CHAPTER

63
New lnternational
Economic Order (NIEO)

ORIGIN

The demand for a New

International Economic
back to the first session of the Order
the UNCTAD in 1964. The (NIEO)
by developing countries goes
quent sessions of UNCTAD Contain a various resolutions
NIEO. At the root of the call for an systematic account of adopted in the subse-
NIEO lies the the various
elements of an
financial, technological and other policies dissatisfaction of LDCs with regard
LDCs..The developed countries have pursued by the developed to trading,
their income and denied them accessoppressed the LDCs,
discrimirnated countries towards the
Hheir development efforts, to advanced technology. Such against them, drained
perpetuated inequalities in wealth arnd policies have obstructed
employment and poverty in them. But there were three incomes and increased un
early 1970s. Theyphenomena
impetus to the demand for an NIEO in the that gave an immediate
the breakdown of the Bretton were: (a) a severe energy crisis; (b)
äid which was much below Woods the UN
System in 1973; (c) the disappointment
with development
iomation of the OPEC(Organisation oftarget of 0.7% of GNP of developed countries; (d) the
MTaising oil prices; and (e) the existencePetroleum Exporting Countries) in 1973 and its success
inLDCs. of unusual high rates of inflation and
unemployment
Specific proposals for an
NIEO were put forward at the Summit Conference of Non-Aligned
 Newnternatio
The Economics off Development and decisionsc

of OPECled the
Planning additional
468
The success
September 1973.
developing,countries to
April 1974. This ssession
developm
Nations heldin
call the
Economic
Sixth
Order
Algicrs in
Session of the UN
"based
declaration anda on
General Assemblyin
Programme of
equity, sovereign
adopted,without
Action on the EsEstablishment ofNew International
equality, interdependence, Common interest and
toconcluc
payments
a vote, a economic and social systems
which shall
ona gran

irrespective of their
correct inequalities
among and redress existinginjustices, make it possible tooeliminate the widening
all states, credit
on
cooperation
countries and ensure steadily
gap between the
developed and
development
the developing
and peace and justice for
present and future accelerating
generations!"
on more

industria
Decemberand
economic 1974,social
the UN General Assembly approved the "Charter of Economic Rights and favourab
documents of NIEO
these three Resolutions constitute the 5 .I n t e r d s

Duties of States". All

efficient

(OR FEATURES) OF NIEO sharpfo

OBIECTIVES
of+.te
objectives of an NIEO based on the proposals the pros
The following are the most important there is 1
Resolutions: greater role of LDCs in internati.
1. International Trade. The NIEO lays emphasis on a improving the terms of trade ofI no
econom

aim at trade, fi
trade by adopting the following measures which establishment of LDC sovereignty over nate
and to remove their chronictrade deficits: ()
processing of raw materials fo
and especially mineral resources for export; (ii) promoting the
IMPLEME

through integrated program

exports; (üi) increase in the relative prices of the exports of LDCsinternational buffer stocke and LDCs h
for commodities, compensatory financing, establishment of
creation of a common fund to finance stocks, and formation of producers' associations: (in) nation

providing proper framework for stabilising prices of raw materials and primary products so only lir
as to stabilise export income earnings; (v) indexation of LDCexport prices to rising import 1.Trad
prices of manufactured exports of developed countries; (vi) increase in the production of has be
manufactured goods; and (vi) improved access to markets in developed countries through been e:
progressive removal of tariff and non-tariff barriers and restrictive trade practices. Fund f
2. Technology Transfer. The NIEO proposals stress the establishment of mechanism for the UNCT
transfer of technology to LDCsbased on the needs and conditions prevalent in them. In this total
context, particular emphasis is on the :() establishment of alegally binding international code opera
regulating technology transfers; (ii)establishment of fair terms and prices for the licensing and Comm
sale of technology: (ii)expansion of assistance to LDCs in research and development of tech As reg
nologies and in creation of indigenous technology; and (iv) adoption of commercial practices ten of
governing transfer of technology to the requirements of LDCs. On co
3.on Regulation
the
andControl of the Activities of MNCs. The NIEO declaration also emphasises still ir
formulation, adoption and implementation of an international code of condauct
MNCs (multinational or transnational corporations) based on the following :()to regulate Little
their activities in host countries so as to remove restrictive business practices in LDCs: (i) to and
bring about assistance, transfer of technology and management skills to LDCs on equitable have
and favourable terms; (iii) to regulate the repatriation of their profits; (iv) to promote impo
reinvestment of their profits in LDCs. No de
4. Reforming the International Monetary System and Special Aid Programme. The NIEO worlc
declaration proposes to reformthe international monetary ssystem onthe following lines:() on th
elimination of instability in the international monetary System due to uncertainty of the of Pre
exchange rates; (ii) maintenance of the real value of the currency reserves of LDCs as.aresultof 15 m
inflation and exchange rate depreciation; (ii) full and effective participation by LDCsinthe So fa
ently
 IInternational
Economic Order (NIEO) 469
New

decisions of thelMF and the World Bank; (iv) linkage of development aid with the creation of
additional SDRs; (v) attainmnent of the target of 0.7% of GNP of developed countries for
development assistance tolLDCs; (vi) debt re-negotiation on a case-by-case basis with a view
concluding
agreements on debt-cancellation, moratorium or rescheduling; (vii) deferred
payments for all or partss of essential products; (viii) conmmodity assistance, including food aid,
to

grant basis without adversely affecting the exports of LDCs; (ix) long-term suppliers'
on a easy terms; (x) long-termfinancial assistance on concessionaryterms; (xi) provision
credit on
More
terms of capital goods and technical assistance to accelerate the
favourable
industrialisation of LDCS; and (xii) investment in industrial and development projects on
on

favourable terms.
on more
Interdependence and Cooperation. Above all, the NIEO declaration laysemphasis
5. andl equitable management of interdependence of the world economy. It brings into
is close interrelationship andlinterdependence between
efficient
focus the realisation that
there
sharp
of developed countries and the growth and development of LDCs. For this,
the
prosperity
environment conducive to accelerated social and
tore is need to create an exterrnaleconomic strengthening of mutual economic,
onomic development of LDCs. Further, it requires the
financial and technical cOoperation among LDCs,
mainly on preferential basis.
trade,

IMPLEMENTATION OF NIEO PROGRAMME

programme implemented at the various
inter
been striving hard to get the NIEO successful in
LDCshave developed countries. But they have
been
national forain cooperation with the
only limited fields. progress
proposals to readjust international trade, no wothwhile
1. Trade. In the package of programme for commodities
(IPCs) has
implementation of integrated Common
has been made. The element of this programme is the creation of a
principal
been extremely slow. The stocks. After several years of negotiations at the various
international buffer been created with a
Fund for financing Fund for commodities of $ 4.7 billion has
UNCTAD meetings, a
Common allowing it to become
cent at the UNCTAD VII in 1987,
total pledged capital of
66.9 per
succeed in providing adequate price support to
will
operational. Whether this Funddominated by developed countries is highly commodities,
uncertain.
commodities of LDCs in
nmarkets proposals relate to 18
agreements, the NIEO agreements
Asregards international
commodity
buffer stock scheme. Of these, five
initially included in the agreement on rubber is
ten of which were to be negotiated. But only the
were
coffee, cocoa, sugar, tin and rubber
On prices of raw materials,
stillin operation. framework for stabilising
providing a suitable earnings of LDCs.
Similarly, no steps
uittle has been done in export rising
products to stabilise
the
of export prices of LDCs to
and processed primary proposal l of in exation
have been taken up toimplementthe developed countries. rapidly yet their
share in
goods of increased
import prices of manufactured from LDCs have agreed to give tariff preferences
countries have
manufacturedgoods

No doubt, exportsof developed GSP(Generaiised System

small. The of LDCs under including the
world trade is still very semi-manufacturedgoods
preference-giving
countries
on the manufactured and operation in 29
of Preferences). GSP schemes are in are
concerned, there are appar-

15members of the EC. products from

LDCs
Products of
LDCs enter the
other Rounds.
So far as tariff cuts on primary and after the Uruguay
trade
ently no significant barriers to
 The Econonicssof Developnent and
470 But in the
Planing to
Favoured Nation). case of many th
MFN (Most
duty free under with those of
developed countries,
developvd countries
agricultural products
of LDCs which compete
Developed countries
which produce agricultural tariffreduc-
products have
aft

nominal. others place restrictions

tions have been subsidisation of their products, while restrictions on on imports de
new trade the products sof
been resorting to countries have devised LDCs
from LDCs. Developed
Restraint), OMA
(Orderly Marketing Agreements),
non-technical barriers low-cost
VER (Voluntary Export garb of to trade like
such as disruption, etc.
Moreover, in the countries are t
suppliers, market
environmental, health and
sanitary conditions,
the developed
restricting
the V

exports of LDCs. reached under the GATT Rules sfor

barriers, agreements have been codes
technical barriers to trade,
As regards non-tariff duties, customs valuation, etc. But
on subsidies,
countervailing
clauses" and "safeguard rules".
under the "escape : a
LDCs are being discriminatedthe area of technology transfer, UNCTAD-IV at Nairobi dra6
2. Transfer of Technology. In Technology. The
policy paper on the Code of Conduct on Transfer of the
approved a
business practices. There are clauses torbidding LDCS which are
prohibits restricted introduce oni
particular technology to manufacture export-orientedgoods, to
cipients of a
technology, to apply it for purposes other than those specified in
own changes in that use of technologies in their own interests. The poli.
etc. Such clauses prohibit the
technology in the form of "single packages of
agreement,
paper renounces the practice of transferring criteria for
equipments, materials and managerial services, etc. It also provides
plants,
determining "just prices" of technologies. resolutions for the adoption of thËs
Subsequent UNCTAD meetings have been simply passing
rejected by LDCs. Even the setting up
policy paper with slight modifications which have been
and Technology Transfer" at UNCTAD.
of an ad hoc working group relating to "Investment acceptable to LDCs. UNCTAD-IXin
VIIl in 1992 has failed tocome out with acode of conduct
high technology crucial to
1996 also urged to the developed countries to give LDCs access to conduct for technology
evolve acode of
their development. But no progress has been made toagreement
transfer by the developed countries. However, an was reached in 1979 for the
establishment of aUN Financing Systenm for Science and Technology for Development. To
begin with, an Interim Fund had been proposed to supplement the financial resources of LDCs.
But nothing has materialised so far.
3. MNCs. The only significant development in the case of MNCs has been the efforts made by
the UN Commission on Transnational Corporations in drawing up a code of conduct for the
operationsof MNCs. It sets out comprehensive standards of behaviour of these corporations
and of their treatment by home and host governments. Besides, negotiations have been gong
on the code of conduct for technology transfer for establishing a general and universal legal
framework for transfer and development of scientific and technological capabilities of LDS.
4. International Monetary System and Development Aid. After the collapse of the Bretton
Woods System, the present international monetary system has not failed to protect the interestS
of LDCs.The excessive reliance on market forces coupled with excessive exchange rate fluctua
tions have been responsible for financial crises in sonme Asian and Latin American developing
countries. The IMF has failed to increase the allocation of SDRs with the result that the volume
of international liquidity does not meet the requirenments of LDCs. The only positive gain has
been the 10th and 11th quota reviews enlarging the IMF's quotas to SDR $ 212 bimon
establishment of Emergency Structural and Latin
American countries inflicted with the Adjust1ment Loansand
financial crisis, in early 1999 to help
Contingency Credit
Asian
theLinein April1999
 h t e n a t i o n a l
Economic Order (NIEO)
other
LDCs from the contagion of 471
to
protect
crisis are welcomne
of
these,
the
Continues to be
international monetary system by measures by the IMF.
management
guided by ad hocism.
a f f i l i a t e s

years, the various UNCTTAD

the IME, World Despite
Bank and its
aid to LDCs. At best, 1neetings have failed to solve
Over the
rather than getting issuesthey have been fora for the problems of
d e v e l o p m e n t

r e s o l u t i o n s

solved. As exchanging debt and

to LDCs by
developed countries, it regards the flow of ideas and passing
World Bank have beencontinues to be nearly half official development
a s s i s t a n c e

The IMF and the

paucity of funds trying to solve the debt of 0.7% of their GNP

target.
s because of the
success
with littlce with them and problem of LDCs but
banks have bbeen strict
sone
European
rescheduling
The emphasis continues on debts and a few conditionalities. However,
c a n c e l l a t i o n s .

continue to use aid

tied aid governments
or programme have started debt
C o u n t r i e s

increasingly as an instrument assistance.

of promoting Several donor
DCS.
and their exports to
Interdependence
5, Cooperation.
taaken at the Ministerial The first step towards
LDCs was
to launch the Global
meeting of G-77 held at Neweconomic cooperation among
decided
System of Tariff York in October 1982
undertaken in 1987 by Preferences
developing countries to expand mutual (GSTP). GSTP is a major when it
and
non-tariff
fconcessions and other measures. trade through grantinitiative
of tariff
and NAFTA countries. This is being achieved by the
ASIAN, SAARC
Besidessincreasing trade, U UNCTAD-VIreconmmendedthe initiation or
cooperative measures in the fields
of of research and strengthening of anumber
among LDCs. The possibilities of
cooperation for
development, design and engineering
particularly the following 1four sectors : capital technological transfer
The goods, human skills, energy,among and
LDCs exist for
and processing. developing countries are helping the least food production
areas. developed countries inthese
talso proposed a simpler payments
n which provides considerable unechanism under acommon clearing system. This is another
aloned countries insist that the encouragement to cooperation among LDCs. Further, the
existing international institutions
Bank should be strengthened financially so that like the IMF and World
nver their balance of payments and debt they may provide larger aid to LDCs to tide
problems.
newfinancial institution which should exclusively cater to their But the LDCs call for the setting up of a
in fields such as joint ventures, development special financial requirements
stabilisation, and regional payments support, and long-term
projects, export credit, commodity price
investment
food and primary products, and for storage, processing and transport. So to expand trade in
been made in this direction. far no progress has
UNCTAD-VIl set up a new Standing Committee on Economic Cooperation among developing
COüntries to study report on all facets of co-operation. But nothing has come out of it.
Inere are many factors which stand in the way of economic cooperation among the LDCs. The
economies of LDCs are highlyycompetitivein nature. They have limited import capacity,inad-
Credit facilities, chronic foreign exchange shortage, and prejudice against the goods
though hong
g0ods themselves.
manufacturedConsequently,
by LDCs arethey prefer to trade with developed countries even
cheaper and of high quality. However, some LDCs
suffer from other limitations which prevent them from entering into trade with other LDCs.
These are technological backwardness, shortage of keyinputs, high costof production, lack of
Competitive strength, and weak marketing structure. The various problems listed above can
 The Economics of
472

among LDCs of a region and

Development
be overcome by mutual help and trust working in dose
among themselves.

CONCLUSION
copert
Besides the lack of economic cooperation among the LDCs, the
plicitly and implicitBy tried to oppose NIEO programmes. This is developed
and "escape" clauses, phasing out of concessions to LDCs and other countries htave
apparent from
LDCS under the GATT Rules and WTO Agreement at the Uruguay agreements the"tat
Round.
opposition of developed countries, LDCs require greater unity and To
of alltypes of cooperation in their struggle for NIEO at all solidarity
international and overcone he
foora.