Tuesday, October 28, 2014

Some views on the Trade and Development Report, 2014

Opinion by: Verónica Velásquez Zuluaga*
Law student at Universidad EAFIT, Colombia

On a post 2015 development agenda, the transformative and sustainable approach to development will be a key role in the setting of new goals and targets for policymakers.

UN Open Working Group on sustainable development presents 17 goals. But we will talk about 3 of them that international community regards them as major. The first is organizing any new goals and targets to a policy paradigm that can help raise productivity, generate enough jobs, and establish a stable international financial system that increase productivity investment and deliver reliable public services that leave no one behind; the second challenge is to formulate a new developing agenda to decrease the inequality which has accompanied the spread of market liberalism. This is relevant because the inequity could damage the well-being and threaten the economic, progress and stability; and the third is restoring a development model that favors the real economy over financial interests and ensures that the policy instruments are available to countries to enable them and advance the development agenda.

About natural resources for public revenue, in some cases, the developing countries need collecting them for the financing of development. The principal contribution to the development of these activities is the payment of the government revenues. However, the mining companies make the prices of commodities increase for their own benefit, that’s why the public gains were falling behind. As a result, many governments, both from developed and developing countries, have begun to revise their policies relating to the extractive industries. This has included renegotiation or cancellation of existing contracts, increases in tax or royalty rates, introduction of new taxes and changes in the degree of State ownership of the extractive projects. However, these changing market conditions should not obscure the wider policy challenges faced by producing countries in making the most of industries for development.

A comprehensive policy aimed at improving revenues from natural resources incorporated this element. First, governments should retain their right to review the tax regimes and ownership structures. Second, governments should have mechanism to enforce the rules to control the MNC's. Third, governments should be allowed to the MNC's transfer pricing manoeuvres and underreporting of export volumes with threats of legal punishment. This topic has to be included in the post-2015 development agenda.

According to UNCTAD international trade grew 2 per cent in the first period of the 2014. All regions have experienced a deceleration in their volume of trade in varying degrees, the greatest slowdown being in the developed countries, the transition economies and Latin America. Trade in developing and transition economies also decelerated. Talking about Latin America and the Caribbean, the trade volume slowed down to a growth rate of around 2 per cent. Slow GDP growth in its major markets (including U.S.) and real exchange rate appreciation affected the regions exports.

The way to expand trade globally is through a domestic-demand-let output recovery; not the other way round. However if a country want to try an exit from the crisis through net exports, this strategy would create a fallacy of composition if followed by many trading partners. But demand must also be geographically distributed in a way that is consistent with the reduction of global imbalances. This requires that developed countries take the lead in expanding domestic demand so as to enable an expansionary adjustment in contrast with the recessionary bias of balance-of-payments adjustments, which place the entire burden on deficit countries.

In conclusion: developed countries need to adopt a balanced approach that gives a larger role to domestic and regional demand and to South-South trade than in the past. Trading partners should encourage domestic demand simultaneously, they would also be supporting each other’s exports and the recovery of international trade and production capacities should be expanded and adjust to the new demand pattern through appropriate, proactive industrial policies.

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