1 THE ECONOMIC OUTLOOK , DECEMBER 1971 OECD's CODE FOR LIBERALISING CAPITAL MOVEMENTS TRADE MEASURES AND THE ^ADJUSTMENT OF BALANCES OF PAYMENTS ^DEVELOPMENT ASSISTANCE: THE CURRENT PICTURE HIGH-LEVEL MEETINGS AT OECD CONTENTS OECD 3 DEVELOPMENT ASSISTANCE : THE OB SERVER CURRENT PICTURE by Edwin M. Martin, Chairman of OECD" s Development Assistance Committee N° 55 DECEMBER 1971 6 TRADE MEASURES AND ADJUST¬ MENT OF THE BALANCE OF PAY¬ MENTS by Serge De vos, Head of Division, OECD's Trade Direc¬ torate 9 OECD GROUP ON TRADE AND RELA¬ TED PROBLEMS Published bi-monthly in English and French by 10 TOWARDS RATIONAL FISHERY MANAGEMENT THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT 13 HIGHLIGHTS FROM THE OECD ECO¬ NOMIC OUTLOOK - December 1971 EDITORIAL OFFICES 19 TEN YEARS OF ECONOMIC EVOLU¬ OECD Information Service, Chateau de la Muette, TION 2 rue André Pascal, F 75 Paris 16e. 20 EVALUATION CONFERENCE ON INSTITUTIONAL MANAGEMENT Individual articles not copyright may be reprinted provi¬ IN HIGHER EDUCATION ding the credit line reads "Reprinted from the OECD 22 MEETING OF MINISTERS OF Observer", plus date of issue, and two voucher copies are SCIENCE OF OECD sent to the Editor. Signed articles reprinted must bear author's name. 27 HIGH-LEVEL MEETING OF THE The Organisation cannot be responsible for returning OECD DEVELOPMENT ASSIST¬ ANCE COMMITTEE unsolicited manuscripts. Signed articles express the opinions of the authors and do 28 INTERGOVERNMENTAL CONFE¬ RENCE ON THE UTILISATION not necessarily represent the opinion of OECD. OF HIGHLY QUALIFIED PER¬ SONNEL Annual Subscription Rates : £ 1 . 1 5. $ 3.50, F 1 5.00, FS 1 3.00, 30 WORKING PARTY N 3 OF THE DM 10.50. ECONOMIC POLICY COMMIT¬ Single copies : £ 0.27, $ 0.80, F 3.50, FS 3.00, DM 2.50. TEE Editor : Anker Randsholt 37 INTERNATIONAL INSTITUTE FOR Assistant Editors : Peter Tewson and Jane Bussière THE MANAGEMENT OF TECHNOLO¬ Production and Layout : Marc Delemme GY 38 OECD'S CODE FOR LIBERALISATION All correspondence should be addressed to the Editor. OF CAPITAL MOVEMENTS 44 REUNION OF THE " GROUP OF FOUR " PHOTOS : Cover : USIS ; paze 9 : L. Jouan - OECD ; page 11 : USIS ; pages 20-26 : L. Jouan - OECD ; pages 28-29 : Ravagnan for OECD ; pages 30, 37 and 45 : L. Jouan - OECD. 46 NEW OECD PUBLICATIONS DEVELOPMENT ASSISTANCE : THE CURRENT PICTURE by Edwin M. Martin, Chairman of OECD's Development Assistance Committee (i) On the major issues of development assistance 1971 will show any significant overall improvement over the growth of aid, terms, untying and the grant¬ 1970 although of course some countries will do much ing of preferences to the exports of less deve¬ better. And the perspective for 1971 as well as 1972 for loped countries the record is hardly encour¬ the contributions [of the United States (which in 1970 aging, especially in light of the " promises " of the Se¬ accounted for some 50 per cent of the total GNP of cond Development Decade. DAC Member countries, and whose contributions The " promise " highlight was the adoption of a accounted for nearly 40 per cent of the DAC total Strategy for Development by the United Nations General and for 45 per cent of official development assistance) Assembly on 25th October, 1970. The Strategy's recog¬ is clouded by the 10 per cent administrative cut in nition of the importance of specific social goals, its expenditures and by the delay in Congressional action introduction of a goal for net official development on the foreign aid authorisation bill. assistance (though not accepted as stipulated by some donors) and its at least indirect implication of a goal for population growth were all pretty much unthinkable at The Promise of Preferences the governmental level ten years ago when the First Another " promise " within the United Nations Development Decade began. framework was that made by the industrialised countries at UNCTAD II in New Delhi, in the spring of 1968, to The Record on Volume introduce as soon as possible general, non-reciprocal As to performance: the key goal for developed coun¬ tariff preferences on imports from developing countries of tries in the 1960's was to reach a net flow of resources to manufactures and semi-manufactures. Trade policy is developing countries of 1 per cent of GNP. Tn 1961, the not a DAC responsibility, but it is of the greatest impor¬ year the goal was accepted, the figure actually obtained tance and has an impact on all aspects of the develop¬ was 0.95 per cent; in 1970, at the end of the decade, the ment partnership. Jn 1970 a " promise " was made in comparable figure was only 0.74 per cent (2). And this specific terms: in the fall of that year, OECD did transmit at a time when DAC citizens had on the average $ 1 ,470 detailed proposals on the matter to the UNCTAD which more per capita to spend. were accepted. For the key category of official development assistance, While a number of developed countries put these pro¬ volume has also tended to decline from 0.52 per cent of posals into effect in the course of 1971 , as was generally GNP to 0.34 per cent during the decade as compared with expected at the time the specific "promise " was made 0.70 per cent proposed as a target in the UNCTAD Stra¬ last fall, not all, including the largest, the United States, tegy (though not unanimously accepted). This decrease have yet done so. The status of United States action on took place over a period when government expenditures this "promise" will greatly affect the atmosphere in rose by $ 136 billion; of this sum only $ 1.5 billion could which all development matters will be considered by the be found for development purposes in yearly budgets Third UNCTAD Conference to be held in the spring of though at the same time governments were able to increase 1972 in Santiago, Chile. their annual military expenditures by $ 39 billion. In this context it is important that we seek a solution The declining trend in both official and overall deve¬ to current trade and monetary differences among the lopment assistance is largely the responsibility of a few developed countries which will promote rather than limit donors, principally the major ones, and it is only fair to world trade and which will encourage the export growth record that not all countries " looked the other way ". potential of the developing countries. As the chart shows, six countries were above the 1 per (continued on page 4) cent mark in 1970 for the total flow of resources, and as to official development assistance, the decline in the per¬ centage of GNP was due to substantially smaller percen¬ (1) The Chairman'syearly official report " 1971 Review, tages for Belgium, France, the United Kingdom and the Development Assistance : Efforts and Policies of the United States (in alphabetical order); on the other hand, Members of the Development Assistance Committee " Australia, Canada, Denmark, the Netherlands, Norway, has just been published. Sweden and Switzerland have all increased their official (2) Excluding newfigures, availablefor thefirst time in development assistance as a percentage of GNP very 1970, on private voluntary organisations such as religious substantially during the 'Sixties. and other charitable groups which amounted to % 840 mil¬ Judging from those estimates we have received in the lion. If this figure is included, the percentage of GNP course of annual reviews this year, it seems unlikely that reached was 0.78 per cent. TERMS VOLUME 1970 Whether or not target * * * reached NETHERLANDS Yes FRANCE Yes BELGIUM Yes AUSTRALIA Yes UNITED KINGDOM Yes PORTUGAL No JAPAN No GERMANY Yes ITALY No CANADA Yes SWEDEN Yes AUSTRIA No SWITZERLAND No Total Net Flow of Re¬ sources to Developing countries as a % of DENMARK GNP Yes Net Official Develop¬ ment Assistance as a UNITED STATES % of GNP Yes NORWAY Yes * Target recommended in DD-II Strategy but not accepted by all donor countries. ** Target accepted by all DAC Members. *** Target accepted by all DA C Members : 70 % of official development assistance commitments as grants ; or for 85 % of ODA each transac¬ t/on to have minimum grant element of 61 % ; or 85 % of ODA to have an average grant element of at least 85 ",,. The volume at qualify¬ ing terms must not be significantly below the DAC average. ing of the terms of assistance provided by Member govern¬ Terms and Untying ments to developing countries and to increase the grant element in those loans. All DAC countries pledged United Nations' " promises " are not the only ones themselves to work towards these goals, and a new target which have turned out to be hard to translate into action. intended to be more rigorous was adopted in 1969. In 1965, the DAC adopted a " terms target " by unani¬ By 1970 five of the sixteen countries that make up the mity, the purpose of which was to set goals for the soften DAC had not yet reached this goal (see chart) although all had accepted it in principle. In actual practice terms more on education, and those of Latin America 15 per have not improved much and the grant element in loans cent more. In both the Far East and Middle East, is falling. military budgets were a higher percentage of GNP than This factor, along with the stagnation in volume, par¬ in developed countries. ticularly of official development assistance, might cause a Unfortunately, military expenditures are not only a crisis which could be very serious for all of us: appar¬ drain on local resources, but purchases of expensive ently with the limited volume of concessional funds, equipment from developed countries may represent a there is pressure on many countries to expand the volume drain of one or two billion dollars a year of scarce foreign of their export credits in order to get essential things done.