GROUP OF 77
GENEVA

STATEMENT DELIVERED ON BEHALF OF G-77 AND CHINA BY H.E. DR ANTHONY MOTHAE MARUPING OF LESOTHO
TO THE THIRD SESSION OF THE TRADE AND DEVELOPMENT COMMISSION OF UNCTAD
(Geneva, 6 June 2011)

Mr. Chairman,

1. It is a distinct honour and special privilege to make this statement on behalf of the Group of 77 and China. May I take this opportunity to congratulate you, Chair, and the members of your Bureau, upon election to lead this third session of the Trade and Development Commission. The Group of 77 and China expresses its full support to you and your team in piloting this meeting to a successful and fruitful conclusion. Appreciation goes to the outgoing team from the helm. Gratitude should go the Secretary General for his illuminating and ground laying introductory remarks. The Group is also appreciative of the Secretariat for the excellent preparations made for this Commission, including the thought-provoking documentation. Profound gratitude also goes to Hon Mme M. Pangestu, Minister of Trade of Indonesia, for a stimulating and enlightening keynote address. It will go a long way in guiding our deliberations right through the work of the Commission. It has been the expressed wisdom of someone at the helm, indeed '… the wearer of the shoe who knows exactly where it pinches'.

2. This session of the Trade and Development Commission takes place at a critical moment in the broader discourse on development and international trading system.

3. First, the global economy and global trade have just began to rebound following that deep and long global financial and economic crisis. The pace of the recovery and the extent in terms of country coverage, remain low, however. Added to that steady 'financialisation' of the world economy has been resumed thus opening it once again to the risk of 'boom and bust'. These are concerns for the global community to address.

4. Second, that fragile and reluctant economic recovery, which is short on job creation, could be further adversely affected by the stalemate in the WTO Doha Round of trade negotiations particularly for LDCs and small and vulnerable economies. There is dire need for constructive dialogue and devising of new approaches to resolving outstanding differences especially on concerns and interests of developing countries regarding the development outcomes of the Round. The conclusion of the Round is equally important for strengthening the multilateral trading system against protectionism and will lay firm ground for the growth of the global economy.

5. Third, a new programme of action for LDCs was adopted by the UN LDC IV Istanbul Conference in May, 2011. It is the Istanbul Programme of Action (IPOA). While modest compared to its predecessor, the Brussels Programme of Action (BPOA), the Istanbul outcomes must be implemented more earnestly and should be marked by greater faithfulness to commitments made. That will help raise LDCs to an acceptable stage of socio - economic activity and higher level of achievement and sustenance of the Millennium Development Goals (MDGs). The preparatory process has commenced for UNCTAD XIII. It is our fervent hope that it will culminate, in April, 2012, with realistic and ambitious ideas on development. It will also give guidance on how UNCTAD can contribute effectively to the global community's efforts to bring about significant and inclusive development to humankind. In addition, the process towards the United Nations Conference on Environment and Development (Rio+20) preparations has begun. That Conference, which is scheduled for 2012, should result in approaches that will further consolidate the development agenda and chart a credible path forward towards real sustainability. Ongoing efforts to reform global financial governance, including attendant supervisory and regulatory framework and mechanisms, together with all these other global initiatives will certainly impact on UNCTAD's work on trade and development.

6. In view of these developments in the international scene, this Commission will provide an opportunity to discuss the state of international trade and the trading system. It will also probe and forge convergence into ways and means of enhancing its contribution to post-crisis recovery, strong, sustained and inclusive economic growth and rapid socio-economic development in the developing countries. G-77 and China invites all participants to engaging in thorough and constructive discussions, as well as to arriving at concrete recommendations. Such recommendations should highlight viable key policy options and strategies that can be useful to countries in their pursuit of sound, meaningful and sustainable socio - economic development.

Mr. Chairman,

7. Permit me to offer some thoughts on the agenda items before this third Commission on trade and development. Before doing so, it is quite in order to once again commend the secretariat for meticulous preparatory work, particularly with regard to the documentation provided which certainly have laid firm ground for the deliberations to follow.

8. On agenda item 4 - "Assessing the evolution of the international trading system and enhancing its contribution to development and economic recovery" several issues need to be highlighted.

9. Developing countries were not at the root causes of the global financial and economic crisis. Yet they have become the major drivers of real economy recovery so far. They have been providing an important source of global effective import demand for all economies. As such developing countries turned out to be a critical safety valve in terms of export destination, helping a number of economies to survive global demand contraction in traditional destinations during the crisis. The share of developing countries as export destinations increased at an accelerated rate in 2009. The projected average economic growth rate of about 7.1 per cent in 2011 in developing countries contrasts rather sharply with about 2.3 per cent for developed economies. That impressive average economic performance by developing countries is largely pulled up by strong growth rates in Asia and Latin America.

10. Noteworthy also is the fact that the share of South-South trade increased by 2.8 percentage points in 2009. Asia's export dynamism, for instance, suggests a rapid rebound in import demand for final products transmitted throughout the regional supply chains. The growing South-South trade should receive further boost from the conclusion in December 2010 of the São Paulo Round of the Global System of Trade Preferences among Developing Countries (GSTP) negotiations. LDCs and small and vulnerable economies stand to gain from that GSTP. UNCTAD must be applauded for its active support to these negotiations.

Mr Chairman

11. It must be pointed out at this juncture, however, that not all is bright. There are a variety of enormous challenges that continue to confront developing countries which deserve attention.

a) The process of regaining lost ground in trade is not over. Despite steady and dynamic export recovery in many developing regions, by October 2010, in value terms, world merchandise exports were still 12 per cent below their pre-crisis levels. Only Asia has already managed to regain the pre-crisis levels.

b) Among developing regions, there are a wide variations in trade performance. Apart from the Asian region's dynamic recovery, many others continue to suffer from the lagged adverse effects of the crisis. This is particularly so for countries whose exports depend significantly on primary commodities, particularly fuels. Some of the African countries and the Middle East, owing to their export concentration on fuels, whose prices remained lower throughout 2009-2010, provide a glaring example.

c) The international debate on commodity production and trade is once again focusing on the opportunities and challenges facing commodity dependent countries and on policies needed to drive development in these countries. As recent trends have shown, prices have rebounded strongly since the dramatic fall in 2008 spurred by the financial crisis, and have also exhibited high volatility. which raises concern over food security. As crude oil prices surged in early 2011, higher oil prices further pushed up price levels by increasing input costs. Such radical and erratic price movements adversely affect developing countries' trade and economic prospects, particularly those of net oil and net food importing developing countries. Hence these phenomena continue to pose significant challenges for many developing economies. Even though the high prices driven largely by resurgence in demand have created opportunities for commodity dependent developing countries (CDDCs) to harness development gains from commodity trade, the increase in price volatility is causing a wide range of challenges. These include; i) income variations which in turn has created investment uncertainties manifesting itself in cancellation or postponement of projects, or downsizing of existing projects and job losses. ii) complexities entailed in fiscal planning and macroeconomic management; iii) food security; and iv) difficulty in providing social services and public goods, among others. The export performance of many developing countries continues to be highly sensitive to the price shocks and changes.

d) In late 2010 developing countries saw their trade competitiveness eroded as their currencies appreciated against the US dollar, and capital flowed into their economies which raised asset prices and increased macroeconomic instability. Many countries have had to address such unusual levels of capital inflows through resort to capital controls. Such currency misalignment has distorted international competition conditions, largely compromising developing countries competitiveness thus negatively affecting their exports.

e) High and prolonged unemployment rates - with an estimated level in absolute terms totaling about 210 million globally in 2009 - continues to persist in all economies, particularly those of the developing countries. Lack of access to income opportunities through employment is the immediate cause of poverty. Developing countries were mainly affected by job losses in export sectors through drastic trade declines during the crisis. To date some developing countries continue to grapple with the problem of pervasive unemployment. Pervasive unemployment, widening inequalities and youth unemployment in particular are detrimental to requisite social harmony conducive for sound and inclusive socio - economic development. Managing such a tumultuous labour market and struggling to create employment while at the same time continuing to try to engage competitively in international trade poses a key challenge. This challenge is particularly more acute in developing countries that are characterized by large informal sectors.

13. Dealing with the challenges just highlighted requires, among other things, increased international cooperation and solidarity. One key area to be addressed is in making the international trading system more development oriented. The international trading system has historically focused predominantly on trade liberalization, and has often neglected taking fully into account its implications on productive capabilities, employment generation and development. It is thus imperative to review its conventional focus on trade liberalization and to align liberalization approaches and disciplines to broader developmental objectives. The most important area where such a change is being attempted is in the WTO Development Doha Round. However, so far the negotiations seem to have tended to stray away from the development deliverables and have now tended to focus more on pure market access issues. This may well explain much of the current stalemate in the negotiations. Innovative approaches to breaking the current logjam are direly needed. G - 77 and China also reiterates the call for the conclusion at an earliest opportunity the Doha Round of trade talks, with a strong development focus and provisions to effectively support the productive and export capacities of developing countries. Intensification in the area of Aid for Trade (AFT) initiative, particularly the LDCs specific Enhanced Integrated Framework (EIF), should be part of the next steps.

Mr. Chairman,

14. Attention is now being shifted to agenda item 5 on "Integration of developing countries in global supply chains, including through adding value to their exports". During the past decades the world economy had undergone profound changes. One of the most important transformations has been the emergence of global production networks or global supply chains. These global networks are characterized by segmentation and delocalization of production processes, with intermediate inputs crossing borders several times. As a result, lower trade and transaction costs, as well as a competitive business environment are becoming vital sources of comparative advantage.

15. Developing countries are differently equipped to take advantage of this evolving scenario dominated by the global supply chains business model introduced by transnational corporations. While transaction costs are already generally low and declining in emerging economies, relatively higher transaction costs hinder many developing countries' participation in global supply chains, especially LDCs and small vulnerable economies. Added to these are other barriers such as red - tape, inherent rigidities and efficiencies that are still not up to par.

16. Given the large gap in transaction and business costs, traditional trade policies (that is, for example, preferential market access), are no longer sufficient to provide LDCs and other developing countries with meaningful advantage to compete in attracting investment and production localization for global production networks. The erosion of preferential market access as a result of multilateral, regional and unilateral liberalization also plays a downsizing effect in this regard.

17. While many Asian and Latin American countries may have the resources, a conducive environment and human skills to keep their economies relatively attractive for global networks, the situation is direr for many African countries. Transaction costs are much higher for these countries and policy measures aimed at mitigating these costs are crucial and urgent. It should be noted, however, that low-income countries generally lack the requisite resources to efficiently implement these policies. Thus effective and well targeted trade related assistance is necessary. Still, trade related assistance would not be sufficient for integrating into global supply chains. Countries should also put in place domestic policy measures aimed at substantially improving their business environment.

18. A particular area of concern is access to cost-efficient and sustainable international transport services. It remains a major challenge for developing countries that are already burdened by a deficit in adequate and efficient transport infrastructure and services, that drive up transport costs and hinder trade. These difficulties are compounded by emerging global concerns such as increasing pressure on conventional energy supplies and the resulting rise in oil prices. Higher oil prices are highly likely to drive up fuel costs and in turn raise the cost of transportation. Another important challenge in relation to international transportation is climate change. While efforts are afoot in different fora to reach agreement on measures to reduce greenhouse gas emissions, including those related to transportation, much less attention is being paid to the impact of climate change on transport infrastructure and services and to the question of how any adverse effects may be mitigated. A much better understanding of these issues is necessary to ensure that appropriate adaptation measures can be taken. Further research by UNCTAD on the nexus between energy-related developments and transport costs as well as climate change and transport costs is required to help address these issues.

19. Trade facilitation reforms are being pursued at the multilateral, regional and national levels, that can help to build up the enabling environment for improving trade-related infrastructure. Many practical solutions to facilitate trade and to address related transport challenges require cooperation at the regional level. Thus such regional cooperation needs to be strengthened at the multilateral level. The Doha negotiations on trade facilitation have achieved much progress. A key challenge, however, remains the linkage between commitments and implementation capacities of developing countries. Trade facilitation is of critical importance, especially to the landlocked developing countries (LLDCs).

Mr. Chairman,

20. Brief comments on the expert meetings are warranted. All expert meetings this year have provided invaluable insights into different aspects of international trade that need to be improved to facilitate the beneficial integration of developing countries in the post crisis period. The expert meeting on commodities, for example, discussed the important matter of speculative activities in commodity exchanges that disrupt commodity markets and how they can be addressed to minimize their negative effects. There were also useful deliberations on investment and technology in enhancing greater participation in commodity value chains.

21. Under the services expert meeting, there was a welcome emphasis on an integrated approach to infrastructure services development and regulation with coherence between regulatory and institutional frameworks and other policies. Of special interest was that the meeting highlighted that the State has a major role to play in promoting such an integrated and coherent strategy and develop best-fit regulatory practices, taking into account national specificities and development needs.

22. With regard to the expert meeting on transport and trade facilitation, important discussions took place on the nexus between energy and transport costs as well as the broader economic impact of higher transport costs and the related implications for trade and competitiveness, of which greatly affect LLDCs. These highlight the importance of further study on this emerging topic with major implications for competitiveness of developing countries' exports.

23. The expert meeting on remittances highlighted that this area can be a win-win development opportunity for all countries. The development impact of remittances could be enhanced through targeted policies and measures including formalization of remittances channels, expansion of financial education and financial inclusion, and provision of technical training on migrant entrepreneurship as well as incentives for their business operations.

24. Lastly, G77 and China appreciated UNCTAD's effort in convening and servicing the 6th UN Conference to Review all aspects of the Set of Multilaterally Agreed Equity Principles and Rules for the Control of Restrictive Business Practices last November. It reaffirmed UNCTAD's unique role in the UN system in promoting policy and regulations to address anti-competitive practices and to enhance consumer welfare, as well as strengthen international cooperation in addressing cross-border practices especially in the post crisis period.

Mr. Chairman,

25. May it be noted that various activity reports prepared by the secretariat on the implementation of the Accra Accord last year in regard to trade, commodities, transport and trade facilitation and training have been read meticulously and with keen interest. The level of implementation, the outreach to a large number of developing countries in all regions, and the emphasis on practical policy options as well as proposal of workable solutions to pending problems, by UNCTAD, have to be fully recognised and appreciated. The membership looks forward to another year of equally heightened implementation of the Accra Accord even as preparations for UNCTAD XIII are simultaneously also assiduously and meticulously pursued.

26. Finally, G - 77 and China would like to see this Commission succeed in its work.
Constructive engagement and deliberations should characterize the proceedings. This includes arriving at agreed conclusions that capture the substantive elements raised at this meeting, as well as key outcomes of the expert group meetings held under the auspices of this Commission. The Group of 77 and China is committed to meaningful consensus building. Use of all resources at our disposal, including time, in the most constructive, efficient and effective manner should be our common pursuit. G - 77 and China fully recognises that consensus building may not be easy. Prevalence of goodwill and co-operation, however, can go a long way towards making that seemingly formidable task easier. G - 77 and China stands ready to exert all efforts towards successfully finishing in as expeditious and as meaningful manner as possible. Hopefully negotiating partners are equally committed to genuinely constructive and cordial consensus building process in the coming days ahead.

Thank you Mr. Chairman.