50th Birthday of UNCTAD

By: Verónica Velásquez Zuluaga * (vvelasq5@eafit.edu.co)
Law student at Universidad EAFIT, Colombia

In its half-century, UNCTAD has made a book about its history. As we know, this organ of the UN was created after the Second World War because an international rebuilding in the economy was a necessity, and the spirit that motivated the group that worked at that attempt of changing the world was a sense of devotion which was very enhancing of the quality of relationships and the quality of the work itself, that’s why it builds something, UNCTAD.

For the creation of this organ, they have to perform many meetings to organize and decide how was going to work. At this time, 1964, there were 120 countries that decided to join the organization, then they establish some rules and 3 central elements that Raul Prebisch, the executive secretary at that time, laid out for UNCTAD. There were: general framework for international commodity agreements, new forms of financing – supplementary and the demand for temporary preferences for the industrial exports that developing countries exported to developed country markets.

The Trade and Development Report have maintained a continuing focus on the interaction of the international economic environment with the development prospects of developing countries. Its policies have been implemented by other institutions that want follow the same principles. UNCTAD became a new international order for the economy and trade.

Nowadays, besides others function that UNCTAD has, it is responsible manly for design policies for international trade and development of the economy. In this globalized world where we live, this organ has a very important role in the trade and development: it looks for increasing the opportunities for the developing countries and integrate them to the world trade. UNCTAD has already constructed a new investment policy framework, and its technical assistance capacity is already strong through the Investment Policy Review mechanism. Other international bodies recognize its expertise on investment, trade and development.

Bibliography

Toye, John (2014) Unctad at 50: A Short History. Available online at: http://vi.unctad.org/resources-mainmenu-64/digital-library?i=VI&op=all&q=UNCTAD+at+50%3A+A+short+history&act=search&option=com_gslink

The Status Quo of Chaos in Colombia: An opportunity for development

Opinion Article by: Juan Gonzalo Perez* (jperezg@eafit.edu.co)

* International Business Student, Universidad EAFIT, Medellin, Colombia

A year later after the implementation of the Free Trade Agreement (FTA) between Colombia and the United Sates, as a result of the lack of development policies for rural areas, several agricultural sectors are on strike. The status quo of chaos in Colombia has led to a serious economic and political crises.  Protesters are blocking main roads of transportation, causing a shortage of agricultural goods and, consequently, food prices are increasing. Also, according to some government officials, political opposition movements are taking advantage of the urban and rural riots to gain popularity for the upcoming elections.

Protesters are asking the government for subsidies, elimination of import tariffs on agricultural supplies and adjustments in the FTAs already signed. Let’s try to analyze the causes and possible solutions to this problem.

According to Dhanraj Harrypersad from the Export Market Research Centre in Trinidad and Tobago, the reality is that in most cases there is a disconnect between those negotiating FTAs and those which stand to be affected. He also argues that FTAs are often more politically than economically motivated. They are negotiated quickly and do not give sufficient thought to the impact they will have on some of the smaller producers in a country. Usually it is the larger companies, groups and conglomerates which have the say in negotiations because they may have funded the political campaigns of the governments.

It is true that as Colombia becomes more open to international markets it is necessary for local industries and small farmers to become more competitive. The challenge is to develop a higher value added agricultural industry that creates quality jobs and increases the salaries of farmers. To accomplish this task the government should implement clear development policies and take advantage of the benefits from the large amounts of Foreign Direct Investments (FDI) coming into the country as well as the royalties from the extracting industries. 

Although subsidies can solve the farmer’s problems in the short term, the fact is that it affects the country’s welfare. Also, they cannot rely on the government to give subsidies and preferential treatment indefinitely. At some point in time farmers need to be able to stand on their own and compete in international markets. For instance a more feasible solution could be to implement programs to transform the agricultural sector from one of primary goods, like potatoes, raw coffee beans and bananas, which are low cost but also low profit, to one of value added products that can be incorporated in global value chains. For example, Chilean pineapple exporters have recently determined that exporting pineapple juice, a value added product, is more profitable than exporting the pineapple itself. The role of the government should be to get farmers to that state rather than offering subsidies and reducing import duties on inputs.

Furthermore, there is little chance that the government will accept to negotiate the terms of the FTAs because it is a risky political and diplomatic decision, even though it is legal for the Colombian government to establish consultations with the US claiming that the FTA is causing internal social conflicts.

In conclusion, the status quo of crisis in Colombia can be seen as an opportunity to develop the agricultural sectors. But, most important is to establish a clear plan to improve the technology to transform the basic production of agricultural goods into value added products that will allow small farmers to become more competitive in international markets and even become part of global value chains. For now, let’s hope that the protests stop and the parties can come to some sort of agreement soon because the fact that people are using it as an excuse to gain political benefits and damage property just shifts the focus away from the true reasons behind the protest.

Global Value Chains (GVCs): the path towards a global economy

Opinion article by: Nathalia Rios Ballesteros* (nriosba@eafit.edu.co) 

Economics student at Universidad EAFIT, Colombia.

Global capitalism has taken over the current economic field. Over the last two decades, terms such as ‘globalization’, ‘internationalization’ and  ‘international free trade’ have emerged and have jointly given rise to a new line of research and a new ‘form of trade’ which has increased greatly in importance nowadays: Global Value Chains (GVCs).  According to Gereffi (2003) a value chain is the range of activities –understood as a set of process that take place transnationally - involved in the design, production and marketing of a product before it is turn into a final good; it is ‘the functional integration and co-ordination of internationally dispersed activities’’ (Gereffi 1999: 41)

Within this broad framework; the growing integration of the global economy posed by the implementation of the GVCs in the various sectors of the economy, has provided the opportunity for substantial economic and income growth, creating and promoting significant opportunities for developing countries and regions as a way to potentially increase the rate and scope of industrial growth and the upgrading of their manufacturing and service activities as well as a way for addressing the poverty and inequality inherent to its internal situation.

However, at the same time, GVCs carry along not only positive but also negative attributes for these countries. As it was stated by the UNCTAD WIR for 2013, even though developing countries are increasingly becoming active participants of GVCs and thus gaining significant improvements in living standards and domestic value added in their exports - higher contribution to countries’ GDP- through it, it still remains a long way towards equity in contrast with developed economies. In this sense, as global trade grows, developed economies appear to increase import dependence for exports, allowing developing countries to add disproportionately to their domestic value; in a nutshell, innovation activities tend to attract higher incomes and continue to be concentrated in the developed countries.

In this context, it seems like the impact of GVCs on inequality is perhaps a complex and wide reality, but unraveling this ‘complexity’ is the key challenge for all developing economies in order to succeed in their path towards integral growth and economic development. What matters then, is how producers – whether firms, regions or countries – become active participants of the global economy and GVCs to narrow this disparity. Hence, there is a need to manage and control the mode of insertion into this ‘plural economy’, to ensure that incomes are not reduced or further transferred to developed countries. Thus, identifying the circumstances which enable developing countries to extend and transform their production capabilities into innovation capabilities along with profit maximization, acquisition of competitive and comparative advantage, reduction of reliance on developed countries to create own-domestic value added and the diversification and expansion of the range of production, which implies exploring other economic sector and fields, rather than sticking into the one that provides the least profit range: the primary sector, can become useful strategies to forge the way to a true global economy.

References: 

Gereffi, G., 1999, ‘International trade and industrial upgrading in the apparel commodity chain’, Journal of International Economics, Vol 48, No 1, pp 37-70.