United Nations Trade and Development Report

2225-3262 (online)
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The Trade and Development Report (TDR), launched in 1981, is issued every year for the annual session of the Trade and Development Board. The Report analyses current economic trends and major policy issues of international concern, and makes suggestions for addressing these issues at various levels.
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Trade and Development Report 2004

Trade and Development Report 2004

Policy Coherence, Development Strategies and Integration into the World Economy You do not have access to this content

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06 Oct 2006
9789211556018 (PDF)

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The current edition of the Trade and Development Report focuses on the global economic recovery currently underway. The Report raises questions about its considerable downside risks stemming from oil prices and exchange rates and the fact that both the sources and incidence of growth are unequally distributed around the globe. The TDR 2004 argues that, to enable developing countries to establish a virtuous interaction between external financing, domestic investment and export growth, a feasible development agenda has to be based on the concept of coherence. UNCTAD warns that attempts by many countries to keep their currencies undervalued could end up in competitive devaluations that could be disastrous for the world economy. UNCTAD suggests that changes in the exchange rate that imply deviation from purchasing-power parity should be governed by multilateral regulations.

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  • Foreword

    After years of slow growth, a global recovery that includes many developing countries now appears to be under way. If it is sustained and widened, the recovery could be a step forward on the way to meeting the Millennium Development Goals by the internationally agreed target year of 2015.

  • Explanatory notes

    The classification of countries in this Report has been adopted solely for the purposes of statistical or analytical convenience and does not necessarily imply any judgement concerning the stage of development of a particular country or area.

  • Abbreviations
  • Overview

    The situation of the global economy is brighter than it was a year ago. Since growth in world output and trade recovered in 2003, there is now widespread optimism that the acceleration of growth in 2004 could lead to a return of the performance experienced at the end of the last decade and that the world economy may enter an extended period of growth.

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  • Expand / Collapse Hide / Show all Abstracts Policy coherence, development strategies and integration into the world economy

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    • Introduction

      Beginning in the mid-1980s, many developing countries made close integration into the international trading system a pillar of their economic reform agenda. They sought to achieve this not only through active participation in multilateral trade negotiations, but also through rapid unilateral trade liberalization. In many countries, trade liberalization was accompanied by an opening up of their financial sector and capital account. Rapid liberalization and increased exposure to international market forces and competition were expected to boost efficiency and competitiveness, which in turn would underpin a more rapid rate of economic growth and a narrowing of the income gap with developed countries. However, by the early 1990s there were many instances where the outcome of this policy strategy did not live up to expectations.

    • Openness, integration and national policy space

      The move to unrestricted cross-border flows of goods, services and capital has always been one of the principles of globalization. Since the late 1970s, “the propensity to truck, barter and exchange one thing for another” (Adam Smith), unhindered by political boundaries, has been regarded as the cornerstone of a global system that would produce efficiency gains from allowing resources to be directed to their most efficient use, and specialization gains from accessing a greater variety of intermediate and capital goods. If improved institutional quality and technology spillover are added, trade and capital openness should automatically allow for catch-up growth in poorer countries and bring about income convergence at the global level (see, for example, IMF, 2002; WTO, 1998; World Bank, 2002; Winters, 2004). But the empirical evidence supporting this approach has been elusive. In fact, most of the evidence suggests that the impact of trade openness has been highly uneven, and contingent on a variety of institutional factors, and that there is room for discretionary policy measures at the micro and macro level.

    • Fostering coherence between the international trading, monetary and financial systems

      Developing countries depend on a favourable international trading environment to reap the full benefits of their integration into the world economy. Equally important for their successful integration is the creation of strong supply capacities. An essential lesson from the experiences of countries that combined successful integration into the world economy with sustained growth is the critical role of active and well sequenced policies to augment the existing stock of physical and human capital, enable the use of more efficient technologies, and shift resources from traditional, lowproductivity activities towards activities that offer a high potential for productivity growth.

    • Conclusions and policy challenges

      Rapid integration into the world economy, followed by many developing countries as a key element of their economic reform agenda since the mid-1980s, has not had the expected developmental effects. Their increased exposure to international market forces and competition has not enabled these countries to establish the kind of virtuous interaction between international finance, domestic capital formation and export activities that underpinned the successful catching up of Western Europe after the Second World War and of the NIEs during the 1980s and early 1990s. In this context, a fundamental question is how to reinforce coherence between national development strategies and global processes and disciplines, as well as policy coherence among and within the various aspects/sectors of the global economy that impact on development prospects of developing countries. Of particular importance is the interface between the international trading system and the international monetary and financial system.

    • References - Part 2
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