When confronted with the tragic and revolting events of 11 September in the United States, we must rely on our recognition of a common destiny and reassert our faith in real interdependence leading to multilateral cooperation, said Rubens Ricupero, UNCTAD´s Secretary-General, at the opening plenary of the 48th session of the Trade and Development Board (Geneva, 1-12 October).
The President of the previous session, Ambassador Camilo Reyes Rodriguez of Colombia, said that the Board - UNCTAD´s governing body comprising 144 States - should carry out an objective analysis of how countries see the future from a development perspective. It is important to send the international community a clear and renewed signal of commitment to multilateralism.
The newly-elected President of the current session, Ambassador Ali Said Mchumo of the United Republic of Tanzania, stated that no national or international development agenda can remain unaffected by the consequences of the dramatic events of 11 September for security and social and economic aspects of life in the global village.
The nature of danger itself has changed, noted Mr Ricupero. Shadow terrorist organizations have demonstrated their ability to inflict tremendous suffering; long-standing problems, such as the conflict in the Middle East, remain and civil and ethnic conflicts proliferate. These complex situations call for global solutions by the international community.
At the time of the tragic events of 11 September, there were already signs of a simultaneous slowdown in the major industrialized economies. The US was already heading towards a period of recession. Consumer confidence was starting to waver. In the aftermath of the attacks, consumer confidence fell by 16 points, compared to a 12-point drop at the time of the Gulf War.
However, although there are still many unknowns, there are reasonable grounds for optimism in the medium term. While a recession seems unavoidable, economic recovery could already start in the second half of 2002. The US economy will benefit from low interest rates. The $50 billion emergency credit allocated by the US Congress and the additional $70 billion in US Government expenditure will inject the equivalent of almost 1% of the US GDP into the economy.
In the last few weeks, noted Mr. Ricupero, it has been very encouraging to note that the financial authorities of the major industrialized economies (Federal Reserve, US Treasury and European central banks) reacted swiftly and in a synchronized manner. Let´s hope, he said, we will show the same willingness to remedy the disastrous consequences that this crisis will most certainly have on developing countries, particularly in trade, investment and financial flows.
Regarding trade, Asia and Latin America could be affected by a strong fall in demand, as the US is a major world importer. A new decrease in foreign direct investment (FDI) is also to be expected. Before the terrorist attacks, UNCTAD had already projected a 40% reduction in FDI due to a slowdown in mergers and acquisitions. A further contraction of net capital financial flows is also to be foreseen: according to the Washington Institute of International Finance, they could fall to $106 billion dollars, compared to $167 billion in 2000 and $336 billion in 1996. The least developed countries will be affected by a fall in commodity prices, a decrease in FDI and reduced access to financial markets, warned the Secretary-General.
Organization of work of the Board
The Board will examine a report by the UNCTAD secretariat on Global Economic Trends and Prospects which updates the analysis of the economic trends given in the Trade and Development Report 2001. The study discusses the possible implications of the terrorist attacks in the USA on the world economy, assesses the policy responses by the major industrialized countries and looks at what more can be done at the global level to alleviate the resulting difficulties for the economies of developing countries.
The report serves as an input for the second item on the Board´s agenda, Financial stability: reform of the international financial architecture and the role of regional cooperation, which will be discussed by a panel of international experts on Tuesday 2 October. The panel includes Mr. Philip Bowring of the International Herald Tribune; Prof. Steve H. Hanke of the Johns Hopkins University of Baltimore; Prof. Paulo Nogueira Batista Jr. of the Getúlio Vargas Foundation of São Paulo and former Undersecretary for Economic Affairs of the Brazilian Ministry of Planning; Dr. Eisuke Sakakibara of the Global Security Research Centre, Keio University of Tokyo, and former Japanese Vice Minister of Finance and International Affairs; and Dr. Yu Yongding of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences of Beijing. The meeting, to take place in Room XXVI of the Palais des Nations, is open to journalists.
The facilitator for the International Conference on Financing for Development (FfD) (Monterrey, Mexico, 18-22 March 2002), Minister Mauricio Escanero of the Permanent Mission of Mexico to the United Nations in New York, will address the Board; a videoconference with the members of the Bureau of the FfD Preparatory Committee will be organized in Room XXVI on 3 October at 15:30. As Mr Ricupero recommended, this should allow the outcome of the Board´s deliberations to be taken into account when preparing for upcoming international events such as the FfD or the next WTO Ministerial meeting (Doha, Qatar, 9-13 November 2001).
The Board will review the progress to date in the implementation of the Programme of Action adopted in Brussels by the third UN Conference on the Least Developed Countries. UNCTAD´s contribution to the UN New Agenda for the Development of Africa, and in particular the bold policy measures called for in the report on Economic Development in Africa: Performance, Prospects and Policy Issues (see press release TAD/INF/PR20), will also be examined.
Finally, the current situation of the Palestinian economy will be presented to the Board in the secretariat´s Report on UNCTAD´s assistance to the Palestinian people (document TD/B/48/9).
