rU > 1
PRIME MINISTER
FOR MEDIA 9 MAY 1979
UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT
Mr President,
On behalf of the Australian delegation, it gives me pleasure to
congratulate you on your election for this session of the United
Nations Conference on Trade and Development. I-t reflects both
your personal merit and the standing and reputation of your
country. I would also like to express my thanks to Dr. Gamani Corea and
the UNCTAD Secretariat for their work in preparing for this
Conference and in anticipation, for the assistance we will all
receive in the coming weeks. Further, my delegation wishes to
associate itself with others in expressing to the Philippine
Government and people, its warm appreciation for the excellent
arrangements which have been made for this Conference in these
very fine surroundings, and for the most generous hospitality
we have received.
It is a matter of special satisfaction for me to be present a~ t
this United Nations Conference on Trade and Development in the
Philippines, a country with which Australia has close regional
ties and which has in recent years made rapid progress in a
wide range of endeavours, under the purposeful leadership of its
President.
Mr President, this Conference meets at the end of what has been
a troubled decade for the wor] lieconomy, a decade characterised
by high inflation, high unemployment, and, as a consequence, a
dangerous drift to protectionism. A decade which has also seen
a great deal of acrimony and friction between developing and
developed countries, causing alarm in some and disillusionment
and cynicism in others.---
As we come together at such a time, I believe it is essential
that we come armed with a sense of historical perspective, so
that we can see these recent events in their proper context and
proportion. But while the last few years have been difficult
ones, it is as well to remember that the last three decades have
been ones of unprecedented growth and prosperity for the world
economy. In the aggregate, both developing and developed countries
have participated in and benefited enormously from this growth.
2/
But the aggregate figures hide the fact that there remain areas
of great human need, and that there are countries which have hardly
participated in the general advance. The scope of the gains made
is indicated by the fact that despite the economic stagnation
and slow growth which some countries unfortunately experienced, the
average per capita incomes of developing countries more than
doubled in real terms over this thirty year period.
Indeed, the reason why the last few years have seemed as bad
as they have is largely because they stand in such sharp
contrast to the immediately preceding period. For a quarter of
a century the system worked so well that all our expectations
our sense of what was normal rose very rapidly. During this
period, it was not just the peoples of developing countries, but
those of developed countries who experienced a " revolution of
rising expectations" and a consequent impatience with any
performance which did not meet those expectations, even if by
historical standards it was very respectable.
Despite the confrontationist atmosphere which built up in the
years 1974 1975 and which continued to prevail to some extent
after that, in historical perspective the decade clearly stands
out as one in which real progress was made in the North-South dialogue,
It is worth remembering that the term " North-South dialogue" only
gained currency during this period.
Ten years ago there was really little in the way of sustained,
serious economic discussion between developed and developing
countries to which such a label could be attached. Five years
ago the dialogue was strained and tense. On both sides there
was little evidence of empathy and much of rigidity and selfrighteousness.
To a disturbing extent we were attemtping to deal with very
complex issues using the blunt instruments of dogma, and on the
assumption that they could be dealt with in simple terms of two
undifferentiated " sides"
Mr President, we have not solved all our problems far from it.
And it is entirely possible that if we do not consolidate and
build * on our gains the atmosphere may again deteriorate. That
is the main theme of what I have to say. I believe that the
friction and polemics of the mid seventies were in a real sense
evidence that the two groups of countries, were going through
the painful process of learning how to speak and deal with each
other, and discovering what was productive and counter-productive,
acceptable and unacceptable in their dealings.
If there is less drama and rhetoric today, it is largely because
certain things have been learnt by both developed and developing
countries. In particular, I believe that most of us have learnt
that moderation and compromise are not treason to a cause, but
a necessary condition for accommodation and progress.
Over the last three years my Government has proceeded on the
assumption that it is essential that countries move away from
and break down rigid, fixed positions. We have sought to give
an example. We have worked to strengthen the middle ground and
to build consensus. 3/
-3
We have done so not only over the issue of the Common Fund, on
which we took up a stance well in advance of the Group B position,
but also in Commonwealth and Regional meetings and indeed wherever
we have been able to inject an influence. Nothing illustrates
the progress which has been made better than the history of UNCTAD
itself.
When it was created 15 years ago, on the initiative of the
developing countries it was received with considerable indifference
and scepticism. Today we are in a position to take a more
balanced view. The institutionalisation of the economic demands
of the developing countries which took place in UNCTAD, concentrated,
and therefore dramatised, the conflict between national interests.
From the point of view of the developing countries this was a
necessary step those who are fighting to have their cause
recognised must dramatise it. But at the same time, it is clear
that UNCTAD has been important in helping to provide a framework
hitherto lacking for the clarification and resolution of those
conflicts through cooperation and compromise, that is, for
constructive dialogue. Such a forum is indispensible if it
did not rxist it would have to be invented immediately. Nevertheless
UNCTAD has shown that its utility extends beyond this that it
has the capacity to be an instruilient for initiating the negotiation
of significant changes, of policies and structures within the
existing international system and a system which cannot accommodate
change cannot survive.
. A major achievement on UNCTAD'S part has been agreement on
the fundamental elements of the Common Fund. The progress towards
the establishment of the Common Fund follows complex and
protracted negotiations between developed and developing countries.
The Agreement is important not only because it provides hope for
commodity exporters that they may have a more stable economic
future, but because it gives evidence of a growing willingness on
the part of countries to approach the problems of trade and
development in a proper spirit; that is, with the aim of achieving
practical solutions to the problems of the global economy.
Australia has taken an active role in these negotiations
because, as a commodity producer and exporter ourselves, we
understand the problems faced by developing country producers and
the beneficial role the Common Fund can play. Our history gives
us that understanding. While our trade has now greatly diversified,
there was a time when we too depended on two or three commodities
whose prices fluctuated enormously. We can remember we can
sympathis-e with.. the plight--of countries.. in that position.
Accordingly, at the Commonwealth and other forums, and at informal
discussions such as that which several Heads of Government held in
Jamaica a few months ago on the initiative of Prime Minister
Manley, I have sought to make other Governments aware at the
highest political level of the importance Australia attaches to
the Common Fund issue. As of now, the Common Fund is far from
being a reality. 4/
There is much more work to be done, there are more initiatives
to be taken. In proceeding it is imperative that we do not
retread the sterile ground of past debates. The Interim
Committee when it meets must be prepared to produce
agreement on all oustanding issues. Some of these, are
technically complex and detailed technical preparation will
be needed to assist the Interim Committee in arriving at
decisions. I see advantage in the assembling of a group of
technical experts as soon as possible. Such groups have
proved useful in the past and I believe we should utilize them
again. we would lend our support and our own expertise to such
a group if that was wanted.
Governments have also to consider their position with respect
to funding for the Common Fund. Australia will of course be
fully supporting the first window's operations, and the sooner
proportions of contributions are settled between countries the
better it will be. Australia's view has been, and is, that there
should be a viable second window; we will make an effective
contribution to it. We believe that those prepared to support
the second window would do much to guarantee its success if they
could agree on a formula for contributions to it. Again our
support for a second window is firmly based in our own
history we know from experience that such supports as adequate
research and effective promotion can be crucial to the success
of a commodity agreement. We urge all other Governments with
a capacity to do so to adopt a similar approach to the second
window. Experience indicates that those funds which have an
established burden sharing pattern for voluntary contributions
tend to be successful, whereas those which simply make a
plenary appeal for pledges often tend to attract little
support. We therefore strongly support the adoption by
donors of an arrangement which would ensure that the second
window is adequately and equitably financed.
At the UNCTAD IV in Nairobi three years ago this body
adopted a key resolution establishing the integrated programme
for commodities with a Common Fund as a central principle of it.
But while there is now agreement on the basic principles of a
Common Fund, progress in respect of the integrated programme
has been minimal.
Leaving aside sugar, where negotiations were un der way before
the integrated programme was agreed upon, not a single agreement
has been concluded. This truly is a disturbing situation.
Producing and consuming countries with an interest in the
relevant trade should be prepared to cooperate in working out
practical and viable stabilisation arrangements for-appropriate
commodities. Yet what we have in fact is a situation in which
some of the most powerful of the developed countries refuse
to join fully in key commodity arrangements.
It is a matter for concern and regret that the European
Economic Community has not been prepared to join the international
sugar agreement and further that it has used massive export
subsidies to frustrate the operation of the agreement. The
United States has also been unable to participate fully in the sugar
agreement because of domestic political restraints, though, in this
instance, the United States Government has indicated its willingness
to join and in the meantime, to the extent possible, is conforming
with the disciplines of the arrangement.
The result of this limited participation in commodity arrangements
is doubly unfortunate. On the one hand, it becomes more difficult
to achieve the objective which is in the interests of both
producers and consumers of stabilisation of prices on
international markets. On the other, the future of the Common
Fund as an effective mechanism is put in doubt.
In this second respect, if developed countries are serious
if they are to avoid the charge of inconsistency and even of
hypocrisy, they must join and agree to participate financially
in all viable commodity arrangements where they have an interest
in the trade. They must be prepared to participate actively in
work on the other elements of the integrated programme for
commodities. Otherwise, it will be difficult to see their
agreement to the establishment of the Fund as other than an
empty and rather cynical gesture.
I now turn to one of the main themes of this important meeting,
that of the interdependence of North and South, and the need
for a greater accommodation of developing countries within the
global economy. In the context of UNCTAD, " interdependence"
has become something of a term of art. But it has a life
beyond that. It has, in fact, become a standard part of the
rhetoric of the seventies. In this general sense, the term,
and some of the claims attached to it, deserve closer scrutiny
than they sometimes get. We should remember that, in itself,
interdependence does not guarantee a harmony of interest. It
is not irrelevant, for example, to recall that the countries
of Europe had achieved an unprecedented level of interdependence
at the beginning of this century, but that this did not prevent
them from engaging in the most devastating wars.
Again, it should be borne in mind that the existence of a
substantial degree of interdependence does not in itself ensure
that the benefits flowing from it are evenly distributed and
as we all know, economic disputes are often about questions of
distribution. It is important that we do not delude ourselves
about the situation we are in. There is a considerable and
perhaps an unprecedented degree of interdependence among the
countries of the world today. But that interdependence is not
something to rest on it is something to build on: Australia
believes that we.: must build on it by further reducing
restrictions on trade and capital flows. To do this requires
a political will to co-operate and to think in terms of mutual
interest unless and until we do that it will remain part of
the problem rather than of the solution.
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Against this background, Mr. President, I want to suggest that,
the international economic system and the long term welfare
of all the participants in it, depend on successfully meeting
two fundamental challenges which now face it: the challenge
of inflation and the challenge of increased protectionism
in all its forms.
I want to lay particular emphasis today on the over-riding
importance of overcoming inflation. Its destructive effects
can hardly be exaggerated. It is an acid that eats away at the
social fabric of nations. It undermines both confidence in
governments and the confidence of governments. It causes
unemployment by reducing profitability and increasing uncertainty.
It leads to disorderly exchange rate conditions and increases
pressure for forms of intervention which inhibit market forces
in general and world trade in particular.
We cannot overlook the conjunction between the increased rates.
of inflation since 1973 and the fact that the volume of world
trade grew at only 4 pe_, rcent per annum between 1973 and 1978
compared with 8 per cent over the previous. 20 years. This one fact
alone underscores the reason why tne world's economies are
in difficulty. Until the challenge posed by inflation is met,
we shall not experience a return to the economic growth rates
which developed countries achieved prior to 1973 and which
underpinned the great progress which was made in liberalising
trade and payments up to that time.
As developed countries provide about 70 percent of the market
for the exports of developing countries, and as the volume of
capital flows to the latter is linked to demand for their
exports, this is a matter of the utmost importance for developing
as well as developed countries.
Given these linkages, it is evident that developed countries could
make a significant contribution to faster economic growth in
developing countries if they adopted policies to overcome inflation.
But this is not the end of the matter. It is not simply a
question of the effects of inflation on aggregate demand.
High inflation rates are also one of the root causes of the
drift towards protectionism. They have created distortions in
our economies which some governments, responding to strong
internal pressures, have sought to correct through resort
to various protective measures to shield industries and employment
from outside competition.
These protectionist pressures must be resisted. If they are not
they will put the future growth of developing countries into
jeopardy. They will make a mockery of talk of " interdependence"
and of claims that the best prospect for developing countries
lies in working within the existing system. If the reward for
success is to be punishment by means of new protectionist
devices, by means of " selective safeguards", by the abandonment
of the most favoured nation clause which in recent decades has
been the only real protection for middle-ranking and less
powerful countries, then what credence will such claims have?
What incentives will there be to succeed? It will demonstrate
that the economic principles by which the established countries
have professed to live apply only to those who have arrived
not to those who are on their way. ./ 7
-7-
I can think of nothing which would lead to greater bitterness
and disillusionment among developing countries, which would do
more to strengthen the case of those who argue for extreme
policies, than the systematic frustration of their access to
developed country markets by resort to a variety of
protectionist devices. But beyond that, even in terms of
cold-blooded self-interest, such devices are short-sighted and
self-defeating. They deny -the basic truth that the success
of the existing system a system which has allowed enormous
progress to be made in the recent past, depends essentially
on the growth of mutual trade and on maintaining the
conditions which allow and encourage that growth.
The recent MTN negotiations, if disappointing in some aspects,
helped to hold the line and to prevent a further deterioration
in the situation. They made some welcome progress in reducing
traditional barriers to international trade. But most of us
know to our cost that these traditional barriers have, in many
cases, been replaced and supplemented in recent years by other
forms of protection, by quotas and market sharing arrangements,
and by more subtle and covert forms such as job and export
subsidies on a huge scale. What we must do now is to look
beyond the MTN towards the reduction of barriers of all sorts
to the freer flow of goods. It is of vital importance to the
efficient and equitable working of the international economic
system that we ensure the continuation of efforts to liberalize
trade in the post-MTN world. Much remains to be done,
particularly in the area of non-tar-iff barriers. This is a
matter in which all can play a part, working together to achieve
mutual benefit. It is a challenge which we would ignore
at our peril.
As we meet here in Manila we do so knowing that shortly there will
be a much smaller meeting at another place, that the major
developed countries of the world will meet in an Economic Summit
in Tokyo. We also know that, although the great majority of us
will not be represented and will not even know much of what
transpires, what will be decided there could be of great
significance to the issues which concern us. There is, therefore,
a great burden of responsibility on those countries which will
meet in Tokyo for it is their management or mismanagement of
their own economies and the effects of that on the international
system which is decisive. Indeed the holding of the periodic
summit meetings acknowledges the responsibility which resides
with them because of the dominant size of their economies.
I believe that this conference should, therefore, call on the
major industrialised countries in the most forthright terms
to adopt policies to bring inflation under control. They should
do so in their own interests and in the interests of the rest
of the world. We should call on them to resist the temptation
to evade their long-term responsibilities to their own constituencies,
and to the wider world, by surrendering to the pressure for
protectionism. / 8
8-
Beyond this, I believe that t he individual governments of
developed countries should be prepared to allow increased
market access for imports from developing countries.
Indeed, Australia has been doing this very effectively for
over a decade. During this period the percentage of our-total
imports coming from developing countries has nearly'doubled.
In recent years the rate of increase has been nearly
percent per annum.
We have taken positive measures to encourage this trend. We were
the first developed country to introduce a developing country
tariff preference scheme. More recently we have set up a market
advisory service and held trade promotion seminars to help
developing countries who wish to trade with us.
But there are obvious limitations to what a middle-ranking
country nearly half of whose exports suffer from the
protectionism of others can do on its own. Such a country
finds in practice that tackling protectionism unilaterally must
be a slow and difficult process. That is why we look to the major
trading countries, with the tremendous weight they carry in
international trade to respond effectively to the needs of
developing nations.
Mr. President, Australia attaches special importance to this
Conference because it is taking place here in the Philippines,
one of Australia's neighbours, a member of the ASEAN group
and a representative of regions South East Asia and East Asia
which are both close to my country and among the most
economically dynamic in the world. Our host country is an example,
and there are others, to remind us that UNCTAD need not approach
its formidable agenda in any spirit of despair. Indeed, it
should serve the opportunities that are so manifestly there.
The striking success of some countries in promoting development
must not of course, induce any form of complacency or lack of
awareness of what needs to be done. Some other countries have had
to overcome great obstacles in order to make even the most
modest steps forward and some have even found the obstacles
too great to make any advance. It is a matter of grave concern
that progress has been so uneven and that a significant part
of the developing world has participated to only a very limited
extent in the economic progress of the past thirty years.
The success of this region, however, is important both in its
own right and because it is indicative of what is happening, and
can happen, in the third world. It is well known that some
developing countries have sustained better growth rates than any
developed countries through the 1970S. 9
-9-
Both developed and developing countries, including my own,
can take a lesson from the recent successes of the South East
and East Asian countries. Of course, this success creates
new challenges and opportunities as old economic partners
are transformed and new competitors, suppliers and buyers
appear. We are determined to face the challenge-and seize the
opportunity of adjusting to that performance and its implications.
We hope that others will realise the fundamental importance of
pursuing sound domestic economic policies and of creating
an economic environment conducive to entrepreneurship.
At this conference the whole range of factors involved in the
development process will be considered: industrialisation,
technology transfer, finance, transport and commercial
arrangements. In some instances it will be true that the most
relevant repositories of recent experience for some of us here
will not be the mature industrialised countries but the
newly industrialising countries not the MIC's but the NIC's.
Until recently these countries were thought by most to face
overwhelming economic difficulties. But they have achieved
spectacular breakthroughs to rapid growth and what is more have
sustained it in difficult circumstances.
Having mentioned the rapid growth of trade between the
developing countries themselves, and the efforts of developed
countries like my own are making to accommodate exports from
the developing countries, it is appropriate to point out that
the centrally planned economies communist countries have
so far proven to be extremely poor markets for developing
countries' exports of manufactures. In fact, the communist
countries' share in developing countries' trade in manufactures
declined in the period 1970-76 from about 5 percent to below
3 percent. When this is set alongside the very low level of
aid that the developing world receives from the communist
countries, it is apparent that the latter are contributing
little to help the development of the third world.
It is to be hoped that the role of the centrally planned
economies increases in the next decade in a constructive and
co-operative fashion. At present what does most to sustain that
hope is the courageous decision of the present leadership of
the People's Republic of China to intensify economic relations
with the rest of the world. The modernisation of the Chinese
economy attracts the closest interest in the countries of this
region including my own and we trust that any impediments
to its progress will be overcome.
Mr. President, the agenda of this conference is so vast that it
is impossible to cover all of the items on a comparatively
brief speech. I-have had to-concentrate-on what I believe are
the key issues, the ones which can unlock the doors to general
progress. I do, however, want to say something about the
question of aid.
It is essential that developed countries maintain, and where
possible improve, their aid effort for many countries whichl
have so far not achieved significant growth are unfortunately
going to need it for some time yet. I would put particular
emphasis on the improvement of the quality of aid, and
Australia has tried to set an example in this respect by
giving nearly all its aid in grant form and by untying it.
Two things must be recognised. First, in the total picture,
as the figures indicate, the role of aid can only be
supplementary. Increasingly it is the right and the
opportunity to trade which developing countries are demanding and
their emphasis is right. It is through trade combined with
sound domestic policies, that they will achieve sustained growth.
Secondly, in so far as aid continues to be important, it must
be recognised that there is likely to be a close connection
between the aid performance of developed countries and the
general growth and prosperity of their economies. In this
respect the general thrust of my comments today have been
very pertinent to the question of the prospects for aid.
The other area on which I would like to touch briefly in
concluding is that of international monetary questions.
We cannot overlook the detrimental effects of instability in the
international monetary system on development efforts. I know
that concern about this basic issue is shared by all participants
in this conference. It is important in this context that the
international Monetary Fund's distinctive role is clearly
appreciated. While the IMF does not provide development finance
as such, the temporary financing it makes available gives
countries timve to adjust their policies to overcome balance
of payments difficulties. This financing, and the pursuit of
sound economic policies that go with it, are thus an important
element in sustaining economic growth in both developed and
developing countries. In approaching its task, the fund needs,
of course, to take account of the particular circumstances
of individual countries. But beyond this, my Government accepts
that the Fund's activities, and its resources, should be directed
towards the achievement of the basic objectives of international
monetary stability and growth and that questions of direct
financing of development are best considered in the context of
other international institutions designed for that purpose.
Mr. President, the task before this conference is a formidable one
and it is very important that we approach it in the right
spirit. We will need to display moderation. Not the moderation
of indifference or lack of conviction, but a principled
moderation derived from an appreciation of the necessity for
compromise and a true understanding of interdependence.
We will need to display realism. We will need to display vision.
And lastly, and perhaps most importantly we will need to display
resolution the resolution to control and shape events, rather
than be controlled and shaped by them, the resolution to face
formidable problems and the resolution to surmount those problems.
With this dedication, with these qualities, I am confident that
together we can make significant progress. We will at times have
our differences. But if we are prepared to seek reconciliation
and moderation we will advance our cause and that is the cause
of mankind. 00---