2.  A Second and Third Window for the UNDP

We have argued that foreign aid programmes as conventionally conceived and administered do not have a future within a new framework for development cooperation. The notions of "donors" and "recipients" as used for the past forty-five years are outmoded and should be replaced by a broader conception of international economic relations. During the Cold War the volume and distribution of foreign aid were strongly influenced by security issues, and security was perceived to refer to the security of states, not the security of peoples. We now need to change our focus and make the well being of people the organizing principle for global economic and political relations. In place of donor and recipient states we need to substitute the notion of cooperation among all states to promote the human development of people everywhere.

This does not imply there is no need to transfer resources from rich to poor countries. On the contrary, we have argued in favour of a restructured global aid programme that would channel resources to the very poorest countries. The purpose of this international development fund would be humanitarian, namely, to reduce the most acute forms of poverty. In effect, foreign aid would act as a global safety net. Contributions to the fund would be an international obligation of all states with per capita incomes above a threshold level; resources would be raised automatically and disbursed automatically to countries with a per capita income below an agreed threshold level. While we accept the need for a policy dialogue, and welcome it, we do not favour linking the allocation of aid to acceptance by governments of international policy prescriptions. The advocacy of sensible development policies should not become entangled in the global safety net.

The size of the international development fund we envisage would be comparable to the current level of official development assistance. However the number of countries contributing to the fund would be larger than the number of official donors today, the fund would be administered by a multilateral institution (the UNDP), the number of countries eligible to receive assistance from the fund would be smaller than the number receiving official development assistance today and all disbursements from the fund would be in the form of grants. The burden of aid would thus be spread fairly and the benefits of assistance would be concentrated where they are most needed.
 

Payment for services rendered

Quite apart from resource transfers to provide a global safety net, there is potentially a large number of inter-governmental transactions that would be of mutual interest to the contracting parties. Where these transactions involve more than two countries, it may be advantageous to all concerned if the same multilateral institution that administers the international development fund also assumes responsibility for collecting and disbursing these funds and monitoring contract compliance. In effect this would become a second window of operations for the UNDP, the new international development institution.

The purpose of the second window is to maintain a clear separation between foreign assistance proper and payments to countries for services rendered. There is a category of transactions, mostly between rich countries and poor, where the motivation is not humanitarian interests but self-interest. These transactions are perfectly legitimate, in fact beneficial; they are of a market-type but are not mediated by markets; and they are likely to increase in future. But they are not foreign aid and should not be confused with foreign aid; they are payments for services rendered.

Examples of what we have in mind are (i) environmental programmes in developing countries which are partly or even primarily of benefit to developed countries; (ii) programmes to destroy nuclear weapons and reduce the risks of radiation to countries downwind of nuclear facilities; (iii) programmes in developing countries to reduce the supply of narcotic drugs exported to developed countries, such as crop substitution projects; and (iv) public health measures in developing countries designed to prevent the spread of the AIDs epidemic or other communicable diseases. One might also include (v) financial support for programmes to convert armaments factories to civilian purposes as a way of reducing exports of military equipment and thereby contributing to global peace; (vi) programmes to control international terrorism and transnational crime; and possibly (vii) measures to improve the health and economic and social position of women as ways to reduce the rate of growth of the world's population. One would also consider (viii) negotiations over the joint financing and management of natural resources which cross national boundaries, such as coastal fisheries and river systems, and perhaps ultimately (ix) the management of the global commons, i.e., antarctica, the oceans and outer space. If one looks ahead there are many possibilities, although it would be sensible to begin modestly and allow the machinery for negotiation to evolve naturally in the light of experience.

The central point is that if the developed countries wish the remaining tropical forests to be preserved in order to prevent global warming and maintain biodiversity, then it is reasonable that they should bear part of the costs of preservation. Their portion of the costs should reflect the portion of benefits that accrue to them. Similarly, if the developed countries wish to discourage the use of CFCs in developing countries in order to reduce the rate of depletion of the ozone layer in the upper atmosphere, then they should compensate the developing countries for net social benefits forgone, either by making cash payments or by providing substitute technology or by helping to finance the development of alternative technologies. Economic and technological globalization generate "externalities" and "free rider" problems, particularly but not exclusively for the environment. As a result, no one has an incentive to contribute to the solution although it is in the interests of all that a solution be found. The purpose of the second window of the UNDP is to provide a mechanism whereby mutually beneficial transactions can be arranged, the transfer of funds facilitated and the results monitored.

The end of the Cold War creates an unprecedented opportunity to transform swords into ploughshares. Unfortunately, however, this a costly process. Nuclear weapons must be disarmed, industries dependent in part on exports of arms must be converted to other purposes or else shut down and their workers found employment elsewhere, and nuclear power plants (a by-product of the nuclear weapons research industry) must either be made safe or alternative sources of energy supplied. It is in the interest of the world as a whole that these tasks be accomplished as quickly as possible, yet it is unrealistic to assume that Russia and the other newly independent former republics of the Soviet Union that possess nuclear weapons, armaments factories and nuclear power stations can finance the reconversion out of their own resources. Some foreign assistance will be necessary. Foreign payments to finance a reconversion programme, however, should not be regarded as foreign aid. Instead they should be treated as payments for benefits received or services rendered and the disbursement of funds should be linked to fulfillment of an internationally agreed contract or compact.

The same principles apply in other areas of mutual interest between developed and developing countries. For example, just as it makes sense for the entry visas of international passengers to be checked at the point of departure rather than at the point of arrival, so too it pays developed countries to support public health programmes in developing countries and thereby prevent the spread to them of communicable diseases. It is cheaper to vaccinate the entire population of developing countries against smallpox than it is to police permanently the borders of developed countries; it is cheaper to clean up the water supply in cholera-prone countries than to prevent contaminated food from being loaded on to airplanes. The old saying that an ounce of prevention is worth a pound of cure applies well to some aspects of international relations between rich and poor countries. Of course, in many cases the developing countries should be spending money on such things as public health measures and clean water supplies regardless of possible external benefits. It is in the self-interest of their people to do so. We are here concerned only with those cases where consideration of external benefits makes the difference in the overall evaluation of a project or programme.

Where there are externalities of the type mentioned, it pays for countries to cooperate. The question then arises as to how much should be paid. In principle the answer is straightforward although in practice quantification is unlikely to be easy. Let us assume the cost of a programme (C) is borne entirely by the country concerned. Some of the benefits also accrue to the country concerned (Bc) and some to the rest of the world (Br). The minimum payment from the rest of the world that would make the project just worthwhile to the country concerned is C-Bc, i.e., the difference between total costs and the benefits received by the country. If C-Bc is negative, the country's benefits exceed its costs and no additional payments would be necessary.

The maximum payment the rest of the world could consider is Br, the value of the benefits received. If Br > (C-Bc), there is room for negotiation and bargaining over the "price": total benefits to the country and the rest of the world combined are greater than total costs and there is some scope to haggle over the distribution of the net benefits. Whatever the outcome of the haggling, however, the payment from the rest of the world to the developing country should be regarded as a price paid for a mutually agreed transaction and not as a form of foreign aid.

The second window of our proposed international development fund would be open to all countries whether members of Group A, B or C. The fund would have an important role to play in identifying mutually beneficial transactions, quantifying benefits and costs, assigning benefits to the countries comprising the rest of the world, negotiating an agreement among all the parties concerned, handling payments and supervising adherence to the agreement. By acting as a disinterested intermediary, the second window could also help to ensure that no one party to a negotiation is able to exploit excessively its bargaining strength to the relative disadvantage of its partners. There is much to be done. The amount of "business" transacted in this way is difficult to forecast, but once the "market" is established the volume of transactions is likely to be considerable. One aspect of the growing interdependence of peoples and countries is an increase in the number of potentially beneficial transactions that do not take place because there is neither a market mechanism to allocate benefits and costs among parties to the transaction nor a government possessing a global jurisdiction with powers to tax and spend that can "internalize" externalities. The mechanism proposed here would remedy this deficiency and make it easier for everyone to share in global opportunities by creating a flexible negotiating framework for mutually beneficial economic cooperation.
 

Compensation for damages

The point of origin for a new framework for international economic cooperation is a liberal, market oriented global economic regime. The rules of the game of such a regime should permit the unimpeded flow worldwide of goods and services, technology, capital and labour. Departures from this regime can on occasion be justified, and we have advocated two major interventions ourselves, but departures from the regime should not be arbitrary and no country should be allowed to ignore the rules with impunity. The rules, after all, are intended to make it possible for everyone to share in global opportunities. Under a liberal regime this implies that commodity markets, capital markets and labour markets should be allowed to operate freely.

We argued above that considerations of equity justify the creation of a foreign aid programme designed to provide a global safety net and reduce poverty in countries where the incidence of poverty is exceptionally high. A progressive income tax on the Group A countries combined with a negative income tax on the Group C countries could be used to transfer resources from rich to poor and bring about an improvement in the global distribution of income. The scheme, we suggested, could be administered by an international development fund which we have named the UNDP.

We also argued, secondly, that considerations of efficiency justified activities to correct market forces where important global negative externalities were present, where free rider problems could not readily be overcome and where markets are missing. A second window at the UNDP, open to all countries, could be created to handle these pseudo-market transactions and improve the functioning of the global economy.

The intellectual basis for a liberal economy is the demonstration that apart from exceptional circumstances both parties to a transaction benefit. The benefits may be unequally distributed, but both parties gain. In the market for goods and services, both the vendor and the purchaser gain. In the capital market, both the lender and the borrower expect to be better off as a result of the transaction. And in the labour market, both those seeking employment and those hiring workers benefit when jobs are filled. It follows from this that when one party refuses to engage in potentially beneficial transactions with another, he harms both himself and his potential trading partner.

One would perhaps not be unduly concerned if an economic agent (a firm or an individual) were to inflict harm upon itself by failing to engage in beneficial economic activity. One might react with pity, puzzlement or irritation, but one is unlikely to respond by offering charity. The old adage that there is no compensation for self-inflicted injury would apply. When one agent injures another, however, our attitudes are likely to change. Indeed in many countries discrimination against workers (on the basis of race, religion, gender) is illegal, as is discrimination against particular groups of borrowers or businesses owned or managed by particular groups of persons. The injured party may take the offender to court and claim substantial damages. There is a remedy in law.

This same principle that applies at the national level can be said to apply at the international level. Indeed normative sanctions already exist: governments that adopt beggar-thy-neighbour policies and thereby impoverish other countries encounter strong disapproval and condemnation by the international community. There are however few provisions in international law to stop such behaviour or to provide compensation to the injured victims. National sovereignty is given precedence over law and justice. As a result, those countries which are damaged by others have few ways to seek redress. They can threaten retaliation, but actual retaliation merely adds to their injuries. They can attempt to negotiate a treaty, but there is no guarantee negotiation will be successful: the offending country, for political reasons of its own, may prefer to continue to inflict injury on itself and others. Or they can attempt to seek relief by appealing to international agreements such as the General Agreement on Tariffs and Trade (GATT), but such agreements are narrow in coverage and their provisions for enforcement are weak.

The time may have come to review the situation and consider whether, within a new framework for economic cooperation, some provision can be made to compensate countries for damages inflicted upon them by other countries. In the discussion below we shall assume that compensation would be payable only in cases where rich countries injure the very poorest countries, i.e., when Group A countries inflict damage on Group C countries. We illustrate how a system of compensation might work by considering three cases, namely (i) brain drain, (ii) the international migration of low-skilled labour and (iii) trade restrictions on exports from developing countries.
 

(i) brain drain

It has long been recognized that the emigration from developing countries of professional, technical and highly skilled persons can result in a serious loss of human capital to the sending country. The developed countries have been the major recipients of this human capital, their immigration laws generally being biased in favour of those who possess valuable skills or finance capital that can be invested in the country of immigration. From the point of view of the developed countries, the numbers involved are relatively small, but from the point of view of some developing countries the numbers can be very large. In Africa, for example, it is estimated that one-third of its highly-educated labour has gone abroad in recent decades.18

The receiving countries benefit from this brain drain in several ways, but most of all because they obtain fully trained people without having had to invest in their education. The sending countries lose in three ways. First, highly skilled persons generate positive externalities that accrue to the rest of the population. For instance, the value of a doctor to a developing country exceeds the personal salary he receives. Second, an exodus of technical and professional people creates a shortage of the skills they possess. This drives up the wages and salaries of those skilled persons left behind relative to the incomes of the less skilled. As a result, the distribution of income becomes more unequal, to the relative and absolute disadvantage of the less skilled.

Third, to the extent that tertiary education is financed by taxpayers, the highly skilled were subsidized as students by the society at large. Brain drain in effect prevents taxpayers from reaping a return on their investment and deprives them of the human capital they helped to create. One way to correct for this would be to require the beneficiaries to repay the subsidy prior to emigration. Another way would be to eliminate the subsidy, i.e., to charge students the full cost of tertiary education. Yet another possibility would be to introduce a two-tiered system of tuition charges under which those paying the higher (full) tuition cost would be free to emigrate while those paying the lower (subsidized) tuition cost would be required to engage in national service for a specified period of time. 19

If international cooperation could be secured, a tidier solution would be possible which would be consistent with the liberal objective that people everywhere should be free to live and work where they please. A simple, workable scheme could be built around three principles. First, compensation would be payable only in the case of those migrating from a Group C to a Group A country. This is commonly what is meant by brain drain and under our proposed scheme migrations from group C to B or between Groups B and A or migrations from Group A to C or intra-Group migrations would be excluded. Second, compensation would be payable only in the case of persons whose tertiary education was subsidized by taxpayers of the sending country. Third, the compensation payable by the receiving to the sending country would be one half the income tax liability of the migrant for x number of years, where x is the number of years of subsidized tertiary education minus the number of years spent working in the sending country after completion of tertiary education.

This is a crude formula and it almost certainly fails to provide full compensation to the taxpayers of Group C countries for the loss of human capital, but at least it acknowledges explicitly that some compensation should be paid by rich countries to the poorest of the developing countries for the damage caused by brain drain. If such a scheme could be implemented, it would represent a major step forward in international economic cooperation.

In principle the developed (Group A) countries should compensate the developing (Group C) countries for the stock of "brain drain" migrants working within their borders. Our proposal deals only with the flow of future migrants in the professional and technical categories but it leaves untouched the problem of arrears, i.e., the cumulative and uncompensated inflow of highly skilled immigrant labour over, say, the last 20 years. The Group A countries, in effect, have accumulated a human capital debt which is owed to the Group C countries and this debt really ought to be repaid. One way to do this, a rough and ready way, would be to offset the human capital debt against the finance capital debt owned by the Group C countries. Mutual cancellation would have the advantage of wiping the slate clean and allow us to proceed with forward-looking global policies.
 

(ii) international migration of low-skilled labour

The international labour market is segmented. Professional, technical and highly skilled labour is relatively free to move and as we have seen, this gives rise in some developing countries to problems of brain drain. On the other hand, the mobility of low-skilled labour is severely restricted by immigration controls, not only in the Group A countries but in many other countries as well, and this deprives millions of poor people of an opportunity to improve their livelihood.

Both the sending and receiving countries benefit from a free global labour market. The receiving countries are able to augment their human capital, increase the level of output and incomes and accelerate the rate of growth. The economic boom in Western Europe in the 1960s and the explosive growth in the oil producing states of the Middle East were made possible by large flows of immigrant labour. Contrary to popular perceptions, immigration stimulates expansion and prosperity rather than depresses it. The main economic disadvantage is that large inflows of low-skilled labour dampen wages at the bottom of the scale and this tends to increase inequality in the national distribution of income, while of course reducing it internationally.

Some of these points can be illustrated by a simple diagram. In Figure 2:1 we assume the initial supply of low-skilled labour is OC. Given the demand for labour represented by the marginal product curve (MPL), this results in a wage rate of w(0) and total output of OABC. This output is divided between the low-skilled workers (Ow(0)BC) and the rest of society (w(0)AB). Assume the supply curve of labour shifts to S_ because of immigration. The additional amount of labour (CF) increases total output by CBEF, of which CDEF is received by the immigrant workers. The rest, the triangle DBE, accrues to the rest of (the non-immigrant) society. That is, the income of the non-immigrants rises by DBE, and if part of this additional income is invested, the rate of growth should increase.

Within the receiving country, however, the wage rate for low-skilled labour falls from w(0) to w(1). There is a redistribution of income from the low-skilled to the rest of the population (highly skilled labour, professional and managerial workers, property owners) of w(1)w(0)BD. Since in a market economy the remuneration of the low-skilled will be less than the average, the initial effect of immigration will be to transfer income from the poor to the rich within the receiving country. That is, unless suitable policy measures are adopted by the government, the distribution of income will become more unequal. This explains why many workers in developed countries are hostile to large scale immigration. Potentially, however, everyone in the receiving country could be better off and hence policy makers should concentrate not on keeping foreign workers out but on introducing policies which ensure that income is equitably distributed.

The analysis so far, moreover, has considered only the immediate impact effects of migration. The dynamic effects lead to additional gains for both the migrants and the local population. These dynamic effects arise from investments in human and physical capital that are made possible by the original increase in total income. The local population is likely to save and invest part of their additional income (DBE) and this will increase the stock of capital, raise the productivity of labour and, in our figure, shift the marginal product of labour curve to the right. More important, migrants are known for their entrepreneurial propensities, their thriftiness and the emphasis they place on education and training. That is, a relatively high proportion of the migrants' additional income (CDEF) is likely to be channelled into human and physical capital formation and this will shift the marginal product curve even further to the right.

This situation is described in Figure 2.2. The shift of the marginal product curve to MPL_ raises total output to OXZF. This represents an increase over the original output by an amount equal to ABCFZX (the total area shaded). This additional output has two components: an increase arising from the impact effect of migration equal to CBEF (the light shading) and an additional increase arising from the dynamic effects of migration on investment and growth equal to AEZX (the dark shading). These dynamic effects, because of the operation of compound growth rates, are likely to be more important than the impact effects and will quickly counteract the tendency of immigration to depress the wages of low-skilled labour and worsen the distribution of income. These dynamic effects of immigration on growth often are overlooked.

Our analysis assumes all workers are able to find employment. Some challenge this assumption and it is frequently argued that in periods of high unemployment, immigration accentuates the problem of joblessness. In fact there is little evidence to support this since most immigrants enter low wage occupations which are not attractive to the indigenous population and few become openly unemployed. Moreover, in practice the inflow of immigrant workers is small in relation to the size of the total labour force and hence even if migrant workers were to displace some indigenous workers and add to unemployment, the quantitative effect on the aggregate rate of unemployment would be marginal. In any case, the solution to unemployment is not to restrict the international mobility of labour but to adopt macroeconomic policies which encourage employment, investment and growth. If all of the Group A countries were to seal their borders to keep out foreign workers, the effect on the level of unemployment would be approximately zero. In some cases, in fact, unemployment might actually increase, e.g., if a less fluid labour market were to reduce incentives to invest.

It is now obvious, moreover, that it simply isn't possible to stop the migration of labour. If immigration is declared illegal, workers will continue to migrate, probably in slightly reduced numbers, but they will enter the recipient countries as undocumented, illegal workers, vulnerable to exploitation (particularly if they are women) and with few if any rights. As long as global income differentials are as great as they are, the incentive to migrate will remain strong, and policies to reduce immigration will in most cases be only partially successful. Wise policy makers in receiving countries will not attempt to prevent the flows of labour but to accommodate them.

The stock of migrants actually is very small. Only one or two per cent of the world's population, say 50 to 100 million people, live outside their country of origin.20  Moreover, most migrants do not live in the rich Group A countries; they live in other developing countries, i.e., the Group B and C countries. Rough calculations suggest that only 21 per cent of the world's migrants live in developed countries. This includes 13 per cent of the international refugee population and 23 per cent of the non-refugee migrant population. It is ironical and more than a little sad that the greatest barriers to the international flow of labour and the loudest complaints about immigration are found in the developed countries whereas in fact most of the immigrants are located in developing countries. Those who live in comfort seem least inclined to share global opportunities with those who do not, even when their lack of generosity also harms themselves.

The benefits to the sending countries are considerable. Not only do the migrant workers benefit directly from the higher incomes earned abroad, but those left behind also benefit from remittances sent home. Remittances, in fact, are between $66 billion and $70 billion a year, i.e., significantly larger than the $58.3 billion of official development assistance received by developing countries in 1992. If restrictions on the international migration of low-skilled labour were reduced, there is no doubt that remittances would increase sharply, further reducing the relative significance of aid.

Obstacles to the mobility of labour erected in the developed countries harm the developing countries. The extent of the damage depends on two things. First, it depends on the difference between what the migrant would earn in the rest of the world if she were free to migrate [Wr)] and what she earns in her country of origin [W(c)]. The expression [W(r)- W(c)] measures the gain in real income received by the average migrant worker.

Second, the amount of damage depends on the extent to which barriers to immigration actually succeed in reducing the flow of migration. Let us call _M a measure of labour market repression. It represents the amount by which the number of migrants would increase each year if global labour markets were liberalized. Total damage inflicted on the sending countries is thus _M [W(r)- W(c)]

For purposes of illustration, let us assume that only damages suffered as a result of a loss of potential migration from Group C to Group A countries would qualify for compensation. Let us also assume that if global labour markets were free, the annual flow of labour from Group C to Group A countries would increase by one million workers. Lastly, let us assume that on average migration would raise the incomes of migrant workers by $3,000. Under these assumptions, the amount of compensation payable by the Group A countries would be $3 billion. The international agency administering the compensation scheme, the UNDP, would have to devise formulas for raising funds from the Group A countries and for distributing the compensation among the Group C countries, but that should not be too difficult. The important points of principle that should be established is that discrimination against workers whether in the national or the international labour market is no longer acceptable and that those who discriminate are liable for damages. Once these principles are accepted, it should be easy to design a feasible scheme for compensation.
 

(iii) trade restrictions

Although liberal principles are espoused, particularly by some of the major Group A countries, free markets are rare in international trade and the institution responsible for promoting more liberal trade is weak. Indeed the General Agreement on Tariffs and Trade (GATT) covers only 7 per cent of the world output that enters global markets. Primary commodities do not come under the purview of GATT; international trade in services does not come under its jurisdiction; the drafting of rules of the game governing trade in intellectual property rights is not part of its mandate; and of course neither international capital flows nor the international migration of labour are regulated or monitored by GATT. Nearly fifty years after the United Nations was founded, the world still does not have an International Trade Organization. It sorely needs one.

After decades of following protectionist trade policies, the developing countries have begun to liberalize their markets rapidly. Quantitative trade restrictions have been removed, tariffs have been cut sharply and multiple exchange rates have been abandoned. Similarly, in the former Soviet bloc countries, and in China, after decades of following a policy of quasi-autarky, markets have been opened to international trade and vigorous attempts are being made to become more closely integrated into the world economy. Unfortunately, the developed countries, which still account for nearly 85 per cent of world trade, are moving in the opposite direction.

Seen from the perspective of the developing countries, three things can be said about the trade policies of the developed countries. First, protection in the developed countries is strongly biased against exports from the developing countries. This is especially the case for clothing, textiles, footwear, processed primary commodities and light manufactured goods. Second, the level of protection in developed countries is increasing, not diminishing. That is, the developed countries are becoming less liberal, less willing to rely on market forces. Third, the increased protection often takes the form of imposing non-tariff barriers to trade as a way to circumvent the rules of GATT against raising tariffs.

In 1981, non-tariff barriers covered about 21 per cent of the exports from developing countries to the OECD countries. Today, about 28 per cent of the exports from developing countries to the OECD must overcome non-tariff protection. It has become increasingly common for developed countries to protect their domestic markets by "persuading" foreign exporters to accept voluntary export restraints (VERs). The latest estimate is that there are 171 VERs against developing countries as compared to only 117 against other developed countries. Another device used to harass exporters and restrain imports is anti-dumping complaints and countervailing measures against alleged dumping. Here again, the majority of such actions are directed against developing countries. During the period 1981 to 1990 there were 321 anti-dumping and countervailing actions directed against the exports of developing countries as compared to 238 directed against the exports of other developed countries.21

The Group A countries are of course well aware that "developing countries face higher tariffs and a larger range of non-tariff barriers than developed countries",22  but as long as there is no penalty for discrimination, the practice may persist, even though discrimination is not in the general interest of the developed countries themselves. Precise estimates of the damage inflicted upon the developing countries is not available, but the OECD states that "the cost of these barriers has been estimated to exceed the value of aid flows."23 The Economist claims, without giving a source, that "on one estimate, if rich countries abolished all their barriers to third-world goods, the increase in developing nations' exports would be worth twice what they receive in aid."24  In agriculture alone, trade protection and price support policies lower the per capita income of the developed countries on average by $75 (in 1985 prices) and inflict a loss on Argentina, potentially a major supplier, of $100 per capita. The developing countries as a whole, despite benefitting from cheaper food (world food prices are estimated to be 14 per cent lower than otherwise as a result of agricultural protection), join Argentina as net losers.25

Once again, a case can be made, within a new framework for economic cooperation, for compensation to be paid by Group A countries for the damage caused to the economies of Group C countries by restrictions on their exports. It should not be difficult to estimate the amount by which value added from exporting would rise in Group C countries if all barriers to trade in Group A countries were removed. This would be the amount of compensation payable to eligible developing countries. As before, the UNDP would be responsible for preparing the estimates, collecting compensation payments from the trade discriminating countries in Group A and distributing the monies raised to the Group C countries. Such a scheme would provide strong incentives in favour of trade liberalization, either through multilateral negotiations or through unilateral action. Indeed any country which wished to avoid a liability for compensation could do so at a stroke by eliminating trade barriers against Group C countries, and in the process it would increase efficiency in the allocation of its resources and raise the standard of living of its own people. If the compensation scheme works perfectly, obstacles to international trade between Group A and C countries would disappear and no compensation payments would in fact be made.

18  UNFPA, The State of World Population 1993, New York, 1993, p. 23.

19  See Keith Griffin and Azizur Rahman Khan, op. cit. , pp. 54-6.

20 UNFPA, op. cit., p. 7.

21  OECD, Development Assistance Committee, op. cit., pp. 44-5. The OECD cites World Bank, Global Economic Prospects and the Developing Countries, Washington, D.C., April 1992 and Samuel Laird and Alexander Yeats, Quantitative Methods for Trade-Barrier Analysis, London: Macmillan, 1990.

22  Ibid., p. 37.

23  Ibid.

24  "While the Rich World Talks," The Economist, 10 July 1993, p. 12.

25 Tod Tyers and Kym Anderson, Disarray in World Food Markets: A Quantitative Assessment, Cambridge: Cambridge University Press, 1992.