CHAPTER 17

ECONOMIC RELATIONS

17.1 Introduction

International economic law has tended to be marginalised in general works in English on public international law.1 Clearly, any discussion of the law of the sea will need to consider the economic aspects of the management of the sea’s resources and discussion of state responsibility will usually consider the issue of expropriation of foreign-owned property. But it is rare to find a chapter devoted solely to economic law. This is not to say it is not a valid subject of study nor should it be taken to suggest that there is no coherent body of international economic law. On the contrary, any effective legal system needs to provide some framework for the conduct of economic relations. If, as was suggested in Chapter 6, the majority of wars have had as their cause a dispute over territory, the desire to acquire territory has usually had an economic motive. With the realisation that the world’s physical resources are not infinite there has developed a need for the existence of rules governing the exploitation and trade in such resources and the products of such resources. The attempts made by international law to conserve and manage the world’s natural resources will be discussed in Chapter 18. This chapter will consider the rules of international law which pertain to trade and development. It will not refer to developments that have occurred within the European Union which can be studied in the textbooks of European law.

The rules regulating economic relations are of comparatively recent origin. During the 19th century most states operated a laissez faire policy towards their internal economies and accordingly there was little, if any, control of commercial and financial transactions involving foreigners. Such controls as existed were contained in provisions of municipal law and were largely confined to customs and import restrictions. A major impetus for change came with the emergence of the USSR in 1917 and its adoption of economic policies based on the state ownership of the means of production. Implementation of such policies involved the expropriation of foreign-owned property and at the Brussels Conference on Russia in 1921 a resolution was passed which stated that:

The forcible expropriations and nationalisations without compensation or remuneration of property in which foreigners are interested is totally at variance with the practice of civilised states. Where such expropriation has taken place, a claim arises for compensation against the government of the country.

The current position regarding expropriation of foreign-owned property is discussed at 17.6.

An important aspect of international economic law is the emphasis placed on the need for free trade. During the 19th century many states had swung

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1This is not true of studies carried out in states other than Britain. The difference in approach may partly be explained by the fact that there is no real tradition within English law of studying economic law as a separate and independent subject.

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between policies of free trade and polices of protectionism depending upon estimations of the relative strength of their own economies. Following the end of World War Two, with many economies in ruins, the USA saw the opportunity to expand its own economy by foreign investment. Such foreign investment undoubtedly helped in the recovery of local economies but to facilitate such investment it was necessary to keep trade barriers to a minimum. The international community also accepted the importance of international monetary stability. It was widely recognised that the extremely high inflation in Germany during the late 1920s and early 1930s had been one of the contributory factors in Hitler’s rise to power. To assist in the maintenance of currency stability and the encouragement of free trade three international institutions were established. In July 1944 an international conference was held at Bretton Woods in the USA at which was established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). In 1947, 53 states met in Cuba and adopted the Havana Charter 1947 which established the International Trade Organisation (ITO). However the Charter was not signed by the USA and the ITO did not come into existence. Instead as a temporary measure the General Agreement on Tariffs and Trade 1947 (GATT) was signed. The role of the three institutions is discussed at 17.3 and 17.4.

The emergence of a large number of new independent states during the 1950s and 1960s resulted in new problems for international economic law. In particular, the new states argued for the recognition of a right to economic development which was not always compatible with the rules established through the work of the IMF, World Bank and GATT. Further, the principle of free trade conflicted with the new states desire to protect their own fledgling economies. In addition a number of the new states had strong reservations about foreign companies having control of important local industries and therefore adopted policies involving expropriation. In 1964 the first UN Conference on Trade and Development (UNCTAD) was attended by the overwhelming majority of states. The conference adopted a number of resolutions which set down guiding principles which should govern the law relating to economic development. The General Assembly subsequently established UNCTAD as one of its permanent institutions with a secretariat and executive body (the Trade and Development Board). The conference has met on a regular basis since then. The international law of development is discussed at 17.5.

17.1.1 The nature of international economic law and its definition

Perhaps more than is the case with other areas of international law, the definition of what should be included in the study of international economic law is itself problematic. It is heavily influenced by the role that is perceived for international law and, in a wider context, the role of states themselves:

Let usa see how public international lawyers define their subject. Some definition is particularly essential to the English lawyer before embarking on the subject’s study because he enjoys no background familiarity from national law with concepts of economic law.

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Definitions fall into three groups; they may be determined by the source of legal authority, the content of the subject or the objective to be achieved. Once again, it must be borne in mind that the subject is under constant change; change in the international economy itself, and in the regulatory mechanisms adopted to deal with it. Definitions will inevitably alter to accommodate these changing facts.

A Source of legal authority

Writers who adopt a definition on the origin of the rules governing the topic include Schwarzenberger, Carreau, Juillard, Flory, VerLoren van Thermat, and Seidl-Hohenveldern. For them international economic law is defined as public international rules for international economic relations. VerLoren van Thermat speaks of ‘the total range of norms (directly or indirectly based on treaties) of public international law with regard to transnational economic transactions’.

B Content of subject

The second group defines by reference to the content of the subject. Petersmann speaks for writers supporting this method, contrasting ‘the international law of the economy’ of the first method with his own preferred definition of ‘the law of the international economy’, ‘a functional unity of the private, national and international regulations of the world economy’ and consequently including private law, state law and public international law. Schwarzenberger offered, as early as 1966, a definition spanning both these methods:2

International economic law is the branch of public international law which is concerned with:

(i)ownership and exploitation of natural resources;

(ii)production and distribution of goods;

(iii)invisible international transactions of an economic and financial nature, currency and finance, related services;

(iv)status and organisation of those engaged in such activities.

Zamora also adopts a list approach: ‘... the main subject is international trade in goods and services, international financial transactions and monetary affairs, foreign investment.’3

Any definition on a list basis, however, can be criticised as open-ended, quickly becoming out of date and hence requiring continual additions.

C Objective

The third group, that of the objective to be achieved, is best illustrated by proponents of the New International Economic Order who see the topic as one of regulation of the international economic order to give a proper place to Third World developing states. Flory equates international economic law with ‘le droit du dévelopement’, the law of development, which, as Peller phrases, concerns the third stage of the three Ds: after decolonisation and (self-) determination of Third World states the law of development will enable these states to attain economic equality with Western industrialised states.

The economic advancement of developing states is not, however, the sole goal pursued by adherents of international economic law. Some see it as a mechanism

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2G Schwarzenberger, ‘The Principles and Standards of International Economic Law’ (1966-I)

Hague Recueil.

3S Zamora, ‘Is There Customary International Economic Law?’ (1990) 32 German Yearbook of International Law 9 at p 1.

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to curb the domestic protectionism of their own states, the long-term interests of which, in their view, lie in liberalisation of world trade. Others emphasise the accountability of both state and international organisations in the management of world economy to the individual and the private trader and seek to develop procedures to protect the latter’s interests. Yet another school of thought would emphasise the shared use of resources for the common good; the concept of the common heritage applied to outer space and the deep sea bed, the moratorium on minerals exploitation in Antarctica, the protection of the environment by restriction of economies to sustainable growth – all these concerns would be brought within the scope of international economic law.

D Characteristics of international economic law

What are the characteristics of international economic law which these definitions seek to capture? Prosper Weil, in a well-argued paper, identified the original features of the subject. He wrote that it employed novel techniques of fact collection, monitoring of state conduct, and consultation; it abandoned the principle of equality of states in order to reflect the divergent weight which the economic policies of countries have on world development; rules of the GATT and regional economic free trade areas were applied with flexibility, hedged with safeguards and exceptions with their content expressed in vague, temporary and constantly modified terms; dispute settlement by third party adjudication was seen as too adversarial, rigid and slow to be resorted to – a convergence of viewpoints rather than a clarification of legal rights or a crystallisation of a rule, was sought. These features – lack of certainty, of formality or precision, impermanence of any general rule, absence of judicial sanctions – did not, however, in his view, entitle international economic law to qualify as an independent branch of law. They were more the marks of an immature legal system; and he explained them as due to a lack of cohesiveness in the international community which it was sought to regulate, inability to control or fully understand the economic factors at work resulting in consequent weakness in the community’s sanctions, and non-justiciability of its rules.

V SOURCES OF INTERNATIONAL ECONOMIC LAW

Bearing these strictures in mind, let usa look at the definitions to see how they draw the boundaries of the subject and what source material they rely upon. All the definitions have to deal with the problems which the peculiar characteristics of the subject gave rise to. They can be dealt with by reference to the three elements which the title of the subject includes.

A International

1 States and international organisations

Under ‘international’ we need to know who are the actors or subjects of this branch of law. Writers who define the subject by source of authority would reply states and international organisations. The study is consequently concerned with their acts, the agreements of states and the constitutions establishing international economic institutions. Source material will, therefore, include international agreements, universal, regional and bilateral: universal agreements include the General Agreement on Tariffs and Trade, international commodity agreements, regional agreements include the European Free Trade Area (EFTA), the Canada-USA Free Trade Area, ASEAN, ANDEAN and other agreements relevant to Central and South America and the Caribbean. (The decision to include these other regional arrangements may turn on whether the criterion is comprehensive coverage of attempts at economic co-operation or the

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effectiveness of that co-operation). Bilateral agreements would include treaties of friendship, navigation and commerce, investment protection treaties and lump sum agreements settling inter-state claims. There will be some overlap with the constitutions of international economic institutions; the universal group of these will include the articles of association of the IMF, of the World Bank and its ancillary bodies, the International Development Association (IDA), the International Finance Corporation (IFC), the Centre for Settlement of Investment Disputes (ICSID), the Bank for International Settlements (BIS); among the regional constitutions would be those relating to the Organisation for Economic Co-operation (OECD), and to the European Economic Community (EEC). A further category of functional arrangements might include on a world basis UN specialised agencies such as the Food and Agriculture Organisation (FAO) and ILO, the International Atomic Energy Agency (IAEA) and the World Intellectual Property Organisation (WIPO).

If we add to this body of international agreements secondary material relating to acts of states implementing the agreements or decisions of the financial institutions, and thus include the GATT codes, the Multifibre Arrangement, decisions of IMF relating to conditionality, the extended fund facility and general agreements to borrow, we will find that we have already a considerable corpus of material to study.

2 Other actors

But supporters of the other types of definition would extend the range of materials. Petersmann, for instance, sees one of the purposes of international economic regulation as the reduction of the unilateral power of the state to control trade matters. He would extend the study to other actors who have an impact on the international economy such as multinational corporations, agencies or sub-units of governments working together, such as the Committee of Central Bankers, the Basel-Mulhouse Airport project, non-governmental organisations such as ICC and IUCN. In doing so he would extend the scope of the materials, particularly in the field of foreign investment; thus documents relating to the conduct of transnational enterprises such as the ICC Guidelines for International Investment 1972, the ILO Tripartite Declaration of Principles relating to Multinational Enterprises and Social Policy 1977, the OECD Declaration on International Enterprises and Multinational Enterprises 1976, the UN ECOSOC Draft Code of Conduct on Multinational Corporations 1987, would all become relevant. Statements of intent in communiqués of political groupings such as G7 (Canada, France, Germany, Italy, Japan, UK and USA) would also be included.

3 Objectives of international law

Supporters of a policy-orientated definition would extend the material even further. Those who see international economic law in terms of a law of development would include UN General Assembly Resolutions such as Resolution 1803 (XVII) on Permanent Sovereignty over Natural Resources, the 1974 Declaration on the Establishment of a New International Economic Order, and the Charter of Economic Rights and Duties of States, the documentation relating to the regional and functional commissions of ECOSOC, UNCTAD’s establishment in 1964 and work relating to commodities, UNCITRAL’s programme from 1966 for the unification of the law of international trade. Not all collections of documents of international economic law include such material. For instance such documentation is notably absent from the American Society of International Law’s database of basic materials set up by its interest group in international economic law. It is presumably excluded on the ground that it is

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policy not law. Its inclusion requires a consideration of the second element ‘law’ in the subject of our study.

B Law

1 Treaty

International lawyers are already familiar with the distinction between ‘hard’ and ‘soft’ law, and the distinction needs to be examined in relation to international economic law. International agreements between states are clearly recognised as a source of law in Article 38 of the ICJ Statute; decisions of international organisations are not specifically mentioned; some derive their legal force expressly from their member states’ agreements, others may be treated as evidence of state practice and hence evidence of custom or as themselves constituting international customary law.

2 Custom

International custom is not frequently invoked as a source of international economic law, it being widely accepted that this subject today remains largely treaty-based. The international law of expropriation is perhaps one instance of customary economic law.

3 Soft law

Recommendations of the UN General Assembly and other international organisations, guidelines and programmes for action vary in their authority. Some may rank as declaratory or interpretative of existing law; others’ persuasive force will depend on the content, the wording of the text, the voting pattern by which they are adopted, subsequent repetition and practice of states and use by other international agencies – for example, the ICJ’s use of the UN General Assembly Resolutions to interpret the UN Charter in the Nicaragua v United States of America (Merits) case lent the authority of that tribunal to those resolutions.4 Lawyers engaged in the study of international economic law will need to assess their sources, to be aware that much may be models, optional standards, or tentative drafts of emerging law rather than crystallised law. They should keep in mind Sir Hersch Lauterpacht’s words in the Voting Procedure case:

The state ... while not bound to accept the recommendations is bound to give it due consideration. If ... it disregards it, it is bound to explain its reasons.5

4 Private and public law

We also need to understand what is meant by an international transaction. Does it cover any commercial act which takes place across frontiers? The Third restatement of the Foreign Relations of the United States seems to be of that view, declaring the law of international economic relations to cover ‘all the international law and international agreements governing economic transactions that cross state boundaries or that otherwise have implications for more than one state’. There is a division of opinion among teachers and writers whether transnational private law transactions are to be totally excluded. On one view they do not involve international actors; they relate to bilateral commercial matters between private traders adjudicated by private law courts and even where the rules are internationally harmonised by treaty they remain of private law character to be applied by national courts with, in some exceptional cases,

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4[1986] ICJ Rep 14 at p 99–100.

5Voting Procedures in Questions relating to reports and petitions concerning the territory of SW Afric [1955] ICJ Rep 67 at p 12.

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the possibility of an appeal to a regional court to provide a uniform ruling. On this view national commercial laws relating to sale, supply and transport of goods and the financing of foreign sales, and the private international law rules governing such transactions are to be excluded as also is any lex mercatoria or customary rules followed by merchants or any international harmonisation of such substantive rules such as the UN Uniform International Sales Convention, or international harmonised private international law rules such as the Hague Conventions on Service Abroad of Judicial Documents and on Taking Evidence Abroad and international enforcement rules such as the New York Convention on the Recognition of Foreign Arbitral Awards and the Brussels Convention on Jurisdiction and Judgments 1982. On another view, which is the view frequently adopted in USA law courses on international trade and that followed in the database of basic documents set up by the ASIL interest group in international economic law, documents governing private law commercial transactions, international litigation and arbitration are relevant to the subject. This view approximates to that noted above as the English viewpoint which considers that if the rules governing transnational operation of these private law transactions are properly drawn, the unrestricted pursuit of these transactions will be the best means to achieve international economic prosperity.

C Economic

However, to reduce the subject to manageable proportions for study, both in relating to the private law of international trade and to other branches of international law, we must remind ourselves of the third element in its title, ‘economic’. Its inclusion does not require the fashioning of legal concepts to implement the latest economic theory, planned, mixed, privatised, federal, corporatist, or whatever. (Lawyers should follow Dean Collard’s advice and beware of basic concepts, whether economic, mathematical or physical and confine their attention to the consequences of their application.) But it does mean that the subject is concerned with the direct legal regulation of the economy by international means. Indirect means through private law transactions or through other branches of international law which protect or balance economic interests of states as in the law of the sea, of the air, of neutrality, or as in international environmental law are therefore to be excluded.

VI CONCLUSION

To sum up, international economic law may be defined as the law of regulation of the economy by states, international organisations and other international means. Its sources are primarily the treaties and constitutions of international economic institutions which have been referred to in the preceding pages and the consequential decisions and acts implementing the objectives of these treaties and constitutions. The extent to which other material is studied will depend on its classification as a source of law, on the type of definition applied to the subject, and above all, on its suitability for legal analysis and development of legal concepts. The student should never forget his role as a lawyer in handling such material.

As a conclusion ... let me offer some suggestions as to the areas which the subject may cover.

First, the identification, examination and testing by reference to the materials identified in the preceding pages of the fundamental assumptions on which the law must be based. Those assumptions will surely include economic sovereignty and mutual interdependence. The core of the problem lies in striking a balance

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between these two principles and in applying them in a uniform and fair way to the very different economic situations of large and small states, developed and developing, North and South. Account must also be taken of the position of the private individual or enterprise. This may call for recognition of freedoms of economic action exercisable by all and of internationally derived prohibitions to enforce such freedoms. Part of this enquiry will go to the extent to which such freedoms are to be vested in the state or directly in private enterprises and individuals, thereby bypassing the state.

Second, the subject must cover the manner in which the economic mechanisms and international economic institutions regulate the use of natural resources and investment. This may call for a comparative analysis of the major international economic institutions, their objectives, structure, the form and content of the legal means which they use, their co-ordination of action and resolution of disputes internally with member states, and externally with non-member states and other international institutions.

Finally, the subject will concern itself with the identification of legal values (often longer-term rather than transient economic targets) which should control the exercise of economic regulatory powers; such legal values include proper notification, record-keeping and transparency of any action taken, observance of jurisdictional limits, non-retroactivity, proportionality, equity, the recognition of the individual’s right or reasonable expectations relating to the action regulated. The agenda is a lengthy one, but one which by reason of its application of legal techniques to a novel and uncharted territory offers a rewarding challenge to international lawyers entering the 21st century.6

17.2 The sources of international economic law

The international law governing economic relations differs from many other areas of law in that customary rules play a far more limited role. Although the majority of states may practise a capitalist form of economics and, in varying degrees, support the idea of a free market and free trade, there are a number of states that vehemently oppose such views. Even among the capitalist states there can exist considerable differences of view as to the rules that should be imposed. The bulk of the rules are contained in bilateral agreements made between states to regulate such things as import and export trade, shipping, foreign investment and banking. Many of these bilateral treaties display common characteristics but their nature has not given rise to a body of state practice and opinio juris sufficient to create binding customary rules. There are also a number of important multilateral treaties, for example, the Articles of Agreement of the International Monetary Fund 1944, the General Agreement on Tariffs and Trade 1947 and the various international commodity agreements. A third category of treaties relevant to the international economy would include those treaties which establish a regional body with powers relating to the economy, the best known example being the Treaty of Rome 1957.

In addition to treaty law there is an ever-growing body of resolutions and declarations which, while not constituting formal sources of law, do have an

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6Hazel Fox, ‘The Defintion and Sources of International Economic Law’, in Hazel Fox (ed),

International Economic Law and Developing States, 1992, London: British Institute of International and Comparative Law.

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enormous impact on the economic behaviour of states. The importance of such resolutions has led to arguments that they should be considered to constitute a body of quasi-law, not binding in themselves but representing a firm plan for future legal developments. Such quasi-law is generally referred to as soft law. Among the resolutions which are claimed as soft law are the UN General Assembly’s Declaration on the Establishment of a New International Economic Order 1974 and the Charter of Economic Rights and Duties of States 1974. Additionally the declarations of institutions such as the Organisation for Economic Co-operation and Development (OECD) have an important role to play in the development of the law. The Organisation for European Economic Co-operation (OEEC) was established in 1948 to help implement the Marshall aid plan for European economic recovery and to provide a forum for the harmonisation of economic policies and the exchange of information and operates through the holding of regular meetings of government ministers. In 1961 the European members of OEEC were joined by the USA, Canada and Japan and the OECD was created.

17.3 Free trade and the WTO

The emergence at the end of World War Two of the USA as the world’s most economically powerful state had the consequence that there was enormous pressure on international law to adopt and reflect principles of capitalist economics. Since USA economists stressed the need for a free market at home it is not surprising that free trade should become the guiding principle for the international economy. Until 1995 the institution principally charged with the development and encouragement of free trade was GATT. In fact, as has already been indicated, GATT was not created as an international organisation and it was only agreed after the failure to establish an International Trade Organisation. The abbreviation GATT is used in two senses: to indicate the actual treaty which was drafted in 1947, and to indicate the Geneva based institution which administers the agreement. In the latter sense GATT is hard to distinguish from an international organisation, although it is one without a separate international legal personality of its own. Over 100 states are now contracting parties to the agreement and their combined trade represents 80% of total world trade. The agreement provides a framework for developing international trade rules and sets down certain fundamental principles. Instead, GATT established a framework for discussion and set down a number of important guiding principles. The work of GATT is overseen by the GATT Council and there exists a procedure for settling trade disputes between states and the possibility of imposing sanctions on those state parties who do not abide by GATT rules. The agreement contains six principal obligations:

•commitment to most-favoured-nation trade;

•reduction of tariff barriers;

•non-discrimination between imported and domestic goods;

•elimination of import quotas;

•anti-dumping;

•restriction on export subsidies.

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Most of the significant work of GATT has been achieved at the regular and sometimes protracted negotiations that are held between the parties to the agreement. In December 1993 the most recent such negotiation, the Uruguay Round, was concluded. The Uruguay Round achieved a number of important breakthroughs in the development of international law. The GATT rules were extended to several new areas of trade including agriculture, film and broadcasting and intellectual property rights. In addition, it was agreed to extend the life of the Multifibre Agreement (MFA) which regulates certain aspects of the international trade in textiles and clothing. Significantly the 117 participants at the concluding session agreed to establish the World Trade Organisation (WTO) as a true international organisation with a General Council and bi-annual ministerial meetings. The main functions of the WTO are:

•administering and implementing the multilateral and plurilateral trade agreements which together make up the WTO;

•acting as a forum for multilateral trade negotiations;

•seeking to resolve trade disputes;

•overseeing national trade policies; and

•co-operating with other international institutions in global economic policymaking.

The highest authority of the WTO is the Ministerial Conference which meets every two years – most recently in Singapore in December 1996. The day-to-day work of the WTO is carried out by the General Council which also convenes as the Dispute Settlement Body and the Trade Policy Review Body. The General Council delegates responsibility to three other major bodies – the Council for Trade in Goods; the Council for Trade in Services; and the Council for Traderelated Aspects of intellectual Property Rights. In addition there are three other bodies which report to the General Council: the Committee on Trade and Development, the Committee on Balance of Payments and the Committee on Budget, Finance and Administration.

THE WTO AGREEMENT

Marrakesh agreement establishing the World Trade Organisation 15 April 1994

The Parties to this Agreement,

Recognising that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development,

Recognising further that there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development,

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Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations,

Resolved, therefore, to develop an integrated, more viable and durable multilateral trading system encompassing the General Agreement on Tariffs and Trade, the results of past trade-liberalisation efforts, and all of the results of the Uruguay Round of Multilateral Trade Negotiations,

Determined to preserve the basic principles and to further the objectives underlying this multilateral trading system,

Agree as follows:

Article I Establishment of the Organisation

The World Trade Organisation (hereinafter referred to as ‘the WTO’) is hereby established.

Article II Scope of the WTO

1The WTO shall provide the common institutional framework for the conduct of trade relations among its members in matters related to the agreements and associated legal instruments included in the Annexes to this Agreement.

2The agreements and associated legal instruments included in Annexes 1, 2 and 3 (hereinafter referred to as ‘Multilateral Trade Agreements’) are integral parts of this Agreement, binding on all members.

3The agreements and associated legal instruments included in Annex 4 (hereinafter referred to as ‘Plurilateral Trade Agreements’) are also part of this Agreement for those members that have accepted them, and are binding on those members. The Plurilateral Trade Agreements do not create either obligations or rights for members that have not accepted them.

4The General Agreement on Tariffs and Trade 1994 as specified in Annex 1A (hereinafter referred to as ‘GATT 1994’) is legally distinct from the General Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the Final Act Adopted at the Conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment, as subsequently rectified, amended or modified (hereinafter referred to as ‘GATT’).

Article III Functions of the WTO

1The WTO shall facilitate the implementation, administration and operation, and further the objectives, of this Agreement and of the Multilateral Trade Agreements, and shall also provide the framework for the implementation, administration and operation of the Plurilateral Trade Agreements.

2The WTO shall provide the forum for negotiations among its members concerning their multilateral trade relations in matters dealt with under the agreements in the Annexes to this Agreement. The WTO may also provide a forum for further negotiations among its members concerning their multilateral trade relations, and a framework for the implementation of the results of such negotiations, as may be decided by the Ministerial Conference.

3The WTO shall administer the Understanding on Rules and Procedures Governing the Settlement of Disputes (hereinafter referred to as the ‘Dispute Settlement Understanding’ or ’DSU’) in Annex 2 to this Agreement.

4The WTO shall administer the Trade Policy Review Mechanism (hereinafter referred to as the ‘TPRM’) provided for in Annex 3 to this Agreement.

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5 With a view to achieving greater coherence in global economic policymaking, the WTO shall co-operate, as appropriate, with the International Monetary Fund and with the International Bank for Reconstruction and Development and its affiliated agencies.

Article IV Structure of the WTO

1There shall be a Ministerial Conference composed of representatives of all the members, which shall meet at least once every two years. The Ministerial Conference shall carry out the functions of the WTO and take actions necessary to this effect. The Ministerial Conference shall have the authority to take decisions on all matters under any of the Multilateral Trade Agreements, if so requested by a member, in accordance with the specific requirements for decision-making in this Agreement and in the relevant Multilateral Trade Agreement.

2There shall be a General Council composed of representatives of all the members, which shall meet as appropriate. In the intervals between meetings of the Ministerial Conference, its functions shall be conducted by the General Council. The General Council shall also carry out the functions assigned to it by this Agreement. The General Council shall establish its rules of procedure and approve the rules of procedure for the Committees provided for in para 7.

3The General Council shall convene as appropriate to discharge the responsibilities of the Dispute Settlement Body provided for in the Dispute Settlement Understanding. The Dispute Settlement Body may have its own chairman and shall establish such rules of procedure as it deems necessary for the fulfilment of those responsibilities.

4The General Council shall convene as appropriate to discharge the responsibilities of the Trade Policy Review Body provided for in the TPRM. The Trade Policy Review Body may have its own chairman and shall establish such rules of procedure as it deems necessary for the fulfilment of those responsibilities.

5There shall be a Council for Trade in Goods, a Council for Trade in Services and a Council for Trade-Related Aspects of Intellectual Property Rights (hereinafter referred to as the ‘Council for TRIPS’), which shall operate under the general guidance of the General Council. The Council for Trade in Goods shall oversee the functioning of the Multilateral Trade Agreements in Annex 1A. The Council for Trade in Services shall oversee the functioning of the General Agreement on Trade in Services (hereinafter referred to as ‘GATS’). The Council for TRIPS shall oversee the functioning of the Agreement on Trade-Related Aspects of Intellectual Property Rights (hereinafter referred to as the ‘Agreement on TRIPS’). These Councils shall carry out the functions assigned to them by their respective agreements and by the General Council. They shall establish their respective rules of procedure subject to the approval of the General Council. membership in these Councils shall be open to representatives of all members. These Councils shall meet as necessary to carry out their functions.

6The Council for Trade in Goods, the Council for Trade in Services and the Council for TRIPS shall establish subsidiary bodies as required. These subsidiary bodies shall establish their respective rules of procedure subject to the approval of their respective Councils.

7The Ministerial Conference shall establish a Committee on Trade and Development, a Committee on Balance of Payments Restrictions and a Committee on Budget, Finance and Administration, which shall carry out the functions assigned to them by this Agreement and by the Multilateral Trade

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Agreements, and any additional functions assigned to them by the General Council, and may establish such additional Committees with such functions as it may deem appropriate. As part of its functions, the Committee on Trade and Development shall periodically review the special provisions in the Multilateral Trade Agreements in favour of the least-developed country members and report to the General Council for appropriate action. membership in these Committees shall be open to representatives of all members.

8 The bodies provided for under the Plurilateral Trade Agreements shall carry out the functions assigned to them under those Agreements and shall operate within the institutional framework of the WTO. These bodies shall keep the General Council informed of their activities on a regular basis.

Article V Relations with Other Organisations

1The General Council shall make appropriate arrangements for effective cooperation with other intergovernmental organisations that have responsibilities related to those of the WTO.

2The General Council may make appropriate arrangements for consultation and co-operation with non-governmental organisations concerned with matters related to those of the WTO.

Article VI The Secretariat

1There shall be a Secretariat of the WTO (hereinafter referred to as ‘the Secretariat’) headed by a Director General.

2The Ministerial Conference shall appoint the Director General and adopt regulations setting out the powers, duties, conditions of service and term of office of the Director General.

3The Director General shall appoint the members of the staff of the Secretariat and determine their duties and conditions of service in accordance with regulations adopted by the Ministerial Conference.

4The responsibilities of the Director General and of the staff of the Secretariat shall be exclusively international in character. In the discharge of their duties, the Director General and the staff of the Secretariat shall not seek or accept instructions from any government or any other authority external to the WTO. They shall refrain from any action which might adversely reflect on their position as international officials. The members of the WTO shall respect the international character of the responsibilities of the Director General and of the staff of the Secretariat and shall not seek to influence them in the discharge of their duties.

Article VI Budget and Contributions

1The Director General shall present to the Committee on Budget, Finance and Administration the annual budget estimate and financial statement of the WTO. The Committee on Budget, Finance and Administration shall review the annual budget estimate and the financial statement presented by the Director General and make recommendations thereon to the General Council. The annual budget estimate shall be subject to approval by the General Council.

2The Committee on Budget, Finance and Administration shall propose to the General Council financial regulations which shall include provisions setting out:

(a)the scale of contributions apportioning the expenses of the WTO among its members; and

(b)the measures to be taken in respect of members in arrears.

The financial regulations shall be based, as far as practicable, on the regulations and practices of GATT 1947.

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3The General Council shall adopt the financial regulations and the annual budget estimate by a two-thirds majority comprising more than half of the members of the WTO.

4Each member shall promptly contribute to the WTO its share in the expenses of the WTO in accordance with the financial regulations adopted by the General Council.

Article VIII Status of the WTO

1The WTO shall have legal personality, and shall be accorded by each of its members such legal capacity as may be necessary for the exercise of its functions.

2The WTO shall be accorded by each of its members such privileges and immunities as are necessary for the exercise of its functions.

3The officials of the WTO and the representatives of the members shall similarly be accorded by each of its members such privileges and immunities as are necessary for the independent exercise of their functions in connection with the WTO.

4The privileges and immunities to be accorded by a member to the WTO, its officials, and the representatives of its members shall be similar to the privileges and immunities stipulated in the Convention on the Privileges and Immunities of the Specialised Agencies, approved by the General Assembly of the United Nations on 21 November 1947.

5The WTO may conclude a headquarters agreement.

Article IX Decision-making

1The WTO shall continue the practice of decision-making by consensus followed under GATT 1947. Except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting. At meetings of the Ministerial Conference and the General Council, each member of the WTO shall have one vote. Where the European Communities exercise their right to vote, they shall have a number of votes equal to the number of their member states which are members of the WTO. Decisions of the Ministerial Conference and the General Council shall be taken by a majority of the votes cast, unless otherwise provided in this Agreement or in the relevant Multilateral Trade Agreement.

2The Ministerial Conference and the General Council shall have the exclusive authority to adopt interpretations of this Agreement and of the Multilateral Trade Agreements. In the case of an interpretation of a Multilateral Trade Agreement in Annex 1, they shall exercise their authority on the basis of a recommendation by the Council overseeing the functioning of that Agreement. The decision to adopt an interpretation shall be taken by a three-fourths majority of the members. This paragraph shall not be used in a manner that would undermine the amendment provisions in Article X.

3In exceptional circumstances, the Ministerial Conference may decide to waive an obligation imposed on a member by this Agreement or any of the Multilateral Trade Agreements, provided that any such decision shall be taken by three-fourths of the members unless otherwise provided for in this paragraph.

(a)A request for a waiver concerning this Agreement shall be submitted to the Ministerial Conference for consideration pursuant to the practice of decisionmaking by consensus. The Ministerial Conference shall establish a time period, which shall not exceed 90 days, to consider the request. If consensus is not reached during the time period, any decision to grant a waiver shall be taken by three-fourths of the members.

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(b)A request for a waiver concerning the Multilateral Trade Agreements in Annexes 1A or 1B or 1C and their annexes shall be submitted initially to the Council for Trade in Goods, the Council for Trade in Services or the Council for TRIPS, respectively, for consideration during a time period which shall not exceed 90 days. At the end of the time period, the relevant Council shall submit a report to the Ministerial Conference.

4A decision by the Ministerial Conference granting a waiver shall state the exceptional circumstances justifying the decision, the terms and conditions governing the application of the waiver, and the date on which the waiver shall terminate. Any waiver granted for a period of more than one year shall be reviewed by the Ministerial Conference not later than one year after it is granted, and thereafter annually until the waiver terminates. In each review, the Ministerial Conference shall examine whether the exceptional circumstances justifying the waiver still exist and whether the terms and conditions attached to the waiver have been met. The Ministerial Conference, on the basis of the annual review, may extend, modify or terminate the waiver.

5Decisions under a Plurilateral Trade Agreement, including any decisions on interpretations and waivers, shall be governed by the provisions of that Agreement.

Article X Amendments

1Any member of the WTO may initiate a proposal to amend the provisions of this Agreement or the Multilateral Trade Agreements in Annex 1 by submitting such proposal to the Ministerial Conference. The Councils listed in para 5 of Article IV may also submit to the Ministerial Conference proposals to amend the provisions of the corresponding Multilateral Trade Agreements in Annex 1 the functioning of which they oversee. Unless the Ministerial Conference decides on a longer period, for a period of 90 days after the proposal has been tabled formally at the Ministerial Conference any decision by the Ministerial Conference to submit the proposed amendment to the members for acceptance shall be taken by consensus. Unless the provisions of paras 2, 5 or 6 apply, that decision shall specify whether the provisions of paras 3 or 4 shall apply. If consensus is reached, the Ministerial Conference shall forthwith submit the proposed amendment to the members for acceptance. If consensus is not reached at a meeting of the Ministerial Conference within the established period, the Ministerial Conference shall decide by a two-thirds majority of the members whether to submit the proposed amendment to the members for acceptance. Except as provided in paras 2, 5 and 6, the provisions of para 3 shall apply to the proposed amendment, unless the Ministerial Conference decides by a threefourths majority of the members that the provisions of para 4 shall apply.

2Amendments to the provisions of this Article and to the provisions of the following Articles shall take effect only upon acceptance by all members:

Article IX of this Agreement; Articles I and II of GATT 1994; Article II:1 of GATS;

Article 4 of the Agreement on TRIPS.

3 Amendments to provisions of this Agreement, or of the Multilateral Trade Agreements in Annexes 1A and 1C, other than those listed in paras 2 and 6, of a nature that would alter the rights and obligations of the members, shall take effect for the members that have accepted them upon acceptance by two-thirds of the members and thereafter for each other member upon acceptance by it. The

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Ministerial Conference may decide by a three-fourths majority of the members that any amendment made effective under this paragraph is of such a nature that any member which has not accepted it within a period specified by the Ministerial Conference in each case shall be free to withdraw from the WTO or to remain a member with the consent of the Ministerial Conference.

4Amendments to provisions of this Agreement or of the Multilateral Trade Agreements in Annexes 1A and 1C, other than those listed in paras 2 and 6, of a nature that would not alter the rights and obligations of the members, shall take effect for all members upon acceptance by two-thirds of the members.

5Except as provided in para 2 above, amendments to Parts I, II and III of GATS and the respective annexes shall take effect for the members that have accepted them upon acceptance by two-thirds of the members and thereafter for each member upon acceptance by it. The Ministerial Conference may decide by a three-fourths majority of the members that any amendment made effective under the preceding provision is of such a nature that any member which has not accepted it within a period specified by the Ministerial Conference in each case shall be free to withdraw from the WTO or to remain a member with the consent of the Ministerial Conference. Amendments to Parts IV, V and VI of GATS and the respective annexes shall take effect for all members upon acceptance by twothirds of the members.

6Notwithstanding the other provisions of this Article, amendments to the Agreement on TRIPS meeting the requirements of para 2 of Article 71 thereof may be adopted by the Ministerial Conference without further formal acceptance process.

7Any member accepting an amendment to this Agreement or to a Multilateral Trade Agreement in Annex 1 shall deposit an instrument of acceptance with the Director General of the WTO within the period of acceptance specified by the Ministerial Conference.

8Any member of the WTO may initiate a proposal to amend the provisions of the Multilateral Trade Agreements in Annexes 2 and 3 by submitting such proposal to the Ministerial Conference. The decision to approve amendments to the Multilateral Trade Agreement in Annex 2 shall be made by consensus and these amendments shall take effect for all members upon approval by the Ministerial Conference. Decisions to approve amendments to the Multilateral Trade Agreement in Annex 3 shall take effect for all members upon approval by the Ministerial Conference.

9The Ministerial Conference, upon the request of the members parties to a trade agreement, may decide exclusively by consensus to add that agreement to Annex 4. The Ministerial Conference, upon the request of the members parties to a Plurilateral Trade Agreement, may decide to delete that Agreement from Annex 4.

10Amendments to a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement.

Article XI Original membership

1The contracting parties to GATT 1947 as of the date of entry into force of this Agreement, and the European Communities, which accept this Agreement and the Multilateral Trade Agreements and for which Schedules of Concessions and Commitments are annexed to GATT 1994 and for which Schedules of Specific Commitments are annexed to GATS shall become original members of the WTO.

2The least-developed countries recognised as such by the United Nations will only be required to undertake commitments and concessions to the extent

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consistent with their individual development, financial and trade needs or their administrative and institutional capabilities.

Article XII Accession

1Any state or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement and the Multilateral Trade Agreements may accede to this Agreement, on terms to be agreed between it and the WTO. Such accession shall apply to this Agreement and the Multilateral Trade Agreements annexed thereto.

2Decisions on accession shall be taken by the Ministerial Conference. The Ministerial Conference shall approve the agreement on the terms of accession by a two-thirds majority of the members of the WTO.

3Accession to a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement.

Article XIII Non-application of Multilateral Trade Agreements between particular members

1This Agreement and the Multilateral Trade Agreements in Annexes 1 and 2 shall not apply as between any member and any other member if either of the members, at the time either becomes a member, does not consent to such application.

2Paragraph 1 may be invoked between original members of the WTO which were contracting parties to GATT 1947 only where Article XXXV of that Agreement had been invoked earlier and was effective as between those contracting parties at the time of entry into force for them of this Agreement.

3Paragraph 1 shall apply between a member and another member which has acceded under Article XII only if the member not consenting to the application has so notified the Ministerial Conference before the approval of the agreement on the terms of accession by the Ministerial Conference.

4The Ministerial Conference may review the operation of this Article in particular cases at the request of any member and make appropriate recommendations.

5Non-application of a Plurilateral Trade Agreement between parties to that Agreement shall be governed by the provisions of that Agreement.

Article XIV Acceptance, entry into force and deposit

1This Agreement shall be open for acceptance, by signature or otherwise, by contracting parties to GATT 1947, and the European Communities, which are eligible to become original members of the WTO in accordance with Article XI of this Agreement. Such acceptance shall apply to this Agreement and the Multilateral Trade Agreements annexed hereto. This Agreement and the Multilateral Trade Agreements annexed hereto shall enter into force on the date determined by Ministers in accordance with para 3 of the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations and shall remain open for acceptance for a period of two years following that date unless the Ministers decide otherwise. An acceptance following the entry into force of this Agreement shall enter into force on the 30th day following the date of such acceptance.

2A member which accepts this Agreement after its entry into force shall implement those concessions and obligations in the Multilateral Trade Agreements that are to be implemented over a period of time starting with the entry into force of this Agreement as if it had accepted this Agreement on the date of its entry into force.

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3Until the entry into force of this Agreement, the text of this Agreement and the Multilateral Trade Agreements shall be deposited with the Director General to the Contracting Parties to GATT 1947. The Director General shall promptly furnish a certified true copy of this Agreement and the Multilateral Trade Agreements, and a notification of each acceptance thereof, to each government and the European Communities having accepted this Agreement. This Agreement and the Multilateral Trade Agreements, and any amendments thereto, shall, upon the entry into force of this Agreement, be deposited with the Director General of the WTO.

4The acceptance and entry into force of a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement. Such Agreements shall be deposited with the Director General to the Contracting Parties to GATT 1947. Upon the entry into force of this Agreement, such Agreements shall be deposited with the Director General of the WTO.

Article XV Withdrawal

1Any member may withdraw from this Agreement. Such withdrawal shall apply both to this Agreement and the Multilateral Trade Agreements and shall take effect upon the expiration of six months from the date on which written notice of withdrawal is received by the Director General of the WTO.

2Withdrawal from a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement.

Article XVI Miscellaneous provisions

1Except as otherwise provided under this Agreement or the Multilateral Trade Agreements, the WTO shall be guided by the decisions, procedures and customary practices followed by the Contracting Parties to GATT 1947 and the bodies established in the framework of GATT 1947.

2To the extent practicable, the Secretariat of GATT 1947 shall become the Secretariat of the WTO, and the Director General to the Contracting Parties to GATT 1947, until such time as the Ministerial Conference has appointed a Director General in accordance with para 2 of Article VI of this Agreement, shall serve as Director General of the WTO.

3In the event of a conflict between a provision of this Agreement and a provision of any of the Multilateral Trade Agreements, the provision of this Agreement shall prevail to the extent of the conflict.

4Each member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements.

5No reservations may be made in respect of any provision of this Agreement. Reservations in respect of any of the provisions of the Multilateral Trade Agreements may only be made to the extent provided for in those Agreements. Reservations in respect of a provision of a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement.

6This Agreement shall be registered in accordance with the provisions of Article 102 of the Charter of the United Nations.

DONE at Marrakesh this fifteenth day of April one thousand nine hundred and ninety-four, in a single copy, in the English, French and Spanish languages, each text being authentic.

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SINGAPORE MINISTERIAL DECLARATION

Adopted on 13 December 1996 .

1 We, the Ministers, have met in Singapore from 9 to 13 December 1996 for the first regular biennial meeting of the WTO at Ministerial level, as called for in Article IV of the Agreement Establishing the World Trade Organisation, to further strengthen the WTO as a forum for negotiation, the continuing liberalisation of trade within a rule-based system, and the multilateral review and assessment of trade policies, and in particular to:

assess the implementation of our commitments under the WTO Agreements and decisions;

review the ongoing negotiations and work programme; examine developments in world trade; and

address the challenges of an evolving world economy.

Trade and economic growth

2 For nearly 50 years members have sought to fulfil, first in the GATT and now in the WTO, the objectives reflected in the preamble to the WTO Agreement of conducting our trade relations with a view to raising standards of living worldwide. The rise in global trade facilitated by trade liberalisation within the rules-based system has created more and better-paid jobs in many countries. The achievements of the WTO during its first two years bear witness to our desire to work together to make the most of the possibilities that the multilateral system provides to promote sustainable growth and development while contributing to a more stable and secure climate in international relations.

Integration of economies; opportunities and challenges

3 We believe that the scope and pace of change in the international economy, including the growth in trade in services and direct investment, and the increasing integration of economies offer unprecedented opportunities for improved growth, job creation, and development. These developments require adjustment by economies and societies. They also pose challenges to the trading system. We commit ourselves to address these challenges.

Core labour standards

4 We renew our commitment to the observance of internationally recognised core labour standards. The International Labour Organisation (ILO) is the competent body to set and deal with these standards, and we affirm our support for its work in promoting them. We believe that economic growth and development fostered by increased trade and further trade liberalisation contribute to the promotion of these standards. We reject the use of labour standards for protectionist purposes, and agree that the comparative advantage of countries, particularly low-wage developing countries, must in no way be put into question. In this regard, we note that the WTO and ILO Secretariats will continue their existing collaboration.

Marginalisation

5 We commit ourselves to address the problem of marginalisation for leastdeveloped countries, and the risk of it for certain developing countries. We will also continue to work for greater coherence in international economic policymaking and for improved co-ordination between the WTO and other agencies in providing technical assistance.

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Role of WTO

6 In pursuit of the goal of sustainable growth and development for the common good, we envisage a world where trade flows freely. To this end we renew our commitment to:

a fair, equitable and more open rule-based system;

progressive liberalisation and elimination of tariff and non-tariff barriers to trade in goods;

progressive liberalisation of trade in services; rejection of all forms of protectionism;

elimination of discriminatory treatment in international trade relations;

integration of developing and least-developed countries and economies in transition into the multilateral system; and

the maximum possible level of transparency.

Regional agreements

7 We note that trade relations of WTO members are being increasingly influenced by regional trade agreements, which have expanded vastly in number, scope and coverage. Such initiatives can promote further liberalisation and may assist least-developed, developing and transition economies in integrating into the international trading system. In this context, we note the importance of existing regional arrangements involving developing and leastdeveloped countries. The expansion and extent of regional trade agreements make it important to analyse whether the system of WTO rights and obligations as it relates to regional trade agreements needs to be further clarified. We reaffirm the primacy of the multilateral trading system, which includes a framework for the development of regional trade agreements, and we renew our commitment to ensure that regional trade agreements are complementary to it and consistent with its rules. In this regard, we welcome the establishment and endorse the work of the new Committee on Regional Trade Agreements. We shall continue to work through progressive liberalisation in the WTO as we are committed in the WTO Agreement and Decisions adopted at Marrakesh, and in so doing facilitate mutually supportive processes of global and regional trade liberalisation.

Accessions

8 It is important that the 28 applicants now negotiating accession contribute to completing the accession process by accepting the WTO rules and by offering meaningful market access commitments. We will work to bring these applicants expeditiously into the WTO system.

Dispute settlement

9 The Dispute Settlement Understanding (DSU) offers a means for the settlement of disputes among members that is unique in international agreements. We consider its impartial and transparent operation to be of fundamental importance in assuring the resolution of trade disputes, and in fostering the implementation and application of the WTO agreements. The Understanding, with its predictable procedures, including the possibility of appeal of panel decisions to an Appellate Body and provisions on implementation of recommendations, has improved members’ means of resolving their differences. We believe that the DSU has worked effectively during its first two years. We also note the role that several WTO bodies have played in helping to avoid disputes. We renew our determination to abide by the

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rules and procedures of the DSU and other WTO agreements in the conduct of our trade relations and the settlement of disputes. We are confident that longer experience with the DSU, including the implementation of panel and appellate recommendations, will further enhance the effectiveness and credibility of the dispute settlement system.

Implementation

10 We attach high priority to full and effective implementation of the WTO Agreement in a manner consistent with the goal of trade liberalisation. Implementation thus far has been generally satisfactory, although some members have expressed dissatisfaction with certain aspects. It is clear that further effort in this area is required, as indicated by the relevant WTO bodies in their reports. Implementation of the specific commitments scheduled by members with respect to market access in industrial goods and trade in services appears to be proceeding smoothly. With respect to industrial market access, monitoring of implementation would be enhanced by the timely availability of trade and tariff data. Progress has been made also in advancing the WTO reform programme in agriculture, including in implementation of agreed market access concessions and domestic subsidy and export subsidy commitments.

Notifications and legislation

11Compliance with notification requirements has not been fully satisfactory. Because the WTO system relies on mutual monitoring as a means to assess implementation, those members which have not submitted notifications in a timely manner, or whose notifications are not complete, should renew their efforts. At the same time, the relevant bodies should take appropriate steps to promote full compliance while considering practical proposals for simplifying the notification process.

12Where legislation is needed to implement WTO rules, members are mindful of their obligations to complete their domestic legislative process without further delay. Those members entitled to transition periods are urged to take steps as they deem necessary to ensure timely implementation of obligations as they come into effect. Each member should carefully review all its existing or proposed legislation, programmes and measures to ensure their full compatibility with the WTO obligations, and should carefully consider points made during review in the relevant WTO bodies regarding the WTO consistency of legislation, programmes and measures, and make appropriate changes where necessary.

Developing countries

13 The integration of developing countries in the multilateral trading system is important for their economic development and for global trade expansion. In this connection, we recall that the WTO Agreement embodies provisions conferring differential and more favourable treatment for developing countries, including special attention to the particular situation of least-developed countries. We acknowledge the fact that developing country members have undertaken significant new commitments, both substantive and procedural, and we recognise the range and complexity of the efforts that they are making to comply with them. In order to assist them in these efforts, including those with respect to notification and legislative requirements, we will improve the availability of technical assistance under the agreed guidelines. We have also agreed to recommendations relative to the decision we took at Marrakesh concerning the possible negative effects of the agricultural reform programme on leastdeveloped and net food-importing developing countries.

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Least-developed countries

14 We remain concerned by the problems of the least-developed countries and have agreed to:

a Plan of Action, including provision for taking positive measures, for example duty-free access, on an autonomous basis, aimed at improving their overall capacity to respond to the opportunities offered by the trading system;

seek to give operational content to the Plan of Action, for example, by enhancing conditions for investment and providing predictable and favourable market access conditions for LDCs’ products, to foster the expansion and diversification of their exports to the markets of all developed countries; and in the case of relevant developing countries in the context of the Global System of Trade Preferences; and

organise a meeting with UNCTAD and the International Trade Centre as soon as possible in 1997, with the participation of aid agencies, multilateral financial institutions and least-developed countries to foster an integrated approach to assisting these countries in enhancing their trading opportunities.

Textiles and clothing

15 We confirm our commitment to full and faithful implementation of the provisions of the Agreement on Textiles and Clothing (ATC). We stress the importance of the integration of textile products, as provided for in the ATC, into GATT 1994 under its strengthened rules and disciplines because of its systemic significance for the rule-based, non-discriminatory trading system and its contribution to the increase in export earnings of developing countries. We attach importance to the implementation of this Agreement so as to ensure an effective transition to GATT 1994 by way of integration which is progressive in character. The use of safeguard measures in accordance with ATC provisions should be as sparing as possible. We note concerns regarding the use of other trade distortive measures and circumvention. We reiterate the importance of fully implementing the provisions of the ATC relating to small suppliers, new entrants and least-developed country members, as well as those relating to cotton-producing exporting members. We recognise the importance of wool products for some developing country members. We reaffirm that as part of the integration process and with reference to the specific commitments undertaken by the members as a result of the Uruguay Round, all members shall take such action as may be necessary to abide by GATT 1994 rules and disciplines so as to achieve improved market access for textiles and clothing products. We agree that, keeping in view its quasi-judicial nature, the Textiles Monitoring Body (TMB) should achieve transparency in providing rationale for its findings and recommendations. We expect that the TMB shall make findings and recommendations whenever called upon to do so under the Agreement. We emphasise the responsibility of the Goods Council in overseeing, in accordance with Article IV:5 of the WTO Agreement and Article 8 of the ATC, the functioning of the ATC, whose implementation is being supervised by the TMB.

Trade and environment

16 The Committee on Trade and Environment has made an important contribution towards fulfilling its work programme. The Committee has been examining and will continue to examine, inter alia, the scope of the complementarities between trade liberalisation, economic development and environmental protection. Full implementation of the WTO Agreements will make an important contribution to achieving the objectives of sustainable development. The work of the Committee has underlined the importance of

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policy co-ordination at the national level in the area of trade and environment. In this connection, the work of the Committee has been enriched by the participation of environmental as well as trade experts from member governments and the further participation of such experts in the Committee’s deliberations would be welcomed. The breadth and complexity of the issues covered by the Committee’s work programme shows that further work needs to be undertaken on all items of its agenda, as contained in its report. We intend to build on the work accomplished thus far, and therefore direct the Committee to carry out its work, reporting to the General Council, under its existing terms of reference.

Services negotiations

17 The fulfilment of the objectives agreed at Marrakesh for negotiations on the improvement of market access in services – in financial services, movement of natural persons, maritime transport services and basic telecommunications – has proved to be difficult. The results have been below expectations. In three areas, it has been necessary to prolong negotiations beyond the original deadlines. We are determined to obtain a progressively higher level of liberalisation in services on a mutually advantageous basis with appropriate flexibility for individual developing country members, as envisaged in the Agreement, in the continuing negotiations and those scheduled to begin no later than 1 January 2000. In this context, we look forward to full MFN agreements based on improved market access commitments and national treatment. Accordingly, we will:

achieve a successful conclusion to the negotiations on basic telecommunications in February 1997; and

resume financial services negotiations in April 1997 with the aim of achieving significantly improved market access commitments with a broader level of participation in the agreed time frame.

With the same broad objectives in mind, we also look forward to a successful conclusion of the negotiations on Maritime Transport Services in the next round of negotiations on services liberalisation.

In professional services, we shall aim at completing the work on the accountancy sector by the end of 1997, and will continue to develop multilateral disciplines and guidelines. In this connection, we encourage the successful completion of international standards in the accountancy sector by IFAC, IASC, and IOSCO. With respect to GATS rules, we shall undertake the necessary work with a view to completing the negotiations on safeguards by the end of 1997. We also note that more analytical work will be needed on emergency safeguards measures, government procurement in services and subsidies.

ITA and pharmaceuticals

18 Taking note that a number of members have agreed on a Declaration on Trade in Information Technology Products, we welcome the initiative taken by a number of WTO members and other states or separate customs territories which have applied to accede to the WTO, who have agreed to tariff elimination for trade in information technology products on an MFN basis as well as the addition by a number of members of over 400 products to their lists of tariff-free products in pharmaceuticals.

Work programme and built-in agenda

19 Bearing in mind that an important aspect of WTO activities is a continuous overseeing of the implementation of various agreements, a periodic examination and updating of the WTO Work Programme is a key to enable the WTO to fulfil

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its objectives. In this context, we endorse the reports of the various WTO bodies. A major share of the work programme stems from the WTO Agreement and decisions adopted at Marrakesh. As part of these Agreements and decisions we agreed to a number of provisions calling for future negotiations on Agriculture, Services and aspects of TRIPS, or reviews and other work on Anti-Dumping, Customs Valuation, Dispute Settlement Understanding, Import Licensing, Preshipment Inspection, Rules of Origin, Sanitary and Phyto-Sanitary Measures, Safeguards, Subsidies and Countervailing Measures, Technical Barriers to Trade, Textiles and Clothing, Trade Policy Review Mechanism, Trade-Related Aspects of Intellectual Property Rights and Trade-Related Investment Measures. We agree to a process of analysis and exchange of information where provided for in the conclusions and recommendations of the relevant WTO bodies, on the Builtin Agenda issues, to allow members to better understand the issues involved and identify their interests before undertaking the agreed negotiations and reviews. We agree that:

the time frames established in the Agreements will be respected in each case;

the work undertaken shall not prejudge the scope of future negotiations where such negotiations are called for; and

the work undertaken shall not prejudice the nature of the activity agreed upon (ie negotiation or review).

Investment and competition

20 Having regard to the existing WTO provisions on matters related to investment and competition policy and the built-in agenda in these areas, including under the TRIMs Agreement, and on the understanding that the work undertaken shall not prejudge whether negotiations will be initiated in the future, we also agree to:

establish a working group to examine the relationship between trade and investment; and

establish a working group to study issues raised by members relating to the interaction between trade and competition policy, including anti-competitive practices, in order to identify any areas that may merit further consideration in the WTO framework. These groups shall draw upon each other’s work if necessary and also draw upon and be without prejudice to the work in UNCTAD and other appropriate intergovernmental fora. As regards UNCTAD, we welcome the work under way as provided for in the Midrand Declaration and the contribution it can make to the understanding of issues. In the conduct of the work of the working groups, we encourage co-operation with the above organisations to make the best use of available resources and to ensure that the development dimension is taken fully into account. The General Council will keep the work of each body under review, and will determine after two years how the work of each body should proceed. It is clearly understood that future negotiations, if any, regarding multilateral disciplines in these areas, will take place only after an explicit consensus decision is taken among WTO members regarding such negotiations.

Transparency in government procurement

21 We further agree to:

establish a working group to conduct a study on transparency in government procurement practices, taking into account national policies, and, based on this study, to develop elements for inclusion in an appropriate agreement; and

direct the Council for Trade in Goods to undertake exploratory and analytical work, drawing on the work of other relevant international organisations, on the

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simplification of trade procedures in order to assess the scope for WTO rules in this area.

Trade facilitation

22In the organisation of the work referred to in paras 20 and 21, careful attention will be given to minimising the burdens on delegations, especially those with more limited resources, and to co-ordinating meetings with those of relevant UNCTAD bodies. The technical co-operation programme of the Secretariat will be available to developing and, in particular, least-developed country members to facilitate their participation in this work.

23Noting that the 50th anniversary of the multilateral trading system will occur early in 1998, we instruct the General Council to consider how this historic event can best be commemorated.

17.3.1 Commitment to most-favoured-nation trade

A guiding principle of GATT is non-discrimination. Accordingly Article I of the agreement provides that:

Any advantage, favour, privilege, or immunity granted by any other contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.

In the late 19th century it was common for bilateral trade agreements to include a most-favoured-nation clause which committed each party to grant to the other all the trading rights and benefits that it accorded to the third state it treated best, in other words the states agreed to treat each other as well as their most favoured nations. Article I amounts to a most-favoured-nation (MFN) clause binding on and between all parties to the agreement. MFN treatment governs all import and export trade and applies to import and export customs duties and similar charges, all rules and formalities connected with import and export and to internal taxes or charges of any kind in excess of those applied to like domestic products. The commitment to immediate and unconditional MFN trade means that whenever a state party to GATT extends some privilege or right to one of its trading partners it will automatically extend to all other state parties. An important aspect of the unconditional nature of the rule is that it does not require reciprocity: if state A agrees to impose a reduced tariff on particular goods imported from state B that reduction will apply to state C and all other parties to GATT irrespective of whether state C and the other parties reduce tariffs on imports from state A. For this reason MFN status does not ensure that all GATT members trade on the basis of equality, although the multilateral and reciprocal basis of most trade agreements does help to avoid extreme imbalances.

17.3.2 Reduction of tariff barriers

Article II GATT commits the parties to co-operate on the lowering of tariffs. This is to be done through the tariff concession whereby a party promises to levy a tariff on a stated product no higher than that level agreed to at trade negotiations. GATT establishes the framework for regular negotiations between states to set tariff levels. These regular negotiations are known as ‘rounds’ and there have been eight such rounds. The early rounds tended to be conducted on

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a bilateral basis but gradually it became clear that more would be achieved by holding multilateral talks. The Kennedy Round (1962–67) resulted in a considerable lowering of tariffs and by the mid 1970s tariffs had been lowered to such an extent that they were no longer seen as the major barrier to international trade. Instead attention was turned to non-tariff barriers and a number of codes of practice were adopted at the Tokyo Round, for example the GATT Agreement on Technical Barriers to Trade which has the aim of harmonising product standards.

17.3.3 Non-discrimination

Article III GATT requires states to treat imported goods in the same way as domestically produced goods. Specifically, imported goods cannot be regulated or taxed in a manner different from that applying to domestic products. Article III(4) provides that:

The products ... imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations, and requirements affecting their internal sale.

Article VII does allow charges to be imposed on imports where they reflect services provided to the importer, for example, charging for the use of port facilities or for product inspection is permitted provided that it is reasonable and based on actual costs. Such charges cannot be used as an indirect import duty.

17.3.4 Import quotas

There is clearly little point in reducing import tariffs if states impose harsh restrictions on the number of imports allowed. Article XI GATT therefore prohibits states from imposing any restriction on imports other than duties, taxes and other charges. This prohibition is subject to a number of exceptions. Article XII allows states to impose import quotas where they are considered necessary to correct a severe balance of payments deficit which is resulting in the imminent threat or actual occurrence of ‘a serious decline in its monetary reserves’.

17.3.5 Anti-dumping

Underlying GATT is the belief that everyone benefits from the existence of free trade and that obstacles to such trade should be kept to a minimum. However, this belief relies on trade being fair. Just as imposing high duties on imports is unfair to the importing country and adversely affects the flow of trade, so artificially reducing the price of exports is unfair to the importing country and can have a devastating effect on its economy. Dumping refers to the practice of selling goods in a foreign country for less than the price charged for the same goods in the producer’s domestic market. Article VI GATT provides that where such a situation causes or threatens material injury to domestic industry or retards the development of such an industry, the importing state may impose an additional duty which reflects the difference between the price being charged for the goods and the price of the goods, or comparable goods, in the

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exporter’s home market. Thus, for example, if a Japanese company were to market a machine in the UK at a price of £400 while the same machine was marketed at £800 in Japan, then the UK would be entitled to impose a £400 antidumping duty on the imported Japanese computer. The usual motivation behind the practice of dumping is an intention to drive competing companies in the importing state out of business. However, the intention of the exporter is not relevant to the imposition of anti-dumping duties. In 1979 the GATT AntiDumping Code was adopted in an attempt to further clarify Article VI. The code sets down a procedure for dealing with disputes arising out of allegations of dumping and establishes the Committee on Anti-Dumping Practices which is responsible for assisting in the settlement of such disputes.

17.3.6 Export subsidies

Just as dumping may distort international trade, so too can subsidies granted to exports since they too can make a product less expensive in the importing country which is likely to be to the detriment of foreign competitors. Export subsidies may take the form of export credit guarantees, favourable tax rates for income earned from export trade, or foreign exchange risk guarantees. Article XVI restricts the right of states to grant export subsidies where such subsidies threaten or cause material injury to an industry in the importing state. In such a situation, if export subsidies have been imposed, the importing state is entitled to offset the effect of the subsidies by imposing an additional tariff (countervailing duty). In 1979 GATT adopted the Subsidies Code which further refines the law and provides a mechanism for the settlement of disputes. One such dispute arose out of the development, manufacture and export of the European Airbus. Germany provided currency stabilisation guarantees to assist in the sale of the planes in the USA. The USA alleged that such guarantees violated the GATT code by threatening and causing injury to the American aviation industry. In 1992 a GATT panel of experts upheld the USA complaint.

17.4 Financial stability

At the end of World War Two the international community was faced with two major problems relating to international finance. An immediate problem concerned the need to finance the rebuilding of domestic economies devastated by six years of war. It was also recognised that there was a need to provide some system of regulation of currency exchange to help prevent the violent exchange rate fluctuations and associated hyper-inflation that had occurred during the 1920s and 1930s. These problems were addressed at the international conference held at Bretton Woods in 1944 which resulted in the establishment of the IMF and the International Bank for Reconstruction and Development.

17.4.1 The International Monetary Fund

The IMF was established to promote international monetary co-operation, to facilitate the growth of international trade and to promote foreign exchange stability. The IMF has a board of governors, 22 executive directors and a managing director. The Articles of Agreement of the IMF place a number of obligations on member states. Originally, the currency of each member was

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assigned a par value expressed in terms of gold and members were under a duty to maintain this value. Changes in par value could only be made to correct serious balance of payment crises and required the agreement of the IMF. By the late 1960s the fixed exchange rates were becoming increasingly difficult to maintain and in 1973 the Articles of Agreement were amended to allow for floating exchange rates. The IMF is financed through subscription by its members. Each member is allocated a subscription quota which is based on a number of criteria relating to the strength of its economy. The size of a state’s quota affects its voting rights at meetings of the IMF. The IMF operates a system of weighted voting which gives those states with the strongest economies the biggest voice. As a result the IMF, which now has over 150 members, has always been heavily influenced by the Western industrialised nations. The size of the quota also influences a state’s Special Drawing Rights. The Special Drawing Rights allow member states to draw currency from the IMF to correct temporary balance of payments problems. It amounts to a sort of overdraft facility for members. It was envisaged that the provision of Special Drawing Rights would remove the need for states to resort to protectionism in times of economic crisis. For the first 30 years of the IMF currency transactions and payments into the fund were calculated by reference to the official price of gold. In 1978 the Articles of Agreement were amended with the effect of abolishing this gold standard and since that time transactions have been valued on the basis of a ‘weighted basket’ of the five principal currencies (USA dollar, Deutschmark, yen, French franc, and pound sterling).

17.4.2 The International Bank for Reconstruction and Development

Traditionally states wishing to raise capital by resorting to the private financial markets or by borrowing from other states. As far as the private markets were concerned investors did not always see an adequate rate of return and also ran the risk that such investment might be wiped out by nationalisation or other measures adopted by the borrowing state. Borrowing from other states often led to problems involving the lending state interfering in the domestic affairs of the borrowing state. With the need for a massive injection of capital into the economies of many states after World War Two and with the desire to avoid some of the problems that had been encountered with the traditional methods the Bretton Woods conference agreed to establish the IBRD. membership of the bank is the same as that of the IMF and the two organisations work closely together. The capital of the bank is contributed by the members in proportion to their relative economic strength. Like the IMF voting is weighted according to contribution. The bank exists to lend money to states or to private enterprises where such loans are guaranteed by the government in whose territory the loan is to be used. Although initially the bank provided money to finance immediate post-war reconstruction, loans are now given only for projects which will enhance economic growth. Before any loan is made the bank will carry out a thorough investigation. Money is not lent for high-risk projects and the loans are generally provided on market terms.

It was soon realised that the IBRD’s policies were aimed largely at industrialised nations experiencing short-term problems and were not really appropriate to the situation of a newly independent state attempting to

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establish its own economy. Developing states argued that a UN fund for development should be established but the Western states felt that this would not be in their own interests. As some sort of compromise the IBRD established the International Finance Corporation (IFC) in 1956. The aim of the IFC is to promote private investment in developing countries and to supplement such investment with its own funds. In 1960 the bank established the International Development Association (IDA). The IDA provides long-term low cost finance for the establishment of basic economic infrastructure, such as power supply and communications. The voting rights in the IDA are very heavily weighted in favour of the Western states which has led to criticisms of the organisation by a number of developing or under-developed states.

Together the IBRD, IFC and IDA are generally referred to as the World Bank.

17.5 Development

The basic objective of international economic law is to improve the situation of those developing countries most severely affected by the existing structure of world trade and the international division of labour. This emerging branch of law should nevertheless essentially be conceived as a tool for describing and regulating economic relations between all states. There is no question of establishing a branch of law consisting of rules applicable only to developing states. The basic purpose of international economic law is to establish a link between the industrialised countries and the developing countries, by means of a system of rights and obligations binding on all states together. The aim would be for the rich countries to treat the less developed countries more fairly, within the framework of a new system of rules covering all states. The universality of this branch of international law – in other words, the fact that it aims essentially to cover economic relations between all states in general – not only does not conflict, but is perfectly compatible, with its essential purpose, namely, to protect and to aid the less developed countries through the creation or reform of institutions and principles. This is not a new approach, neither is it alien to the law in general.

During the 19th century and at the beginning of the 20th it was thought that the existence of an objective, general system of laws, and equality before the law, were incompatible with the protection of particular social groups. Fortunately, this 19th century laissez faire concept no longer has a place in national legal systems. Sixty or 70 years ago at least, the more developed states realised that equality before the law did not prevent inequality and oppression, and consequently felt obliged to go beyond the purely formal concept of equality of all citizens before the law by creating a whole body of protective legislation to defend certain disadvantaged social groups against the economically powerful. This is precisely the reason and justification for the existence of a particular type of legislation, such as labour law and its institutions, which would have seemed unthinkable in the 19th century and which are now accepted by all. Social security is another example. It was realised with the passing of time that the creation of statutory institutions devised specifically to aid a social group had benefited society as a whole.

Likewise, the present international legal order cannot be based solely on the principle of the sovereign equality of states. The international community today can no longer remain satisfied with a legal order which merely ensures that the freedom of each one of its members is compatible with that of the others, which

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defends the territorial integrity of the state and provides machinery for the peaceful settlement of disputes. Observance of the principle of non-intervention is not enough.

International economic law must include the following two basic ingredients: on the one hand, a series of institutions, practices, methods and principles guaranteeing the effective protection of the natural resources of the developing countries. Examples of such principles and practices would be the principle of sovereignty over natural resources, equitable regulations of foreign investments and the establishment or recognition of appropriate regulations concerning nationalisation, expropriation, compensation and so on.

Its second basic ingredient would be the establishment of international economic co-operation as a legal institution within the general framework of international law. international co-operation in favour of the underprivileged countries should be more than a question of morality or good intentions and become an integral part of the law. The principles of solidarity and collective responsibility for the common good should be reflected in legal institutions, that is in a system of rights and obligations which, while protecting one section of the international community, will ultimately benefit that community as a whole.

Four phases of UN involvement in development

1 The first phase 1945–63

Four broad phases may be distinguished in the evolution of the UN’s involvement with economic development since 1945. The first stretches from 1945 to 1963. One striking development at an early stage was the recognition by member states of the need for a measure of accountability to the international community in the economic and social domain. This development culminated in a report published in 1949 on national and international measures for full employment,7 which led to a decision setting in motion a process of monitoring the progress of the world economy and the extent to which countries were meeting their employment commitments. The report also addressed the reduction of unemployment in the underdeveloped world, as it was then called, but only as an aspect of the broader question of world economic growth.

In this post-war colonial period systematic thinking on economic development was still in its infancy. The intellectual landmark of the period was a report prepared in 1950 by a group of five experts, which set the stage for UN development activity.8 Curiously the report made no attempt to discuss the meaning of economic development, presumably because this was considered self-evident. Its main message was that underdeveloped countries should promote ‘progressive attitudes and organisations’, ‘receptiveness to progressive technology’, increased domestic capital formation, and reduced population growth. Thus development was essentially, indeed almost exclusively, a matter for ‘measures requiring domestic action’. The report did, however, represent a departure from what was called ‘colonial economics’, in that it addressed the issue of the preconditions for economic development, in which were included the removal of relevant structural impediments through, for example, land reform. The report pointed to the administrative and legal actions, both in the public and private sectors, that were necessary for ‘economic progress’. It also recognised a somewhat expanded role for government in the promotion of

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7National and International Measures for Full Employment, 1949, New York: UN.

8Measures for the Economic Development of Under-Developed Countries, 1951, New York: UN.

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economic development, going beyond the simple provision of physical infrastructure, social services, and administration.

These ideas bear a noticeable resemblance, in their essentials, to those advanced by Professor Arthur Lewis, who was actually a member of the expert group, in his book The Theory of Economic Growth, published a few years later.9 (Interestingly, domestic measures and policies were to resurface in the 1980s, in some circles, as the new hallmark of development wisdom.) Measures by developed countries in support of development were limited to a show of selfrestraint in refraining from subsidising certain products competing with the exports of underdeveloped countries. International action was restricted to increasing World Bank lending, and organising technical assistance through an international development authority.

The impact on UN development activity was to be seen in the spread of ‘development planning’, the techniques and priorities of which were spelled out in the expert group’s report; in the sectoralising of international assistance, and the related evolution of technical assistance, and the related evolution of technical assistance programmes; and in the targeting of development resource transfers from developed countries. The UN First Development Decade, which was actually proclaimed in 1962, was in effect an operationalised version of basic ideas contained in the original expert group’s report.

This first phase of the UN’s involvement with economic development was also characterised by the absence of a collective presence on the part of the developing countries; by the implicit assertion of a wholly convergent process of world development; and by the assumption of an essentially benign external policy environment, and hence the irrelevance of negotiated policy reform addressing the structures and arrangements underpinning international economic relations.

2 The second phase: 1963–82

The second phase in the evolution of the UN’s involvement with economic development extends from 1963 to about 1982. The impulses for new orientations in this period were many. They included the decolonisation process, the radical transformation this effected in the UN’s membership, and the interest of many of the newly independent nations in socialist doctrines. As the period progressed a clearer perception emerged of the reality that political independence did not itself bring economic growth and development. These countries began to articulate the need for a framework of international economic relations that would be more conducive to the realisation of their economic aspirations. This perception, triggered by the more blatant abuses by transnational enterprises and reinforced by these countries’ awareness of their potential power as a source of supply and as a market for the industrialised world, contributed to the evolution of a new outlook on relations between the developed and developing countries.

By the mid-1960s the UN was ripe for a major revision of its development philosophy. This time the intellectual underpinning was provided by the developing world itself, in the form of the doctrines of Raul Prebisch and his collaborators at the Economic Commission for Latin America. Although these ideas were being shaped from the latter part of the 1940s onwards,10 they did

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9W Arthur Lewis, The Theory of Economic Growth, 1955, London: Allen & Unwin.

10UN, Economic Commission for Latin America, The Economic Development of Latin America and its Principal Problems, 1950, New York: UN, Dept of Economic Affairs; and Hans Singer, ‘The Distribution of Gains between Investing and Borrowing Countries’, Amercian Economic Review, 40, no 2 (May 1950) at p 47.

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not emerge in the form of specific propositions for North-South, or, as it was then called, centre-periphery, relationships until the first UN Conference on Trade and Development (UNCTAD) was held in 1964, with Prebisch as its Secretary General.11

The notions that informed the new approach to development theory and practice were radically different from those of the 1950s and the First Development Decade. The new approach asserted the existence of a process of inequalising exchange between the North and the South, as the latter’s terms of trade of primary commodities exports for manufactured imports persistently deteriorated, as economic surplus was transferred from the South to the North through transnational enterprises, as mercantilist policies restricted access to technology, and as international capital limited structural change and constrained the potential for growth. A distinguishing feature of the new theories was that they ruled out the possibility of self-correcting forces operating spontaneously to restore equilibrium in the world economy. Persistent divergence between North and South was seen as the natural order. If these tendencies were to be corrected, deliberate policy actions would have to be taken, and thus international policy negotiations would become a special and continuing responsibility of the UN. There was accordingly a concentration on improving the international economic environment to promote development across a broad front. This was an attempt to rectify the gaps and shortcomings of the post-war system (encompassing IMF, IBRD, and GATT), which had given insufficient weight to the development issue. In this sense, the original, virtually exclusive, preoccupation with ‘measures requiring domestic action’ as the critical determinant of development was relegated to a less important place in the UN approach to economic development.

During this period therefore the focus of attention in the UN, and especially in UNCTAD, turned to the negotiation of international policies and principles, organised on the basis of four country groupings – the Group of 77 (developing countries), the developed market-economy countries, the socialist countries of eastern Europe, and China. The main areas of negotiation were commodity prices, trade in manufactures, the international monetary system, the transfer of technology, transnational corporations, restrictive business practices, international shipping, and, at a general level, the economic rights and duties of states. Many of these negotiations led to agreements, codes, and resolutions, some with greater legal significance than others.12 Underlying these processes was a belief that market forces alone could not be relied upon to promote development, even if the policies of developing countries were optimal. Governmental intervention in cases of market failure was therefore necessary to support the development effort, and national strategies would have to be adjusted to one another with a view to a consistent set of international economic policies supportive of the development of the Third World.

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11Towards a New Trade Policy for Development: Report by the Secretary General of UNCTAD, 1964, New York: UN.

12Examples include the International Commodity Agreements, the Agreement establishing the Common Fund for Commodities, the Code of Conduct on Liner Conferences, the Set of Principles and Rules on Restrictive Business Practices, the Generalised System of Preferences, the Resolution on Debt Relief for the Least-developed Countries, and the Charter on Economic Rights and Duties of States. Negotiations on proposals for Codes of Conduct on the Transfer of Technology, and on Transnational Corporations, ran into intractable difficulties which have yet to be resolved.

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At the same time, it must be said, a difficult path was being pursued by the International Monetary Fund and the World Bank where, increasingly, access to their resources was being made conditional on the adoption of domestic measures and policies recommended by them. During this period too there was an impressive growth in technical and financial assistance to the various sectors of economic activity in developing countries, intended to enhance these countries’ domestic capabilities. In the field of technical co-operation there was a considerable expansion in the range and volume of activity by the UN Development Programme (UNDP), which was formed in 1965 by a merger of the UN Expanded Programme of Technical Assistance and the UN Special Fund. This expansion was itself to give rise to continuing questions about the UNDP’s priorities, coherence, and cost-effectiveness.

The action taken by OPEC in 1973 was seen by developing countries as a successful, even if painful, example of the assertion of endogenous control over national resources and as an inspiration to refashion the international economic system in the interests of efficiency and equity. This naturally gave a strong new impetus to the ‘policy negotiation’ approach to international economic cooperation for development. It lent credence to the possibility of fundamental change, and to the aspiration that a world of economic equity and justice, as envisaged by the developing countries, might actually be created. The 1974 Declaration on the Establishment of a New International Economic Order (NIEO) and its accompanying Programme of Action embodied this new message of strength and purpose.13 The impulses for change deriving from this sense of commodity power were so strong that the period from 1973 might well be considered a distinct sub-phase, or even a new phase altogether. Essentially, they underscored the developing countries’ conviction that change was needed in the structure and operation of the international economic system, and that such change could be effected through a process of global negotiation, in a context of the developing countries’ strengthened bargaining power, and of the concrete realities of global interdependence. It is worth noting, for example, that the NIEO was ostensibly proclaimed to reassert and strengthen the ‘spirit, purposes and principles of the Charter of the United Nations’.

Despite the language and the ambitiousness of the programme of international economic reform, as well as the more explicitly confrontational approach of the post-1973 period, many of the measures envisaged for their realisation dated back several years. However, in practical terms the new consciousness of and stress on ‘permanent sovereignty over natural resources’ gained in influence, while the notion of interdependence emerged more explicitly and with greater clarity as a rationale for international economic management. These approaches, together with the basic ideas associated with the founding of and developments in UNCTAD, merged with the older development currents of the 1950s to influence the shape of the International Development Strategy as proclaimed for the second and third UN Development Decades (which began respectively in 1971 and 1981).14

3 The third phase: the decade of the 1980s

The third phase dates from the early 1980s. The new strength and hopes inspired by the NIEO were to be relatively short-lived. By about 1982 the servicing of the massive petrodollar borrowing of developing countries ran into severe difficulty

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13General Assembly Resolution 3201 (S-VI) of 1 May 1974.

14General Assembly Resolution 2626 (XXV) of 24 October 1970 and 35/56 of 5 December 1980.

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as recession in the North, brought about by anti-inflationary monetary and fiscal policies, curtailed the export earnings of developing countries.15 Besides this, a number of other influences had a modifying effect on the UN’s development philosophy. There was much disappointment over the failure to negotiate or implement important aspects of the international agenda – international commodity agreements, the Common Fund for Commodities, the Code of Conduct for the Transfer of Technology, and the NIEO. The weakening of commodity power generally, including that of OPEC, diminished the Third World’s bargaining power. The revival of the arms race, and continuing EastWest tensions, put the North-South dialogue lower on the agenda of international concerns.

The period witnessed a return, primarily at the insistence of the developed market-economy countries, to a preoccupation with national measures and policies of developing countries, similar to that of the 1950s. In major Western economies, the ascendancy of neo-classical economics with its faith in market forces, together with the trend towards deregulation and privatisation, went hand in hand with a reduced interest and investment in forms of international management. These tendencies signalled a diminished concern with negotiated international policies for the promotion of international economic co-operation for development. They also pointed to a greater role for the private enterprise sector in the promotion of international co-operation and development.

Not surprisingly the period saw a weakening of the development consensus underlying the UN’s work in this field. Fundamental differences became apparent in economic philosophies, and in perceptions of the capabilities of governments in national and international policy-making. The role of governments and of intergovernmental institutions, on the one hand, and of private market forces, on the other, became the subject of renewed controversy. Disagreement surfaced about the interplay of domestic policies and the external environment, and of the public and private sectors of economic activity. Indeed, governments came to hold divergent views even on how agreed common interests are best pursued in an international and multilateral context; such was the case, for example, on issues of global economic management, trade policies in the context of increasing protectionism, international monetary reform, the evolving international debt strategy, and resource flows to the developing world.

Yet there was no attempt to abrogate the goals and objectives of the International Development Strategy for the Third Development Decade.16 On the contrary, member states registered their concern about the substantial deterioration of the situation of many developing countries, particularly in Africa, together with the disquieting dimensions that the problem of indebtedness had assumed for a larger number of them.

Meanwhile, increased interdependence within and among the different groups of countries through trade and production went hand in hand with, and was reinforced by, closer financial linkages. These, in turn, enhanced the influence of international finance over trade. Propelled by new developments in information and communications technologies, domestic financial markets increasingly became part of and subordinate to international markets; and the markets for

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15UNCTAD, Trade and Development Report, 1986, Geneva.

16See the Agreed Conclusions section of Report of the Committee on the Review and Appraisal of the Implementation of the International Development Strategy for the Third UN Development Decade, UN doc A/40/48, New York, 1985.

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different assets themselves became more intermeshed. The role of private international markets in the net flow of financial resources, particularly between developed and developing countries, assumed vast proportions. The international financial system as a whole became more sensitive to changes in the ability of developing countries to service their debts. Consequently, as countries became more exposed to international financial influences, the impact of fluctuations in world monetary and financial conditions on their output, employment, and price levels became more pronounced.

4 The fourth phase: from the turn of the decade

In the early 1990s the world community may be moving into a new, more mature phase of international economic co-operation for development. The shifts that have been under way for some years in approaches to economic and social organisation, and in perceptions of development policy, accelerated around the beginning of the decade. Much of the new momentum derived from the dramatic developments that took place in the central and eastern European countries, including the Soviet Union, leading to the introduction of democratic forms of government in place of existing regimes and the suppression of central planning systems by moves towards market-based economies. The challenges posed by the shifts just mentioned are described in the second part of this chapter, but they have laid bare many of the ingredients for a fresh development consensus.17

The retreat from multilateralism has come to a halt, prompted possibly by calculations of long-run self-interest on the part of the major industrialised countries – manifested, for instance, at the 1992 Conference on Environment and Development18 – and partly by considerations of common interest and mutual benefit. Development itself is increasingly seen as a people-centred and equitable process whose ultimate goal must be the improvement of the human condition. Political arrangements are regarded as viable and important for the development process to the extent that they are based on consent, and the observance of human rights is widely accepted as a source of creativity, innovation, and initiative. A convergence of views has occurred on the necessity of supportive frameworks of broad economic policy, both national and international.

Reliance on market forces and competitiveness, and the fostering of entrepreneurial initiative, have become common features of the pursuit of economic efficiency. Approaches to sustainable growth are no longer confined to such criteria as the avoidance of high inflation, large payments imbalances, and sharp cyclical swings: they now encompass the improvement of medium-term growth potential through, for instance, policies that improve the functioning of markets, enlarge human capital, enhance labour mobility, promote openness to international trade, encourage competitiveness, and incorporate respect for the environment. The sharp rise in the level of concern for the health of the global environment and for the long-term security of the planet’s ecology base has underscored the need to manage natural resources wisely and to evolve production and consumption patterns in ways consistent with the protection of the environment. Moreover, countries accept that high priority must be accorded to such aspects of the development process as the eradication of poverty and

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17General Assembly Resolution S-18/3 of 1 May 1990 entitled ‘Declaration on International Economic Co-operation, in particular the Revitalisation of Economic Growth and Development of the Developing Countires’; and ‘A New partnership for Development: the Cartegena Commitment’ in Report of UNCTAD on its Eighth Session, February 1992, UN doc TD/364 of 6 July 1992, pp 6–60.

18See Chapter 1.

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hunger, human resources and institutional development, and improved population policies, as well as protection of the environment.

The proposition that, while the external economic environment is critical for small and open economies, developing countries have the primary responsibility for their own development remains unquestioned: there is no substitute for sustained national policies aimed at liberating and mobilising the latent energies and impulses for development within developing countries, at promising efficiency in the allocation and use of resources, and at taking advantage of the opportunities for trade, investment, and technological progress provided by the changing global environment. Indeed, it is these policies that have determined and will continue to determine how changes in external variables affect the pace of development.

Another factor now widely seen as inseparable from the success of development efforts is the quality of public management. The concept of good governance – or, less controversially, good management – has many dimensions, and it is ultimately defined by a wide variety of historical, cultural, social, and political considerations. As currently understood it encompasses governmental action to establish appropriate frameworks and rules of the game for the effective and proper functioning of markets, and a healthy climate for economic activity.19 This purpose entails the provision of physical and social infrastructure, the pursuit of sound macroeconomic policies, the creation of a conducive policy environment, and the development of human resources required to support economic activity, as well as policies that promote efficiency in the use and allocation of resources. It also requires clear legal and regulatory frameworks, transparent processes for rule-setting and decision-making, and efficient institutions for the management of resources.

Good management should furthermore stimulate entrepreneurship and productivity growth; help to expand employment opportunities; and promote, or where necessary undertake, functions which cannot be adequately initiated or performed by the private sector. It calls, in addition, for the use of economic and regulatory instruments when markets left to themselves are unable to deal with the phenomenon of externalities and public goods, or to integrate environmental costs adequately into economic activities. Questions of income distribution also need to be addressed, including economic and social safety nets, and assistance to disadvantaged groups to gain access to market opportunities. Likewise, public intervention may be required to foster competition, particularly where concentrations of market power create excessive rents. Finally, strengthened systems of dispute settlement and conflict resolution, with an appropriate role for courts of law and guarantees of their independence, are essential.

As already indicated, the international aspects of good management are also important. Most governments acknowledge, in varying degrees, that the efforts of developing countries in particular to improve their domestic economic policy framework will not have the desired outcome without a supportive international economic environment. Such an environment is seen as depending critically on greater dynamism in the global economy, and on the loosening of such constrictions on development as external indebtedness, inadequate development finance, high trade barriers, depressed commodity prices, and adverse terms of

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19Accelerating the Development Process: Report by the Secretary General of UNCTAD to the Eighth Session of the Conference, part 2, Chap 1, Market Forces, Public Policy and Good Management; and Report of UNCTAD on its Eighth Session, 1992.

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trade. The industrialised countries, it must be said, accept the importance of appropriate national macroeconomic growth and structural polices aimed at non-inflationary growth and structural adjustment and at avoiding undesired exchange-rate fluctuations and financial market disturbances. What would be even more helpful is a strong commitment to narrowing their imbalances in a manner that would benefit other countries, to stepping up their efforts to invigorate world economic growth, and bringing about a supportive and predictable international economic environment for development.

UN bodies have played a key role in the shaping of these common attitudes. They have also sought to encapsulate the guidelines stemming from them into such major texts as the resolution adopted at the 18th Special Session of the General Assembly in May 1990;20 the International Development Strategy for the Fourth Development Decade, adopted in December 1990;21 the Cartagena Commitment adopted by UNCTAD VIII in February 1992;22 and, from a different vantage point, the final outcome of the 1992 Rio Conference on the Environment and Development.

In the short time that has passed since these texts were adopted, the results have been mixed. Perceptions of certain problems, particularly poverty eradication and environmental protection, have sharpened, and greater recognition of the paths to be followed has emerged. But the recession in the developing market economies, and the persistence of an unsupportive economic environment, not to speak of the 1991 Persian Gulf war and the dissolution of the Soviet Union, have weakened some of the basic premises of the guidelines these documents embody. The gap between international commitments made, and action taken by some of the key actors, has been large.

Effectively mobilised, the common attitudes just mentioned could evolve into a conviction that world economic stability and growth depend on higher levels of international co-operation for the management of interdependence. Interdependence could become a consistent vehicle of growth and development, bringing benefits for all in a positive sum game, on two conditions. One is that national policies, particularly those of the economically powerful, are formulated in a mutually reinforcing fashion to favour constructive adjustment and adaptation in the world economy. The other is that co-operative efforts are pursued to improve the systems, structures, and arrangements that have thus far underpinned international economic relations, particularly as regards trade, money, and finance.

Whether the necessary political determination among countries can be mustered to build on these perceptions so as to reactivate growth and development in the world economy is another matter. The vast enterprise that it entails requires countries both rich and poor to promote a new partnership for development based on the recognition of sovereign equality, mutual interests, and shared responsibilities. Its success depends crucially, of course, on the concerted efforts of the UN together with the family of organisations that has been built up around it.

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20GA Resolution 18/3 of 1 May 1990.

21GA Resolution 45/199 of 21 December 1990, annex, ‘International development Strategy for the Fourth UN Development Decade’.

22Report of UNCTAD on its Eighth Session, 1992.

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If the UN is effectively to address the challenges that these unprecedented changes pose for development, its capacity to deal with their various facets in an integrated manner – and within a coherent conceptual framework – will have to be enhanced. It is to be hoped that the current wave of reform in the UN, which follows closely upon far-reaching institutional reforms undertaken in UNCTAD, will make a stronger contribution to this objective.23

DECLARATION ON THE RIGHT TO

DEVELOPMENT

The General Assembly,

Bearing in mind the purposes and principles of the Charter of the United Nations relating to the achievement of international co-operation in solving international problems of an economic, social, cultural or humanitarian nature, and in promoting and encouraging respect for human rights and fundamental freedoms for all without distinction as to race, sex, language or religion,

Recognising that development is a comprehensive economic, social, cultural and political process, which aims at the constant improvement of the well-being of the entire population and of all individuals on the basis of their active, free and meaningful participation in development and in the fair distribution of benefits resulting therefrom,

Considering that under the provisions of the Universal Declaration of Human Rights everyone is entitled to a social and international order in which the rights and freedoms set forth in that Declaration can be fully realised,

Recalling the provisions of the International Covenant on Economic, Social and Cultural Rights and the International Covenant on Civil and Political Rights,

Recalling further the relevant agreements, conventions, resolutions, recommendations and other instruments of the United Nations and its specialised agencies concerning the integral development of the human being, economic and social progress and development of all peoples, including those instruments concerning decolonisation, the prevention of discrimination, respect for, and observance of, human rights and fundamental freedoms, the maintenance of international peace and security and the further promotion of friendly relations and co-operation among states in accordance with the Charter,

Recalling the right of peoples to self-determination, by virtue of which they have the right freely to determine their political status and to pursue their economic, social and cultural development,

Recalling further the right of peoples to exercise, subject to relevant provisions of both International Covenants on Human Rights, their full and complete sovereignty over all their natural wealth and resources,

Mindful of the obligation of states under the Charter to promote universal respect for and observance of human rights and fundamental freedoms for all

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23Kenneth Dadzie, Secretary General of UNCTAD, ‘The UN and the Problem of Economic Development’, in Roberts and Kingsbury (eds), United Nations, Divided World, 1994, Oxford: Oxford University Press at pp 298–31.

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without distinction of any kind such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status,

Considering that the elimination of the massive and flagrant violations of the human rights of the peoples and individuals affected by situations such as those resulting form colonialism, neo-colonialism, apartheid, all forms of racism and racial discrimination, foreign domination and occupation, aggression and threats against national sovereignty, national unity and territorial integrity and threats of war would contribute to the establishment of circumstances propitious to the development of a great part of mankind,

Concerned at the existence of serious obstacle to development, as well as to the complete fulfilment of human beings and of peoples, constituted, inter alia, by the denial of civil, political, economic, social and cultural rights, and considering that all human rights and fundamental freedoms are indivisible and interdependent and that, in order to promote development, equal attention and urgent consideration should be given to the implementation, promotion and protection of civil, political, economic, social and cultural rights and that, accordingly, the promotion of, respect for, and enjoyment of certain human rights and fundamental freedoms cannot justify the denial of other human rights and fundamental freedoms,

Considering that international peace and security are essential elements for the realisation of the right to development,

Reaffirming that there is a close relationship between disarmament and development and that progress in the field of development would considerably promote progress in the field of development and that resources released through disarmament measures should be devoted to the economic and social development and well-being of all peoples and, in particular, those of the developing countries,

Recognising that the human person is the central subject of the development process and that development policy should therefore make the human being the main participant and beneficiary of development,

Recognising that the conditions favourable to the development of peoples and individuals is the primary responsibility of their states,

Aware that efforts to promote and protect human rights at the international level should be accompanied by efforts to establish a new international economic order,

Confirming that the right to development is an inalienable human right and that equality of opportunity for development is a prerogative both of nations and of individuals who make up nations,

Proclaims the following Declaration on the right to development:

Article 1

1The right to development is an inalienable human right by virtue of which every human person and all peoples are entitled to participate in, contribute to, and enjoy economic, social, cultural and political development, in which all human rights and fundamental freedoms can be fully realised.

2The human right to development also implies the full realisation of the right of peoples to self-determination, which includes, subject to relevant provisions of both International Covenants on Human Rights, the exercise of their inalienable right to full sovereignty over all their natural wealth and resources.

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Article 2

1The human person is the central subject of development and should be the active participant and beneficiary of the right to development.

2All human beings have a responsibility for development, individually and collectively, taking into account the need for full respect of their human rights and fundamental freedoms as well as their duties to the community, which alone can ensure the free and complete fulfilment of the human being, and they should therefore promote and protect an appropriate political, social and economic order for development.

3States have the right and the duty to formulate appropriate national development policies that aim at the constant improvement of the well-being of the entire population and of all individuals, on the basis of their active, free and meaningful participation in development and in the fair distribution of the benefits resulting therefrom.

Article 3

1States have the primary responsibility for the creation of national and international conditions favourable to the realisation of the right to development.

2The realisation of the right to development requires full respect for the principles of international law concerning friendly relations and co-operation among states in accordance with the Charter of the United Nations.

3States have the duty to co-operate with each other in ensuring development and eliminating obstacles to development. states should fulfil their rights and duties in such a manner as to promote a new international economic order based on sovereign equality, interdependence, mutual interest and co-operation among all states, as well as to encourage the observance and realisation of human rights.

Article 4

1States have the duty to take steps, individually and collectively, to formulate international development policies with a view to facilitating the full realisation of the right to development.

2Sustained action is required to promote more rapid development of developing countries. As a complement to the efforts of developing countries, effective international co-operation is essential in providing these countries with appropriate means and facilities to foster their comprehensive development.

Article 5

States shall take resolute steps to eliminate the massive and flagrant violations of the human rights of the peoples and individuals affected by situations such as those resulting form colonialism, neo-colonialism, apartheid, all forms of racism and racial discrimination, foreign domination and occupation, aggression and threats against national sovereignty, national unity and territorial integrity, threats of war and refusal to recognise the fundamental right of peoples to selfdetermination.

Article 6

1All states should co-operate with a view to promoting, encouraging and strengthening universal respect for and observance of all human rights and fundamental freedoms for all without any distinction as to race, sex, language and religion.

2All human rights and fundamental freedoms are indivisible and interdependent, equal attention and urgent consideration should be given to the

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implementation, promotion and protection of civil, political, economic, social and cultural rights.

3 States should take steps to eliminate obstacles to development resulting from failure to observe civil and political rights as well as economic, social and cultural rights.

Article 7

All states should promote the establishment, maintenance and strengthening of international peace and security and, to that end, should do their utmost to achieve general and complete disarmament under effective international control as well as to ensure that the resources released by effective disarmament measures are used for comprehensive development, in particular that of the developing countries.

Article 8

1States should undertake, at the national level, all necessary measures for the realisation of the right to development and shall ensure, inter alia, equality of opportunity for all in their access to basic resources, education, health services, food, housing, employment and the fair distribution of income. Effective measures should be undertaken to ensure that women have an active role in the development process. Appropriate economic and social reforms should be made with a view to eradicating all social injustices.

2States should encourage popular participation in all spheres as an important factor in development and in the full realisation of all human rights.

Article 9

1All the aspects of the right to development set forth in this Declaration are indivisible and interdependent and each of them should be considered in the context of the whole.

2Nothing in this Declaration shall be construed as being contrary to the purposes and principles of the United Nations, or as implying that any state, group or person has a right to engage in any activity or to perform any act aimed at the violation of the rights set forth in the Universal Declaration of Human Rights and in the International Covenants on Human Rights.

Article 10

Steps should be taken to ensure the full exercise and progressive enhancement of the right to development, including the formulation, adopting and implementation of policy, legislative and other measures at the national and international level.

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CHARTER OF ECONOMIC RIGHTS

AND DUTIES OF STATES24

The General Assembly,

Recalling that the United Nations Conference on Trade and Development, in its Resolution 45 (III) of 18 May 1972, stressed the urgency to establish generally accepted norms to govern international economic relations systematically and recognised that it is not feasible to establish a just order and a stable world as long as a Charter to protect the rights of all countries, and in particular the developing states, is not formulated,

Recalling further that in the same resolution it was decided to establish a Working Group of governmental representatives to draw up a draft Charter of Economic Rights and Duties of States, which the General Assembly, in its Resolution 3037 (XXVII) of 19 December 1972, decided should be composed of forty member states,

Noting that, in its Resolution 3082 (XXVIII) of 6 December 1973, it reaffirmed its conviction of the urgent need to establish or improve norms of universal application for the development of international relations on a just and equitable basis and urged the Working Group on the Charter of Economic Rights and Duties of States to complete, as the first step in the codification and development of the matter, the elaboration of a final draft Charter of Economic Rights and Duties of States, to be considered and approved by the General Assembly at its twenty-ninth session,

Bearing in mind the spirit and terms of its Resolutions 3201 (S-VI) and 3202 (S-VI) of 1 May 1974, containing the Declaration and the Programme of Action on the Establishment of a New International Economic Order, which underlined the vital importance of the Charter to be adopted by the General Assembly at its twenty-ninth session and stressed the fact that the Charter shall constitute an effective instrument towards the establishment of a new system of international economic relations based on equity, sovereign equality, and interdependence of the interests of developed and developing countries,

Having examined the report of the Working Group on the Charter of Economic Rights and Duties of States which, as a result of the task they performed in its four sessions held between February 1973 and June 1974, assembled the elements required for the completion and adoption of the Charter of Economic Rights and Duties of States at the twenty-ninth session of the General Assembly, as previously recommended,

Adopts and solemnly proclaims the following Charter:

PREAMBLE

The General Assembly,

Reaffirming the fundamental purposes of the United Nations, in particular the maintenance of international peace and security, the development of friendly relations among nations and the achievement of international co-operation in solving international problems in the economic and social fields,

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24Resolution 3281 (XXIX) adopted on 12 December 1974 by a vote of 120 in favour, six against (Belgium, Denmark, German Federal Republic, Luxembourg, UK, USA) and 10 abstentions.

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Affirming the need for strengthening international co-operation in these fields,

Reaffirming further the need for strengthening international co-operation for development,

Declaring that it is a fundamental purpose of the present Charter to promote the establishment of the new international economic order, based on equity, sovereign equality, interdependence, common interest and co-operation among all states, irrespective of their economic and social systems,

Desirous of contributing to the creation of conditions for:

(a)The attainment of wider prosperity among all countries and of higher standards of living for all peoples;

(b)The promotion by the entire international community of the economic and social progress of all countries, especially developing countries;

(c)The encouragement of co-operation, on the basis of mutual advantage and equitable benefits for all peace-loving states which are willing to carry out the provisions of the present Charter, in the economic, trade, scientific and technical fields, regardless of political, economic or social systems;

(d)The overcoming of main obstacles in the way of the economic development of the developing countries;

(e)The acceleration of the economic growth of developing countries with a view to bridging the economic gap between developing and developed countries;

(f)The protection, preservation and enhancement of the environment,

Mindful of the need to establish and maintain a just and equitable economic and social order through:

(a)The achievement of more rational and equitable international economic relations and the encouragement of structural changes in the world economy;

(b)The creation of conditions which permit the further expansion of trade and intensification of economic co-operation among all nations;

(c)The strengthening of the economic independence of developing countries;

(d)The establishment and promotion of international economic relations, taking into account the agreed differences in development of the developing countries and their specific needs,

Determined to promote collective economic security for development, in particular of the developing countries, with strict respect for the sovereign equality of each state and through the co-operation of the entire community,

Considering that the genuine co-operation among states, based on joint consideration of and concerted action regarding international economic problems, is essential for fulfilling the international community’s desire to achieve a just and rational development of all parts of the world,

Stressing the importance of ensuring appropriate conditions for the conduct of normal economic relations among all states, irrespective of differences in social and economic systems, and for the full respect of the rights of all peoples, as well as strengthening instruments of international economic co-operation as means for the consolidation of peace for the benefit of all,

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Convinced of the need to develop a system of international economic relations on the basis of sovereign equality, mutual and equitable benefit and the close interrelationship of the interests of all states,

Reiterating that the responsibility for the development of every country rests primarily upon itself but that concomitant and effective international cooperation is an essential factor for the full achievement of its own development goals,

Firmly convinced of the urgent need to evolve a substantially improved system of international economic relations,

Solemnly adopts the present Charter of Economic Rights and Duties of States.

CHAPTER I

FUNDAMENTALS OF INTERNATIONAL ECONOMIC RELATIONS

Economic as well as political and other relations among states shall be governed, inter alia, by the following principles:

(a)Sovereignty, territorial integrity and political independence of states;

(b)Sovereign equality of all states;

(c)Non-aggression;

(d)Non-intervention;

(e)Mutual and equitable benefit;

(f)Peaceful coexistence;

(g)Equal rights and self-determination of peoples;

(h)Peaceful settlement of disputes;

(i)Remedying of injustices which have been brought about by force and which deprive a nation of the natural means necessary for normal development;

(j)Fulfilment in good faith of international obligations;

(k)Respect for human rights and fundamental freedoms;

(l)No attempt to seek hegemony and spheres of influence;

(m)Promotion of international social justice;

(n)International co-operation for development;

(o)Free access to and from the sea by land-locked countries within the framework of the above principles.

CHAPTER II

ECONOMIC RIGHTS AND DUTIES OF STATES

Article 1

Every state has the sovereign and inalienable right to choose its economic system as well as its political, social and cultural systems in accordance with the will of its people, without outside interference, coercion or threat in any form whatsoever.

Article 2

1Every state has and shall freely exercise full permanent sovereignty, including possession, use and disposal, over all its wealth, natural resources and economic activities.

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2Each state has the right:

(a)To regulate and exercise authority over foreign investment within its national jurisdiction in accordance with its laws and regulations and in conformity with its national objectives and priorities. No state shall be compelled to grant preferential treatment to foreign investment;

(b)To regulate and supervise the activities of transnational corporations within its national jurisdiction and take measures to ensure that such activities comply with its laws, rules and regulations and conform with its economic and social policies. Transnational corporations shall not intervene in the internal affairs of a host state. Every state should, with full regard for its sovereign rights, co-operate with other states in the exercise of the right set forth in this subparagraph;

(c)To nationalise, expropriate or transfer ownership of foreign property, in which case appropriate compensation should be paid by the state adopting such measures, taking into account its relevant laws and regulations and all circumstances that the state considers pertinent. In any case where the question of compensation gives rise to a controversy, it shall be settled under the domestic law of the nationalising state and by its tribunals, unless it is freely and mutually agreed by all states concerned that other peaceful means be sought on the basis of the sovereign equality of states and in accordance with the principle of free choice of means.

Article 3

In the exploitation of natural resources shared by two or more countries, each state must co-operate on the basis of a system of information and prior consultations in order to achieve optimum use of such resources without causing damage to the legitimate interest of others.

Article 4

Every state has the right to engage in international trade and other forms of economic co-operation irrespective of any differences in political, economic and social systems. No state shall be subjected to discrimination of any kind based solely on such differences. In the pursuit of international trade and other forms of economic co-operation, every state is free to choose the forms of organisation of its foreign economic relations and to enter into bilateral and multilateral arrangements consistent with its international obligations and with the needs of international economic co-operation.

Article 5

All states have the right to associate in organisations of primary commodity producers in order to develop their national economies, to achieve stable financing for their development and, in pursuance of their aims, to assist in the promotion of sustained growth of the world economy, in particular accelerating the development of developing countries. Correspondingly all states have the duty to respect that right by refraining from applying economic and political measures that would limit it.

Article 6

It is the duty of states to contribute to the development of international trade of goods, particularly by means of arrangements and by the conclusion of longterm multilateral commodity agreements, where appropriate, and taking into account the interests of producers and consumers. All states share the responsibility to promote the regular flow and access of all commercial goods

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trade at stable, remunerative and equitable prices, thus contributing to the equitable development of the world economy, taking into account, in particular, the interests of developing countries.

Article 7

Every state has the primary responsibility to promote the economic, social and cultural development of its people. To this end, each state has the right and responsibility to choose its means and goals of development, fully to mobilise and use its resources, to implement progressive economic and social reforms and to ensure the full participation of its peoples in the process and benefits of development. All states have the duty, individually and collectively, to cooperate in order to eliminate obstacles that hinder such mobilisation and use.

Article 8

States should co-operate in facilitating more rational and equitable international economic relations and in encouraging structural changes in the context of a balanced world economy in harmony with the needs and interests of all countries, especially developing countries, and should take appropriate measures to this end.

Article 9

All states have the responsibility to co-operate in the economic, social, cultural, scientific and technological fields for the promotion of economic and social progress throughout the world, especially that of the developing countries.

Article 10

All states are juridically equal and, as equal members of the international community, have the right to participate fully and effectively in the international decision-making process in the solution of world economic, financial and monetary problems, inter alia, through the appropriate international organisations in accordance with their existing and evolving rules, and to share equitably in the befits resulting therefrom.

Article 11

All states should co-operate to strengthen and continuously improve the efficiency of international organisations in implementing measures to stimulate the general economic progress of all countries, particularly of developing countries, and therefore should co-operate to adapt them, when appropriate, to the changing needs of international economic co-operation.

Article 12

1States have the right, in agreement with the parties concerned, to participate in subregional, regional and interregional co-operation in the pursuit of their economic and social development. All states engaged in such co-operation have the duty to ensure that the policies of those groupings to which they belong correspond to the provisions of the present Charter and are outwardlooking, consistent with their international obligations and with the needs of international economic co-operation, and have full regard for the legitimate interests of third countries, especially developing countries.

2In the case of groupings to which the states concerned have transferred or may transfer certain competencies as regards matters that come within the scope of the present Charter, its provisions shall also apply to those groupings, in regard to such matters, consistent with the responsibilities of such states as members of such groupings. Those states shall co-operate in the observance by the groupings of the provisions of this Charter.

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Article 13

1Every state has the right to benefit from the advances and developments in science and technology for the acceleration of its economic and social development.

2All states should promote international scientific and technological cooperation and the transfer of technology, with proper regard for all legitimate interests including, inter alia, the rights and duties of holders, suppliers and recipients of technology. In particular, all states should facilitate the access of developing countries to the achievements of modern science and technology, the transfer of technology and the creation of indigenous technology for the benefit of the developing countries in forms and in accordance with procedures which are suited to their economies and their needs.

3Accordingly, developed countries should co-operate with the developing countries in the establishment, strengthening and development of their scientific and technological infrastructures and their scientific activities so as to help to expand and transform the economies of developing countries.

4All states should co-operate in research with a view to evolving further internationally accepted guidelines or regulations for the transfer of technology, taking fully into account the interests of developing countries.

Article 14

Every state has the duty to co-operate in promoting a steady and increasing expansion and liberalisation of world trade and an improvement in the welfare and living standards of all peoples, in particular those of developing countries. Accordingly, all states should co-operate, inter alia, towards the progressive dismantling of obstacles to trade and the improvement of the international framework for the conduct of world trade and, to these ends, co-ordinated efforts shall be made to solve in an equitable way the trade problems of all countries, taking into account the specific trade problems of the developing countries. In this connection, states shall take measures aimed at securing additional benefits for the international trade of developing countries so as to achieve a substantial increase in their foreign exchange earnings, the diversification of their exports, the acceleration of the rate of growth of their trade, taking into account their development needs, an improvement in the possibilities for these countries to participate in the expansion of world trade and a balance more favourable to developing countries in the sharing of the advantages resulting from this expansion, through, in the largest possible measure, a substantial improvement in the conditions of access for the products of interests to the developing countries and, wherever appropriate, measures designed to attain stable, equitable and remunerative prices for primary products.

Article 15

All states have the duty to promote the achievement of general and complete disarmament under effective international control and to utilise the resources released by effective disarmament measures for the economic and social development of countries, allocating a substantial portion of such resources as additional means for the development needs of developing countries.

Article 16

1It is the right and duty of all states, individually and collectively, to eliminate colonialism, apartheid, racial discrimination, neo-colonialism and all forms of foreign aggression, occupation and domination, and the economic and social consequences thereof, as a prerequisite for development. States which

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practise such coercive policies are economically responsible to the countries, territories and peoples affected for the restitution and full compensation for the exploitation and depletion of, and damages to, the natural and all other resources of those countries, territories and peoples. It is the duty of all states to extend assistance to them.

2No states has the right to promote or encourage investments that may constitute an obstacle to the liberation of a territory occupied by force.

Article 17

International co-operation for development is the shared goal and common duty of all states. Every state should co-operate with the efforts of developing countries to accelerate their economic and social development by providing favourable external conditions and by extending active assistance to them, consistent with their development needs and objectives, with strict respect for the sovereign equality of states and free of any conditions derogating from their sovereignty.

Article 18

Developed countries should extend, improve and enlarge the system of generalised non-reciprocal and non-discriminatory tariff preferences to the developing countries consistent with the relevant agreed conclusions and relevant decisions as adopted on this subject, in the framework of the competent international organisations. Developed countries should also give serious consideration to the adoption of other differential measures, in areas where this is feasible and appropriate and in ways which will provide special and more favourable treatment, in order to meet the trade and development needs of the developing countries. In the conduct of international economic relations the developed countries should endeavour to avoid measures having a negative effect on the development of the national economies of the developing countries, as promoted by generalised tariff preferences and other generally agreed differential measures in their favour.

Article 19

With a view to accelerating the economic growth of developing countries and bridging the gap between developed and developing countries, developed countries should grant generalised preferential, non-reciprocal and nondiscriminatory treatment to developing countries in those fields of international economic co-operation where it may be feasible.

Article 20

Developing countries should, in their efforts to increase their overall trade, give due attention to the possibility of expanding their trade with socialist countries, by granting to these countries conditions for trade not inferior to those granted normally to the developed market economy countries.

Article 21

Developing countries should endeavour to promote the expansion of their mutual trade and to this end may, in accordance with the existing and evolving provisions and procedures of international agreements where applicable, grant trade preferences to other developing countries without being obliged to extend such preferences to developed countries, provided these arrangements do not constitute an impediment to general trade liberalisation and expansion.

Article 22

1All states should respond to the generally recognised or mutually agreed development needs and objectives of developing countries by promoting

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increased net flows of real resources to the developing countries from all sources, taking into account any obligations and commitments undertaken by the states concerned, in order to reinforce the efforts of developing countries to accelerate their economic and social development.

2In this context, consistent with the aims and objectives mentioned above and taking into account any obligations and commitments undertaken in this regard, it should be their endeavour to increase the net amount of financial flows from official sources to developing countries and to improve the terms and conditions thereof.

3The flow of development assistance resources should include economic and technical assistance.

Article 23

To enhance the effective mobilisation of their own resources, the developing countries should strengthen their economic co-operation and expand their mutual trade so as to accelerate their economic and social development. All countries, especially developed countries, individually as well as through the competent international organisations of which they are members, should provide appropriate and effective support and co-operation.

Article 24

All states have the duty to conduct their mutual economic relations in a manner which takes into account the interests of other countries. In particular, all states should avoid prejudicing the interests of developing countries.

Article 25

In furtherance of world economic development, the international community, especially its developed members, shall pay special attention to the particular needs and problems of the least developed among the developing countries, of land-locked developing countries and also island developing countries, with a view to helping them to overcome their particular difficulties and thus contribute to their economic and social development.

Article 26

All states have the duty to coexist in tolerance and live together in peace, irrespective of differences in political, economic, social and cultural systems, and to facilitate trade between states having difference economic and social systems. International trade should be conducted without prejudice to generalised nondiscriminatory and non-reciprocal preferences in favour of developing countries, on the basis of mutual advantage, equitable benefits and the exchange of most- favoured-nation treatment.

Article 27

1Every state has the right to enjoy fully the benefits of world invisible trade and to engage in the expansion of such trade.

2World invisible trade, based on efficiency and mutual and equitable benefit, furthering the expansion of the world economy, is the common goal of all states. The role of developing countries in world invisible trade should be enhanced and strengthened consistent with the above objective, particular attention being paid to the special needs of developing countries.

3All states should co-operate with developing countries in their endeavours to increase their capacity to earn foreign exchange from invisible transactions, in accordance with the potential and needs of each developing country and consistent with the objectives mentioned above.

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Article 28

All states have the duty to co-operate in achieving adjustments in the prices of exports of developing countries in relation to prices of their imports so as to promote just and equitable terms of trade for them, in a manner which is remunerative for producers and equitable for producers and consumers.

CHAPTER III

COMMON RESPONSIBILITIES TOWARDS THE INTERNATIONAL COMMUNITY

Article 29

The sea-bed and ocean floor and the subsoil thereof, beyond the limits of national jurisdiction, as well as the resources of the area, are the common heritage of mankind. On the basis of the principles adopted by the General Assembly in Resolution 2749 (XXV) of 17 December 1970, all states shall ensure that the exploration of the area and the exploitation of its resources are carried out exclusively for peaceful purposes and that the benefits derived therefor are shared equitably by all states, taking into account the particular interests and needs of developing countries; an international regime applying to the area and its resources and including appropriate international machinery to give effect to its provisions shall be established by an international treaty of universal character, generally agreed upon.

Article 30

The protection, preservation and enhancement of the environment for the present and future generations is the responsibility of all states. All states shall endeavour to establish their own environmental and developmental policies in conformity with such responsibility. The environmental policies of all states should enhance and not adversely affect the present and future development potential of developing countries. All states have the responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other states or of areas beyond the limits of national jurisdiction. All states should co-operate in evolving international norms and regulations in the field of the environment.

CHAPTER IV

FINAL PROVISIONS

Article 31

All states have the duty to contribute to the balanced expansion of the world economy, taking duly into account the close interrelationship between the wellbeing of the developed countries and the growth and development of the developing countries, and the fact that the prosperity of the international community as a whole depends upon the prosperity of its constituent parts.

Article 32

No state may use or encourage the use of economic, political or any other type of measures to coerce another state in order to obtain from it the subordination of the exercise of its sovereign rights.

Article 33

1Nothing in the present Charter shall be construed as impairing or derogating from the provisions of the Charter of the United Nations or actions taken in pursuance thereof.

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2In their interpretation and application, the provisions of the present Charter are interrelated and each provision should be construed in the context of the other provisions.

Article 34

An item on the Charter of Economic Rights and Duties of States shall be included in the agenda of the General Assembly at its thirtieth session, and thereafter on the agenda of every fifth session. In this way a systematic and comprehensive consideration of the implementation of the Charter, covering both progress achieved and any improvements and additions which might become necessary, would be carried out and appropriate measures recommended. Such consideration should take into account the evolution of all the economic, social, legal and other factors related to the principles upon which the present Charter is based and on its purpose.

DECLARATION ON THE ESTABLISHMENT OF A NEW

INTERNATIONAL ECONOMIC ORDER25

The General Assembly

Adopts the following Declaration:

We, the members of the United Nations,

Having convened a special session of the General Assembly to study for the first time the problems of raw materials and development, devoted to the consideration of the most important economic problems facing the world community,

Bearing in mind the spirit, purposes and principles of the Charter of the United Nations to promote the economic advancement and social progress of all peoples,

Solemnly proclaim our united determination to work urgently for THE ESTABLISHMENT OF A NEW INTERNATIONAL ECONOMIC ORDER based on equity, sovereign equality, interdependence, common interest and cooperation among all states, irrespective of their economic and social systems which shall correct inequalities and redress existing injustices, make it possible to eliminate the widening gap between the developed and the developing countries and ensure steadily accelerating economic and social development and peace and justice for present and future generations, and, to that end, declare:

1 The greatest and most significant achievement during the last decades has been the independence from colonial and alien domination of a large number of peoples and nations which has enabled them to become members of the community of free peoples. Technological progress has also been made in all spheres of economic activities in the last three decades, thus providing a solid potential for improving the well-being of all peoples. However, the remaining vestiges of alien and colonial domination, foreign occupation, racial discrimination, apartheid and neo-colonialism in all its forms continue to be among the greatest obstacles to the full emancipation and progress of the developing countries and all the peoples involved. The benefits of technological

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25 General Assembly Resolution 3201 (XXIX) of 1 May 1974 – adopted without a vote.

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progress are not shared equitably by all members of the international community. The developing countries, which constitute 70% of the world’s population, account for only 30% of the world’s income. It has proved impossible to achieve an even and balanced development of the international community under the existing international economic order. The gap between the developed and developing countries continues to widen in a system which was established at a time when most of the developing countries did not even exist as independent states and which perpetuates inequality.

2The present international economic order is in direct conflict with current developments in international political and economic relations. Since 1970, the world economy has experienced a series of grave crises which have had severe repercussions, especially on the developing countries because of their generally greater vulnerability to external economic impulses. The developing world has become a powerful factor that makes its influence felt in all fields of international activity. These irreversible changes in the relationship of forces in the world necessitate the active, full and equal participation of the developing countries in the formulation and application of all decisions that concern the international community.

3All these changes have thrust into prominence the reality of interdependence of all members of the world community. Current events have brought into sharp focus the realisation that the interests of the developed countries and those of the developing countries can no longer be isolated from each other, that there is a close interrelationship between the prosperity of the developed countries and the growth and development of the developing countries, and that the prosperity of the international community as a whole depends upon the prosperity of its constituent parts. International co-operation for development is the shared goal and common duty of all countries. Thus the political, economic and social well-being of present and future generations depends more than ever on co-operation between all the members of the international community on the basis of sovereign equality and the removal of the disequilibrium that exists between them.

4The new international economic order should be founded on full respect for the following principles:

(a)Sovereign equality of all states, self-determination of all peoples, inadmissibility of the acquisition of territories by force, territorial integrity and non-interference in the internal affairs of other states;

(b)The broadest co-operation of all the states members of the international community, based on equity, whereby the prevailing disparities in the world may be banished and prosperity secured for all;

(c)Full and effective participation on the basis of equality of all countries in the solving of world economic problems in the common interest of all countries, bearing in mind the necessity to ensure the accepted development of all the developing countries, while devoting particular attention to the adoption of special measures in favour of the least developed, land-locked and island developing countries as well as those developing countries most seriously affected by economic crises and natural calamities, without losing sight of the interests of other developing countries;

(d)The right of every country to adopt the economic and social system that it deems the most appropriate for its own development and not to be subjected to discrimination of any kind as a result;

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(e)Full permanent sovereignty of every state over its natural resources and all economic activities. In order to safeguard these resources, each state is entitled to exercise effective control over them and their exploitation with means suitable to its own situation, including the right to nationalisation or transfer of ownership to its nationals, this right being an expression of the full permanent sovereignty of the state. No state may be subjected to economic, political or any other type of coercion to prevent the free and full exercise of this inalienable right;

(f)the right of all states, territories and peoples under foreign occupation, alien and colonial domination or apartheid to restitution and full compensation for the exploitation and depletion of, and damages to, the natural resources and all other resources of those states, territories and peoples;

(g)Regulation and supervision of the activities of transnational corporations by taking measures in the interest of the national economies of the countries where such transnational corporations operate on the basis of full sovereignty of those countries;

(h)The right of the developing countries and the peoples of territories under colonial and racial domination and foreign occupation to achieve their liberation and to regain effective control over their natural resources and economic activities;

(i)The extending of assistance to developing countries, peoples and territories which are under colonial and alien domination, foreign occupation, racial discrimination or apartheid or are subjected to economic, political or any other type of coercive measures to obtain from them the subordination of the exercise of their sovereign rights and to secure from them advantages of any kind, and to neo-colonialism in all its forms, and which have established or are endeavouring to establish effective control over their natural resources and economic activities that have been or are still under foreign control;

(j)Just and equitable relationship between the prices of raw materials, primary commodities, manufactured and semi-manufactured goods, exported by developing countries and the prices of raw materials, primary commodities, manufactures, capital goods and equipment imported by them with the aim of bringing about sustained improvement in their unsatisfactory terms of trade and the expansion of the world economy;

(k)Extension of active assistance to developing countries by the whole international community, free of any political or military conditions;

(l)Ensuring that one of the main aims of the reformed international monetary system shall be the promotion of the development of the developing countries and the adequate flow of real resources to them;

(m)Improving the competitiveness of natural materials facing competition from synthetic substitutes;

(n)Preferential and non-reciprocal treatment for developing countries wherever feasible, in all fields of economic co-operation whenever possible;

(o)Securing favourable conditions for the transfer of financial resources to developing countries;

(p)Giving to the developing countries access to the achievements of modern science and technology, and promoting the transfer of technology and the creation of indigenous technology for the benefit of the developing countries in forms and in accordance with procedures which are suited to their economies;

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(q)The need for all states to put an end to the waste of natural resources, including food products;

(r)The need for developing countries to concentrate all their resources for the cause of development;

(s)The strengthening, through individual and collective actions, of mutual economic, trade, financial and technical co-operation among the developing countries, mainly on a preferential basis;

(t)Facilitating the role which producers’ associations may play within the framework of international co-operation and, in pursuance of their aims, inter alia, assisting in the promotion of sustained growth of the world economy and accelerating the development of developing countries.

5The unanimous adoption of the International Development Strategy for the Second United Nations Development Decade was an important step in the promotion of international economic co-operation on a just and equitable basis. The accelerated implementation of obligations and commitments assumed by the international community within the framework of the Strategy, particularly those concerning imperative development needs of developing countries, would contribute significantly to the fulfilment of the aims and objectives of the present Declaration.

6The United Nations as a universal organisation should be capable of dealing with problems of international economic co-operation in a comprehensive manner and ensuring equally the interests of all countries. It must have an even greater role in the establishment of a new international economic order. The Charter of Economic Rights and Duties of States, for the preparation of which the present Declaration will provide an additional source of inspiration, will constitute a significant contribution in this respect. All the states members of the United Nations are therefore called upon to exert maximum efforts with a view to securing the implementation of the present Declaration, which is one of the principal guarantees for the creation of better conditions for all peoples to reach a life worthy of human dignity.

7The present Declaration on the Establishment of a New International Economic Order shall be one of the most important bases of economic relations between all peoples and all nations.

17.6 Expropriation of foreign-owned property

GENERAL ASSEMBLY RESOLUTION ON PERMANENT

SOVEREIGNTY OVER NATURAL RESOURCES 196226

[RESOLUTION 1803 (XVII)]

The General Assembly,

Recalling its Resolutions 523 (VI) of 12 January 1952 and 626 (VII) of 21 December 1952,

Bearing in mind its Resolution 1314 (XII) of 12 December 1958, by which it established the Commission on Permanent Sovereignty over Natural Resources and instructed it to conduct a full survey of the status of permanent sovereignty

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26Adopted by the UN General Assembly on 14 December 1962: 87 states voted in favour, two against (France and South Africa) and the USSR abstained.

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over natural wealth and resources as a basic constituent of the right to selfdetermination, with recommendations, where necessary, for its strengthening, and decided further that, in the conduct of the full survey of the status of the permanent sovereignty of peoples and nations over their natural wealth and resources, due regard should be paid to the rights and duties of states under international law and to the importance of encouraging international cooperation in the economic development of developing countries,

Bearing in mind its Resolution 1515 (XV) of 15 December 1960, in which it recommended that the sovereign right of every state to dispose of its wealth and natural resources should be respected,

Considering that any measure in this respect must be based on the recognition of the inalienable right of all states freely to dispose of their natural wealth and resources in accordance with their national interests, and on respect for the economic independence of states,

Considering that nothing in para 4 below in any way prejudices the position of any member state on any aspect of the question of the rights and obligations of successor states and governments in respect of property acquired before the accession to complete sovereignty of countries formerly under colonial rule,

Noting that the subject of succession of states and governments is being examined as a matter of priority by the International Law Commission,

Considering that it is desirable to promote international co-operation for the economic development of the developing countries, and that the economic and financial agreements between the developed and the developing countries must be based on the principles of equality and of the right of peoples and nations to self-determination,

Considering the benefits to be derived from exchanges of technical and scientific information likely to promote the development and use of such resources and wealth, and the important part which the United Nations and other international organisations are called upon to play in that connection,

Attaching particular importance to the question of promoting the economic development of developing countries and securing their economic independence,

Noting that the creation and strengthening of the inalienable sovereignty of states over their natural wealth and resources reinforces their economic independence,

Desiring that there should be further consideration by the United Nations of the subject of permanent sovereignty over natural resources in the spirit of international co-operation in the field of economic development, particularly that of the developing countries,

I

Declares that:

1The right of peoples and nations to permanent sovereignty over their natural wealth and resources must be exercised in the interest of their national development and of the well-being of the people of the state concerned;

2The exploration, development and disposition of such resources, as well as the import of the foreign capital required for these purposes, should be in conformity with the rules and conditions which the peoples and nations freely consider to be necessary or desirable with regard to the authorisation, restriction or prohibition of such activities;

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3In cases where authorisation is granted, the capital imported and the earnings on that capital shall be governed by the terms thereof, by the national legislation in force, and by international law. The profits derived must be shared in the proportions freely agreed upon, in each case, between the investors and the recipient state, due care being taken to ensure that there is no impairment, for any reason, of that state’s sovereignty over its natural wealth and resources;

4Nationalisation, expropriation or requisitioning shall be based on grounds or reasons of public utility, security or the national interest which are recognised as overriding purely individual or private interests, both domestic and foreign. In such cases the owner shall be paid appropriate compensation, in accordance with the rules in force in the state taking such measures in the exercise of its sovereignty and in accordance with international law. In any case where the question of compensation gives rise to a controversy, the national jurisdiction of the state taking such measures shall be exhausted. However, upon agreement by sovereign states and other parties concerned, settlement of the dispute should be made through arbitration or international adjudication;

5The free and beneficial exercise of the sovereignty of peoples and nations over their natural resources must be furthered by the mutual respect of states based on their sovereign equality;

6International co-operation for the economic development of developing countries, whether in the form of public or private capital investments, exchange of goods and services, technical assistance, or exchange of scientific information, shall be such as to further their independent national development and shall be based upon respect for their sovereignty over their natural wealth and resources;

7Violation of the rights of peoples and nations to sovereignty over their natural wealth and resources is contrary to the spirit and principles of the Charter of the United Nations and hinders the development of international co-operation and the maintenance of peace;

8Foreign investment agreements freely entered into by, or between, sovereign states shall be observed in good faith; states and international organisations shall strictly and conscientiously respect the sovereignty of peoples and nations over their natural wealth and resources in accordance with the Charter and the principles set forth in the present resolution.

II

Welcomes the decision of the International Law Commission to speed up its work on the codification of the topic of responsibility of states for the consideration of the General Assembly.

III

Requests the Secretary General to continue the study of the various aspects of permanent sovereignty over natural resources, taking into account the desire of member states to ensure the protection of their sovereign rights while encouraging international co-operation in the field of economic development, and to report to the Economic and Social Council and to the General Assembly, if possible at its eighteenth session.

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GENERAL ASSEMBLY RESOLUTION ON PRMANENT SOVEREIGNTY OVER NATURAL RESOURCES27

1Strongly reaffirms the inalienable rights of states to permanent sovereignty over all their natural resources, on land within their international boundaries as well as those in the sea bed and the subsoil thereof within their national jurisdiction and in the superjacent waters;

2Supports resolutely the efforts of the developing countries and of the peoples of the territories under colonial and racial domination and foreign occupation in their struggle to regain effective control over their natural resources;

3Affirms that the application of the principle of nationalisation carried out by states, as an expression of their sovereignty in order to safeguard their natural resources, implies that each state is entitled to determine the amount of possible compensation and the mode of payment, and that any disputes which might arise should be settled in accordance with the national legislation of each state carrying out such measures;

4Deplores acts of states which use force, armed aggression, economic coercion or any other illegal or improper means in resolving disputes concerning the exercise of the sovereign rights mentioned in paras 1 to 3 above;

5Re-emphasises that actions, measures or legislative regulations by states aimed at coercing, directly or indirectly, other states or peoples engaged in the reorganisation of their internal structure or in the exercise of their sovereign rights over their natural resources, both on land and in their coastal waters, are in violation of the Charter of the United Nations;

6Emphasises the duty of all states to refrain in their international relations from military, political, economic or any other form of coercion aimed against the territorial integrity of any state and the exercise of its national jurisdiction;

7Recognises that, as stressed in Economic and Social Council Resolution 1737 (LIV) of 4 May 1973, one of the most effective ways in which the developing countries can protect their natural resources is to establish, promote or strengthen machinery for co-operation among them which has as its main purpose to concert pricing policies, to improve conditions of access to markets, to co-ordinate production policies and, thus, to guarantee the full exercise of sovereignty by developing countries over their natural resources;

8Requests the Economic and Social Council, at its fifty-sixth session, to consider the report of the Secretary General mentioned in the last preambular paragraph above and requests the Secretary General to prepare a supplement to that report, in the light of the discussion that are to take place at the fifty-sixth session of the Council and of any other relevant developments, and to submit that supplementary report to the General Assembly at its twenty-ninth session.

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27General Assembly Resolution 3171 (XXVIII) adopted on 17 December 1973: 108 states voted in favour, one against (UK) and 16 abstained (including France, FRG, Japan and the USA).

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