Summary of discussions
1. Round table one addressed the topic “Globalization and the Least Developed Countries: Issues in Trade and Investment”. The Panel was chaired by H. E. Ms. Sahana Pradhan, Minister of Foreign Affairs of Nepal. Kamal Malhotra, Officer-in-Charge, Poverty Group and Senior Adviser on Inclusive Globalization, Bureau for Development Policy, UNDP was the presenter of the issues paper “Globalization and the Least Developed Countries: Issues in Trade and Investment”. It was noted that the paper is a collaborative effort of UNCTAD and UNDP. The paper was presented on behalf of the two agencies.
2. The key messages of the presentation highlighted that while globalization has been associated with rising world income, the benefits among countries have been unequal, and the least developed countries, despite significant trade liberalization and economic reforms, have often been marginalized. While there is little doubt that trade can be a positive force for economic growth, poverty reduction and human development, by increasing productivity and by providing access to new markets and new technologies, nothing about this is either automatic or inevitable. To make this happen, there is a need to shift from trade-led development policies to development-led trade policies.
3. The presentation also emphasized that at the national level, while the focus on supply side issues is desirable and welcome, there is a need to broaden that focus out to also concentrate on support for productive and economic growth capacities. At the international level, there is a need to strengthen export capacities of the least developed countries and ensure effective market access and adequate policy space. It was concluded that both international development assistance as well as national poverty reduction strategies need to focus much more strongly on a production oriented approach to poverty reduction in the least developed countries if commonly shared objectives are to be achieved.
4. Most participants agreed to the major recommendations stated in the issues paper. Participants emphasized the importance of integrating the least developed countries into the world economy. In the context of globalization, trade and investment are important movers of globalization and least developed countries can benefit from both if properly addressed.
5. Many participants noted that there are impediments that affect any meaningful trade participation by the least developed countries in the world economy. Difficulties facing the least developed countries are many, including, but not limited to, insufficient levels of foreign and domestic investment, poor infrastructure, structural handicaps –such as geography and climate-, commodity dependence and lack of value addition of export products, limited access to international markets, low levels of human, physical and technological capital, migration of skilled workers, informal sector, weak institutions, post-conflict situations, and lack of ownership and effective power to enforce international aid commitments in the context of international economic governance institutions.
6. Several interventions highlighted that the integration of the least developed countries into the world economy through better market access remains a major challenge. While preferential market access is yet to deliver the expected benefits to the least developed countries, it was noted that a number of policy issues should be addressed, including the heavy dependence of least developed countries on a narrow range of primary commodities exports and the weaknesses of the least developed countries in supply-side capacities. In order to effectively increase their access to international markets, special attention should be given to enhanced special and differential treatment and duty-free and quota-free access for all least developed countries’ products in the markets of developed markets.
7. It was emphasized that regional integration is essential to maximizing the benefits of globalization for the least developed countries. Regional integration has the potential to attract investment flows, expand market size and develop regional infrastructure and connectivity, especially in the case of landlocked least developed countries.
8. Participants also reaffirmed the great potential of South-South cooperation based on bilateral, as well as regional and sub-regional integration schemes. They underlined that international development partnerships with emerging economies from the South offer unprecedented opportunities for the least developed countries, especially in the areas of infrastructure development and technology transfer.
9. Many participants called for a fair and open trade framework, citing the need to achieve a truly developmental Doha Round. To ensure a successful outcome, overall reduction of tariff and non-tariff barriers, such as the simplification and harmonization of restrictive rules of origin, is crucial.
10. There was a broad understanding that increased ‘aid for trade’, of which the Enhanced Integrated Framework for Trade-Related Technical Assistance to least developed countries is a key element, must enable them to build capacities so that they can compete effectively in international markets. Attention was drawn to impediments to improve ‘aid for trade’ led initiatives, notably poor infrastructure, low levels of education and skills, poor technological base, weak export institutional frameworks, lack of effective market access and cumbersome custom procedures.
11. Participants felt that trade and investment are critical elements to promote sustainable growth. Both are mutually supportive and reinforcing. However, to make trade a powerful force for poverty reduction and effective sustainable growth, special and differential treatment for the least developed countries under the multilateral trading system needs to be enhanced and effectively implemented. In all, an open, fair and non discriminatory multilateral trading system is essential to help promote investment and enhance productive capacities of the least developed countries.
12. Participants concluded that both domestic and international enhanced institutional support measures are needed to build the productive capacities needed by the least developed countries to engage productively in the process of globalization.