The relevance of Prebisch to today’s Unctad
Business Line, June 27, 2008

By Pradeep S Mehta

Having attended the past four triennial meetings of the United Nations Conference on Trade and Development (Unctad), this writer has been witness to the UN body’s struggle to maintain its critical role amidst pockets of opposition.

It is much more than being a standing conference, which only means it meets often and does little more than that. Because of its bureaucratic and democratic nature, people have also dubbed it: Under No Circumstances Take Any Decision.

Humour apart, Unctad is not mandated to negotiate any agreement and, hence, decision-making is relegated to, often hectic, negotiations on the text of its declaration. However, some agreements such as those on commodities have been negotiated under its banner. That said, the declarations, unlike the ones adopted by the WTO ministerials, do have a bearing on the international community’s approach to the complex issues of global trade policy, where all countries are at different levels of development.

This is not a simple task. Therefore, given the magnitude of the problems facing developing countries in international trade and the need to address them, the conference was institutionalised to meet every four years to address the above concerns.

Economic order

Traditionally, Unctad had been conducting discourses on the ‘new international economic order’ (NIEO) and has been making its case on the basis of analytical policy-oriented research, at least until the debate on NIEO was replaced by the Washington Consensus.

Such an approach has been inspired by the teachings and vision of Unctad’s founding Secretary-General, Mr Raúl Prebisch — the prominent Argentinean economist and thinker with a strong influence on world economic debates — who served Unctad from 1964 to 1966 and advocated preferential access to the markets of rich countries and regional integration.

During the Unctad XI, 2004, held at Sao Paulo, Mr Rubens Ricupero, the then Secretary-General, while delivering the 12th Raúl Prebisch Lecture reminded the audience about Mr Prebisch’s legacy of ethical commitment to genuine development.

The ideas were originally developed in the late 1940s or early 1950s. One instance is the ‘recognition of technical progress as a key to the development process, or the need to redress the asymmetries in trade between the centre and the periphery, which also results in a terms-of-trade bias against developing countries.

This, and the adoption of industrialisation policies to correct that bias, the prescription of not only an import substitution strategy but also of export promotion of manufactures as the best recipe for reducing the trade gap, are some of the issues that still occupy centre-stage in the current discourse. Research and investigation in this area, according to Mr Ricupero, has been adopting a ‘systematic critical inquiry method that has become inseparable from the modern approach to the social sciences’.

Change in approach

With Mr Ricupero asserting the relevance of Mr Prebisch’s core thinking, even in today’s economic set-up at the eleventh ministerial meeting of the Unctad and the Raúl Prebisch Lecture remaining an essential ritual at Unctad since its inception, it seemed that the Unctad was following a certain approach to investigating problems relating to trade and development.

However, the twelfth ministerial meeting of the Unctad in Accra, Ghana during April 20-25, 2008 made an exception, with no Raúl Prebisch Lecture being delivered.

So far, so good. The Unctad is upholding the essence and relevance of its foundation. In the1960s and 1970s, with its profound work on GSP (Generalised System of Preferences, 1968) wherein rich countries provide market access to exports from developing countries; its facilitation of commodity price stabilisation, particularly of exportables relevant to developing countries; its role in providing development aid, and its evolving work on trade and competition policies, Unctad has been advancing a global economic reform strategy.

The 1980s and 1990s at Unctad witnessed the challenge of a changing economic and political environment. Development strategies became more market-oriented, and the ‘one-size-fits-all’ type structural adjustment programmes by the World Bank and the International Monetary Fund dragged many developing countries into severe financial crises and economic stagnation. Unctad highlighted the need for a differentiated approach to the problems of developing countries to address the development agenda in a globalising world.

More recently, Unctad’s work on FDI (foreign direct investment) has become a major component of globalisation based on its extended analytical research effort on the linkages between trade, investment, technology and enterprise development.

‘Failed’ ideas

All such broad-based activities of the Unctad are in keeping with the words of Mr Prebisch, “to renew our ideas is an imperative,” spoken before his death in 1986 in one of his last lectures in Medellin, Colombia. Even so, his ideas have been subject to much criticism. His followers affirm, though, that much of this is based on distortions of his work rather than his original contributions. It would be wrong to look at Mr Prebisch’s proposals ‘out of their historical context’, they say.

It should be taken into consideration that ‘many of his proposals were made in the light of the Great Depression, and the collapse of the international trade and financial system in the 1930s, whose reconstruction had barely begun when he published his works (Prebisch, 1949, 1951, and 1952). Even in India, Mr Prebisch’s works are commonly labelled as failed prescriptions for India’s growth strategy. Nonetheless, the noted trade economist, Prof Jagdish Bhagwati, while commenting on Mr Prebisch’s essay, once described him as a remarkable economist.

Poor implementation

Properly understood, the lessons of the Singer-Prebisch thesis, which provided a justification for import substitution industrialising (ISI) policies were not properly implemented by governments. Whether the supposed import substitution policy of the 1960s in India can be considered as leading to a predominantly socialist-type planned economy, with ‘excessive’ state intervention is debatable. In this context, another well-known trade economist and Prof Bhagwati’s acolyte, Prof Arvind Panagariya, assessing India’s post-Independence economic history in his new book, has blamed extreme government intervention culminating in restrictive policies on investment, and not Mr Prebisch’s prescriptions, for damaging India’s growth effort.

Such an omission can be explained by Korea’s noteworthy experience in this regard — it practised import-substituting industrialisation for two decades before shifting towards an export-led growth policy. Arguably, today’s prescribed export-led growth strategy is working well for a handful of countries. So, it may be said that no set formula can be prescribed to ensure economic growth.

Current relevance

Unctad as a forum seems to have adopted Mr Prebisch’s basic idea of critical enquiry through its own analytical research. The attitude of readiness to change and innovate to suit the need for development and poverty alleviation reflects its credo. Consider, for instance, one of Mr Prebisch’s reformulated ideas in the context of the current global food crisis.

Food self-sufficiency appears to have regained some relevance, as against many who thought on the Ricardian lines of comparative advantage. In the case of most poor African countries, 60-70 percent of their foreign exchange is used to import food, leaving very little for importing intermediate manufacturing capital goods for progressive industrialisation. The current development policy-based literature is increasingly found to be advocating import substitution in African agriculture.

Though the Unctad XII did not organise a ‘Raúl Prebisch Lecture’ this year for some reason, by no means was it a sign of rejection of Mr Prebisch’s critical development thinking. The issues taken up for discussion at the last conference at Accra in April, 2008, followed by the Accra Declaration, are indeed proof of this.

The author is Secretary General, CUTS International, a leading research, advocacy and networking group and can be reached at psm@cuts.org

This article can also be viewed at: http://www.thehindubusinessline.com/

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EU eco-labels to open new vistas
ZEE News, June 25, 2008

EU eco-labels would provide Indian textile exporters new opportunities, European marker Robert Donkers, first counsellor of the European Commission EC said on Wednesday.

"'Eco-labels' is a certificate of environmental quality and the EU eco-labels are ones that are ratified by EC," Donkers told a two-day workshop organised by the Consumer Unity & Trust Society (CUTS) and the Confederation of Indian Textiles Industries (CITI), in collaboration with the United Nations Environment Programme (UNEP) here.

The event marked the first opportunity for national stakeholders to get information on eco-labelling opportunities and was a part of a project titled, "Enabling developing countries to seize eco-label opportunities" funded by the EU and the German Federal Ministry for Economic Cooperation and Development.

The project aims at providing technical assistance and building capacity of a wide range of national stakeholders to increase market access in developed countries and promoting more sustainable consumption and production patterns.

In India, it specifically aims at supporting Indian industries in attaining the EU eco-label for their products.

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Eco-Labels to provide Indian textile exporters new vistas in
European market, says EC official
Thesynergyonline.com, June 25, 2008

“EU eco-labels would provide Indian textile exporters new opportunities in the European market”, said Robert Donkers, First Counsellor of the European Commission (EC), dealing with environmental issues while addressing the two-day workshop on June 23-24, 2008, organised by the Consumer Unity and Trust Society (CUTS) and the Confederation of Indian Textiles Industries (CITI), in collaboration with the United Nations Environment Programme (UNEP) at Country Inn and Suites, Jaipur. An eco-label is a certificate of environmental quality and the EU eco-label is one that is ratified by the EC.

The event marked the first opportunity for national stakeholders to get information on eco-labelling opportunities and was a part of a project entitled 'Enabling developing countries to seize eco-label opportunities' funded by the EU and the German Federal Ministry for Economic Cooperation and Development.

The project aims at providing technical assistance and building capacity of a wide range of national stakeholders to increase market access in developed countries and promoting more sustainable consumption and production patterns. In India, it specifically aims at supporting Indian industries in attaining the EU Eco-label for their products.

The EU Eco-label also called the “EU Flower” was introduced by the EU in 1992 with the aim of providing more transparency and information to consumers about environmentally preferable products. It is a broader strategy of the EU to stimulate sustainable consumption and production.

Till date, there have been around 620 licensed companies with approximately 4000 EU Flower labelled products with a market value approaching a billion Euros. The licences are spread over a number of European as well as developing countries, namely Thailand, China, Indonesia and Egypt.

The workshop provided textile industry stakeholders with knowledge of the EU Eco-label, the criteria and procedures that underlie its award and related market opportunities.

Addressing the workshop Shishir Jaipuria, Vice Chairman, CITI, while pointing to the mounting pressure on the textile sector to adopt more “eco-friendly” manufacturing processes, underlined the importance of textile producers in India going in for such environmental certifications to retain their market position.

He said that obtaining an eco-label can also generate financial savings through process optimization and reduced consumption of raw materials and improved environmental performance. Pradeep S. Mehta, Secretary General, CUTS underlined the opportunities created by eco-labels as well as their potential misuse as non tariff barriers.

The presentations at the workshop highlighted that an increase in the market for home textiles and apparel in the EU, US and Japan is predicted due to the phasing out of production capacities in spinning and weaving in these countries.

Since the EU Flower label is recognised by all EU countries, it makes market penetration easier, especially to major markets like Italy, UK, France, Germany and Spain.

The workshop brought together relevant representatives of the textile industry and designers, textile associations, laboratories associated with textile manufacture, consumer and environmental organizations, EU and United Nations officials linked to the eco-label scheme, as well as academic experts and international industry representatives.

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Why isn’t our mango going places
Hindustan Times, June 6, 2008

WEST BENGAL may rank seventh among India’s mango-producing states, but little of its produce reaches a thriving international fruit market simply because there is no proper export infrastructure.

So, while western India leads the export bandwagon with Alphonso as the brand ambassador of the country, Bengal’s luscious Himsagar, Langra and Malika remains mere curious in the discerning markets of Europe and the US.

Lack of exports infrastructure and grower’s isolation from the fruit export market is one reason why Bengal’s mangoes have failed to reach the shelves of European, West Asian and North American departmental stores.

A study by CUTS, a Kolkata NGO striving to intervene in national policy matters, has revealed a set of shortcomings that keep Bengal’s mangoes, once patronised and cultured by the Nawabs, from going places.

The study has noted that almost 30 per cent of the state’s mango production rots because of cyclical overproduction and inadequate storage facilities. Also, there are few fruit-processing units in the state to lift the excess produce for use in value-added products. The growers, in general, also don’t have access to security shields such as institutional finance and insurance cover to export a product lacing in long shelf life.

“There is a general lack of information on the specific requirements of particular export market among both growers and processors. The problem of overproduction is compounded by inadequate cold storage and packing facilities,” the study says.

Although Malda, Murshidabad, Nadia, North 24-Parganas and South 24-Parganas have been growing high quality mangoes for ages, the government has been indifferent to the potential of the fruits. Almost 60 per cent of the state’s produce is consumed in the domestic market and little, if ever, goes beyond its borders.

Though mango is one of the state’s major horticulture products, there is no monitoring unit to help growers attain global standards. Anup Datta, CEO, West Bengal Agri-Horticulture Exporters’ Association, had cited this as a stumbling block to mango exports from Bengal in an interview to a news agency last year.

The CUTS report shows the situation hasn’t changed, with the growers remaining cut off from export market operations and losing out in the process. This isolation has also been compounded by the grower lack of awareness of the features of the country’s foreign trade policy and programmes, and an absence of knowledge among policy-makers about grassroots reality, the report has observed.

It has also noted that the panchayats have failed to serve as information hubs. They have failed to tell growers about available schemes that can help their business grow. They have also not liaised with the government, the study feels, to communicate local needs and help tailor policies to let this business flourish.

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Indians bristle at American criticism
Deccan Herald, June 2, 2008

By Heather Timmons

The recent statement by US President that the rise in food price globally due to economic prosperity of Indians was sharply denounced by academicians and experts.

Instead of blaming India and other developing nations for the rise in food prices, Americans should rethink their energy policy—and go on a diet.

That has been the response, basically, of a growing number of politicians, economists and academics in this country, who are angry at statements by top US officials that India’s rising prosperity is to blame for food inflation.

The debate has sometimes devolved into what sounded like petty playground taunts over who are the real gluttons devouring the world’s resources.

For instance, Pradeep S Mehta, Secretary-General of the Centre for International Trade, Economics and the Environment of CUTS International, an independent research institute based in New Delhi, said that if Americans slimmed down to the weight of middle-class Indians, “many hungry people in sub-Saharan Africa would find food on their plates.”

He said, archly, that the money spent in the United States on liposuction to get rid of fat from excess consumption could be funnelled to feed famine victims.

Mehta’s comments reflect genuine outrage—and ballooning criticism—toward the United States in particular, over recent remarks by President Bush.

After a news conference in Missouri on May 2, he was quoted as saying of India’s burgeoning middle class, “When you start getting wealth, you start demanding better nutrition and better food, and so demand is high, and that causes the price to go up.”

‘Comprehensively wrong’

The comments, widely reported in the developing world, followed a statement on the subject by Secretary of State Condoleezza Rice that had upset many Indians. In response to the president’s remarks, Minister of State for Commerce Jairam Ramesh, told the PTI, “George Bush has never been known for his knowledge of economics,” and the remarks proved again how “comprehensively wrong” he is.

Another Indian newspaper argued in an recent editorial that Bush’s “ignorance on most matters is widely known and openly acknowledged by his own countrymen,” and that he must not be allowed to “get away” with an effort to “divert global attention from the truth by passing the buck on to India.”

The developing nations, and in particular China and India, are being blamed for global problems, including the rising cost of commodities and the increase in greenhouse gas emissions, because they are consuming more goods and fuel than ever before. But Indians from the prime minister’s office on down frequently point out that per capita, India uses far lower quantities of commodities and pollutes far less than nations in the west, particularly the United States.

Explaining the food price increases, Indian politicians and academics cite consumption in the United States; the west’s diversion of arable land into the production of ethanol and other biofuels; agricultural subsidies and trade barriers from Washington and the European Union; and finally the decline in the exchange rate of the dollar.
There may be some foundation to Indians’ accusations of hypocrisy by the west. The United States uses—or throws away—3,770 calories per person each day, according to data from the UN Food and Agriculture Organisation collected in 2001-3, compared with 2,440 calories per person in India. Americans are also the largest per-capita consumers in any major economy of the most energy-intensive common food source, beef, the US Agriculture Department says.

And the United States and Canada lead the world in oil consumption per person, according to the Energy Information Administration, a US Energy Department agency.

The subsidy factor

When it comes to trade, western farming subsidies undercut agricultural production in fertile areas of Africa, Commerce minister, Kamal Nath, said in an interview, repeating the point that Americans waste more food than people in many other countries.

The United States is responsible “many times more” than India for the world food crisis, said Ramesh Chand, an economist with the Indian Council of Agricultural Research, which advises the government on farm policy.

The Bush administration has called for a truce. Bush is a “great friend and admirer” of India, the US ambassador here, David C Mulford, said. He added that “this is a time for increased cooperation among nations to solve this problem and that hostile political commentary is not productive.”

A White House spokesman, Scott Stanzel, said, “We think it is a good thing countries are developing, that more and more people have higher standards of living.” Some economists argue that blaming India’s growth is not only unfair, but makes little sense.

Sudden spark

Food prices have not been rising continually as developing nations grew, said Ramgopal Agarwala, a former World Bank economist and senior adviser at RIS, a research institute in New Delhi. “They were static until 2006, then in 2007 and 2008 there was a sudden spark,” he said. But India has been growing for the last decade. This is “not last year’s phenomena,” he added.

“I don’t know who advised the president” on his recent comments, Agarwala added, but his analysis is “subprime”.

Mehta of the research institute conceded that his remarks on liposuction were meant to be tongue in cheek, but that “politically incorrect” attitudes like Bush’s and Rice’s needed to be challenged. Rather than blaming India, Mehta said, the west should be adjusting to a changing world.

“If the developing world is going to develop, demand is going to go up and there are going to be new political paradigms,” he said.

This news item can also be viewed at: http://www.deccanherald.com