Debt stymies UNCTAD. World forum highlights growing discord on issue

Yesterday's draft resolution ending an impasse over trade and debt policies between Western nations and third-world countries fell far short of the new strategies sought by developing nations. The debate, which had kept delegates to the seventh United Nations Conference on Trade and Development (UNCTAD) in Geneva working around the clock for two extra days, was symbolic of increasingly dissonant views on the debt issue.

The final draft accord on easing third-world debt was built on resolutions endorsed earlier by leaders of the major industrial democracies. It suggests a few new ways to address the crisis. But developing countries had pushed for a definite committment of new aid and loans, cuts in interest rates, and a write-off of old debt for the most indebted nations.

During debates, Western market-oriented countries argued that the third world should get its own house in order before asking for more help. There were signs that the Scandinavian countries would break from the West and take what one diplomat called ``a more enlightened stance,'' and support a fresh approach to third-world debt.

At press time, the key issue remained of how strongly the accord should urge lower interest rates, increased overseas development aid, and easing repayment of loans. Diplomatic sources said that the draft accord was at least a small sign of increased efforts to address the third-world's debt crisis.

Still, differences of opinion on the fundamental purpose of UNCTAD spotted the three-week meeting with acrimonious debate. Western nations argue that it should simply assess economic trends, while developing nations want it to prescribe solutions to economic woes.

Officials from many Western nations, especially the US, view UNCTAD as more or less superfluous to other international organizations such as the General Agreement on Tariffs and Trade (GATT) and the International Monetary Fund (IMF).

Officials from developing nations say, however, that UNCTAD is one of few international institutions where North and South meet on equal footing, and thus it enjoys their trust. They also say that an organization such as GATT or the IMF operates in a discrete economic sector, whereas UNCTAD deals with worldwide linkages among different sectors.

The UN Secretary General's report to UNCTAD VII highlights the importance of the linkages between trade, debt, and development. It describes a cycle in which slow development in the South exacerbates slow growth in the North.

Deflationary policies of the developed nations over the past seven years have slowed economic growth and thereby heightened tensions in the trade arena. Protectionism has cut off markets for exports from developing countries, hindering their ability to generate resources for development or for debt repayment. As their development grinds to a halt, so does their demand for Western imports.

UNCTAD meetings in the 1960s and early 1970s forged positive links to other sectors and institutions, recommending trade and monetary intiatives to promote development, that became the impetus for changes in GATT and IMF. But after 1972, polarization in UNCTAD carried into other fora and resulted in a widening North-South gap on issues such as foreign investment and natural resources.

The third-world bloc at UNCTAD VII had warned that a negative outcome would have consequences for developing country behavior elsewhere. And Western diplomats had said that one possible consequence of a fruitless outcome would be increasing third-world intransigence on debt repayment.