research+HELP

===Main conclusions of [|UNCTAD May 7, 2009 Report: Global economic crisis: implications for trade and development] ===

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The world economy is currently facing a severe global crisis that spilled from the [|financial sector] to the real economy in the last quarter of 2008, leading to steep falls in industrial production and a rapid decrease in international trade, and to a slowdown in [|foreign direct investments (FDI)] and potentially in development assistance. The crisis has brought about a slump in economic growth in most countries, and has been accompanied globally by increases in unemployment. The current global crisis – preceded by the [|food crisis], volatile energy prices and climate change challenge – is a major blow to attaining the [|MDG] s for developing countries. Addressing the dampening impact of the crisis on international trade and investment to restore growth, and reviewing development policies and partnerships to create sustainable practices and greater resilience to future shocks, must be key priorities in the multilateral agenda.=====

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Most developing countries are now closely linked with the global economy by trade and foreign direct investment flows, and their economies are more sensitive to falling international demand (and conversely to expanding demand). The degree of exposure and integration of developing countries’ economies to external markets has greatly increased in recent years. Developing countries’ exports on average accounted for more than half of their [|gross domestic product (GDP)] in 2007, up from about a quarter of GDP in 1995.=====

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The ongoing reduction of trade and investment flows is starting to restrain the development prospects of developing countries. They are currently seriously hurt through falling [|commodity] prices, demand-driven drops in exports exacerbated by the deficit of credit and trade finance, capital outflows, declining [|remittances], and contracting investment. The prospects are more dire for export-oriented developing countries, especially those with a small domestic economy, where the reduction in international demand is more likely to raise unemployment. In some developing countries, workers are shifting out of dynamic export-oriented sectors into lower-productivity activities. Potentially, all these effects could bring millions of people back into poverty.=====

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The decrease in merchandise trade appears to be affecting all developing regions and most types of goods. Moreover, **South–South trade (in other words, developing to developing countries)**, which has been the most dynamic component of world trade for over a decade, is declining too, especially intra-Asian trade. The quick contraction of developing countries’ manufacturing trade is largely due to today’s highly globalized production and marketing schemes. Among the most affected sectors are automotive products, office and telecommunications equipment, and electronics, as well as textiles and clothing.=====

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Many commodity exporters, particularly those in West Asia, Africa, and countries with economies in transition that benefited from the commodity price boom with considerable terms-of-trade gains, are now facing the downside of their commodity dependence, manifested in a substantial shrinking of export revenues. More than 90 developing countries earn at least 50 per cent of their exports from commodities (47 of them being non-fuel commodity exporters).=====

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[|UNCTAD] currently estimates world merchandise trade to fall between 6 and 8 per cent in 2009. Exports from developing countries and countries with economies in transition could potentially decline in the range of 7 to 9 per cent in volume, in 2009. Developed countries’ exports are projected to decline by up to 8 per cent this year. The trade contraction in value would be much greater.=====

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The crisis is also spreading to trade in services and to service sectors in general. Maritime transport is particularly affected, as are tourism and construction services. There is also a growing reduction in the employment levels of migrant workers from developing countries. This is expected to lead to a further fall in remittance inflows to developing countries, which began to slow down in 2008. Conversely, trade in **ICT-enabled services (ICT means Information Communication Technology)** appears to be less influenced by the economic downturn, as companies see the offshoring of services as one method of enhancing their competitiveness.=====

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The crisis has translated into a sharp decline in [|FDI] inflows, both for developed and developing countries. UNCTAD estimates that global FDI inflows declined by 15 per cent in 2008. An outright decline in FDI inflows to developing countries is very likely in 2009. FDI flows to financial services, automotive industries, building materials, intermediate goods and some consumption goods are among the most significantly affected, but so is FDI into activities ranging from the primary sector to non-financial services. FDI outflows from the South are also set to slow down, but to a lesser degree than those from the North. Thus the share of developing countries in global FDI outflows continues to rise, highlighting an increasing presence of transnational corporations (TNCs **same as MNC** ) from the South.=====

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Multilateral policy responses are required to achieve a sustained global economic recovery. These need to address developing countries’ concerns and enable them to continue to grow through trade, investment, remittances, aid, and technological innovation. Strategic intervention by governments is also required to provide new directions in order to achieve the [|United Nations MDGs] .=====

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At the international level, restoring trade finance and mitigating **(avoiding)** the risk of increased protectionism are immediate challenges. Concluding the [|World Trade Organization (WTO)] Doha Round on balanced and pro-development terms will help, as well as harvesting some of the key development deliverables such duty-free **(tax free)** and quota-free **(no limit)** treatment for least developed countries (LDCs). Maintaining and increasing ODA **(Official Development Aid)**, including through aid for trade, will be important too, especially to build and strengthen productive capacities of developing countries, and related trade-efficiency and facilitation infrastructure.=====

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At the interregional and regional levels, expanding and diversifying South–South cooperation is a viable solution to support and to increase developing countries’ trade and investment performance. The crisis offers opportunities for strengthening South–South trade and investment linkages, including through reshaping the existing production supply chains (and creating more regional demand). Available policy instruments such as the [|Global System of Trade Preferences among Developing Countries (GSTP)] and more comprehensive and effective regional trade and investment agreements should be consolidated and enhanced.=====

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At the national level, the crisis has made it timely to review development strategies so as to make them more sustainable against future external shocks, focused on delivering broad-based and inclusive development, and responsive to the imperatives of preserving the environment, while also providing new economic opportunities. Developing countries need to continue to address income inequality and to invest more in education, training, trade-adjustment assistance, health care, community development and tax policy. The role of the state in promoting development has increased in light of the crisis, and there is a need to reflect on how this role can be effectively articulated.=====

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A major challenge for developing countries is to continue to attract foreign investment during the crisis to stimulate economic activities, especially for such investment that serves long-term development goals and enhances competitiveness. Public investment programmes can help. [|Public–private partnerships] are also important. Bilateral and regional investment agreements can encourage FDI. However, national efforts to maintain and attract foreign investment must not result in “race to the bottom” policies.=====

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The United Nations – and in particular UNCTAD – has a special role to play in monitoring the impact of the crisis on trade and development, suggesting coping policies and measures, and building a new consensus on sound and suitable strategies at the national, regional and global level. Given the global span of the crisis, inter-agency collaboration will be crucial.=====

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//__**The report claims that the UN and UNCTAD have a "special role to play" in the crisis. What diplomatic obstacles might hinder your efforts at the upcoming conference next Thursday? How do you plan to deal with them?**__//=====