditions, and coordination of fiscal, social

and taxation policies at a regional and global level.

These are some of the relatively new issues which have not been

adequately explored, or even researched, so this forum could provide a

place for that. And lastly, it could influence resource allocation,

channelling available resources into promising approaches and tested

projects and initiatives. This would not involve the creation of a new

organization; on the contrary, it would be best to exploit and use the

existing network of conferences at the regional and international levels,

indeed like this very gathering, but with a view to promoting human

development and human solidarity at a global level.

Moderator

Thank you Mr. Ghai. You have said that there is indeed a risk of

marginalization but it can be avoided if countries implement proper

policies and set the right priorities oriented towards stability. At the end,

you said that it is quite possible to increase the standard of living of poor

people, even with a low level of per capita income. Is there not a

contradiction between the two sets of priorities, i.e. becoming a player

in global markets on the one hand and attaining objectives with regard to

life expectancy and basic health care on the other hand?

Mr. Dharam Ghai

It is possible to conceive of circumstances where indeed there is a

conflict, because to some extent, in order to promote globalization, you

have to attract foreign investment and foreign capital and maintain

competitiveness, particularly by having lower wages, restraining

government expenditures, and not having high rates of taxation. But I

think it is a false dichotomy. We know that countries which have been

especially successful in globalization are those which, apart from having

large markets, have a sound physical infrastructure and most important

of all an educated, literate labour force, and therefore the social

development that I am talking about contributes directly to the

strengthening of institutions and of skills and human capital. I would

Globalization, competition, competitiveness and development

31

also say that the international community and the process of globalization

need to create space for some of these less developed countries to catch

up in some of these areas, and this could be achieved through

development assistance and through other kinds of preferences and

arrangements which will enable them to catch up. But I find it difficult

to accept that countries have to forego programmes of the type that I

have mentioned because of globalization, because one thing that our

research has shown is that the resources required for the implementation

of these broad-based programmes are relatively modest and are within

the possibilities of even poorer countries.

Moderator

That provides the bridge to the fourth question and the fourth

panellist. Globalization, competition and competitiveness - what is the

impact on countries, on factors, on people, the development impact of the

process?

Professor Dani Rodrik, Professor of International Political

Economy, John F. Kennedy School of Government, Harvard

University

Where I will end up is exactly where Mr. Ghai ended up on this

question which I would really want to underscore once again: those

countries that have been successful globalizers have been successful not

because they have followed a strategy of globalization of trade per say,

but precisely because they have followed a strategy of investment in

human resources, investment in physical infrastructure and good

governance.

To a fundamental degree, and this is to give away my punch line,

successful integration into world markets, and this is what we mean by

having a competitive economy, is the result of good development

policies and successful development, and to the extent that we put the

cart before the horse and think of globalization or successful integration

in world markets as an objective in itself, I think we are setting priorities

that are a little bit misguided. Now the question that was posed to me

is whether success in achieving international competitiveness has had

positive consequences for growth, employment and development. This

is a question that, at one level, is a very easy one to answer. Surely, as

Globalization, competition, competitiveness and development

32

you think of countries that have been successful in terms of international

competitiveness, defined somehow, the handful of countries in East Asia

that we all know and the more recent experience of Chile over the last

decade and a half would clearly suggest that the answer is affirmative.

Yes indeed, international competitiveness has had positive consequences

for growth and development.

At another level, I think the question is a much more difficult one:

what does international competitiveness really mean? I was very pleased

to hear earlier that there has been a discussion of this, and the idea that

economies compete with each other is something that is really a non-

starter. That's not the right way to look at it. But how do we measure

international competitiveness? Is this something that should be of

concern to policy-makers? And if so, what would be the policy

implications?

Here, as we pose these more specific questions, I think we confront

a serious danger in how we think about policy and development policy;

excessive focus on competitiveness or on trade strategy might actually

be counterproductive to the extent that it diverts attention from some of

the more fundamental concerns that development policy-makers ought to

have. I often think that policy-makers are in danger of evaluating

national policies too much from the standpoint of success as regards

integration and international markets.

Let me begin with the sort of broad-brush evidence which I just

looked at before I got here. Suppose we take, as our benchmark for

successful development, a growth of GDP per capita of 3 per cent or

higher for the last three decades. There are about 110 countries in the

world for which we actually have good comparable data on growth rates

since the early 1960s. If we take this benchmark of 3 per cent growth

per annum of per capita GDP over three decades as our criterion for

successful development, only a quarter of these countries passed this

test, that is 27 out of the 110 countries for which we have data. Indeed,

it is the case that the vast majority of these 27 countries have also

experienced short increases in their trade, not only in absolute terms,

which is not that surprising, but also in relation to their national output;

i.e. trade as a share of GDP has on average increased quite substantially

in the vast majority of these successful countries. In fact, of these 27

successful countries, only four had lower shares of trade in GDP by the

late 1980s than in the 1960s.

Globalization, competition, competitiveness and development

33

So this suggests that high growth and increased integration into the

world economy go together. But now, let's do a somewhat different

exercise and turn the question around and ask how many of these 110

countries actually had higher shares of trade in GDP by the late 1980s

compared to the early 1960s? How many increased their trade efforts?

How many experienced an increase in trade-to-GDP ratios? And now we

are going to get a somewhat different answer. We now have 80 countries

out of the 110 which actually experienced an increased trade-to-GDP

ratio, but of these 80 countries a majority actually failed to grow at this

rate of 3 per cent or better. In other words, of these 80 countries, 57 had

per capita GDP growth rates that were below 3 per cent. In fact, perhaps

somewhat more surprising, if we take the top 10 countries in terms of

trade performance (not the absolute value of trade, but trade as a share

of GDP), six failed to grow at a rate of 3 per cent or better.

The message that I want to give is this - while it is exceptional and

rare for countries to do well in terms of growth and development and not

become more open to trade, it is actually quite common for countries to

become more open and not experience meaningful growth. I think

increased openness and trade competitiveness might be a necessary

condition for growth and development, but it is really far from sufficient,

and we need other things besides a trade strategy.

What are these other things? Lets look again at the evidence. If we

take the post-war period as a whole and ask which are the regions of the

world that have been more successful in terms of combining increased

trade with high levels of growth, I think two regions stand out, namely

Western Europe and East Asia. And when we look at their experiences

more closely, we find interesting nuances, interesting aspects of their

experiences which I think should inform the way that we evaluate

countries' strategies as we look forward.

With regard to Western Europe, certainly its experience following

World War II must constitute one of the most impressive achievements

in economic history, given the destruction that took place during the

Second World War, and clearly the subsequent growth of Western

European nations was greatly facilitated by the possibilities offered by

international trade and intra-European trade in particular.

Yet, as Governments in these countries took increasing advantage

of trade, what is important is that they also erected an extensive network

of social safety nets. Indeed, when we look at the experience in terms

Globalization, competition, competitiveness and development

34

of the growth of the welfare state in Western Europe, we find that the

welfare state grew the most or the fastest in the countries that were

actually the most exposed to trade, countries like Denmark, the

Netherlands and Sweden. In many ways, the welfare state was actually

the flip side of the open economy in Europe.

In East Asia, the miraculous growth of East Asian countries since

the early 1960s has of course made these countries prime examples of

outward-oriented growth. Yet I think that, when one looks closer at the

experiences of these countries, one finds that the state played a critical

role in a number of dimensions; investment and human resources have

already been mentioned, but the state also played a critical role in

coordinating and stimulating private investment in countries and

territories like the Republic of Korea, Singapore and Taiwan Province of

China; just to give you one example, very few remember that the state

enterprise sector in the Republic of Korea and Taiwan Province of China

actually accounted for a larger share of the economy during the 1960s

and the 1970s than it currently does in India, an economy that we usually

think of as being heavily burdened by state enterprises.

Furthermore, with regard to trade liberalization, in many of these

economies, in particular the Republic of Korea and Taiwan Province of

China, domestic markets were opened up to international trade only very

gradually and over a period of three decades. Mr. Lizana mentioned that

trade liberalization in Chile took place essentially over a period of five

years, roughly during the second half of the 1970s. This is actually quite

rapid by the standards of East Asian experience; two and a half decades

or three decades after these countries started to grow extremely fast, by

many measures their economies were not as open to international trade

as the Chilean economy was after five years of rapid liberalization

following 1975.

I think that the lesson from both Western Europe and Asia is that

successful globalizers have had market-friendly Governments but also

proactive Governments. They have had adequate social insurance, and

they have integrated into the world economy on their own terms. I think

this lesson contradicts much of today's conventional wisdom that

globalization requires small government, that welfare states have to be

cut down to size and that there is a single Anglo-American model

towards which all countries will necessarily converge. And indeed, the

Netherlands provides a very good example of why this conventional

wisdom is not correct in terms of tax ratios, in terms of employment

Globalization, competition, competitiveness and development

35

regulations, in terms of the extensiveness of safety nets and the welfare

state; despite quite a lot of reform in the Netherlands, you would never

confuse the Netherlands' economy with that of the United States or even

the United Kingdom.

It is true that globalization makes the constraints on Governments

much tighter. As we keep finding out, financial markets stand ready to

pounce on any Government that is perceived to be sacrificing fiscal

prudence for broad development or social objectives or whatever.

And clearly, the increased mobility of employers across national

boundaries makes it more difficult for Governments to tax employers

and corporations in order to benefit labour or to expand social

programmes. But I think, by and large, policy-makers are not nearly as

shackled or constrained by global interdependence as they sometimes

believe, and ultimately it is the overall quality of a society's domestic

institutions, respect for the rule of law, good governance, social and

political stability, adequate infrastructure and a skilled labour force,

rather than wages or nominal labour costs or taxes, that determine where

investments go.

In my view, a sustainable growth strategy has to stand on two other

domestic legs in addition to the external strategy of liberalization and

globalization. The first of these is a domestic investment strategy. In the

end, it is investment in human and physical capital at home that produce

growth. It is not trade, it is not outward orientation, it is not

globalization, it is not international competitiveness that raise growth, it

is investments in human and physical capital and the inducements for

doing so. Fundamentally, the East Asian economies grew at the rates

they did over a long period of time because the Governments there cared

about growth and they had an investment strategy.

The second domestic strategy that is very important as a

complement is the strategy of social insurance. Globalization is a source

of a lot of wonderful things, but it is also a source of turbulence, and it

is very important to ensure that important segments of the population are

not left behind in the process of market integration and rapid change; it

is very important to have a social insurance strategy to ensure the social

and political legitimacy of the process. Here again, Chile is a good

example. When the newly elected democratic government came into

power after 1989, one of its important plans was actually a promise on

the social front, a promise to increase spending on social and poverty

Globalization, competition, competitiveness and development

36

programmes to the tune of 2 per cent of GDP. This was viewed as a

clear way of increasing the legitimacy of a long process of market reform

which had taken place under an authoritarian regime, and to a large

extent it was successful and was done in a fiscally responsible manner,

so it was not just an increase in spending with no financing but an

increase in spending with an increase in taxes.

To end, I think I will return to the point that I started out with. The

danger with an excessive focus on globalization and trade performance

from a development standpoint is that it will divert policy-makers'

attention away from these other elements, strategies and internal

domestic strategies which are more central to determining the growth and

development process over the longer term than trade per se, and the

countries that are going to benefit most from globalization are those that

have these complementary strategies at home.

4. Follow-up discussions

Mr. Alec Erwin, Minister of Trade and Industry of South Africa,

President of UNCTAD IX

It is good to be together with you again on this project of making

UNCTAD into an organization that helps this massive reform process

that all four panellists have been speaking about. What I would like to

do is to see if I can draw together some of the threads that have been

enunciated in a way that might help us to focus on certain key issues

which, in terms of the process of bringing about change, could be

important.

The one point that I do think is striking and was touched on in a

way by Professor Rodrik's survey of the evidence is that, to some extent,

globalization has features in it that tend to make us think it is some great

new phenomenon, and it is the emphasis on the development of

information technology, the ability to communicate across the world, that

often makes us think that this is such a new process that we have to

grapple with it from a totally new direction. What I would suggest is that

this is not necessarily the case, and the reasons for this are twofold.

Firstly, if you look at the changes in world history in the last century and

in a part of this, then the industrialization process, the spread of basically

capital production, was as powerful and probably in many respects even

Globalization, competition, competitiveness and development

37

more disruptive for societies and countries than the globalization process

is.

Secondly, if we take that into account, we might understand a little

better what is required of countries to bring about changes. I want to

suggest that, to some extent, the problem for the developing countries is

that they have to recover their economic and political sovereignty in a

period when the economic pressures that they have to confront have

qualitatively changed. For me, one of the defining features of the current

processes, which started towards the last quarter or third of this century,

is that the changes in production processes brought about by information

technology and the speed with which knowledge is now available have

generated new pressures in terms of the whole question of what

sustainable economic activity is. Previously the difference between

tradeables and non-tradeables was clear, and the questions that nation

States had to confront in relation to generating economic activity within

their borders were somewhat more isolated. Now, every economic

activity can be called into question by changes elsewhere in the world.

With the global market, but more important still the change in modern

production processes, I think the challenge for the developing countries

is not so much what sectors they are going to focus on, for example

tourism or agriculture, but being able to carry out economic processes

using new production methods. I think that is the essential challenge

facing us.

What we are confronting is countries that are coming out of a period

of profound economic domination, and here I speak more of the

developing countries, into a world environment where the economic

challenges are different. This requires major reforms at every level of

society, and the problem that countries face is that it is not easy to carry

out a reform if you are in political situation that is fragmented, divided

and weak. This is particularly a problem when, almost inevitably as you

restructure an economy, the first effects will be negative.

I want to suggest that the challenge faced is not only determining the

proper prices of tradeable goods; it actually involves a realignment of the

pricing system, and that applies as much to the provision of social

services as it does to tradeable products. Here I would like to support

strongly the point that reforms cannot and must not focus only on macro-

economic policy and trade. The conventional wisdom that argues that,

I think, is an error and has dangerous effects on developing countries.

The challenge is really to bring about a realignment of the socio-

Globalization, competition, competitiveness and development

38

economic system, and it is not possible to develop a large welfare state

using the traditional mechanisms alone. New challenges are there, and

I think it is absolutely fundamental that reform must bring about new

social institutions as well.

Will we need a new forum, as suggested by Mr. Ghai? I am not so

sure. I would say that the biggest problem we face at present is a

persistent division between what is seen as economic reform and what

is seen as social change or human resource development. This is, I

think, an error, and as a result we have no serious interaction between

those international institutions that focus on economic dimensions and

those that focus on socio-economic dimensions. In my own country, we

have steadfastly integrated these programmes into one policy

programme, the reconstruction and development programme. We have

had to resist measures that try to force us to divide our efforts into

economic measures, i.e. growth, now and development later.

The next point that I would like to make is that I am not so sure

about the proposition that competition only takes place at the enterprise

level or sector level and that economies don't compete. I am not sure

that is the case. I think what you are seeing, as was correctly pointed

out, is that regional development is becoming one of the major responses

of the developing countries to internationalization. And a close look at

MERCOSUR or our own SADEC or ASEAN will show that, as Mr.

Ghai pointed out, these are attempts at profound economic cooperation.

They are attempts to realign the socio-economic interaction between

nation States, and if you look closely, the purpose of regional integration

is really to get sufficient weight and size to be part of certain sectors.

You will not be an automobile producer if you are not part of an

economic zone these days. You will not be a successful producer of

electronic components unless you can bring about a degree of

rationalization within a regional zone. And I think that applies to a

number of industries. In a sense, economies have to begin a

regionalization process in order to be competitive. I would agree with

the points made by Mr. Souty that we must make a distinction, though it

may be difficult, between competition policy and the actual legislation

that is utilized to bring about changes. In our own experience in South

Africa, we have come to the conclusion that bringing about a more

competitive economy requires major reforms within the whole corporate

legislative structure and within financial markets as well, so that

competition law is one instrument in an overall package of corporate law

reform and competition policy. This is a real problem for many

Globalization, competition, competitiveness and development

39

developing countries or LDCs, since the degree of institutional change

is considerable, and if the political will to carry out change is not there,

change will not happen.

Let me then agree that globalization is an opportunity and a danger

at the same time. I don't think that single countries, particularly in the

developing world, can make gains out of globalization unless they work

in a regional context. For small countries, it is exceedingly difficult to

respond to and benefit from globalization unless they begin working

closely with their neighbours. I think this is true for economies such as

South Africa, most of the ASEAN economies and Latin American

economies.

Another lesson that comes out of this is that the need for good

governance is not just something that we have to introduce because it has

become part of some so-called consensus. The need for good

governance arises from the fact that you have to bring about a major

socio-economic transformation in your economy and your state, and it is

not possible to bring about these major transformations unless there is a

considerable reorganization of government. What we are seeing is that,

to respond to the greater access to knowledge, based on improved

information technology, States have themselves to become transparent.

It is not possible to be opaque when anyone in your society can turn on

the television and see BBC World or CNN or something like that. These

kinds of pressures are forcing States to be more transparent, they are

forcing States to be more democratic. So transparency in the context of

governance is not just a good thing to do; it will be forced on

Governments, and how they respond is the key issue they face. With

regard to the reorganization of the state, the latter has to play new roles,

but it cannot withdraw from its responsibilities in the social arena. The

trouble now is that, in the social arena, the state has to use business-like

and modern production methods to produce effective social services, and

that requires the state to become more business-like. It cannot rule by

bureaucracy alone; the demands on the efficiency of the state are so

considerable that it too has to become a more intelligent, thinking state,

following practices that are more closely associated with business.

These are major political challenges, and I think for most political

structures, the real challenge is how to re-establish sovereignty. This is

very true of developing countries. How do you take responsibility for

your nation, your people? This is a very difficult challenge for many

States; those who manage will become successful, while those who don't

Globalization, competition, competitiveness and development

40

condemn their economies to stagnation.

If I could summarize, it seems to me that three points might emerge

from all this. One is that the role of this high-level forum must be to help

establish an effective integration of economic and socio-economic

change, and to the extent that our international institutions exacerbate the

division between them, we must take corrective action. Secondly, I think

we must be very cognizant of the fact that these reform measures are not

something to which you can apply a text book formula, and the reason

for that is that they require a profound political transformation of the

state. And that leads to the third point, which I think this high-level

forum is designed to achieve, and that is that we must have new

processes in the negotiations on multilateral agreements. It is not

possible for certain countries to see the need for competition policy, for

example, and then say that their particular set of viewpoints would have

to be translated into a multilateral agreement. We have to go through the

kind of process that we are not going through. We need a theorical

identification of the problem, an identification of what actual steps are

required, and a dialogue defining the possible agreements around

competition policy, for example, that could be incorporated into a

multilateral agreement under the WTO.

Mr. Pedro Lizana

I would like to underscore what was said about changes in

productive processes which have been brought about by computers.

Basically, this new technology has produced greater mobility of

resources, that is all. Today things move faster, because to mobilize

resources you need information, and this information is now available

instantly and not six months later or not at all, as used to be the case.

Mr. François Souty

I would like just to add that, in terms of competition authorities, I

have to agree. I talked of a liberal system to define a competitive

system. There has been a lot of thinking in Europe recently around the

idea of economic liberty, and I think that is the guiding spirit for a

number of competitive systems in Europe. But it is part of freedom as

a whole, and I think that it squares perfectly with the idea of competition

law and policy. What I said was implicit in that: any system of

Globalization, competition, competitiveness and development

41

economic freedom or total freedom is based on a state of law, and I think

that has been perfectly summed up. Competition law and policies fit in

perfectly with today's subject, and I am very happy to see that.

Prof. Dani Rodrik

Just a brief reaction to the statement that regionalization or regional

strategies are very important for becoming successful on a global scale.

I will draw a distinction here which I think is in the spirit of what was

said and is perhaps mainly a clarification. There is a distinction between

the kind of regionalization, i.e. expansion of regional trade and

investment, that is likely to take place on its own, naturally, without

actual preferences being given to regional trade partners at the level of

national trade policy, or regional integration in the sense of removing

artificial obstacles, for example transport bottlenecks and communication

problems, that prevent trade or investment flows among regional partners

that would otherwise naturally take place, and providing regional

preferences, having two sets of tariff schedules or maintaining QRs and

other restrictions vis-à-vis the world, but having a much more liberal

scheme vis-à-vis your regional partners. I think the argument in favour

of doing the first kind of thing, by which it is sought to underscore the

expansion of regional trade that would naturally take place, is quite

important, and there has been a lot of trade within East Asia, for

example, that is a result of these countries trading more naturally; it has

not been supported or stimulated by regional preferences. If the EU has

been a success, it has been to a large extent because individually the EU

members have had relatively open trade policies vis-à-vis the rest of the

world. If MERCOSUR today is a success, it is again to a large extent

because MERCOSUR members have relatively quite open policies vis-

à-vis the rest of the world. I think this is an important distinction in

terms of regional integration. To what extent you would actually want

to encourage this by actual policies of regional integration in the sense

of having preferences, that is a little bit more controversial.

Mr. Rubens Ricupero

I want to react to the last point made by Professor Rodrik, because

sometimes when people talk about natural regional cooperation, they

assume that the necessary infrastructure conditions and historical

conditions are present worldwide. He has rightly pointed out that it

Globalization, competition, competitiveness and development

42

would be useful to try to remove artificial obstacles like lack of

transportation, but there is another dimension that you have to consider.

Take the case of Latin America, for instance. The current situation, in

which our trade flows have always been North-South, is not something

that you would call natural; it is a consequence of our history, and our

history is a consequence of four centuries of colonization. If you take

the case of my country, Brazil, we have 10 different neighbours, and up

to now, and we are on the eve of the year 2000, we only have land

communications with very few of them. There is no way you can reach

French Guiana, Suriname or Guyana by land, it is very difficult to reach

Venezuela, and there is no way you can reach either Colombia or Peru,

although we have land borders in some cases of 3,000 kilometres. Why

is that so? Because Brazil was a colony of Portugal, the others were

colonies of other powers, and at that time, which was a time of

mercantilist capitalism, the basic principle was monopoly of trade. We

were forbidden from trading with our neighbours during the time of

Spanish and Portuguese rule; most of the trade between the south of

Brazil and what are now the Plata countries was considered smuggling

and was severely punished. There was even some degree of anti-

semitism, since most of the traders on the Brazilian side were new

Christians. It is only now that we are trying to establish those links. If

you look at the matter as some analysts have done in Washington and if

you only concentrate on the economic figures, you will probably say

there is some degree of artificiality, but where does the artificiality start -

now or three or four centuries ago? Some years ago I travelled

extensively in Africa, and I noticed that the French-speaking countries

only had communications through Paris, the others through London. Is

that a natural thing when they are neighbours? So, you have to take that

matter into consideration when you speak about regionalism. We are

now going back to what should be natural, but the heritage of history has

to be considered in this context.

Mr. Alec Erwin

I think the point that we very briefly touched on and which

Mr. Lizana mentioned now of the effect of real-time knowledge and the

changes in the speed of production is something that may deserve a lot

more attention. For many economies, the previous process of

industrialization relied very heavily on the monopolization of knowledge

and the monopolization of technique, whereas this is more difficult these

days. I think this is very important. In concrete circumstances such as

Globalization, competition, competitiveness and development

43

ours in South Africa, unless we integrate our information and

telecommunications systems rapidly, we will not benefit from the

advantages this can give us. The real danger could lie in an inability to

adjust to this immediacy of knowledge or techniques, and this would

produce the final marginalization. As soon as the necessary adjustments

are made, new possibilities begin to open up.

I would also like to make some similar comments on

regionalization. Where I think we agree is that, if regionalization was

based on internal preferences designed to generate rapid growth and

exclude other parties outside the region, that logic is clearly fatally

flowed. Regionalization would have to be part and parcel of the general

liberalization, and I don't think it is possible to do otherwise. I think the

points made by the Secretary-General are already fundamental. Southern

Africa is in an identical position; there is a case for degrees of

preference in our particular circumstances, and we will certainly give

those preferences to our neighbours. To take just one possible example,

our neighbour Zimbabwe produces excellent cotton, and our textile and

clothing industry, particularly in respect of higher-quality products, is

actually expanding, which is surprising these days. It would benefit the

region and both our abilities to trade if we in fact purchased far more

cotton from Zimbabwe, but we should go one step further: instead of

purchasing the cotton, we are very keen that cotton processing should

take place in Zimbabwe. That would establish and protect the

manufacturing base, improve our competitiveness, and begin improving

their competitiveness. I think this is a case where some degree of

preference is important, but not preference at the expense of the rest of

the world. The one thing we continue to lose sight of is that the existing

strength of the Republic of Korea, South-East Asia and many other areas

is based on a careful industrial strategy. The important thing is that the

industrial strategy was focused on becoming an international player. Our

options are not quite as free and easy these days, and we have to be

more sophisticated, but to deny that there must be some degree of

preference amongst groupings of developing countries forces them to

lose many of the possible synergies of economic activity among

themselves that are fundamental for all of them to grow.

Mr. P.P. Prabhu, Commerce Secretary, India

I would like to confine myself to one issue only, that is global

efficiency and competition policy. We believe, of course, that

Globalization, competition, competitiveness and development

44

competition is very important for the development and growth of the

economy and that trade liberalization and open investment policies can

play a significant role in creating contestable markets conducive to

competition. We believe that benefits can be derived from globalization

only so long as fair rules and practices of competition operate in

industrial business. However, globalization in world trade is driven by

the twin forces of technological advancement and liberalized trade and

investment. Neither automatically ensures greater competition.

Technological advancement in fact provides companies with the capacity

to form mega monopolies. The spate of mergers seen recently among

major companies of the world shows that globalization needs government

regulation to control possible restrictive business practices of companies

to ensure free and fair competition.

The Secretary-General of UNCTAD has said that competition will

lead to the survival of the fittest. But trade liberalization, especially

liberalization of imports and foreign direct investment, also exposes

small enterprises in developing countries to unequal competition with

large companies. This can easily wipe out smaller enterprises,

especially if larger companies resort to predatory pricing and misuse of

economic muscle. Such reductions in prices may appear very attractive

in the short term, but in the long term it will be against a country's

interest because it will reduce competition and can lead to social tension

due to unemployment, closing of companies, etc. We believe that there

is need to develop a competition regime, introduce anti-trust laws and

strengthen competition authorities to be able to prevent such

anticompetitive practices.

We face a dilemma in a country like ours because we have to refine

our competition-policy-related measures. In a liberalised environment,

one would expect domestic firms to grow in order to face external

competition. The existence of large domestic firms may be desirable

and in the national interest. It is also logical for domestic companies to

merge to face international competition. In such a scenario, it may

become difficult to distinguish between mergers that encourage

competition and mergers that impede it.

It is therefore necessary for policy in respect of globalization to

take into account the fact that the pro-competitive effects of trade

liberalization can easily be marginalised by a variety of factors, as seen

today, mainly non-tariff barriers like anti-dumping and countervailing

duties, quotas and various other restrictions, standards, specifications

Globalization, competition, competitiveness and development

45

and so-called technical barriers. Agriculture has been mentioned as a

very important source of economic growth for LDCs, but it could easily

be blocked by the introduction of artificially high standards.

Thus we feel that, on the trade side, elements of competition policy

should encompass measures pertaining to anti-dumping, countervailing

and safeguard actions, quotas, rules of origin and other restrictive

practices. The broad approach to competition policy should aim not

only at promoting reforms of governmental regulations where they

unjustifiably distort competition but also at curbing measures which

create barriers to market entry.

And lastly, let me echo the important point that globalization and

trade liberalization or even the promotion of competition or the

development of a competition policy should not be an end in itself but

should ultimately result in more employment or overall economic growth

and development and, most important, improvements in the living

standards of the masses.

Ambassador John Weekes, Permanent Representative of Canada

I must say it is with some trepidation that I take the floor after such

a rich and high-quality discussion. I think that if I draw one impression

from what has been said, it is that there are no simple answers to any of

these questions. But I think the discussion actually makes an excellent

backdrop to next week's high-level meeting on the developing countries,2/

and I think we are fortunate that we will have you as the Chairman of that

meeting as well as the Chairman of this high-level session, and we are

also fortunate that UNCTAD, of course, is one of the key organizations

participating in next week's meeting. It seems to me that that meeting

will provide a practical occasion at which to take the information and

ideas that are coming out of this discussion and putting them to practical

use.

We are always searching for ways to further improve the

functioning of this organization, carrying forward the reforms made at

Midrand, and I must say the session this morning has been of such a high

quality and so stimulating intellectually that I began to wonder if it would

not be better to have had this session at the beginning of the Trade and

Development Board, rather than at the end, so it could have had the

effect of providing a high-level input into the deliberations here in

Globalization, competition, competitiveness and development

46

Geneva.

Let me offer a couple of comments and reactions to some of the

points that have been made during the discussion. First of all, I would

like to offer an observation on globalization and on the extent to which

the phenomenon in a sense is already upon us. As many of you know,

my background is particularly in the trade area, and I would be the first

to admit that trade alone is not going to provide all of the answers, but

recently I looked at the 1996 WTO annual report, which has some very

interesting statistics showing exports as a percentage of gross domestic

product for a range of different countries. One of the categories shown

was developing countries excluding oil exporters, and the average ratio

of exports of goods and services to GDP rose from 10 per cent in 1970

to nearly 30 per cent in 1995. What is most interesting, and I really don't

know what to make of it, is the fact that, for developed countries as a

whole, that figure is about 20 per cent. So you have a situation where

for developing countries on average, and maybe averages are always

dangerous, exports now form a larger proportion of GDP than is the case

for developed countries.

The last point I would like to make concerns marginalization and

some of the observations made on regionalism. I have had some

experience with regionalism, because I am the Chairman of the

Committee on Regional Trade Agreements in the WTO, and in a

previous incarnation I was the chief Canadian negotiator for NAFTA.

The thinking here today has been somewhat along the lines that there

needs to be more regional cooperation among developing countries,

particularly involving some of the least developed countries, in order to

help them with the initial stages of economic development, and I can see

there are some strong arguments that would support that.

Another point that has been made in the discussion is that we have

seen the erosion of some of the preferential benefits that have been

enjoyed by developing countries through the process of multilateral

liberalization in the Uruguay Round and other multilateral negotiations.

The final point is, I think, that the real threat to eroding preferential

benefits will come not through the WTO but rather through the major

initiatives to build new regional free trade agreements in the Americas

and in the Asian/Pacific region and for the further expansion of the

European Community. Less and less trade is taking place on an MFN

basis in the WTO framework, and I think these big new regional

Globalization, competition, competitiveness and development

47

initiatives perhaps pose an even bigger threat for the marginalization of

some of the poorer countries and need to be taken into account.

Ambassador Miguel Berthet, Permanent Representative of Uruguay

First of all, I would like to congratulate the Secretary-General of

UNCTAD for the most excellent initiative he has taken in convening this

High-level Segment. Within the general framework of our discussion, I

think we can say that we agree with what has been said. Specifically, I

should like to ask Mr. Lizana about the experience of Chile. Mr. Lizana

gave us a very interesting statement, since it was practical and very

frank. Specifically, in a number of cases in developing countries, we

have noted that opening up trade did not lead to a drop in the prices of

consumer goods in a useful time frame, and we observe a tension in the

market which prevents prices from dropping and prevents them from

changing, so there seems to be a dichotomy. On the one hand, we have

a beneficial macroeconomic effect - inflation begins to be checked and

is reduced - but at the same time this macroeconomic benefit is not

perceived as profitable to the population, either to families or to

individuals, and in the end, socially speaking, there seems to be a

reaction against trade openness. This is a well known idea, the topic has

been studied by economists, and I would like to ask Mr. Lizana what his

experience is in this respect; what happened in Chile, and what was done

in an attempt to tackle this?

Mr. Pedro Lizana

First, we saw that retail prices on all imported goods went down

very rapidly. Obviously, in countries that are semi-open, imports are in

a way monopolized, but after a couple of years, as new importers appear

and even new producers, some of whom become importers, prices go

down as a result of competition. But more important is the increased

income for the population, because there is an increase in exports. What

is important is that the lowest incomes should rise, and in Chile, that is

what happened.

Ambassador Miguel Berthet

If the response given by Mr. Lizana answers my question, it does

Globalization, competition, competitiveness and development

48

so inasmuch as he mentions time; there is a time lapse of two or three

years, which means that, from the point of view of government policy, it

is necessary to allow for this period of time before the beneficial effects

can be perceived by the population.

Mr. Kassahun Ayele, Minister of Trade and Industry of Ethiopia

First of all, I would like to express my congratulations to UNCTAD

for such a high-quality discussion. I would like to pose a question again

to Mr. Lizana, whose presentation was quite practical and exemplary for

many countries. He stated that subcontracting among enterprises is a

solution to remove constraints in development, and I fully share this

opinion, but I would like to state that in countries where such a system

has never been practised, uncertainties between enterprises prevail and

prevent the implementation of the system. On the basis of your

experience in Chile, what exactly did your Government do to do away

with such uncertainties and to make it possible for the system to be

implemented positively and effectively?

Mr. Pedro Lizana

I think the most important aspect of subcontracting is that it leads

to growth and enhanced productivity as a result of specialization, which

is the very basis of progress, which is why humanity has progressed ever

since man began working on the basis of a division of labour. If we

translate that today, the aggregation of enterprises and specialized

technology can be more efficient and productive, and the same is true in

the case of States. As the state subcontracts activities, it becomes much

more efficient, it costs less and becomes more cost-effective. How can

we encourage this? We have some central offices that deal with

subcontracting, under the auspices of UNIDO, but the main thing is that

there should not be double taxation and there should be no possibility for

the formation of monopolies of workers between the main enterprise and

its subsidiaries, because the advantages would then be nullified.

Subcontracting should provide very open competition; it should stimulate

such competition and produce long-term and medium-term contracts, so

that the subcontractors can develop. For this to happen, contracts should

cover one or two years, whereas with the present system, where most

large enterprises purchase on a one-off basis, it is impossible for small

enterprises to develop technologically, because they have no security for

the future. If they have longer subcontracts, these can be used as

Globalization, competition, competitiveness and development

49

guarantees for financing, and this makes it possible for enterprises to

progress. I think in our countries, it is not so much the technological

delay that matters, it is the transfer of technology to the different

enterprises. Part of the technology can be passed on to small enterprises

from large ones, but we have to improve the network between the large

companies and the small ones.

Globalization, competition, competitiveness and development

50

Mr. Georges Wohlfart, Minister of State, Ministry of Foreign

Affairs, Luxembourg

I would like to note with satisfaction the exceptional level of the

debate and its very great frankness. This is the first time that things have

been described as they are in such a forum. We have heard a lot about

foreign investment but not much has been said about employment. I am

well aware that one needs foreign investment in order to create

employment in the service and industrial sectors. However, how do the

experts here see the emergence and the importance of sectors such as

agriculture and arts and crafts in developing countries? I think these

sectors can play an essential role, just as in the economies of our

industrialized countries, which are highly advanced. The real handicap

in developing these two sectors in my view is the lack of access to

credit, because normally the people active in the sectors don't have

access to commercial credit. So my question is whether there has been

positive experience in micro-financing and whether this should be one of

the paths to be explored in order to promote arts and crafts and

agriculture, which could generate considerable and massive employment.

We have talked about rather modest loans to small firms, and these

are not easily pursued, but thanks to UNCTAD, my country has been

able to set up an investment fund in Luxembourg itself with the help of

our financial institutions. Through UNCTAD monitoring and with the

assistance of local NGOs which are specialized in financial matters, the

fund makes it possible to provide credit at acceptable and proper rates

to potential micro-firms. In this connection, I have a very frank question

for you with respect to the informal sector in developing countries. This

sector is a reality, but I do see that in our discussions, whether at the

international level or within the European Union, we always talk about

the private sector; I really don't know why we avoid talking about the

informal sector, which does have an extremely important role to play in

the economies of developing countries.

My second question concerns the regional approach, and the

Secretary-General of UNCTAD did explain the historical reasons for the

nature of intraregional trade in his region, between Brazil and its

neighbours. If I understood correctly, in a regional approach and in the

establishment of free exchange zones, there exists a danger for the least

developed countries. Now, I can to a certain extent go along with this

analysis, but I would say that the regional approach and integration on a

regional basis can also represent a potential for development; examples

Globalization, competition, competitiveness and development

51

of this are SADEC and MERCOSUR. I would be grateful for your

comments on this approach.

Mr. Dharam Ghai

I think the Minister is absolutely correct that, from the point of view

of employment generation and poverty alleviation or eradication, many

countries, especially the least developed countries, cannot afford to

neglect small-scale agriculture and small-scale manufacturing or

handicrafts in the informal sector. It is very difficult for many of these

countries to expand or grow out of their problems by relying on what I

call the island models of industrialization, involving small city states,

where it is possible to generate employment through large-scale or other

industrialization. So they have no choice but to focus on this sector.

The question of credit is also very important. We now know from

experience in many parts of the world that what has been called micro-

finance or micro-credit can be a very important instrument for

employment generation, income enhancement and poverty alleviation,

and there are many successful models. It is on the basis of these

successful models that we had a summit last year to focus on the

expansion of such credit to sectors, communities and individuals. I do

feel this is one of the more promising approaches at the national and

global levels to pursue in the years to come.

Mr. Auguste Paraina, Minister of Trade of Madagascar

I would also go along with the previous speaker in congratulating

UNCTAD for organizing this meeting. I would like first of all to refer

to a question that I am really concerned with and which my country is

concerned with, and that is setting up competition. I was very pleased

to have heard Mr. Souty say earlier that laws and competition have to

take into account the specificity of each country. Now, we do have

problems in our countries, and we have structural adjustment policies

developed with the Bretton Woods institutions, namely the IMF and the

World Bank. We are compelled to simply remove from our competition

law safeguard clauses which are to be found in agreements of the WTO.

So what we are suggesting is a harmonization of viewpoints between the

Bretton Woods institutions on the one hand and UNCTAD and WTO on

the other.

Globalization, competition, competitiveness and development

52

My second point relates to competition law. Are underdeveloped

countries still obliged to copy the developed countries? For example,

should the authority in charge of competition always be an independent

private organization, because it is our belief that the state still does have

a role to play as an authority in charge of competition. With regard to

regional cooperation, here again we have a problem, being a country

engaged in structural adjustment. In terms of regional cooperation and

integration, the Indian Ocean Community and the countries therein are

trying to lower tariff barriers as much as we can. However, given the

fact that we have structural adjustment programmes, we all have other

priorities, including balancing public financing.

Mr. Rubens Ricupero

Let me only tell you what I heard two days ago from Mr. Gerald

Helleiner from the Department of Economics in the University of

Toronto, who helped us as an expert and is continuing work with the

Group of 24 within the World Bank and the IMF; he commented that in

the OECD community responsible for foreign assistance, in Bretton

Woods institutions and in meetings of bilateral donors, you hear the word

"ownership" everywhere, meaning ownership of policies, but one is not

practising what one preaches. Either we have to change what we say or

we have to change what we do. Organizations don't impose conditions

in a capricious way but because they are convinced that otherwise the

desired results won't be achieved. I think that an organization such as

ours, even if it does not have the power to impose conditionalities, and

in fact because of this, is well placed to try to build consensus, as we

have seen this morning. To give you an example, quite recently Latin

American countries preparing for negotiations on the free trade zone

asked UNCTAD to assist them in technical cooperation matters with

respect to competition law, and one of these major organizations reacted

in a very negative manner because, unfortunately, at the international

level, to be honest, there is an attempt to establish a sort of monopoly

over the type of advice given.

Mr. François Souty

First of all, I would like to thank the Minister of Madagascar for the

question he raised. I would just say that India also asked two very

interesting questions with respect to competition policies, and both sets

Globalization, competition, competitiveness and development

53

of questions really overlap. I would like to start with the last question

first. I did not say that competition policy was implemented by private

bodies. I represent the Competition Council, which is a public or state

body and works for the public benefit. So yes, there is a role for public

powers in the implementation and administration of competition law. I

do not believe that competition law is managed by a private body

anywhere in the world, and I am virtually certain of what I am saying.

On the other hand, for competition authorities, they need to set up

conditions allowing free choice and freedom of action for economic

operators and creating optimum conditions for the freedom involved in

this exercise.

This having been said, it was asked quite correctly whether we

necessarily have to follow the models already used elsewhere. One

might feel that the trend towards globalization and the creation of world

monopolies, as the distinguished Minister from India pointed out, would

be a very serious problem for fragile economies. The Minister also

wanted to know about small and medium-sized enterprises, which are

exposed to unfair competition given their very powerful competitors, and

there is also a question which was raised with respect to control of

mergers on an international level. These are, of course, highly complex

questions.

Here I would like, Mr. Secretary-General, to do some promotion for

UNCTAD in that, at the end of November, there will be an Expert

Meeting on Competition Law and Policy in UNCTAD, which will be

followed by the session of the Working Group on Interaction Between

Trade and Competition Policy in WTO. At the Expert Meeting, we shall

be dealing with vertical and price restrictions, and we shall have specific

proposals for small and medium-sized enterprises. This will, of course,

have to be given detailed and careful scrutiny.

I wish to conclude by saying that, with respect to merger control,

historically merger control started 20 to 30 years after control of anti-

competitive behaviour was to be observed in various countries; this was

the case in the United States and the European Union.

Representative of Poland

I think that our country could be a good example for one question.

Freedom, in the sense that the level of tariffs is very low and sometimes

Globalization, competition, competitiveness and development

54

zero and there are no formal obstacles to market entry or to business

development, does not necessarily mean that the market will develop.

Many countries still do not have an active working market, and their

economy consist of a complex system of cooperation, not necessarily

formally established but sometimes involving the mafia and the like.

It seems to me that this problem could be represented as follows:

the market is able to save a good working economy, but it is too abstract

a term to induce individual initiatives to create economic unions. The

capitalist system has not only market institutions but also market

traditions, market patterns and business patterns as well. In our country,

such experience is available only in books. One of the most important

issues was therefore to establish a good pattern of business activity, and

in our country we succeeded in replicating such a pattern. But I do not

have much trust in government activities in this field, and it seems to me

that the dissemination of business activities and market institutions could

take place independently. This is my question to Mr. Lizana - it seems

to me that the best platform for transposing these patterns to a new

market economy could be the business association - how do you

evaluate such organizations and their contribution to the development of

a market economy?

Mr. Pedro Lizana

I think that schemes and patterns cannot be easily transposed from

one country to another, but if you establish contact with people who are

really involved, the solutions are very simple. I think that the informal

economy is a great advantage, a great benefit to a country; it has to be

formalized, but it is much better to have a strong informal sector than not

having anything at all. You should make it cheap and easy to be

formalized, but the informal sector is very important. A famous

professor of administration, Peter Drucker, says that when you want to

improve productivity, you have to go and see people who do things.

Ambassador Saodah Syahruddin, Deputy Permanent Representative

of Indonesia

After listening to all the panellists, we can see that the current stage

of development is characterized by disparities. Mr. Dharam Ghai said

that our globe today is still facing the need for good food, clean water,

housing, education and long life expectancy, while on the other hand we

face globalization and liberalization of the world economy which have

Globalization, competition, competitiveness and development

55

brought keener competition for trade, investment and new technology.

To the extent that liberalization has accelerated the growth of

international trade, it can be expected also to improve the growth

prospects of individual countries. Yet, at the same time, some

developing countries, especially the structurally weaker and more

vulnerable economies, have been confronted with short-term difficulties

and even the risk of marginalization. We hope for global partnership and

cooperation to assist countries facing structural impediments to

overcome poverty, to cope with unemployment problems and to pursue

their development objectives.

I took note of the presentation of Mr. Lizana, who mentioned the

need to increase income-generating capacity, but for some countries the

problem is not merely income-generating capacity. They are affected by

the international economic environment, which is beyond their control,

for example volatile foreign exchange rates and world commodity prices.

I would like to hear the view of the panellists on how this problem can

be overcome, taking into consideration that most of these countries live

off commodities and natural resources and some countries are also

affected by this exchange volatility.

Prof. Dani Rodrik

I think this is an extremely pertinent question. In fact, it is very

much at the heart of a lecture I am giving at UNCTAD tomorrow

morning on the question of the volatility of the external environment and

its impact on the developing countries . First of all, one has to live with

3/

it - that is the obvious answer. It is going to be around, and the answer

is not going to be to close off markets. But when we look at the

experience - and clearly the 1970s was a period when the volatility of the

external environment was especially marked, and that was followed by

a collapse of growth in a lot of developing countries, particularly in Latin

America - what we can see from the evidence is that the countries that

were better able to cope with the shocks emanating from the world

economy had a number of features in common, and those I can

summarize under two headings: one is the extent of existing social

disparities, and we can think of income inequality or various other

measures of social cleavage in an economy. And those are to a large

extent given things that one cannot do anything about. But the second

determinant governing how different countries reacted to these shocks is

very much man-made and can be affected, and I am referring to

Globalization, competition, competitiveness and development

56

institutions of conflict management. Countries that had better institutions

of conflict management did much better in handling the shocks of the

1970s than countries that did not, and these institutions come in various

forms. I think democracy is the ultimate form of institution of conflict

management. Countries that had personal liberties and political rights

did better in dealing with the shocks than countries that did not.

Countries that had better bureaucracies did better. Countries that had

institutionalized forms of social insurance did better than countries that

did not. I think these are some of the things that have to be underscored,

i.e. the need for complementary domestic institutions to deal with these

shocks that are going to emanate continuously from the world economy.

Representative of Egypt

I have two very brief questions, one for Mr. Rodrik and the second

for Mr. Souty. Mr. Rodrik warned us of the excessive violence of the

market process. He indicated that financial markets do not have mercy

on Governments that do not exercise fiscal prudence. He also addressed

the issue of social safety nets at the national level, and my question to

Professor Rodrik is whether he thinks we need additional safeguards at

the international level to deal with the implications of globalization.

My second very brief question to Mr. Souty is related to

competition policy. He talked about the misuse of dominant positions

and referred to restrictive business practices and mergers, and we have

recently witnessed different competition authorities reaching dramatically

opposed views on whether mergers enhance or restrain competition. In

the light of the globalization and liberalization processes, my question to

him is whether, in his opinion, we can rely only on national policies

related to competition or whether international rules are necessary in this

respect.

Ambassador Werner Porfirio Corrales Leal, Permanent

Representative of Venezuela

I would like to congratulate UNCTAD on its initiative in organizing

this session. I will try to be very brief. From the successful experience

of Chile, as well as the South-East Asian countries, can we categorize

and say what share of success is attributable to liberalization and what

share to policies?

Globalization, competition, competitiveness and development

57

My second question is - what type of public policies do States

pursue internationally and nationally?

I shall refer to three examples only of cases which have been

mentioned as successful. With respect to the objective of developing the

domestic market, competitive services and goods, and proper allotment

of resources, is it enough just to deregulate and liberalize access of

imported goods and services and liberalize the domestic market? Should

you not have additional regulations from the state when it comes to

competition policy, and do you not also need active policies, since just

to promote liberalization of market forces is not enough? What type of

active policies promote competition in supply and distribution? It is not

enough to have multinationals. You have the experience of many

countries in Latin America, for example Bolivia, Peru and more recently

Venezuela, with the introduction of a new player, namely cooperatives,

distributing food without any kind of subsidy, which means that there is

a new factor of competition that improves cost effectiveness and value

or money and helps low-income families.

The second example refers to the objective of raising the level of

savings and productive investment. Experience in Latin America

demonstrates that the mere liberalization of market forces, although it has

helped to raise the surplus of enterprises, has not automatically led to

greater investment, and the only successful experience of converting

savings into greater investment is Chile. Chile not only liberalized its

market, but it implemented active policies similar to the ones which

existed in the 1980s in Asian countries - forced savings, use of pensions

for capitalization. This is an active policy which also helped to protect

against excessive vulnerability to capital flows. Since the 1980s, Chile

has also implemented active policies which to some extent control the

outflow of capital.

The final example involves a comparison between two different

ways of dealing with competition policies. One way is to increase the

competitiveness of exports and that is all. You can use deregulation

policies for openness and macroeconomic policies to manage exchange

rates so that exporters achieve competitiveness, but this approach is now

exhausted and the Latin American experience shows this. The effects do

not last. Mr. Lizana said that he was worried because foreign investment

flows were very large but the exchange rate of the country had gone up

and exports were thus disadvantaged. However, if the problem is

tackled through active policies of productive transformation which help

Globalization, competition, competitiveness and development

58

technology absorption, competition policy will certainly have more

lasting effects. In short, I want to say that there is a possibility of

pursuing domestic policy which complements liberalization of the

market.

Mr. Dharam Ghai

I just want to make a few remarks about regionalization. I think the

emphasis is still too much on trade creation and removal of trade barriers

in the context of regionalization. Regionalization or regional cooperation

can comprise many other elements; it is often a political project, with

strategic concerns and implications for transport, communications, power

and social issues too. At the moment, we have two models. The

European Union is one example of regional integration, where all these

elements are locked together, while the North American Free Trade Area

is different in that it is largely trade-oriented. It seems to me that in the

least developed countries and developing countries, perhaps it would be

better to aim at the broader kind of regional cooperation comprising

economic, trade, and political aspects and strategic issues and questions

of communication and development.

Mr. François Souty

There is no simple answer as to whether there should be

international rules or not. What cannot be denied is that, as shown by

our discussion this morning, it is necessary and useful to have

microeconomic competition policies. This is the point made by the

representative of Venezuela. All I would say is that there are synergies

between national and regional policies and the international debate. And

I don't think that that debate will make much progress unless there is

discussion and action at the national level.

Mr. Pedro Lizana

In this dilemma of regionalization versus globalization, I think if

regional agreements do not have a built-in calendar of globalization and

cooperation with the rest of the world, they are as dangerous as a closed

economy. When you speak of active policies, you are asking a group of

individuals or an authority to decide arbitrarily which sectors they are

going to promote or develop, and that is very dangerous. They might

Globalization, competition, competitiveness and development

59

twist the market around and make it operate in an inefficient way.

Active policy should mean the organization, for instance, of private

pension funds, etc., and creating a series of mechanisms which help the

market to work better, but not have them decide on which way the

market will run.

Prof. Dani Rodrik

Let me respond very briefly on the question of international

coordination versus national policy, specifically as regards issues of

social safety nets. I think there is a role for international coordination,

and there are two aspects in particular which are badly in need of

rethinking. The WTO Agreement on Safeguards badly needs to be

reformed, and I think there is also a lot more thinking to be done on

international cooperation and coordination in the area of corporate

taxation. But I think the main action really remains at the level of

national Governments, and I think it would be a mistake to look to the

international level, whether to WTO or anywhere else, in order to solve

one's own problems. In the context of social safety nets in particular, if

I can use the example of Egypt, where public employment has been the

welfare state choice, it is now obvious that this is too expensive.

Furthermore, it is not targeting the right people; the people you want to

target are not university graduates, who are middle class - they are not

the ones in need. The international community can help you by

providing financing for adjustment, but the problem really has to be

solved within Egypt in terms of coming up with better targeted forms of

social safety nets. So for all the talk about globalization, the reaction

generally in this area really remains at the level of national policy.

Mr. Alec Erwin

It seems to me that, if we look at the question of jobs, jobs, jobs,

given the difficulty and challenge we now face in providing jobs, jobs,

jobs, we probably need very much more sophisticated strategies in both

developed and developing countries. And there, I am convinced that it

requires Governments at the national state level to be able to form new

types of partnership. Governments are going to have to work very

closely with the business community, with social groups and with civil

society for two reasons. One is, I think, to understand better the needs

of business and communities, so policy propositions can be translated

Globalization, competition, competitiveness and development

60

into effective actions, and the second is to ensure that societies hold

together in this process of transformation.

Very briefly on agriculture and crafts, one thing is important here.

If, in agriculture, the beneficiation of products must be given a lot more

attention, and here I think there are tremendous opportunities to utilize

the knowledge available through modern farming methods, the

possibilities for marketing products could be expanded, but this requires

countries to make sure that people can get access to market knowledge.

Credit too is important, but it wont be helpful if they are no market

possibilities.

In crafts, it is important that we follow more the European model.

There is a tremendous danger that our cultural and historical heritage can

be devalued and destroyed if we only produce crafts for sale. This

really must be part of a cultural revival, the re-establishment of our

sovereignty and pride in our own histories. If we can do that, then I think

we shall create a richness in the world through the trade of these craft

products which will be very beneficial. But with all due respect to

McDonalds, if we all become like McDonalds in crafts, then I think we

shall devalue our society. Trade is not just trade; sometimes it is about

presenting our own culture and society.

Globalization, competition, competitiveness and development

61

Electronic commerce

62

Part two

THE FUTURE OF COMPETITION: A

PERSPECTIVE ON ELECTRONIC COMMERCE

Panel discussion held jointly with the

Second Committee of the General Assembly

in New York through videoconferencing

1. Presentations by panellists

Mr. Geza Feketekuty, Director, Centre for Trade and Commercial

Diplomacy, Monterey Institute of International Studies, San Diego,

California

It is indeed a pleasure and honour for me to be here this afternoon

participating in this panel. I very much want to congratulate the

Secretary-General of UNCTAD for his brilliant insight in combining this

topic with this morning's discussion on competition.

Recent developments in electronic commerce have the potential of

empowering small entrepreneurs to reach global market niches at

relatively modest cost. Many individuals and families have already

successfully built businesses by offering home- produced jewellery

products, handicrafts and computer programmes for sale on the Internet.

Those with the skills and entrepreneurship now have a better chance than

ever before of reaching potential customers worldwide on a limited

budget. This new global electronic market place is likely to transform

global competition to the benefit of both small producers and small

consumers. It has already transformed the global market for books.

Electronic commerce has been around for more than a decade and

has been the driving force in the globalization of production by large

corporations. It made possible large investments by these corporations

in assembly facilities and facilities to produce components and parts all

around the world. The widely shared economic benefits helped persuade

WTO member countries to adopt the telecommunications annex to the

General Agreement on Trade in Services and subsequently the

Agreement on Basic Telecommunications Services.

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63

Now the question is - what is different about what we are

discussing today? What is different is that, over the last two years,

electronic commerce has taken on a new dimension through the

commercialisation of the Internet. This development has pushed global

electronic commerce from the level of large corporations to the level of

small businesses and households, and that is a major change. While

global volumes are still modest, it has already had a major impact in a

number of areas. Consumers can use public electronic networks to

collect information about products or services being offered for sale, to

place an order and to arrange for the electronic transport of information-

based products for services to the site of consumption, making them

available virtually instantaneously. And they can do this on a global

basis.

In the first case, the electronic network accessible to the public

makes it much easier to acquire information about products and services

for sale in other countries and on the prices at which they are being sold,

and this is going to have a revolutionary impact on trade policy. As

people generally find out the prices for which they can buy things in

other countries, they will begin to ask why can't buy these goods for the

same prices in their own country.

In the second case, these networks significantly reduce the time,

effort and cost involved in making a purchase, particularly for national

purchases.

In the third case, you can actually transport electronically the

product you are buying, which allows virtually instantaneous

consumption of the product or service produced, not only locally but

around the world.

From the point of view of businesses, the new global network opens

up the opportunity of exponentially increasing the number of potential

costumers and reaching them at relatively very modest cost. It can also

reduce the potential business risk by providing the means for immediate

payment and, in the case of information-based products and services,

immediate delivery to the consumer.

The potential impact of this new information and distribution

channel is revolutionary, to say the least, and it raises a number of policy

challenges for countries. Governments have been caught somewhat by

surprise by the speed at which public use of the Internet has expanded

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64

in the developed countries. Governments in these countries began to

develop a policy forum only in the last year, and there remains a distinct

gap between market developments and the updating of laws and

regulations.

Existing legal and regulatory structures are based on paper

transactions and transactions taking place within clearly sovereign

territories. More specifically, the increase in public use of electronic

commerce raises legal issues such as the validity of electronic contracts

and signatures, the locus of taxation, the distribution of liability, the

nature of electronic cash and the legal reach of the parties outside the

physical boundaries of the state. It also raises social issues such as

protection of privacy, corruption, dissemination of offensive material,

promotion of national culture and protection of consumers.

Many Governments have recognized the enormous stakes involved

and have individually and collectively been taking steps to address both

the legal and regulatory issues involved. The United States, the

European Union and Japan have each issued white papers within the past

year. The OECD has examined a wide range of issues in articles and

policy documents. Other international organizations such as the

International Chamber of Commerce and UNCITRAL have begun to

update the international commercial code, while still other organizations

are struggling with issues like trade marks.

Within the time available, I can only hope to provide a brief sketch

of the ideas, policies and initiatives that have come out of these initial

policy efforts. All of the three major white papers that exist and the

OECD policy recommendations start from the proposition that the growth

of electronic commerce has been market-driven. They recommend that

the primary role of government at this stage should be to create a more

certain legal framework for electronic commerce. They also promote the

principle of neutrality, which holds that the application of current tax

laws and government regulations to electronic commerce should be

neutral as compared to their application to paper-based transactions. In

other words, they should not impose a discriminatory burden on

electronic as against paper-based transactions.

All the papers recognized that the unique aspect of electronic

transactions will require a new blend of self-regulation, national

regulation and international cooperation. But the highly dynamic nature

of the current stage of development requires a wait-and-see attitude on

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65

the part of government. The American paper is more categorical and

explicit in looking to industry self-regulation as the solution in some

areas, but all the papers emphasize the need for government restraint in

the adoption of regulations, which could strangle the further market-

driven development of this new form of commerce.

There is agreement that open access in the use of the

telecommunications infrastructure and comparative pricing of

telecommunications through increased competition are crucial to the

development of electronic commerce. At the same time, most countries

see new challenges ahead in the regulatory separation of

telecommunications, cable and broadcasting as these technologies

converge in the global information super highway that is emerging.

All the papers recognize that development of electronic payment

systems will require market-based innovation and a degree of

government guidance and supervision to protect the integrity of the

financial system and to maintain control over the creation of money and

credit. The US paper proposes that the Internet be declared a tariff-free

zone, and this is not as revolutionary a proposal as it sounds, since

Governments as a practical matter have not found it feasible to place

tariffs on across-border trade in services. Also, most countries place a

tariff only on the physical storage medium, and not on the intellectual

content of information or entertainment products. An agreement to avoid

tariffs on Internet-based trade in information-based services and products

would give a symbolic boost to such trade but will not substantially alter

the status quo.

The OECD has also prepared a number of analytical papers on the

issues arising from the use of electronic networks by households to

purchase physical goods abroad. These networks facilitate the

acquisition of information about goods abroad and the placement of

orders. They do not change matters of shipment and customs clearance,

which still make the completion of such transactions relatively expensive

and cumbersome. The OECD has suggested that regulatory reforms in

customs clearance and transportation could yield substantial benefits to

consumers as they seek to make use of electronic networks to place

orders abroad.

Beyond these issues, the rapid expansion of electronic commerce

at the international level poses new challenges to national regulations in

many areas. In the long run, one core outcome of the growth of

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66

electronic commerce will be the need for greater international

cooperation on regulatory issues, because cyberspace transcends the

traditional territorial boundaries of nation States.

The discussion up to now has focused primarily on policy

developments in developed countries, because that has been the major

focus of activity to date. In developing countries, the major constraints

on the growth of electronic commerce are limited public access to

electronic networks and the excessive costs of telecommunications. In

rural areas, the problem is more basic, namely the lack of adequate

telecommunication facilities.

Organized international discussions of issues related to electronic

commerce at the global level remain focused on relatively narrow

technical issues. A wider discussion is likely to emerge in the WTO

later this year as countries begin to address issues related to phase two

of the information technology agreement. Wherever such discussions

have been held, however, the participation of developing countries has

been very limited. It is likely that few delegations from developing

countries are fully equipped to participate in many of these discussions

in a meaningful way. I therefore believe that UNCTAD has a very

important role to play in this arena, and that is why Secretary-General

Ricupero is to be congratulated for this initiative.

Mr. Carlos Ronderos, Minister for Foreign Trade of Colombia

First of all, I would like to thank the Secretary-General of

UNCTAD for his invitation to discuss this subject. I would like to draw

attention to the areas opened up by electronic commerce. Opportunities

have opened up for trade in goods and services, the provision of digital

data, on-line bank transfers and handling of documentation, but not just

that. Electronic commerce opens up a vast world for implementing joint

projects, the design of on-line services between countries, public

contracting and marketing of products, as my predecessor has pointed

out. All after-sale service will be developed through electronic services.

And this electronic trade can be developed directly or indirectly. Now,

what do we mean by that?

First of all, in direct trade we have a situation where trade occurs

totally in cyberspace, and where order payments and delivery are carried

out through the electronic system; here I am talking about intangible

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67

goods and services. In the case of indirect trade, of course, the order, the

payment, and the paper work, so to speak, are channelled through the

electronic system, but the goods are processed and delivered through

traditional channels. With this frame of reference, the question to ask is

why is electronic trade important? Here, I would like to provide some

figures I have gleaned from a few documents. Seventy-five per cent of

trade or business contacts fail due to unsuccessful communication.

Twenty-five per cent of the cost of a transaction is related to data

capture and to paper work; 71% of the documents we have in computers

and which we print through computers are digitalized manually - they are

not transferred from computer to computer; and 18% of the orders in the

United States have typing mistakes. This compels us to turn to

electronic trade, which allows a reduction of about 60%, according to

published calculations, in the time that elapses between the order and the

delivery of goods. We have to bear in mind that the cost of electronic

mail, or E-mail, is 25% of the cost of any other mail system in the world.

And as a result, we are resorting to the exchange of electronic data more

and more. In America, Europe, Asia, the Pacific and Africa, in the

period 1995-1997, the number of messages relating to this type of trade,

or data exchange, has grown significantly.

What are the systems that we are using today? Professor

Feketekuty referred broadly to the Internet, which is the most widely

used system. The Internet allows greater access for users, but it has

problems of security and reliability, for both information and the handling

of money. Hence the whole concept of electronic data interchange (EDI),

which I will be referring to in more detail, inspires greater confidence in

that it is working towards more homogenous systems that will enable us

to monitor and follow up, which is better than what is offered by the

Internet for the purposes of international trade. Here, I am referring to

EDI defined as the exchange of commercial documentation transmitted

through electronic means. This is a definition which I think comes close

to the subject, because we are getting into the question of documentation

and trade, which involves countries, customs and banks - in other words

we are talking not only about consumers but also about organizations.

What is the EDI environment? It is an environment which uses

formatted documents based on an international standard and is useful for

official entities, financial institutions, major private companies, trade

forwarders, and people who are involved in international trade on a large

scale.

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As far as the evolution of EDI is concerned, in the course of this

decade EDIFACT has been turning precisely into the basic standard for

transmission in this type of trade. What are the costs and benefits of the

use of these systems? Obviously there are costs - design costs in the

development of the interface between existing systems and EDI, staff

training and system installation, as well as the communications necessary

to be able to turn the system into a widely used one. But this kind of

instrument also has tremendous advantages in terms of innovative

strategies and capabilities and staff efficiency, and of course it simplifies

work in international trade. Why? Because it replaces paper documents,

it increases response speed and it minimizes mistakes and delays. Here,

we have three basic, central elements which help countries to engage in

much more competitive trade.

In Colombia, we have a foreign-trade information system which is

helping us to develop the basis for electronic trade. There is also the

ASYCUDA system for customs. But what we want to do is to target

institutions and to have them conceptualize the processes for licensing

and handling of exports and imports in a much more expeditious manner,

record administrative acts, develop better archives and updated

databases, facilitate the follow-up of international trade operations and

provide users, i.e. private entrepreneurs engaging in international trade,

with a better way to handle international trade, better access to databases

and information to improve international trade. What are the

advantages? Of course, there is increased speed. Information is much

more reliable because it is checked more regularly and is more up-to-

date. It enables enterprises to adjust to foreign trade and hence improve

the whole process from management of inputs all the way to accounting

and the handling of inventories. Costs are reduced, paper is eliminated

and competitiveness is increased.

In the case of Colombia, what are the advantages for institutions

and government? The advantages of course are immediate availability

of information, which is of the greatest importance in relationships with

other institutions and in our analysis and decision-making capacity. If

international trade information reaches those of us who design

international policy three months later, this is too late. This information

gives us transparency because it does not depend on the discretion of an

official. It helps us to control corruption and illegal practices. We are

streamlining the whole process of foreign trade to obtain greater

efficiency. This in turn helps us to engage in better international

negotiations, to have greater facility in our international negotiations and

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69

to have greater availability of updated information in these processes of

internationalization and globalization.

To conclude, I would like to refer to two aspects which are to us

crucial in the future of electronic trade. First, the action or actions to be

taken by Governments. Obviously, there is a need for the political will

to introduce the country to the global economy of services, to create the

necessary infrastructure so that prices are accessible to people, to

prepare the population for the challenges of a borderless world economy,

to identify comparative advantages, to develop competitive strategies in

the appropriate sectors, and of course to introduce the necessary

legislation.

What still remains to be done? Challenges remain, challenges

stemming from trade which is no longer subject to controls. As the

previous speaker has pointed out, electronic trade is not subject to state

control. Software which is produced in one country is developed in

another and the payment is made in a tax haven in a third country. And

the question of taxes becomes impossible to handle. Here, we are going

to be confronted with the harsh reality of having to reconcile the

nineteenth-century concept of the nation State limited by physical

frontiers with cyberspace technology which transcends any possibility of

legislative or repressive treatment by a Government.

The other major challenge relates, of course, to a world which is

divided, not as in the 1950s between the haves and the have-nots, but

between those who know and those who don't. Our great challenge is

how to proceed to an equitable distribution of knowledge through the

mechanisms that cyberspace and electronic trade make available to us.

These are a few reflections I would like to leave with you.

Mr. Tariq Sayeed, Chairman, G.77 Chamber of Commerce and

Industry of Developing Countries

The current era has witnessed fast and frequent changes at the

international economic level. We have seen the successful conclusion

of the Uruguay Round negotiations and the creation of the World Trade

Organization. The interdependence of world economies has increased.

On the development scene itself, some developing countries have made

significant progress, but the majority of developing countries are still

struggling to cope with the problems of hunger, poverty and

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70

underdevelopment. In the meantime, the process of globalization and

liberalization of trade in the wake of the revolution in

telecommunications has been intensified.

The introduction of electronic commerce has, of course, unfolded

immense opportunities and challenges in the promotion of trade, the

inflow of capital and technology. The United States of America, the

European Union and Japan have already made much headway. Over the

Internet, we can already buy books and clothing, obtain business advice,

purchase everything from garden tools to hot sauce and high-tech

communications equipment. But we know this is just the beginning.

Trade on the Internet is doubling or tripling every year. In just a few

years, it will generate hundreds of billions of dollars in goods and

services. According to some estimates, the trade volume today is 2

billion dollars and will reach about 1 trillion dollars by the year 2010.

The Internet is currently concentrated in developed countries -out

of the 16.1 million Internet hosts, 16 million are in OECD countries - and

is only beginning to permeate the developing nations. The Internet must

spread within those countries in a manner that makes it accessible not

just in the capital city, but also throughout the country, including rural

areas. Wireless satellite technology must help.

We believe that use of the Internet is inevitable and inescapable in

the current era, whether in developed or developing countries. However,

if the Internet is only available in developed countries, then instead of

being a vehicle for integrating the global economy, it could create further

division and polarity. It could increase the disparity of incomes in the

world. However, if electronic commerce and the Internet become

available to developing countries, then they will be a force for narrowing

the income gap in the world. The Internet can then become a very

positive force for economic and social development in a global sense.

The Internet can make it easier for companies in developing

countries to do business globally. It is now very difficult for a small

company in a developing country to be a part of the global marketplace.

But with the Internet, one can immediately have access to a billion

people globally. Thus, if the Internet can reach the developing countries,

it can be a greater force for economic and social development.

Electronic commerce gives rise to intense competition based on the

survival of the fittest, the standardization of products on the part of

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71

companies and the integration of economies. The question is, when the

least developed and developing countries have a very poor rate of

literacy, not to speak of computer literacy, and their infrastructure base

is so feeble due to resource constraints, and where their rural sector does

not even have telephone links, how can this modern technology and this

digital economy be introduced? About two-thirds of the world does not

have access to telephones. The developing countries continue to

confront critical macroeconomic imbalances, chronic debt burdens and

galloping inflation. The spectre of hunger, disease and poverty continues

to haunt these countries, which are exposed to the risk of being

marginalized in respect of electronic commerce unless they are

adequately assisted by the international agencies and the multinationals.

The second point that I would like to stress here is that the adoption

of a digital economy raises a number of issues. First, declaring the

Internet a free-trade zone - Is it possible for the Governments of

developing countries to allow the duty-free movement of goods?

Second, the protection of intellectual property - sellers must know that

their intellectual property will not be stolen, and buyers must know that

they are getting authentic products. Third, privacy is essential in the

network environment. Fourth, security and protection of data like credit

card numbers, etc., is also required. Fifth, there is a need to develop

uniform rules and uniform rights. Sixth, there is the need to protect

people from objectionable material. There is a need to build a modern

global telecommunication network that is accessible, affordable and

supports electronic commerce. A sense of participation of all partners,

whether belonging to the North or the South, is a prerequisite for the

success of this digital economy; otherwise, electronic commerce

threatens to become little more than high-tech isolationism.

I believe that UNCTAD could prepare a paper on electronic

commerce and its pros and cons, especially for international trade and

the inflow of investment and technology, for the benefit and guidance of

the developing countries. Some mechanism for financial support for the

least developed countries to enable them to switch successfully to this

modern technology should be created. Their lagging behind in the

adoption of a digital economy would indeed be disastrous.

The Group of 77 Chamber of Commerce and Industry can be

counted upon for its full support and cooperation, and in fact it must be

a partner in evolving a modern global telecommunications network. I

hereby renew our pledge that the private sector and the Chamber will

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fully support and supplement the efforts being made at various levels to

improve competitiveness, especially of small and medium-size

enterprises (SMEs), in this increasingly globalized economy.

Under the aegis of the Group of 77, we have been trying to develop

a Group of 77 Trade Information Network in which Pakistan is the

regional focal point for Asia and the Pacific. The focal point is situated

in Karachi and has started to disseminate business information among the

members of the Chambers of Commerce and Industry of developing

countries. The regional focal point for Africa is Cameroon; for South

America it is Colombia.

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Today, the Chamber network has been created through the

cooperation of a number of institutions and strategic alliance partnerships

with several industry leaders. Cooperation with UNCTAD's Trade Point

Programme assures the place of chambers in promoting trade efficiency

in general. The network has grown to include nearly 2,000 chambers of

commerce, making this the de facto global centre of the chamber of

commerce universe on the Internet. This network is now acting as a

conduit for several informational and promotional products of SMEs.

The network provides a great opportunity for Group of 77

chambers, SMEs and their respective Governments to promote South-

South trade and investment. The international development agencies are

being requested to provide adequate assistance to the developing

countries' chambers in order to help them gain access to the information

and communication technology that is now necessary in order for them

to become competitive in this increasingly globalized economy.

Given the importance of investment promotion for developing

countries, particularly for Africa and the least developed countries, there

is a need to provide assistance to enterprises, as well as investment

promotion agencies, to project their investment opportunities and secure

investment partners through electronic video means. Of course, while

the Internet is the emerging priority, this does not mean that it should

submerge the other major issues relating to the debt, market access and

commodity problems of the developing countries.

Building Internet-related infrastructure in developing countries

requires official assistance, as well as investments from the

multinationals. The investment promotion programme of developing

countries will also need to give priority to telecommunications. And

developing countries will have to hold consultations among themselves

on how best to tackle the challenges and the potentialities arising out of

electronic commerce. In that endeavour, the Group of 77 Chamber of

Commerce would be willing to provide the developing countries with

support.

Let me emphasize that electronic commerce is no longer a dream.

It is a reality coming in the wake of the information revolution that the

world has witnessed. The economies in the twenty-first century will be

largely shaped by the Internet. What is required is to identify the

impediments which could be experienced in the regions of the world

whose technological base is thin. Through joint efforts, a strategy could

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be evolved to make this technology economically viable and allow it to

spread throughout the world with as little hindrance as possible.

Moderator

My first question will be the following: all of you, more or less,

referred to the necessity of using electronic commerce as a kind of tax-

free zone. We are in a framework within which it is familiar to speak

about the need to raise domestic resources, to increase the mobilization

of domestic resources. Is this going to impinge on the possibilities of

nations to raise resources for development, in particular also because,

for quite a few developing countries, income taxation is a bit more

difficult as compared to, for instance, trade taxes. Because the three of

you referred to this issue, I would like you to go into it a bit more.

Mr. Carlos Ronderos

I definitely believe it is quite unlikely that countries will be able to

tax producers of goods and services the way they are doing today once

electronic trade takes off, because the concept of a nation will be a

different one. Production is no longer a national issue. Products are

being assembled with bits and pieces from all over the world. Now, they

will be assembled with bits and pieces from all over the world but in

cyberspace, and then it will be much more difficult to see where we

collect the taxes and how we distribute those taxes for development.

That is one of the big challenges I would say we have ahead.

Mr. Geza Feketekuty

First, I would like to make a distinction between a tariff-free zone

and a tax-free zone. I don't think anybody was saying it should be a tax-

free zone. It may be difficult to collect taxes, but nobody has proposed

a tax-free zone. What people have proposed is a tariff-free zone.

With respect to taxation, I have had some conversations with certain

tax authorities, who were more or less concerned. What they said is that

we remain committed to taxing producers - we have mechanisms for

assessing taxes on producers resident in our State. And where you have

an efficient tax administration system and you can efficiently audit the

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books of enterprises, I think there is a basis for taxation of producers.

I asked American tax authorities about tax havens; they do not worry

about that because they tax American citizens. If American citizens use

tax havens, the authorities still tax them, unless they want to give up their

citizenship. I think the problem is taxing consumers. Consumption taxes

will be virtually impossible to collect, because how can the Government

supervise what you consume from the electronic network? There will be

no way of doing it. The Government will have to have massive auditing

efforts. So my sense is that consumption taxes will be a real problem,

but that producer taxes can be collected where the Government has an

efficient system and where there is transparency in record keeping. With

regard to tax havens, some tell me it is not as big a problem as people

think. I don't know.

Mr. Carlos Ronderos

I very much agree with Mr. Feketekuty. But VAT, sales taxes,

consumption taxes are becoming the main source of revenue for

countries, so there is not much point in being able to tax production if

production is not the main source of income for countries. At least in

my country, VAT is becoming the main source of revenue.

Moderator

My second question refers to what was said by Mr. Tariq Sayeed

on the risk that there still will be an increasing gap between those who

have access to knowledge and the others. Could you and your

colleagues try to say something about specific policy measures which

ought to be taken in order to avoid such a gap?

Mr. Tariq Sayeed

When we are talking about global electronic commerce in the

context of developing countries, we have to see the situation within these

countries. For example in the country I come from, we have 34 cities

and 34 chambers. The economic developments that are taking place in

these cities are not known quickly in the other cities. At the moment,

there is no system of collection and dissemination of information within

the cities in developing countries. As a chamber which is working in all

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the developing countries, we are trying to fill this gap, initially on our

own, by creating this information network within the countries and

creating a focal point in each country.

Obviously, a telephone call from one city to another in Pakistan is

more expensive today than one which I have to make to the United States

or to Dubai. These are the constraints which have to be looked into, and

for this, there has to be a joint effort by Governments, international

institutions, donors, the World Bank, and lending institutions. There are

many players in the field who are moving towards the concept of a global

village internationally. This is not very easy, and many developing

countries are already being marginalized, for example, due to the

agreement they have made with WTO. Electronic commerce is one step

ahead of the global village, and due care has to be taken. Each one of

us who is involved in promoting this venture or this new philosophy must

take into account the shortcomings and the limitations that the developing

countries are facing. I could go into more depth on this issue and on the

backlashes that are occurring; for example, what has happened in

Indonesia, Malaysia, and Thailand in the last 45 days. They were the

new Asian tigers. We used to take the Asian tigers as an example

because of the progress and the growth rates they were showing. All of

a sudden, what has happened? In the pursuit of advancing towards

globalization and opening their economies, they went so far that they fell

victim to their own success.

2. Follow-up discussions

Message from H.E. Mr. Kadré Désiré Ouedraogo, Prime Minister

of Burkina Faso

"As you know, it was my firm intention to be with you in Geneva

today in response to the kind invitation of Mr. Rubens Ricupero to

participate in this important meeting. Unfortunately, my obligations

have kept me in my capital. I nevertheless wish to send a brief

message to emphasize the importance which the topic you are

discussing has for a country like mine.

Burkina is one of the poorest countries in the poorest continent.

However, we unceasingly pursue our efforts to enable us to integrate

better into the global economy and to participate fully in today’s global

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77

competition in order to attract trade and investment. We continue to

look towards the future with realism, i.e. without excessive ambition or

concern. The globalization and liberalization of trade are for us

realities which we must face from now on. For the least developed

countries of Africa, globalization is a source of great hope and also of

many fears and concerns, but what we fear most about globalization is

that it might stop on our doorstep.

We believe that the international community must give the least

developed countries the assistance and support necessary to help them

cross the threshold of integration and prevent the new mechanisms of

international competition from marginalizing them even more than in

the past. But we also consider that it is for us ourselves to make every

effort within our power to participate fully in the development of global

markets. For that, we need bodies such as UNCTAD. We need bodies

capable of foreseeing future difficulties and new areas of competition.

For some time, the major developed economies have begun to lay

down the boundaries for electronic trade. It is therefore particularly

encouraging, in particular for countries which, like mine, are the least

well equipped to take part in the ongoing discussions, that a body such

as UNCTAD is already tackling the foreseeable consequences of this

new type of trade competition.

For the least developed countries, this will be a crucial element in

enabling us to participate actively and positively in the progressive

liberalization of world trade and to obtain support in alleviating the

poverty of our populations and providing them with decent standards

of education, health and well-being.

For the least developed countries, for the African countries, for

the land-locked countries, the possibility of trading more cheaply, more

easily and more transparently is crucial. In this sense, the prospects

opened up by electronic commerce represent for us an avenue full of

promise. Nevertheless, this promise will only become an economic

reality if problems of access are resolved: access to infrastructure,

access to financing, and access to training.

When, a few years ago, I had the privilege of presiding over the

session on financial services at the Columbus summit, I felt that a new

UNCTAD was being born, an UNCTAD both close to the needs of its

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members, and particularly its poorest members, and looking towards

the future. The themes that you have chosen for the High-level

Segment today confirm this. Please be assured that we will examine

the results of your work with the greatest interest, and I wish you every

success."

Mr. Rubens Ricupero

I wish to convey a warm welcome from UNCTAD to our

colleagues and friends assembled in the Second Committee of the United

Nations General Assembly. It is indeed for us a moment of particular

satisfaction to have this first interactive meeting with the United Nations

General Assembly, of which UNCTAD is a subsidiary body. It is the

first time that we are able to bridge the considerable gap of distance and

to communicate in real time with New York. It is indeed remarkable that

on the day that we are concentrating on how the new information

technologies are able to reshape the whole field of competition and

competitiveness, we can also have the first experience of showing how

those modern technologies can be put at the service of international

cooperation.

You have probably heard some of the comments that were made by

our panellists. I think that two points deserve particular attention in the

discussions we are going to have.

The first one is that I have not heard much mention of the fact that

not only can electronic commerce serve as a way of helping developing

countries to become more competitive, it can also serve as a powerful

instrument for trade among developing countries. We all know that one

of the major obstacles among developing countries for trade has been the

fact that, because our patterns of transportation and communication were

shaped during centuries of colonial rule, we never had direct links among

developing countries. Of course, electronic commerce cannot solve all

the problems. It will not be able to make up for the lack of maritime

transportation, but it can provide a way of allowing developing countries

to communicate and to enter into trade operations. And when the nature

of the goods or services is information - software programmes,

construction projects, publicity campaigns, art in general, music - you

can deliver through the Internet. So it may be a very powerful instrument

for cooperation among developing countries.

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A second point I would like to highlight is that, as we are all aware,

there is a problem of connectivity that is particularly acute for the least

developed countries, which have very little access to modern technology.

I would like to end my introductory words by saying that priority

action in this field could be taken in three areas. Firstly, measures

should be adopted to enhance access to electronic commerce and its

technologies and know-how in the less advanced regions, including

Africa and the least developed countries. I would suggest that, in

attaining that goal, the very good cooperation that UNCTAD and the

United Nations have here in Geneva with the International

Telecommunication Union will be a very important instrument.

Secondly, an assessment should be made of the possible impact on

developing economies of the proposals regarding a possible global

framework for electronic commerce, including proposals for tariff-free

transactions through Internet, etc.

Thirdly, public and private support should be mobilized to generate

partnerships to promote electronic commerce in developing countries,

especially LDCs and Africa as a whole, in the context of the Partners for

Development summit that we are going to have in Lyon in November

1998.

Ambassador Oscar de Rojas, Permanent Representative of

Venezuela to the United Nations in New York, Chairman of the

Second Committee of the fifty-second session of the General

Assembly

It is a great and special pleasure for me to salute our colleagues

meeting in Geneva on the occasion of the High-level Segment of

UNCTAD's Trade and Development Board. On behalf of my colleagues

in the Second Committee of the General Assembly, I should like to

express our great satisfaction at observing how technological progress is

becoming available to us to carry out this first and, I would say, historic

videoconference between New York and the Trade and Development

Board in Geneva.

You are addressing a subject that has acquired crucial importance

in the development of international trade relations, namely electronic

trade. Indeed, the emergence of global information networks such as the

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Internet, is having an important impact on regular trade, commercial and

financial ties and competitiveness between nations and enterprises.

Hence, it is necessary for the Member States of the United Nations and

institutions such as UNCTAD to continue analysing these issues, taking

into account proposals which have been circulated in various fields in

this regard. As we see it, this is a very appropriate way of involving the

international community in the formulation of a positive agenda for trade

and development. Beyond the specific agenda that we are considering

today, I think that the significance of this act, where for the first time

delegations working in the economic area in New York and in Geneva

are interacting face to face, is of the greatest importance. I recall that

one of the things that had the greatest impact on me personally when I

moved from my post in New York to Geneva, and years later when I

went back to New York, was to see how much we lack mutual

information about our respective jobs. This has to be corrected.

Ultimately, we are the same countries working for the same goals, and

I think that it is precisely through occasions such as this that we can

contribute much to achieving this purpose.

Mr. Nitin Desai, Under-Secretary-General for Economic and Social

Affairs

May I join with Ambassador Rojas in greatly welcoming this

particular event for a variety of reasons. First, it demonstrates the

capacity of the United Nations to contribute to global discussions on

issues which are at the cutting edge of development policy. Secondly,

it is dealing with an issue which is really at the very heart of relations

between nations. Historically, relations between nations have been

shaped as much by developments in the technology of transport and

communications as by other factors, and in the world that we live in, with

the great possibilities of electronic communications, it is clear that the

further development of the Internet is going to shape interactions between

nations as profoundly as past changes in air and sea travel have done.

The third reason I greatly welcome this event is that it demonstrates

the potential we have through technology for a much greater sense of

collaboration and cooperation within the United Nations system. This

particular event, where the Trade and Development Board and the

Second Committee are going to share in a dialogue on themes of interest

to both bodies, is something that could be an excellent example of the

way in which collaborative and cooperative efforts can add to the

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capacities of all organizations in the system.

Mr. Alec Erwin

What has emerged from the three panellists is a theme that is close

to important points that were made earlier today when we looked at the

effects of globalization and competition, where it became clear that this

process is having a profound effect on all economies in our world. And

it is clear from the presentations by the panellists that the electronic

interchange of information and electronic commerce may well have an

equally profound effect on the structures of our economies and

eventually on the structures of our societies. I think we are already

seeing the demands that this places on Governments to provide

information more efficiently, to utilize electronic information systems,

and to get more effective information and policy information. Other

intriguing questions that emerged related to the effect of electronic

commerce on economies, which may be more complex than we think, the

question of how taxes will be collected, tariff-free electronic trade, etc.

Minister Ronderos made an important point that many countries have

moved towards taxation in the form of VAT and other systems as a main

means of collecting taxes. What effect would electronic commerce have

on that? Undoubtedly we are going to have further structural changes

induced in our economies by electronic commerce, which is developing

very rapidly indeed, as was pointed out.

An important point of course is that, except in the case of services,

where the product can be consumed immediately, when we are dealing

with tangible products that still have to be physically traded after the

related transaction has been carried out in the realm of cyberspace, this

form of trade will generate pressure to increase the efficiency of our

transportation systems. What we undoubtedly have to move towards is

a situation where transportation is "seamless": once the information

exchanges have taken place, we need the product to be able to move by

road, air or sea almost as quickly as the information travels, if we are

going to get the full benefits of this trade. But, as has been highlighted,

probably one of the most interesting challenges we face is to see whether

this accessibility to knowledge and information will in fact be fully

utilized in the manner that was envisaged, with trade becoming possible

between every economic actor who can get access to electronic

information exchanges. That is clearly a very exciting prospect, and I am

sure many developing countries are exploring this. Certainly, in my own

country, South Africa, we see this as one of the major means whereby we

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can help small and medium-size enterprises, agro-industry and

agriculture itself by opening up the information highways to allow for the

exchange of information and the operation of a marketplace along the

information highways. As I have already said, this will only be possible

if we can bring about commensurate efficiencies in our transportation

and infrastructure networks.

A last point which has been touched on was the regulation of the

exchange of electronic data. I think this might be a more important

question for the developing countries than it appears because it would

seem, in my view anyway, that the regulation of electronic data exchange

will have a lot to do with how people can actually achieve the

connectivity that the Secretary-General mentioned, though in the end it

might be relatively easy for countries to hook up to these information

systems. A more interesting and maybe a more vexing question for the

developing countries could be the degree of influence they are going to

have over the investment decisions that are taken in connection with the

information highway. And here, the state in developing countries really

has to be very farsighted on this issue right now, because obviously the

investment decisions taken by the private sector as a rule gravitate

towards the more profitable value-added services that would certainly

underpin much of the commercial world. But for many developing

countries, they may not be able to get investments in areas where data

systems and the exchange of information could be used for social

purposes. This, I think, is going to be an important challenge for the

Governments of developing countries, and it reinforces the point that

came up earlier today that it is for developing countries forming regional

cooperation zones to include cooperation in respect of

telecommunications systems in order to ensure that the full spectrum of

potentialities that electronic-data information systems can provide are

actually realized for developing countries.

As was also said this morning, probably the greatest danger of

marginalization that faces the LDCs and maybe some developing

countries would lie in an inability to utilize modern production systems,

and probably the central feature of modern production systems is

precisely this information exchange. I think the discussion we are having

here is extremely timely. We do not have the luxury of time to discuss

coherent regulatory frameworks and to ensure a genuine harnessing of the

potentiality of this whole global exchange of information.

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Mr. Kassahun Ayele, Minister of Trade and Industry of Ethiopia

It is quite refreshing to hear the various points of view expressed

by the distinguished panellists about the issue of electronic commerce.

Indeed, a few months ago, this issue did sound very much like science

fiction to many African countries, especially to LDCs. I wish to express

my gratitude and congratulations to UNCTAD for identifying such an

action-oriented topic for this High-level Meeting of the Trade and

Development Board. It shows that UNCTAD has not lost its ability to

chart the future of trade and development, to provide intellectual

leadership in these areas, and to offer practical means to enhance

developing countries’ participation in international trade.

I am not quite sure if I will get direct answers to my questions in the

light of the fact that some of the panellists have already raised the issues

that I want to ask about, though they have not presented solutions, but

have only stated the problems. We have heard many interesting views

about the extent, nature and possible consequences of globalization for

the economies of poorer countries. I would be very much interested to

hear the views of the panellists about how emerging global information

networks are going to contribute to raising the standards of living of the

populations of countries like mine, where people live mostly in rural

areas Can electronic commerce move beyond large urban areas? Can

it really be a tool for small enterprises?

Mr. P.P. Prabhu, Commerce Secretary, India

I would like to pose just one simple question. The Secretary-

General said that electronic commerce is a very powerful technological

tool of trade which holds the possibility for developing countries of

being able to leapfrog whole stages development and reap the benefits.

We also believe in India that this particular tool offers enormous

promise. But it requires a great deal of improvement in infrastructure,

human resources, etc. What do the panellists see as the practical ways

of ensuring that this opportunity is not missed, and what should the role

of UNCTAD be in this? A corollary question relates to the legal

framework which Mr. Feketekuty referred to and also information about

telecommunication rates and various other connected issues. In these

matters also UNCTAD can probably play a useful role in terms of

dissemination of information and in helping the developing countries to

derive the maximum benefit from electronic commerce. I would like the

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distinguished panellists to explain how UNCTAD could help the

developing countries in this regard.

Mr. Geza Feketekuty

I would start with the proposition that electronic commerce is

ideally suited to help bring rural areas into the world economy, but of

course this does presuppose investment in human resource development

and in infrastructure. Let me cite an example. A few years ago I worked

with the Government of Barbados. Barbados has invested in basic

infrastructure and in basic human resource development, and throughout

the island people are working in electronic-commerce-related activities,

information processing of various kinds, accounting, operations for

insurance companies all over North America, and so forth. So, it can be

done, but we come back to the role of government and what it can do to

bring the population up to the basic level of computer and general

literacy and to create infrastructure. I think we do need to realize that

infrastructure is no longer quite as costly as we used to think, because

you can now have very small satellite dishes and you can connect to the

global communication system. The required level of infrastructure

investment has been significantly reduced by modern technology.

The distinguished Minister from South Africa talked about the need

for increased efficiency in government. The issue of accounting rates is

all a question of regulation and creating a framework for competition and

telecommunications to bring these accounting rates down. As you know,

accounting rates are negotiated bilaterally between the

telecommunications company in one country and the telecommunications

company in another. The reason accounting rates are high for some

countries is that they continue to have a monopoly that charges very high

rates. What is needed is to open up the process to greater competition.

This is exactly what has happened in the developed countries. So, it

becomes an issue of creating a regulatory regime that facilitates entry

into this new kind of world.

I think UNCTAD has a very important role to play. As I mentioned

earlier, much of the activity in terms of international discussions in this

area is going on among developed countries. Frequently developing

countries are not represented, not because they are not invited, but

because they don't have enough people to attend these kinds of meetings.

I think that UNCTAD has an extremely important role to play in

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monitoring what is going on internationally, disseminating that

information, helping educate delegates from developing countries on

what is important and where their interests are really at stake, and

helping them to participate in meetings that really count, whether it is

UNCITRAL, where they discuss commercial law, or ITU or the

International Chamber of Commerce. In each one of these organizations,

developing countries should be playing a more active role, and

UNCTAD can help them to do that.

Mr. Carlos Ronderos

I think that the comment on the leap which is required to give this

technology to developing countries is a particularly interesting point.

First of all, the fact that one does not have such technology should not

mean that it is impossible to have it in the future. Latin American

countries are able to integrate very quickly into the digital system since

they did not have any analogue system that they had to get rid of in

advance. As a result, they could adapt much more quickly and easily

than other developed countries which already had other technologies in

place. It goes without saying that the satellite system that will enter into

operation at the end of this year will make it possible to provide very

local technology to all parts of the world, so I am absolutely convinced

that this will be an essential tool for developing countries.

How can they become more competitive in terms of

communications? I think this is one of the avenues that we will have to

work on so as to put an end to the state monopoly in terms of

telecommunications. The state monopoly on telecommunications makes

telecommunications more expensive and makes competition between

carriers a problem. It is important to reduce the cost of

telecommunications by using more economical systems and by calling

in different companies, allowing for the free play of competition and

permitting communications throughout the world for just a few dollars.

This makes it possible to make technology available to everyone.

The big problem is - how can the population be educated and

trained in the use of this technology? How can we get people to

overcome their fear of technology? How can we make the best use of

the system? I think this is the real challenge before us. It is in this

respect that UNCTAD has an essential role to play, which boils down to

transmitting knowledge and breaking down the walls of fear so that

people will use technology.

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Mr. Tariq Sayeed

I think the questions are very relevant and I believe that, when

talking about standards of living, an extension of these facilities we are

talking about to the rural areas is very important. In this connection,

literacy is very important in developing countries, since it is difficult to

talk about electronic commerce when people cannot read and write.

Attention has to be paid means of raising the level of education in least

developed countries and some developing countries.

Secondly, I feel that the World Bank can play a major role because

it is already financing projects. But if we look at what it is doing, it is

also concentrating mainly on the cities of developing countries. It has to

change its focus. No attention is paid to the rural areas in the developing

countries.

With regard to UNCTAD's contribution, do we have an organization

in the world which can interpret the regulations of the WTO? The only

one is UNCTAD, which has an important role to play in this respect.

I also believe that if other related issues are not taken up, these new

technologies will not be of any use to the least developed countries.

There is free movement of all economic factors, except one factor which

is the strongest point of the developing countries, and that is labour.

There is more scope at the moment through the WTO arrangements for

the movement of skilled labour, and this must be encouraged, because

skilled labour should have equal opportunities for moving around, just

as capital and investment have. These are the kinds of areas which need

to be addressed. What is important is not growth of GNP but whether

prosperity reaches the man on the street. People want buses, more health

facilities, more education. So any economic development which is

directed towards the prosperity of a selected class of people will not

resolve the issue of human development as a whole. These are the kinds

of areas on which we should concentrate.

Representative of the United Republic of Tanzania, New York

On behalf of the Group of 77 and China, I would like to express our

appreciation for this very important interaction between New York and

Geneva on the important subject of electronic commerce. Before asking

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my questions, I would like to endorse the statements made by the

Secretary-General of UNCTAD and Ambassador de Rojas on the critical

role of electronic commerce in terms of the development process.

My question is brief and is divided into two parts. Firstly, I would

like to follow-up on the issue of the role of UNCTAD in the

development of electronic commerce in the developing countries,

especially the least developed countries. I would like to have more

details from both the Secretary-General of UNCTAD and the panellists

on precisely what priority areas should be addressed in this very

important field, taking into account what Mr. Erwin said about regional

cooperation. So, I want to know precisely what priority areas UNCTAD

and the UN system should address in order for marginalization to be

reduced.

Secondly, I would like to take up the question of the legal

framework for electronic commerce. I think we need some elaboration

here - what precise additional complementary elements are being

discussed in the context of electronic trade as far as the legal framework

is concerned.

Representative of Luxembourg, New York

When we read the European press, we often hear that European

companies have already subcontracted some of their activities, mostly

to countries in Asia, through electronic links, which shows that some

parts of the developing world have already managed to establish a place

for themselves in electronic commerce. And one aspect which often

comes up in our debates here in New York concerns the potentialities of

South-South cooperation, in addition to North-South cooperation. What

potentialities exist in electronic commerce for South-South cooperation?

Mr. Rubens Ricupero

I welcome this question on UNCTAD because I think many people

are not aware of the pioneering role that UNCTAD has been playing in

this area since 1994. There are two major fields where I believe that

UNCTAD can make a contribution. One is the more practical field of

using information technology to conduct transactions, and the second is

the matter of international negotiations on this important question.

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With regard to the practical side, UNCTAD has pioneered the

concept of trade efficiency based on information technology. As some

of you are aware, in 1994 UNCTAD organized an important symposium

in Columbus, Ohio. This symposium was devoted to the launching of

the trade efficiency programme which was based, among other things, on

the concept of the so-called trade point. What is a trade point? A trade

point is a locus, a place, where, under the same roof, thanks to

information technology, telecommunications and computers, you can

theoretically conduct all the elements of a business transaction, i.e.

obtain information, establish the first contact between sellers and buyers,

negotiate, conclude the actual contract with an electronic signature, even

make delivery when the product is intangible in nature, and pay. And all

that can be done in a single place, where you have access to trade

information, information about documents required to export or import,

and information on customs clearance, as well as access to export credit

and insurance. All this range of tasks can be done through the trade

point, and we now have trade points established in over 100 countries in

the world. I am proud to say that my country of origin, Brazil, is one

with the largest number of trade points - I think now we have eight or ten

trade points already in operation. And UNCTAD has been receiving

financial cooperation from the European Union, for instance, to provide

for the establishment of trade points in more than 20 countries in Africa.

And we have just opened one in Romania. So this is a reality.

The second aspect, which is the negotiation aspect, is still very

much more of a potentiality than a reality. But I am among those who

believe that negotiations on this matter will take place very soon. I can

deduce this from several signs. One is that President Clinton, in a

speech made on 1 July, already mentioned this matter, and he later went

on record saying that he hopes to have a multilateral agreement in the

next 12 months. When visiting South America, he again raised the issue

with the South American countries he visited. The European Union,

meeting in Bonn, also produced a very substantial and detailed

declaration in which once again the matter of multilateral discipline is

covered. So I imagine this is a matter that will probably come up,

perhaps at the next ministerial meeting of the WTO, and it is necessary

to make people aware. I see this as a role for UNCTAD, and a few

weeks ago, in September, we had a meeting of an Expert Group in

Geneva, back to back with the International Telecommunication Union,

in which we addressed some very specific matters that we are exploring

and about which we are giving information to developing countries.

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Moderator

The second question relates to electronic commerce in the

framework of negotiations on services in WTO.

Mr. Geza Feketekuty

First, let me just say that so far there have been no discussions in

WTO on issues related to the legal framework for electronic commerce.

Discussions in this area are, however, taking place in New York in the

United Nations Commission on International Trade Law, where

delegations are discussing a model commercial law. When you turn,

however, to the World Trade Organization, two agreements were

negotiated in WTO which are of relevance to a legal framework for

electronic commerce. The first and probably most important agreement

was the telecommunications annex to the General Agreement on Trade

in Services. The telecommunications annex established the basis for

access to value-added telecommunication services, and in effect that

regime will be, I think, the legal foundation for whatever may be

developed subsequently to assure access and connectivity, as discussed

by Minister Erwin.

The second agreement in WTO was the agreement on basic

telecommunication services, which provided a regime for competition in

basic telecommunication services, again a very key element in the legal

structure for a future system of electronic commerce.

As Mr. Ricupero mentioned, President Clinton has called for a

tariff-free zone for information-based transactions within the Internet, and

he has asked that this be done in the next 12 months. It is his intention

to have the United States raise this as an issue in the context of ITA II,

i.e. phase two of the Information Technology Agreement, the negotiations

on which are beginning this fall. We cannot predict what the reaction of

other countries will be, but it is quite clear that in negotiations on trade

in services beginning in the year 2000, electronic commerce will have to

be a central issue.

Moderator

The third question is on South-South trade. Is there any advantage

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for South-South trade in electronic commerce?

Mr. Tariq Sayeed

Certainly there is a great potential for developing South-South trade

through electronic commerce, and that is precisely the reason why we are

creating an information network between the developing countries. At

the same time, we thought of establishing a consortium with the

developed world and through the International Chamber of Commerce.

I strongly feel that electronic commerce is going to increase immensely

trade relations not only among countries in the South but also between

the North and the South.

Mr. Auguste Paraina, Minister of Trade of Madagascar

The Panellists referred earlier to the risk of marginalizing the LDCs.

It seems to me that countries or firms that are not English- speaking also

run the risk of marginalization. We must not forget that, with respect to

this virtual market, we are not only dealing with major firms; we also

have to ensure that this market is of benefit to small and medium-size

and indeed micro firms. So, my concern, my apprehension has to do with

the competitiveness and the power to participate of small and medium-

sized firms in countries that are not English-speaking.

Ambassador Nicolas Imboden, Federal Office for Foreign Economic

Affairs, Switzerland

Allow me first to make sure that we are all talking about the same

thing. I am going to address the issue of electronic commerce in goods

and services and not information itself, which is another issue in my

opinion.

We have heard today quite powerful information about new

technologies of trading. My question actually is - what is really new and

why would we need new rules? It seems to me that we have a

multilateral trading system which is supposed to assure free movement

of goods and services. Electronic data represent a powerful market

instrument, but they do not change the manner in which we trade. They

make it more efficient, they make markets more perfect. As a matter of

fact, they ensure transparency, competition and market size, but that is

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nothing fundamentally different. This morning we spoke a lot about

globalization, and it seems to me we have talked about it as if

globalization was here. I believe we have only seen the tip of

globalization, and the real global economy will only be available once

electronic commerce is a reality for the majority of the countries.

Electronic commerce changes the competitiveness of people, of

industries and of nations. But, there is nothing new in it either. Each

time we have new technology, competitiveness changes, I would be

interested if anybody can identify why electronic commerce should

discriminate against any type of economy, be it developed or less

developed. As a matter of fact, I think that electronic commerce is

helping developing countries to overcome some of the major bottlenecks

they suffer, such as size of market, access to information, transparency

and proximity to consumers.

Of course, just because electronic commerce does not discriminate

in theory does not mean that it does not discriminate by the simple fact

that you do not have access. This is an issue for developing countries,

but it cannot be solved through regulations. It will have to be solved

through investments and technical assistance. So what is the role of

Governments and of the multilateral community in the regulation of

information and technology? It appears to me that we have only three

goals in that field. One is we have to ensure free competition, and when

I say free competition, I mean free not only in terms of Governments but

also in terms of monopolies within the private sector. We cannot be

dominated in the field in question by one company, such as Microsoft.

Second, we have to assure, I think, a level playing field for all nations

and for all industries. And third, we have to ensure that everybody has

access and is able to actually take advantage of the new opportunities

created. Certainly, we do need standards in this field, but I believe that

the private sector and the market will figure out those standards much

more efficiently than we as Governments could do.

Moderator

Do we leave it to the market, except perhaps for the enactment of

some competition policies - is there no other role for Governments in

setting rules?

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Mr. Geza Feketekuty

In a way, the answer is yes, we should not create new rules for

electronic transactions per se. In fact, one of the principles I mentioned

that is common to all of the policy papers that have been developed is

the concept of neutrality. Government policy should be neutral as

between paper transactions versus electronic transactions.

The question is, however, why do we need to have discussions

about regulations in this area? The first is that the shift from paper to

electronics requires changes in all commercial laws, because they are all

based on the assumption that you have written pieces of paper. As you

move from written pieces of paper to electronic records, you have to

have an understanding of what constitutes a legal document. How are

these legal documents going to be protected? What constitutes a legal

signature? What constitutes legal verification by a third party to the

transaction? This is a whole new set of issues that have to be tackled

because it is a new medium. The legal framework also raises questions

because in cyberspace you can no longer necessarily clearly identify the

territory within which a transaction takes place. Some Governments

have tried to assert authority just because the server was located in their

territory, even though neither the producer nor the consumer was located

in that territory. This is a legal issue that only Governments can resolve.

Where is the legal liability for taxation, and so forth? So, the question

of the legal framework is a question that has to be addressed, because

cyberspace is a new place that is not currently envisaged in current

structures of law.

The third set of issues really relates to the fact that some forms of

government regulation become difficult to enforce in cyberspace. For

example, for questions like disinformation, pornography, etc., who has

responsibility? The country of the consumer cannot control what is

supplied in another country in those areas. In the case of protection of

consumers - who is going to protect consumers when the producers are

located in other territories? So there is a need here for cooperation

among Governments to ensure that the usual social functions of

government are carried out in a reasonable way. Now, there is going to

be a need in this area for a great deal of self-regulation by industry,

because negotiating agreements at an international governmental level is

not going to be easy. It is probably going to be easier if the private

sectors in different countries get together and develop some norms that

meet the objectives of civil society for social, responsible conduct.

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If that does not take place, then Governments will have to step in and

will have to work out some rules. But this is not to say that what is

needed is a new form of regulation of electronic commerce per se. That

certainly is not the case.

Mr. Rubens Ricupero

Summing up what has been said, traditional trade has always relied

on what are called border measures, that is tariffs and non-tariff

measures that are applied at the border. This is true about intellectual

property. But here you have a situation where, instead of having

physical material crossing borders, you have flows of information going

from computer to computer. This is why new rules will probably be

necessary.

Moderator

The second question was posed by the Minister of Madagascar.

The only person who can answer that is the Minister from another non-

English-speaking country, Minister Ronderos. Are your Spanish-

speaking countries disadvantaged in this area due to the fact that there

is one overall uniform language - the English language?

Mr. Carlos Ronderos

That is a very difficult question to answer. The most widely

spoken language in the world is broken English. I think that bilingual

teaching in countries has become a fundamental issue, and this is one

field in which countries have to make great efforts to provide further

education for people to access cyberspace. At least, in the case of Latin

America, due to the influence of television and of being near the United

States, English has become more widely spoken and is the second

language taught at schools. But I think there is no doubt that there will

be an international language and that would be English.

Ambassador Oscar de Rojas

We have been absorbed by this most interesting and compelling

discussion. As you know for many of us here in New York, we are not

really specialists in any of these fields. We suddenly wish that we knew

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more about these things so that we could perhaps participate in a much

more positive way in your discussion, but we are very happy to see that

we have UNCTAD and that this kind of discussion is taking place in

UNCTAD, which is of course part of us, part of our family.

Representative of Poland, New York

I would like to say that I feel privileged to be able to take part in

this conference. We have already heard questions expressing numerous

worries concerning electronic commerce. This is another question of this

kind. I am concerned to know whether enough is being done by United

Nations bodies to include less developed economies in Central and

Eastern Europe in electronic commerce. I am afraid we are not yet ready

to take advantage of it fully. What are the steps taken or programmes

introduced to prevent the already existing gap between various

economies from widening. I think it is extremely urgent that, in

particular, the question of training an adequate number of specialists in

those countries should be addressed.

Moderator

The question which was asked by the representative of Poland

refers not only to the countries in transition, which she says are having

less opportunity to participate in the technology which we are discussing,

but is also related to the more general question - how indeed could we

at an international level help foster training in all countries which are

behind, in order to allow them to take advantage of this technology that

is so important for trade?

Mr. Alec Erwin

I think this might turn out to be one of the most interesting of all

developments, because certainly, speaking for South Africa, in some

recent meetings on training, what has emerged is that training large

numbers quite quickly in the ability to use computers is relatively easy.

What we are still gauging is how quickly one could then go a step

further, because South Africa finds itself in a somewhat unusual position,

in that we have quite a highly developed information technology industry

but because of our particular position with racial discrimination, we

found that the bulk of the more high-level skills in computer sciences and

technology lay within one population group. Our Ministry of

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Telecommunications and Communications has now embarked upon a

major training exercise to move people very rapidly into new technology

areas and levels, and I think the signs are very promising that this can be

done very quickly. We have regulatory agencies that have been

introduced recently in South Africa, and these agencies are manned by

highly skilled persons. We feel optimistic that training in information

technology up to highly skilled levels will be easier than we think. We

have been working very closely with India, in fact, and I think India in

itself is an interesting case study on how rapidly you can develop an

effective and large information technology industry.

Mr. Geza Feketekuty

The first point refers to what Minister Erwin said. I think one of the

really important things that can be done is to establish a clear legal

framework, because small enterprises, in particular in developing

countries, are going to be hesitant to enter the system of electronic

commerce until they know that there is a certain legal framework. So I

think that the work of UNCITRAL is going to be absolutely critical in

establishing a clear new legal framework.

The second point that I would like to mention has been mentioned

before but cannot be understated. It is that obviously the cost of

participation is key, which means telephone rates have to come down,

and that really brings us back to regulatory forms in the

telecommunications sector. This is something countries need to do on

their own. It is not something that the international community can do.

The third point is that, as Minister Erwin said, the technology

involved lends itself to being used effectively for training. In fact,

Secretary-General Ricupero and I participated in a programme early in

the summer where we broadcast to 300 sites all over Latin America.

This is the result of new technology. But of course it presupposes that

you have at least the minimum computer literacy so that people can

access these systems. So it does ultimately bring you back to the need

for human resource development.

Mr. Carlos Ronderos

Governments have to make a great effort. You can have very fast

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electronic trade, but it is no use if you have to wait for days to get

through customs, to get health permits or to get import permits. If the

state does not involve itself in electronic trade, the private sector will be

stopped by those barriers which paper- working Governments impose.

Representative of Peru, Geneva

I would like to know whether in the future it will be necessary to

have multilateral disciplines in electronic trade and, if so, what the role

of UNCTAD will be given the great disparity in economic development

which exists between the developed and developing countries.

Ambassador Anthony Hill

One of the most important points made, both as a desirable goal and

one which will determine the nature of the global economy, is that we

must focus on recovering sovereignty in these qualitatively changed

circumstances. I caution that this is perhaps a misreading of reality.

The first issue to answer is - what are these qualitatively changed

circumstances? They are legally binding rules and disciplines in

multilateral or international organizations. These rules and disciplines

cut across national borders and reach into the very heart of national

economic policy-making and the national economic space. While you

can reverse political domination, it is less easy to reverse economic

penetration.

Developing countries that are parties to any new rules and

disciplines are binding themselves willingly with their eyes wide open.

Where these issues are not understood, where market power is unequal,

where decision-making is undemocratic, this leads to the reverse of

recovering sovereignty - it leads to a loss of sovereignty. Of course,

there could be a sharing of sovereignty, which is what a true democratic

multilateral negotiation should be about.

Mr. Feketekuty, the other panellists and the Secretary-General all

spoke about a number of developments. I served as Chairman of a

Group of Experts at the intergovernmental level on a similar subject, and

based on this my conclusion is the following: in Singapore, we had an

undemocratic plurilateral agreement on information technology (ITA), an

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agreement which had adverse impacts on a number of developing

countries. Mr. Feketekuty spoke about a possible ITA II, and if it is not

multilateralized, then I fear we might find ourselves bound by rules

which are not necessarily fully understood. He omitted to mention the

understanding on new satellite technology which is being developed in

the ITU. He also omitted to speak about the importance of why

multilateral rules may be necessary to protect intellectual property

holders as much as to protect consumers. And he omitted to mention the

unilateral evolution of settlement and accounting rates, which is

important in developing countries in terms of expanding universal

service. So, my central point is very simple - UNCTAD does have a

role, but it must be very clear that that role is one which prepares

developing countries to be true partners for development in negotiations

outside of this body.

Mr. Geza Feketekuty

I, of course, agree with Ambassador Hill that the role of UNCTAD

is to prepare developing countries to participate effectively in global

negotiations related to issues in this area. I did not mention a number of

the issues he raised because of the limited time available, but let me take

him somewhat to task on ITA. ITA only bound the countries that

subscribe to it; they agreed to remove taxes in the areas concerned. It

did not bind anybody else. I suspect ITA II would be no different. It is

going to be an exercise where a group of countries decide whether they

are prepared to eliminate certain restrictions or eliminate tariffs in certain

sets of products. I think this is not undemocratic.

Mr. Alec Erwin

I think one of the difficulties we have is in a process where

plurilateral agreement commences. Whilst it only binds those countries

that sign, it inevitably must deal with crucial principles of, in this case,

electronic data exchange. What we must just guard against a little is

that, precisely because it is a self-selected plurality that comes together,

the interpretation of crucial principles takes place within a certain view

of the prism, and that then becomes quite a heavy weight in subsequent

negotiations. I think that is one of the concerns one would have about

plurilateral expansions into the multilateral. The truth is we will not be

able to avoid this, because countries need to move forward. So I would

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fully share the view that UNCTAD must play an active role, as we are

trying to do in this very initiative, in terms of promoting a widespread

awareness of the principles involved and then assisting actors that are not

in the plural agreement to begin, themselves, shaping certain issues.

Let me refer here to a difficult strategic choice which we in South

Africa had to make. We have been particularly concerned, as a result

of our own history, by the complete absence of infrastructure, even basic

old analogue telephone systems, in large parts of our country. We had

a policy objective, and that policy objective was to provide

telecommunications to a broad spectrum of people in our cities, as well

as in rural areas. Now, in those circumstances, we had a trade-off,

because we wanted two important things out of our telecommunications

corporation: one was to do a lot of training, so a large part of our

subsequent strategic equity partnership agreement has placed a massive

emphasis on all forms of training. The second objective we had was to

spread the infrastructure into the rural areas. Now, in a very competitive

telecommunications environment, we elected, and whether we were right

or wrong will be tested over time, to provide an exclusivity period,

provided that those two objectives were met in full. That represented a

more complex debate than just saying that you must automatically have

competition. Our own publicly owned corporation was in fact

concentrating on the cities, and it was not going into the areas of poverty

where black persons were; it was staying where the high value-added

services were. That is a slightly different look through the prism. And

that is why I think that a discussion like this in UNCTAD is absolutely

critical, so that all possible objectives and policy packages can be put

on the table and so that progress towards a multilateral agreement, which

I think we are going to have in one way or another, is not achieved

through one process only.

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Partners for Development

100

Part three

PARTNERS FOR DEVELOPMENT

Message from Mr. Kofi Annan, Secretary-General of the United

Nations

"I am pleased to convey a message to the first ever joint session

of the High-Level Segment of UNCTAD's Trade and Development

Board and the Second Committee of the General Assembly and to

participate in the official launch of the "Partners for Development"

initiative. This is a most worthy undertaking, fully compatible not only

with the overall thrust of our work for development and peace but also

with the reform process that is now modernizing the United Nations

family of organizations.

I would like to salute my colleague, the UNCTAD Secretary-

General, Mr. Rubens Ricupero, for his commitment and contributions.

I would also like to thank the Government of France and particularly

Mayor Raymond Barre of Lyon for the support and for the invitation

to host the meeting in Lyon next year to assess progress.

"Partners for Development" is both bold and realistic. Bold in

that it will involve civil society, especially non-governmental

organizations and the private sector, even more deeply in the work of

the United Nations. This by itself is welcome, but it will also help fulfil

another of my main objectives, strengthening the organization's efforts

in the area of economic and social development. And it is realistic in

that it focuses on concrete partnerships and practical solutions.

As we all know, traditional United Nations' resources for

development are not increasing. This initiative will tap the human,

technological and financial resources which have been beyond the

United Nations' reach and which in today's world have become far

greater than official development assistance. Its importance in this

regard cannot be exaggerated.

Those who will participate in these partnership projects have

chosen to work with the United Nations because of the contributions it

is uniquely placed to make. The organization's universal and impartial

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101

perspective, its multicultural approach and its highly professional and

dedicated staff are a formidable combination. "Partners for

Development" offers yet another venue for the United Nations to

demonstrate that it provides real value for money.

I pledge my full support to this initiative and very much look

forward to working with you. Please accept my best wishes for

success."

Mr. Rubens Ricupero

Before I make some comments on the principles that have guided

us in the design and preparation of the initiative "Partners for

Development", I should like to thank the city of Lyon for its generous

offer to host the first meeting to be held in this context. My gratitude

particularly is addressed to the Mayor of Lyon, Mr. Raymond Barre, for

the warm reception he gave our proposal. I am sure that his stature as

a statesman, university professor and a leader of international public

opinion will all constitute a crucial asset for the success of Partners for

Development. It is thus for me a great pleasure to welcome here today

the personal representative of Mr. Barre, Maître André Soulier, the

Deputy Mayor of Lyon and a European Parliamentarian. Maître Soulier

is a humanist whose reputation has gone well beyond the borders of his

country, since he is in particular the President of the Human Rights

Commission in the European Parliament. It is he who has the

responsibility for conducting the efforts of the city of Lyon to organize

the first meeting of Partners for Development.

Mr. André Soulier, Deputy Mayor of Lyon

It is a great honour and privilege for me to speak to you today on

the occasion of the meeting in Geneva and in New York of the Trade and

Development Board. On behalf of the city of Lyon and its Mayor, Mr.

Raymond Barre, the former French Prime Minister, I wish first of all to

thank the Secretary-General of UNCTAD, Mr. Rubens Ricupero, for

having invited us today to Geneva.

In the spring of last year, a number of persons present in this room

took part in the success of UNCTAD IX. A few weeks later, our city of

Lyon hosted another prestigious international meeting, the Summit of

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Heads of State and Government of the G.7. So it was in Lyon that the

Secretary-General of UNCTAD, as a guest of the G.7, for the first time

set forth the results of the Midrand Conference. This was more than

symbolic or a matter of pure coincidence. It was a real coming together,

a sign of things to come. In fact, the Midrand Declaration adopted by

UNCTAD at its ninth session, invited the Secretary-General to "convene

a meeting with actors in development to advise him on how to enhance

the participation of civil society in UNCTAD to build a lasting

partnership for development between non-governmental actors and

UNCTAD".

When he learned of the possibility of such a meeting for Partners

for Development, the Mayor, Mr. Raymond Barre, immediately showed

great interest in the subject and told his assistants and aids about it. The

presentations which were made by Mr. Gurunlian and his team to the

authorities, private and public decision-makers in Lyon, convinced us

that this was a great task to be embarked on and to be brought to a

successful conclusion.

Thus it is with great pleasure and pride that I confirm today, on

behalf of the Mayor of Lyon, the formal invitation by the city of Lyon to

host the first meeting of Partners for Development in November 1998.

Your project fits in perfectly with the historical, cultural and economic

profile of the Lyon area. I would add that the city of Lyon, contrary to

what some people in Lyon believe, was built by people who came from

outside - Italians, Germans, people from the East - and so we are

returning to our traditions and our historical course when we invite you

here. As you will see, Lyon is a friendly, welcoming, convivial city.

I would just like to add the following. The recent conversations

that the Ambassador of France to the United Nations in Geneva, Mr.

Daniel Bernard, and Mr. Raymond Barre have had have convinced us

that we will have the full and total support of our state, and I have a

message from Mr. Raymond Barre, who will be welcoming you in person

to Lyon. If you agree, he will invite the President of the French Republic

and the highest-ranking members of the French Government to participate

in your great world meeting. The elected officials and the dignitaries of

the city and the region have already began anticipating that you will say

yes to this and are preparing the ground. This augurs well for the

success of the meeting.

I would like to conclude by saying that this invitation is not just

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from France, it is from Lyon, and it comes from the heart. So, we look

forward to welcoming you to Lyon in a year's time.

Mr. Rubens Ricupero

I thank Maître André Soulier, and through you I would also like

once again to thank Mr. Raymond Barre for his generous offer to meet

together in Lyon. I thank you for your enthusiastic and warm-hearted

words, which entirely capture the spirit in which we intend to work for

the success of Partners for Development.

I would just like to add that, for us, it is a particular reason for joy

to be able to meet in Lyon, the capital of Gaul. The city where the

industrial revolution began, particularly with the textile industry, and the

setting for the revolt of the poor weavers, it is a city with a glorious past

that we all know well. It is also a city that has great affinities with

Geneva, which is the part of Switzerland that welcomes us here in

UNCTAD.

This initiative for Partners for Development is the result of an effort

to make the renaissance of UNCTAD a reality. When I came to this

organization, a little more than two years ago, I realized that one of the

major causes of the crisis at present affecting all international

organizations, not just in the United Nations system but wherever there

is talk of reform, is the fact that those organizations have not been able

to integrate into their debates, into their life, into their activities, these

new actors who have emerged on the scene and who are the principal

feature of international relations at the end of the century. I mean

obviously non-governmental organizations, the private sector, research

centres and universities. We have not yet managed fully to understand

the scope of this phenomenon, though it is an extremely important one.

The two most important subjects during the second half of the century

have been the evolution of human rights and the evolution of the

environment, and these two subjects have been developed at a very high

level and very intensively not so much by States, which in general have

been somewhat recalcitrant in dealing with them, but by non-

governmental entities. It is in our interests to integrate civil society,

rather like statesmen did after the First World War when the International

Labour Organization and the International Labour Office were set up.

They understood the need to have workers and employers involved at the

same time as Governments. We intend to do this in Lyon in a very

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104

pragmatic manner. This will be the very first time that we shall have an

international meeting where we won't be discussing a document, we won't

be debating on the basis of papers and conclusions and that sort of thing;

we are going to come to an agreement on concrete projects that can

really change people's lives in developing countries. Clearly, we don't

intend to bring along our projects and invite our partners simply to

implement them. We want to discuss those projects with them, and we

have already designed several such projects. I have already spoken of

trade points, but in this case, thanks to the initiative of Geza Feketekuty,

we have begun a project with the Monterey Institute in California and

with San Diego State University whereby we intend to bring together

about a dozen organizations that have the aim of teaching, training and

forming personnel in foreign trade, in the techniques of negotiation and

in how to take advantage of the opportunities created by international

negotiations. We also intend to add to the question of trade questions

concerning investment. We have projects on other subjects as well -

commodity risk management, micro-credit for the least developed

countries, and many others.

It is our intention to work in a pragmatic, specific way on the

projects we have discussed with our partners and with Governments as

well. Everybody will, of course, be free to agree or not, and it is our

hope that Lyon will in fact be the ideal framework for the birth of

something that I think will one day really bring a breath of fresh air to

international organizations, which certainly need it. So, once again, I am

pleased to ask you, Maître André Soulier, to transmit to the distinguished

Mayor, Mr. Raymond Barre, and to all your fellow citizens, our thanks

and of course our joy that we will soon be in your city.

Ambassador Oscar de Rojas

We have come to the conclusion of this first joint session of the

Second Committee and the Trade and Development Board. I hope that

there will be many opportunities in the future to use these technological

advances that help us so much in our intergovernmental activities in the

United Nations. We hope to be able to have an opportunity in the

Second Committee and certainly in the Trade and Development Board

also to identify important issues of immediate interest to both

intergovernmental bodies.

As you know, and I think our colleagues in Geneva know this as

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105

well, in a very few days here in the Second Committee we shall be

considering item 95(c) of the agenda of the General Assembly, entitled

"Trade and Development", and we will be considering the report that the

Trade and Development Board has presented to us. It will be a great

deal easier this year to have that debate after this very helpful meeting

that has allowed us to get to know the Trade and Development Board so

well, so closely.

Finally, I would like to take this opportunity also to say that, in a

few days, on 11 November, as part of a series of special activities that

we are carrying out this year in the Second Committee by way of follow-

up to a number of events that occurred last year, we will have an

interesting panel on the occasion of the fiftieth anniversary of the Havana

Charter on Trade. The theme of the panel is "New Challenges for the

Multilateral System of Trade", and it will be organized by the secretariat

of UNCTAD. We are very pleased because the Secretary-General of

UNCTAD, Mr. Ricupero, has offered to be the moderator of that panel,

and we are looking forward to seeing him here.

Moderator

I have been asked to say a few words to summarize the debate,

which I will do very briefly. This morning we had a discussion on

globalization, competition and development, and we asked ourselves a

number of questions. But all these questions come down to one overall

question, namely under what conditions will globalization be beneficial

rather than a threat, because very often countries, people within countries

or specific sectors exposed to competition feel threatened. The

interesting thing during the discussions this morning on that issue was

perhaps that a particular emphasis on domestic policies, including

competition policies, was seen as necessary in order to make

globalization beneficial for all countries and all societies. The emphasis

was therefore on domestic policies, and many different examples were

mentioned. Countries have to get themselves ready to be exposed to

international competition, invest in physical and social infrastructure,

invest in good governance, and develop good competition policy in order

not to be overwhelmed by the major economic powers. As was said by

one of the panellists, good domestic development policies, seen in broad

terms, are the best passport to the world economy. It is not the other

way round; participation in the world economy is necessary but is not

sufficient to have sustainable human development for the whole of your

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106

society.

I think that was more or less the political gist of the discussion this

morning. At the same time, of course, there were a number of questions.

Even if it is not a threat, globalization can go very fast, or it can be

decided upon in not too democratic a way on the basis of decisions taken

by bigger powers or by big financial companies. It can go too fast; it can

be one-sided; it can perhaps also be too economic.

We all agree, I think, that globalization is an irreversible process,

and so the approach today was to say - join the process, don't try to stop

it. Join the process; that was the message that was delivered to us and

by us, mostly as representatives of the public sector, as diplomats, as

politicians. We understand that that process of globalization, as also was

made clear during this afternoon, is a process which is being led by

technology and by economic powers. I think that implicitly it was also

understood that, insofar as international organizations or Governments

themselves have participated in the process of globalization, it was more

to facilitate that process, make it possible, make it work even better,

rather than to guide it or steer it. We are no longer in an era of steering.

We leave a lot to the market, to the economy, to technology. But at the

same time, of course, there are concerns about leaving too much to

technology and too much to the economy. Should we refrain completely

from guiding the process? Should we only facilitate the process, or

should we do a bit more? Statements made with regard to the specific

issue of electronic trade, or when we were discussing possible wider

disparities due to globalization, made us aware of the fact that is

necessary to go another mile as international organizations, whether

economically here in Geneva or politically perhaps in New York. Four

steps can be mentioned in this connection.

Firstly, what we could do is to discuss timing, sequencing and

phasing, since perhaps not all economies and all societies should move

at the same speed. Some of the panellists spoke about individual

countries that are participating in the process of globalization on their

own terms, because the most important thing is, as Minister Erwin was

saying, to take responsibility for your own people. Timing, sequencing

and phasing might perhaps be discussed in the framework of international

organizations.

Secondly, perhaps also a broader approach is necessary. We have

discussed electronic trade, we have discussed trade, we have discussed

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107

finance in Hong Kong, but what about the globalization of ecology, the

globalization of measures of an environmental character, what about

globalization also of employment policies, what about globalization of

policies related to the issue of political instability and insecurity in

countries? Maybe we have gone a very long way in the facilitation of

the globalization process of the economy, but not far enough in terms of

the facilitation of the globalization of ecological, political, environmental

and social issues, and this may create a lack of balance in our world

society.

These two issues, phasing and broadening, call upon politicians and

the public sector to guide perhaps not the economy itself but all the

complementary sectors of the economy, such as the ones I mentioned.

And that brings me to the third task.

Perhaps we need to create countervailing forces which would only

work on the basis of their own interest, and that is very much related to

the issue of this morning - competition policy. If there is real

competition on an equal footing, then there is greater promise of balance

and stability than if the distribution of economic power in lopsided.

The fourth and final task relates to the fact that the global economy

is perhaps seen as a threat by some people. To a certain extent,

increasing uniformity of rules and behavioural standards, oriented

towards stability in all countries, may mean that stability will become

predominant over democratization. The final task is, in particular, to

create a world society in which everybody can benefit from the process

of globalization. As was also mentioned today, good governance also

includes democratization, and perhaps the United Nations could help

groups within societies, civil society groups, to speak out and to

participate in the process of globalization in order not to leave the

process of globalization only to those who already have economic

power.

So these are four tasks for the international community - four tasks

for the United Nations, not only here in Geneva but also in New York.

I think it is also for that reason that it is quite important that we had a

joint session between Geneva, where there is often a very economic

orientation in UNCTAD, and New York, where the Second Committee

has broader discussions of social and political issues. I very much hope

that the reform of the United Nations will enable it to take up such

challenges.

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Mr. Rubens Ricupero

Let me conclude our meeting by saying that, since we have

discussed problems related to information technology, I think it would be

appropriate to tell you that one of my favourite phrases is by Norbert

Wiener, the great mathematician, who was, as you know, the founder of

cybernetics. He used to say: "To be informed is to be free". I confess

that the first time I read the phrase, I had some difficulty in understanding

what the link was between information and freedom. Then, on reflection,

I came to the conclusion that his intention was to show that to be free is

to be able to choose, but to choose, you must have options, and you

must have information about the options. If you are not informed about

the options, you can't choose, you can't be free.

In the past phases of globalization, namely mercantalist capitalism

and industrial capitalism, technology was used more for domination and

for exploitation, although positive consequences also ensued. Now, we

have to make sure, in this phase of which is maybe the final phase of

globalization, that information, science and technology will be used not

for the oppression of man but for his liberation.

Ambassador Goce Petreski, Permanent Representative of the

former Yugoslav Republic of Macedonia, President of the forty-

fourth session of the Trade and Development Board

Allow me, on behalf of the Trade and Development Board to

express sincere thanks to all who contributed to the success of this

session. As our meeting closes, we can only take consolation in the fact

that every end is a point of departure. Thank you.

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Notes

1/ For the report of the Trade and Development Board on its forty-

fourth session, see UNCTAD document TD/B/44/19 (Vol. I).

2/ High-level Meeting on Integrated Initiatives for Least Developed

Countries' Trade Development, 27-28 October 1997.

3/ Eighth Raul Prebisch lecture, delivered on 24 October 1997.