TERM PAPER ON: INTERNATIONAL ECONOMICS (MKT-520)

NEW INTERNATIONAL ECONOMIC ORDER (NIEO)

University of Dhaka
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Faculty of Business Studies

Department of Marketing

Submitted to

Dr. A.K. Azad

Associate Professor

Submitted by
Nadeem Nafis (41119044)

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Letter of Transmittal

To Dr. A.K. Azad Associate Professor Department of Marketing Faculty of Business Studies University of Dhaka

Dear Sir This is the term paper on International Economics (MKT-520) on the topic The New International Economic Order (NIEO). It is my immense pleasure to write a report on International Economics as this is a course which will give the knowledge of comprehensive economic situation & aspect of various countries in the world & eventually which will lead me to apply marketing knowledge to do business. Moreover this is a course is specially designed for the Marketing MBA course to know worlds economic situation, ideas, opportunities & able to increase competitive advantage of business. Though the course is very tough to complete within the stipulated timeframe but you have made the course so easy to me/us that I find very interesting. There may some error in my writing due to my lack of knowledge but I hope I will recover it if implementation opportunity comes. Hope you will appreciate my hard work and excuse the minor errors. Thanking you for your cooperation.

Sincerely yours Nadeem Nafis (41119044)

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Table of Contents

Introduction Progress and Problems Money and Finance Integrated Programme and Terms of Trade Technology and Transnational Enterprises (TNEs) Sovereignty and Equal Rights Co-operation among Developing Countries Major Elements of NIEO Debate 1984-1994: NIEO Vanishes from Sight The Market Moves Forward, The State Retreats Privatisation Return of the Multinationals International Developments Conclusion

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Introduction

It is now over a decade since the idea of a New International Economic Order (NIEO) has been proposed and gained considerable recognition in the international community. It was an idea which in all its dimensions, embody prescriptions for the various ailments of the world economy as well as providing genuine basis for its future consolidation and development. However, despite the general recognition of the need for the restructuring of the world economy in view of its continuous deterioration and the aggravation of poverty in the developing countries little progress has been made in the implementation of the proposals of the NIEO. Consequently, the hopes about its role and positive contribution to the world economy are rapidly fading. The NIEO which basically seek the restructuring of the pattern of international trade and the flow of capital and technology so that their benefits could be more equitably 'distributed to the developing countries has naturally raised 1m entire array of basic questions. Among them: (1) The question of cost and benefit. Who will have to bear the burden of instituting NIEO and will the results be worth the sacrifices? Will benefits really accrue to the poor people to help them fulfill their basic needs and will developing countries be made truly more selfreliant? Will the developed countries also benefit from NIEO (a positive-sum game) or will it mainly mean the redistribution of the current stock of wealth from them to the developing countries (a zero-sum game)? (2) The question of morality. Do the developed countries have a moral obligation to help the developing countries and does this responsibility extend to those countries who had no historical part in the underdevelopment of the developing countries? (3) The question of legitimacy. Is there free market, the basic mechanism of world trade and the best vehicle of economic development or is it merely a convenient fiction to cover up the current unjust manipulations of the developed countries? The NIEO without much emphasis covers a wide range of international economic issues. However, this paper in the light of the several questions mentioned above, will attempt at drawing attention to the central problems on the basic issues of the NIEO programme and to show how these could be resolved.
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Origin and Development

The uninterrupted series of economic imbalances accompanied by severe economic and political crisis in the countries that make up the contemporary market economies had led to a challenge to today's international economic order and the proposed restructuring of the current system. The entire array of historical events that set the stage for the NIEO began at the end of World War II. While these events arose from their own historical antecedents they themselves produced the setting for the breakdown of the post-war economic system and the widening gap between developed and developing countries. The mid-term review of the achievement of the Second Development Decade's goals showed mixed results. The greatest disappointment came in the area of agricultural production and official development aid. On the average, the United Nations (UN) official development and targets have not been half achieved. At the same time, service charges on past loans began to put enormous pressures on developing countries' balance of payments and world poverty showed no signs of abating. There was insufficient progress in commodity trade, inadequate access to the markets of developed countries particularly for agricultural products, tariffs have escalated, especially for semi-processed and processed products and new tariff and non-tariff restrictions were introduced by many developed countries on a number of items including textiles and leather goods. The plight of the least developed, island and landlocked developing countries, gave rise to additional concern. While some progress was achieved preferences by the developed countries and the proposal of the Tokyo Declaration concerning multilateral trade negotiations, the negative developments weighed more heavily in the balance and created widespread dissatisfaction in the developing countries. Another set of factors came into play as well. This was the sudden and unexpected rise of developing countries' economic and political power. The Middle East oil embargo of 1972-1973 and subsequent fourfold increase in the price of oil created a world energy crisis. It affected all oil importing countries. It also exhibited the dependence of the developed countries on the developing countries for several major natural resources and proved the ability of the developing countries to wield economic and political power effectively. The consequences include rises in the price of food due to the increase in the cost of chemical fertilizers, and further tensions between producers and consumers of raw materials. But the Organization of Petroleum Exporting Countries (OPEC) exercise of developing countries economic and political power
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proved unable to improve the condition of the developing countries as a whole. Despite significantly higher gross resource flows from the oil-exporting to the oil-importing developing countries, the economic plight of the latter worsened due to the higher cost of energy. Developed countries found themselves beset by economic problems of their own including not only higher 'Oil prices but inflation, unemployment and unused industrial capacity. Compounding the economic difficulties of the developed countries were signs of breakdown in the international monetary system which affected all countries. Amidst growing tensions between the United States of America (USA), Japan and European Community over matters of trade, the Bretton Woods System of floating exchange rates. The value of the US dollar began to erode, creating serious difficulties for those countries which held their reserves in dollars. The creation of Special Drawing Rights (SDRs) provided some access to foreign exchange independently of dollar holdings, but such access favoured the countries already developed and the rest remained seriously dissatisfied with the workings of the international monetary system. Hence, it became evident that some of the basic tenets of the post-war world economy were being called into question. It was in this context that Algerias President Boumedienne in 1973 in his capacity as chairman of the Non-Aligned Movement directed a request to the Secretary-General of the UN that a Special Session of the General Assembly should be convened to study raw materials and economic development problems. And as this initiative immediately received widespread support it led to the convening in May 1974, of the Sixth Special Session of the UN General Assembly which adopted the "Programme of Action on the Establishment of a New International Economic Order" which was indeed the full text of "Action Programme for Economic Co-operation" adopted in the Non-Aligned Countries summit in Algiers in September 1973. The NIEO programme distinguishes itself from earlier international economic programmes by virtue of its objectives which are not merely to improve the functioning of existing international economic system but rather to expand its purpose. The purpose to be added to the existing ones is economic development. Given the special situation of the developing countries, the acceptance of this additional purpose involves the acceptance of a number of principles. They include the following: a) orientation of the international monetary system toward the interests of the developing countries; b) production cartels along the lines of OPEC:
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c) Commodity agreements to regulate prices and quantities; d) linkage of export prices in the developing countries to the prices in the developing countries to the prices they have to pay for imports (under the general heading of "indexation");
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e) extension of preferential treatment in trade; f) recognition of developing countries' permanent sovereignty over their natural resources, covering also the issue of exploiting the ocean floor and related question of territorial waters; g) transfer of advanced technology to the developing countries on preferential terms to some extent without a quid pro quo but with guarantees by governments.

Albeit, the problem is not so much the acceptance of these principles (most countries have done this) but their translation into changes in the mechanisms governing the developed and developing countries. Most developed countries have indicated that they have major reservations about the demands. In their view, meeting all of them would imply a dismantling of the market-based international economic system and its replacement by a largely dirigistic structure. Furthermore, it has also been argued that a change of this kind would particularly affect two groups of countries adversely: the poorest of the developing countries, especially those without their own raw materials and countries with extensive foreign economic involvement, such as the Federal Republic of Germany (FRG). Other groups with large natural resources and smaller external economic involvement would definitely benefit; for instance, the Soviet Union, which possesses considerable reserves of oil and other raw materials and are less integrated into the world economy. Indeed, the reservations of the USA one of the countries that matter most have been very clear on this issue. The assumption of the USA's government is that the principal cause of the developing countries poverty is not external but internal. The drawback to adequate internal mobilization of resources for economic development, for example, is said to be the political ideology of Fabian socialism. Governments of developing countries having taken the domestic position that equitable distribution of wealth and income is right and necessary are described as turning to the international arena to fulfill their pledges.

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Thus, although the NIEO may have emerged as a sound proposal to deal with a seemingly intractable global economic problems, nevertheless, the reservations of the developed countries about the circumstances leading to its formation and the assumed "far-reaching" effects taken together with the firm assumption that the critical factors in the underdevelopment of the developing countries are internal inevitably suggests progress in the implementation of the NIEO proposals are bound to be difficult. Let us now proceed to examine the progress made so far.
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Progress and Problems

No significant progress has been made in the demands that have been listed as contributing to the NIEO that go very much to the heart of the present system: money and finance; integrated programme and terms of trade; technology and TNEs; sovereignty and equal rights; and co-operation among developing countries as long as the basic issues are not resolved and a consensus does not emerge concerning them.

(a) Money and Finance

So far, very little progress has been made in the implementation of the General Assembly's recommendations in the area of international monetary reform and development finance. The effort to establish a link the creation of SDRs and the provision of additional development finance had so far been frustrated. No agreement was reached as regards development finance, compensatory financing, alleviation of the debt burden of developing countries or the reform of the international monetary system. Developing countries' prospect for debt or other financial relief have continued to recede inasmuch as its foreign debts have doubled or tripled during these past years with higher rates of interest shorter terms of maturity and more onerous conditions of debt management. Canada and some small European countries have unilaterally cancelled the debts of a few poor developing countries, but the USA's government has not and has no intention of a blanket or a significant write-off of loans to some poor countries even if such a step is given legislative approval. The developing countries with the largest debts, Brazil and Mexico, have themselves opposed all consideration of debt moratoria for fear of damaging their own credit rating, which they need to get new loans to pay off old ones.

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The dollar has been devalued three times reducing the real value of the dollar debt but also the developing countries' dollar reserves; and weakened dollar has caused an effective devaluation of those developing countries currencies that are pegged to it. These real monetary changes have of course occurred without the slightest consideration of the interests of the developing countries. Moreover, the developing countries and their populations have clearly suffered the most as a result of these changes if only because they are the most defenseless against the world-wide inflation, particularly in prices of manufactures that is fed by the reckless printing of devalued dollars by the USA. The supposed measure to demonetize gold and to replace it by SDRs or some similar universal reverse currency have led, on the one hand, to the strengthening and price increase of gold to the disadvantage of developing countries which have little or no gold mines or stocks. On the other hand of the SDRs and other funds created by the International Monetary Fund (IMF) and other financial institutions, only the equivalent of US $2.5 billion has been destined for non-oil producing developing countries. This amount is equivalent to about one percent of their current foreign debt and a very small share of total additional funds almost all of which thus went to the developed countries. The "link" that the developing countries demanded between additional money and development finance has been effectively denied. Thus, it remains to be seen whether states will muster the political will and skill to establish a new monetary order and to manage the system with new rules and procedures. The agenda of reform is long and complex. The political process of reform is fraught with difficulties. Although monetary power is now more widely dispersed but is not equally dispersed. The USA remains the most powerful monetary actor. Unless and until the USA assumes an active role, reform will be impossible.
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(b) Integrated Programme and Terms of Trade

In the area of integrated programme or producers' association, there "has been to date some successful maintenance of OPEC unity and prices, providing the impulse toward the remaining demands for NIEO. However, the effective price of oil was again eroded to an equivalent of US $7 per barrel by world inflation and dollar devaluation before the price was again raised sharply in 1979. For a time, the OPEC countries were not sufficiently united (in view of Saudi Arabia's effective veto power) to raise the oil price again given their common fears of rocking the world economic boat on its current crisis journey.

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Although the oil-producing countries - inside and outside OPEC - increased the price of oil again in late 1978 and in 1979 they did so more out of disunity than unity, each charging the "spot price" that its market will bear. If market demand declines due to recession, so will the price of oil. Be that as it may, most of the effective cost of the oil price hikes has also been passed on to the non-oil producing countries of the developing countries. Meanwhile, the industrial countries have increased exports to the OPEC countries and have recycled the remaining OPEC surplus through their banks. Several other raw material - producer associations have been formed or strengthened; however these associations and their price stabilization efforts have been unable to prosper much against the opposition of developed raw material-producing countries and low world market prices in years of recession and times of crisis. Other raw material producers do not have the relative monopoly power of OPEC, and prospects for their independent successful action through stabilization let alone "solidarity" funds are dim. Common action with raw-material importing industrial countries is limited by the laters' own interests which may admit some stabilization of supply and price but more in favour of consuming than of producing countries. In any event, although the terms of trade for non-oil producing developing countries, raw material-exporting countries improved briefly between 1972 and 1974, they on balance declined again with the 1973-1975 world recession and the post 1975 mild recovery. For non-oil-exporting countries in the developing countries, the terms of trade have fallen by more than 10 percent since 1970 and suffered an "unprecedented" deterioration in the balance of trade of US 532 billion between 1970 and 1975; of this, the sum of US $5 billion can be attributed to changes in volume, and US 527 billion to changes in prices of the goods traded. In turn, of this US $27 billion deficit caused by price changes, US $8 billion can be attributed to international inflation and US 59 billion to unfavourable changes in the terms of trade. The developing countries terms of trade declined by 4.7 percent in 1975, rose by 3.7 percent in 1976, remained unchanged in 1977 and declined by 11.2 percent in 1978. There has not been any significant improvement in the developing countries terms of trade since 1979. Even then, the prospect for foreign trade expansion of the developing countries had been dampened since the increase in manufactures for export had not been complemented with reduced protectionism by developed countries. On the contrary, the demand of some local capital and labour in the latter faced with competition and unemployment in the current crisis had been for protection: the European Common Market, its member countries and the USA have moved to increase tariffs and to impose quotas on the import of manufactures from developing countries. Examples include provision for increased protection
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in the MuItifibre Agreement negotiated at the end of 1977 and USA's restrictions on the imp ort of shoes, textiles, television sets, etc. Thus, so long as there is instability in the prices of raw materials as a result of the failures of the producer associations most developing countries would continue to experience fluctuating foreign exchange earnings. And to the extent that this is so would be incapacitated in the execution of their development plans. In the same vein substantial increase in foreign exchange earnings are not in the pipe line the more the present world economic crisis remains unabated and most developed countries are confronted with increasing unemployment to which in most cases national solutions are considered most appropriate.
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(c) Technology and Transnational Enterprises (TNEs)

The developed countries have agreed to talk about codes for transfer of technology and for conduct of TNEs. However, the real-life conduct of both continues to be just as determined by the global interests of TNEs as before. The developed sector contributes all too little toward the self reliance of developing countries through the selection of more appropriate technology, and still less through its development in the developing countries itself. In fact, the latter's technological dependence on the TNEs in particular and on the developed countries generally increases day by day. Moreover, while the developing countries talk about collective codes of conduct most of these countries are individually reducing or even eliminating the few restrictive provisions on TNEs and technological transfer that they had imposed nationally or regionally in the late 1960s and early 19705. Thus, Argentina, Chile, Mexico and other countries are all busily engaged in relaxing controls on foreign enterprises and are competing with each other to grant greater concessions to international capital. It would be too long and tedious to document this trend in each individual case (some of this documentation is already provided in, the developing countries) but the Business Weekly may be quoted: "There is good news coming out of Latin America for USA and other foreign companies with a stake in this vast region. Major countries are opening their doors wide to private enterprise. Multinational executives consider the region to be one of the worlds major opportunities.

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(d) Sovereignty and Equal Rights

The developing countries are achieving formal equality among unequals where it counts least. For example in the UN General Assembly and The Security Council, but the UN specialized agencies remain under the near exclusive control of the larger developed states. International financial agencies, such as the World Bank and the IMF remain under the control of the USA (with IMF partially controlled by West Europe); and if these institutions admit any developing countries to their boards they do so more to co-opt them to permit them to help steer world financial affairs in a different direction. Collectively, the developing countries are admitted to the conference bargaining tables. However, the developing countries have no power to negate in practice even the little that they were moved to in principle. Individually, the developing countries use their sovereignty more often than not to compete with each other in ever greater concessions to international capital and growing repression of their own populations without outside interferences.
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(e) Co-operation among Developing Countries

Technical co-operation among developing countries certainly does not mean the development or use of "indigenous" technology to promote economic and political self-reliance for the masses of their people. If such co-operation means anything it partially protects capital in some developing countries from competition by metropolitan capital and opens some markets in certain parts of the developing countries to capital from certain others. For example, Brazil, Mexico and India with the participation of TNEs have been selling advanced technology and sophisticated know-how to petrochemical and machine-building industries and to several Arab countries. In the meantime, although the Arab states have found it politically convenient to present a united political front with the developing countries, Arab capital has flowed into the banks of New York, London and Zurich. Seeking the economic and political guarantees of imperialism, Arab capital thus found protection for its profitable investments in Europe and North America and its loans to other developing countries

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through the Eurocredit market. There has been hardly any Arab investment in, let alone solidarity with the developing countries. In addition to these, it will not be an over emphasis to state that the inadequacies of the negotiation framework hindered the implementation of the NIEO programme.
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United Nations Conference on Trade and Development (UNCTAD) and many other fora have been moulded by the Group system, which comprises three Groups of countries the 77, Group Band D - as well as China. The Group 77 (which now has 117 members) consists of developing countries and Group D of East European countries. This' division has consolidated itself as a pattern of alignment and the Group of 77 represents the solidarity of developing countries which is of historic importance enabling them to present a common stand and bring to bear their combined strength in "North-South" negotiations. The Group system has its merits in deliberations where the developing countries has needed to articulate and publicize its problems and position. However, such deliberations have often ended in resolutions which exhort everyone, without binding or committing any of the parties; the differences are drafted away to create an appearance of agreement they persist in reality. One result of this process is that the language of international resolutions has become in bred, specialized and coded. Genuine progress in international relations depends on painstaking negotiations to reach agreed principle or legal instruments, only these processes can produce a common language to provide a basis for action. In this context, Group system has been criticized as tending to crystallize extreme positions on either side which delays and sometimes defeats practical progress in resolving conflicting interests. The process of reconciling differences within each Group has often led to extreme position driving out moderate ones: maximum demands eliciting minimum offers. It has become necessary to carry each Group along as a whole at every stage without neglecting differences, so that the negotiating process becomes unwieldy, cumbersome and time consuming. The time has come to examine whether a negotiating format can be devised which is more functional, while fully respecting the concerns of the developing countries for maintaining their solidarity.

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Major Elements of the NIEO-Debate

The main NIEO resolutions view Third World development as the main goal. The basic underlying perception was that the Western - developed - countries dominance of the international economic system, its institutions, its laws and its unequal exchange relationships prevented developing countries to move forward. The world was seen split into clearly separate blocks: 1. he rich and exploitative "North", 2. he underdeveloped and striving South, and 3. he sympathetic socialist countries. The inequality of the existing relationship was to be remedied by a fundamental restructuring of the institutional and legal economic order governing economic interaction, by solidarity among developing countries, by the introduction of pervasive unilateral and non-reciprocal preferences for the Third World (S-3201, 4 (n)) and by "Southern" claims against "Northern" countries for financial, technology, institutional, political and trade-related concessions. A particular focus was raw materials: A system of regulated prices and prodtion was to re-establish "just" prices (S3201 4 (j)). The same philosophy permeated the regime for seabed mining established under chapter XI of the Treaty on the Law of the Sea. The NIEO had a very strong "statist" bias. State sovereignty, by itself well accepted core element of international law, is emphasised by attributes such as "permanent", "over natural resources and economic activities" (S-3201 at 4 (4); the implication is that it is the insecure states which need special international law crutches to gain by legal claim what they do not possess in substance. State action - by jointly or individually regulating (Third World) states and by aidgiving (Western) states - is a pervasive requirement. t t T
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International organisations - institutionally and politically responsive to and dependent for their survival on - the existence of an impoverished Third World were to play a major role in setting up a highly regulated international system of economic governance to set prices for commodities (S-3201 4 (j)) and ensure the attainment of the economic objectives of Third World states. "Subsidies", the inevitable companion of unfree or non-market systems, played an important role (Res.202, Art.X). In short, NIEO conceived a "dirigiste" international economic system, working in favour of states characterised by national and regional economic planning. The major feature of NIEO, though, was the image of international companies - in the UN parlance "transnational corporations", a term which did not succeed in replacing "multinational company" - as prime malfeasors. Prompted by a conspicuous case of political interference of ITT in Chile, and based on the largely Latin American-based "dependencia" theory, multinational companies were seen as the prime vehicle of maintaining developing countries in a subordinate stage of underdevelopment. Their prime characteristics were seen as exploitation of non-renewable natural resources, sold at inequitable, perennially low and declining prices against ever more expensive industrial products; opposing independent-minded governments and in association with profiteering Third World collaborators, multinationals were seen as continuously involved in exploiting unequal bargaining power, manipulating host state tax returns through affiliate transactions, as exhausting national foreign exchange reserves by excessive repatriion of capital, as denying economic development, training and acquisition of technology to host states by enclave-structured, foreignrun investment projects. The NIEO-perspective on multinational companies resulted in a very legalistic approach: Traditional law was considered very much both an obstacle to Third World development and its reform very much the way to achieve economic progress. Traditional international law with its emphasis on protection of foreign investment was seen as having a prime responsibility for the adverse effect of Western multinational companies: International economic law tends to emphasise the protection of alien property against nationalisation ("full, prompt and adequate" the Hull doctrine) and international arbitration most likely to protect proprietary assets and contractual commitments against the encroachment of host states.
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It is also imbued with notions of commercial freedom - the freedom to invest, to dis-invest, to enter into binding contracts, to take business decisions, to repatriate capital, to navigate or exploit the sea and its resources, to employ, to increase or reduce production, to sell, to purchase goods and svices and to respect freely agreed and accepted customs of the international law merchant and its ways of adjudication. The NIEO-approach was, quite logical in view of its deep resentment against foreign investment activities, to reject traditional international economic law in two ways: First, traditional international law was seen as biased, as originating in the group of countries from which most of now independent Third World and Communist countries had been excluded; a new international legal system based on planning and restriction of business activities, with primacy shifting from commercial freedom to public (national or international) powers was called for. Second, the role of national - and where possible joint regional - state authority was to be strengthened, both against traditional international law and against commercial freedoms claimed by international companies; the particular intensive return to notions of absolute state sovereignty in the UN resolutions and writings of the period are ta large extent a code name for dominance of state powers over commercial freedom, thus continuing not only the philosophy of the then attractive centrally planned economies, but also the mercantilistic heritage of colonialism. A closer analysis of the key elements of the main resolutions bears out this interpretation: Art. 2 of the Charter on Economic Rights and Duties of States (CERDS) focuses exclusively on states' alleged absolute predominance over "commercial freedom": It is "full" "permanent sovereignty" over "all its wealth, natural resources and economic activities" (Preamble $ (4) to UNGA Res. 3201), it is the "right to regulate and exercise authority over foreign investment"; "no state shall be compelled to grant preferential treatment to foreign investment". It is - (Art.2,section 2 (b) - again the right to "regulate and supervise .. transnational corporations", taking measures that the "comply with its laws, rules and regulations, conform with its economic and social policies" - all with "full" - not perhaps half-hearted - "regard for its
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sovereign rights". CERDS rejects explicitly traditional international economic law precepts rules by subordinating "appropriate" (no longer adequate, full & prompt) compensation to e "domestic law of the nationalising state". In computing compensation, not an international standard, but the state's "relevant laws and regulations and all circumstances that the state considers pertinent" are to be the determining rules. The principal global instrument for this statist approach to world business was to be the "Code of Conduct for Transnational Corporations" (UNGA Res. 3201, Art. V) which was to "prevent interference", "regulate their activities", "conform to national development plans" and "facilitate ... the revision of previously concluded arrangements". Everything possible should be done to "defeat attempts to prevent the free and effective exercise of the rights of every state to full and permanent sovereignty over its natural resources". As much as the main resolutions of the NIEO are replete with repetitive - from a pure textual perspective redundant - references to respect to national law, to national and international regulation and the absolutely paramount role of sovereignty in economic matters, as much are they absolutely silent on rights and interests of multinational companies, after all the principal vehicles of economic interaction and on their requirements to operate properly and make the contribution to economic development which, after all, was supposed to be at the heart of NIEO. Commercial freedom, in short, was to be superseded - absolutely, pervasively - by states' powers - in short: NIEO was conceived as the rule of bureaucracy over business. One might keep in mind that the NIEO resolutions did emerge from the caucus of developing countries' diplomats at the United Nations - the product of the conceptual perception, excitement and agitation of the "second secretaries" at the UN missions which form the backbone of the machery producing UN resolutions. It is hard to avoid the conclusion that these diplomats' expectation was that if you pushed through by Third World majority the right type of sufficiently forceful UN General Assembly resolutions, that was sufficient to build a global system of effective economic regulation and solve the issue of economic underdevelopment.

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1984-1994: NIEO Vanishes from Sight

Collapse of the NIEO Platform Why has the paradigm of the "New International Economic Order" so rapidly disappeared from the international discussion - apart from a shadowy existence in international committees with slow adaptation rhythm and academic dissertations which suffer the usual time-lag in adjusting to current themes? First, there was the political and commercial unworkability of the whole concept. It was not possible to direct or regulate international business by resolutions at diplomatic conferences. It proved ultimately even not possible to convince the host states - whose diplomats had championed NIEO in UN, Group of 77 and Non-Aligned conferences - that aligning national economic policy on NIEO lines was in their interest. The countries which had pursued policies comparable to NIEO precepts - the Andean Pact, Mexico, Argentina, India, Brazil - found out they were being economically overtaken by those which did not. Chile whose departure from the Andean Pact in 1976 rang the bell for an alternative approach to foreign investment turned out to be the most impressive economic success in Latin America; its recipes - embodied most clearly in the 1976 Investment Code (Decree No. 600) - are now being emulated. Asian countries - such as Thailand, Singapore, Hongkong, South Korea, Indonesia - which followed open-marke policies, prospered, countries which pursued the isolationist line of NIEO - Albania and North Korea at the radical and bitter end, India as the perhaps most prominent one, did not. Gradually, other countries followed and in current times it is the stalwarts of NIEO - India, Argentina, Mexico, Brazil, China - which are undergoing radical reform of their economic policies towards opening up, encouraging investment, deregulation and privatisation of their economies. Second, it was being realised, albeit grudgingly and only to the extent the generation of dependencia-imbued, Raul-Prebisch trained economists are leaving the baton to a younger generation of Third World managers focused on capitalist approaches, that transnational trade and investment relations were not responsible, and in the main contributed very little, to
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underdevelopment. The most closed societies - Albania, North Korea, Burma/Myanmar - are most underdeveloped. The inward-looking, protectionist large developing countries - India, Brazil - suffered a serious stagnation of their productive capabilities. Countries with the ideal NIEO-profile - in-wardlooking, statist and recipients of massive foreign aid - the most prominent example being Tanzania, remained at the bottom while countries pursuing an open, private and competitive investment policy - apart from the Asian countries Botswana and Ghana in Africa, did well. Very articulate advocates of NIEO and its rejection of the world capitalist system ffered a ignominious debacle: Alan Garcia's APRA presidency did all that NIEO suggested, rejected Peru's foreign debt, obligations and existing agreements, pursuing a very original, now little remembered policy of endogenous economic growth. It ended in economic disaster, political turmoil amidst accusations of widespread corruption. Peru's predicament also gave rise to one of the sharpest analyses of the stifling and corrupting effect of the statist, bureaucratic approach towards business development. Inward-orientation, investment through state enterprises, borrowing of capital - in lieu of private (national or foreign) investment was a key recipe of NIEO. It was implemented largely in the 1970s, just before the usual downward trend in commodity (oil - minerals) prices. The strategy led to sharp disappointment with the state-enterprise model of investment: The high price risk inherent in mineral investment was realised only after nationalisation. Unexpectedly low commodity prices throughout the main part of the 1980s, combined with high real interest rates on foreign loans in the early 1980s, led to significant problems with state enterprises: In lieu of producing revenues, they required subsidies. Where the state enterprise's profitability did not rest on commercial performance, but on an exclusive statutory and political control over mineral rent, as in most cases, possible tax income from projects was sucked up by the mostly inefficient, overstaffed and politicised state enterprises. With high i erest rates borrowed for state-controlled, politicised projects underperforming in a commodity down-turn and general recession, the by now historic Third World debt crisis came about.
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Foreign investors had been driven out, state enterprises did not produce to expectations, new capital was unavailable from whatever source; as a result, the general, global re-orientation towards internationally open, market-economy and private-investment was imposed on Third World governments, political forces and statist intellectuals imbued in the NIEO-paradigm by sheer economic and financial logic. But it was not only the need for money which drove NIEO policies away. The statist model of development had become seriously discredited in the developing countries. As foreigndominated investment, in particular in sentimentally overvalued natural resources, had aroused nationalist ire earlier, so now state-led administration of business exposed its weaknesses: Intensive regulation, screening and permitting opened up many more entry gates for corruption than a fuller separation between a selectively, framework-oriented regulating civil service and commerce. The dominant power of state bureaucracy in (often differentiated) foreign exchange rates, import and export permitting and all sorts of business licensing made control of politicians and state functionaries over licensing power financially very remunerative, a situation of corruption potential inherent in the statist model of state-business interaction now being relived in the former Soviet Union. Funds obtained via borrowing or mineral rent rarely into profitable re-investment, but mostly into state class - and military - consumption. The performance record of state enterprises in most countries is seen as awful: Staffing levels increased, often by multiples of the before-nationalisation levels; jobs at all levels were used for political patronage. Objectives were typically diffuse and financial accountability very limited. In contrast to nationalist rhetoric, the state enterprise basically served the political and financial needs of the powers in each country; it rather wasted than developed national wealth. In only very few cases did the state enterprise manage to become a reasonably professional and competitive organisation. The collapse of Communism almost everywhere - or its transformation, as in China and Vietnam - had a double effect on the NIEO paradigm: First, there was no longer an alternative real-life model to Capitalism. Before, socialism appeared viable, to its proponents even superior and attractive; the very existence of socialist countries seemed to prove that there was a countermodel to the economic philosophy of the West.
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With this alternative discredited and then gone, the ideological foundation further evaporated. Second, the collapse of Communism is having a significant, still not clear and possibly lasting effect on the "Third World", its perception, powers and demands. The Communist countries supported the Third World throughout, not too much in support of the NIEO-demands (from which the Eastern block declared itself immune), but mainly as a tactic in the political and economic competition with the Western countries. This source of political support for NIEO demands - mainly in international conferenc - has now gone. But the collapse of Communism has a much more far-reaching consequence: The very notion of a "Third" world - with its own characteristics, common conditions and interests defines itself largely on the basis of the opposition of East and West in the Cold War. The "Third" world countries were those that may have had affiliations with one of the two blocks, but did not belong to either. They saw themselves separate, with former colony status, underdevelopment and non-alignment as the main elements of the definition. This was the "Third World" self-perception. From the West, they were the part of the world which needed to be prevented from joining the opposition; hence, a strong political interest in pandering to their exigencies even if those were not really much shared or taken seriously. Development aid, one should not forget, had largely the function of keeping developing countries from joining the other side; Third World governments were well aware of this and often played East aga st West. With the collapse of Communism, this game is over. There is a troublesome part of the world now located in the "transition (to where?)" societies. The value and effectiveness of much of development aid was and is controversial anyway, and is now being directed to where the West has greater political interests - in the East. The former "Third World" consists of countries about to join the developed club, mainly in Asia and some in Latin America, together with the Central European countries. There are countries with a well developed core or potential (India, China) and a large underdeveloped periphery, and there are countries likely to remain for a long time underdeveloped, largely for reasons of their political and institutional structure, mainly in Africa; those will keep on getting some aid, but no longer for vital political reasons, and with more detachment whenever the going gets too rough
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for Western humanitarian sentiments as in Somalia. So the unity of the "Third World", underlying the IEO paradigm, is gone as well. Alternative Paradigms Emerge As one paradigm emerges, moves to the top and then ages, new paradigms emerge and shape the perception of situations, institutions and interests - and are rapidly reflected in the discourse of international lawyers. "Development law" departs backstage, and vigorous younger players move to the forefront. Concepts associated with a retreat of the state from the economy - de-regulation and privatisation, environment and human rights form the current dominant paradigm. All three paradigms originate, one should note, in the West.
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The Market Moves Forward, The State Retreats

Privatisation
The first change of paradigm reflected the worldwide retreat of the state from directing business - be it national or international. Deregulation became a key theme in the Reagan-Administration in the 1980s, privatisation for major, state-owned industries (oil, gas, electricity, water, telecommunications) in the Thatcher government in the UK. Both, while at the time controversial, seem from today's perspective successful: They fostered economic growth, an entrepreneurial culture generating new job opportunities, increased significantly the competitiveness and efficiency of former state companies (in particular when privatisation was into a competitive market) and reduced, in average, prices for consumer while eliminating open or hidden subsidies. There is no doubt that both policies gave a significant impetus to the wave of privatisations, deregulation and general retreat of the state from managing the economy in developing countries. While we do not wish to examine details of the why, how and when of ivatisation, it is clear that privatisation runs counter to the basic tenets of NIEO - a state-run economy. With privatisation, a new class of capitalist managers and private investors emerges in developing countries - a challenge to the hitherto dominance by the post-colonial state classes, the main proponents of NIEO.

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These classes are much influenced by the model of the successful Western economies; in lieu of the post-colonial ex-independence fighters and nationalist/socialist intellectuals of the 1960s, we see foreign-trained technocrats and businessmen becoming the dominant force in developing countries. As state companies emerge from the grip of the state bureaucracy, the need to become competitive, to internationalise their operations and alliances grows - and the attraction of the inward, sovereignty-bound model of NIEO recedes.
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Return of the Multinationals The current paradigm is not just characterised by the retreat of the state bureaucracy - and the social classes dominating it - from the economy, but also by the return in force of multinational companies. After a hiatus in the 1980s, foreign investors are back in developing countries, encouraged by the liberalisation of investment conditions and the economic growth It is revealing to compare the emphasis on foreign investment and its positive association with rapid economic growth, liberalisation and privatisation in the UN's 1993 World Investment Report with the authoritative UN study on the subject in 1978: This very in-depth study highlights, in the measured and anodyne language of UN reports issues such as "control, structuring and regulation", requiring local participation, renegotiation of existing contractual arrangements, restriction on foreign minority holdings, prevention of foreign take-overs and on government screening, on improving Third World bargaining power and on ensuring that "development goals, as well as national identity and purpose, are not distorted by the global strategies of transnational corporations" . International Developments With the current halcyon days of foreign investment come legal repercussions. The perhaps two major legal instruments reflecting the NIEO approach to foreign investment have fallen by the wayside: The UN Code of Conduct on Transnational Corporations, the probably major document

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aiming to create international economic law of foreign investment, in the process of negotiation since 1976, was dropped from the UN agenda in 1992 - with the torch of international regulation of foreign investment now being passed on to the Western countries OECD. Decision 24 of the Andean Pact, the most faithful follower of the NIEO-resolutions and the most hostile to foreign investors, was relaxed in 1987 (decision 220); in 1991, through Decision 291, the common foreign investment regime was abandoned. Foreign investment is to be accorded the same treatment as national investment, entry is not restricted, non-discrimination established as key principle and remittances are no longer limited. In the words of a commentator, the Decision reflects a belief in the benefits of a "liberal economic, free trade orientated system" and the Andean countries have essentially gone full circle back to the situation existing prior to 1971". The demise of the UN Code of Conduct, again, is not an isolated incident. It signals that the leadership in the formulation and propagation of international paradigms in economic matters has moved away from the United Nations. It is currently sometimes believed that the disintegration of the UN's role in economic policy is purely a matter of the current SecretaryGeneral's personal whims. It is not so: With the withering of the NIEO as leading paradigm and - following the collapse of Communism - the dissolution of the Third World as a separate, block-type identity, the UN, with its majority voting structure, its image as the main Third World forum, loses out to international institutions controlled by the West - the World Bank, the IMF, the OECD, GATT and, now emerging, the European Energy Charter institutions. Recent and current constructive initiatives no longer flow into and out of the UN committees and conferences, but out of the international and economic institutions aligned with Western countries MIGA, the multilateral investment guarantee agency, was the first significant and successful new international economic institution created after NIEO - attached to the World Bank. Its focus is to promote foreign investment - not restrict or increase host state bargaining power; it was followed by other regional institutions, focusing on insuring the political risk of foreign investment.

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Initiative with respect to international investment law has moved from the UN - its Code of Conduct dead and buried - to other international organisations and fora: The World Bank has become the major global player; its structural adjustment loan programme of the 1980s prepared the ground for much of the re-orientation of government policy towards liberalisation and privatisation now occurring. In 1992 it issued its non-binding Foreign Investment Guidelines which essentially state current accepted expectations and principles on how states should treat foreign investors; these guidelines represent a significant turning away from the Code of Conduct approach - the emphasis is not on duties of multinational companies and rights of states, but on proper standards of treatment of foreign investors by host states. Rather than legitimising state superiority over foreign companies and asserting the supremacy of national economic sovereignty, the guidelines legitimise investor's expectations to fair, non-discrimina ry and positive treatment by governments. The Fourth Lome Conventions, between the European Union and 68 African, Caribbean and Pacific member states of 1991, emphasises investment promotion and the maintenance of a stable investment climate, and endorses bilateral investment treaties. The 1993 North American Free Trade Agreement (NAFTA) linking the US, Canada and Mexico contains a very significant extension of the original trade orientation to cover as well investment matters. NAFTA mandates national treatment, forbids export-related performance standards and domestic content requirements for foreign investment. Transfer of capital and profits must be permitted without hindrance; expropriation requires due process and reasonable and prompt compensation. The NAFTA provisions are of particular interest since they impose obligations on Mexico - a forerunner of the NIEO positions with its 1938 oil industry nationalisations and one of the champions of the NIEO resolutions. The new GATT agreement (Uruguay round) completed in 1993 contains, inter ali a prohibition against investment restrictions such as performance requirements and other trade-related investment measures (TRIM's) - a principle that runs counter the NIEO-positions favouring economic development, domestic processing and related "performance requirements". Finally, the multilateral instruments discussed are complemented by an ever increasing number of
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bilateral investment treaties which impose Western standards of protection on foreign investment on host states - both developing and transition economies. The movement towards an investor-friendly international economic law is taken further by the major current item on the agenda of international economic law negotiations: The (European) Energy Charter Treaty signed on 17 December 1994. It constitutes the first (limited by sector and groups of countries) multilateral treaty with a principal focus on foreign investment. Following the non-binding 1991 European Energy Charter, the 1994 Energy Charter Treaty provides farreaching obligations imposing on member states and the European Union far-reaching obligations to treat foreign investment fairly, without discrimination and afford most-favoured nation and national treatment (Art. 10). The Treaty also provides (Art. 10 (1) a possibly significant obligation of sanctity of contract and a series of important obligations (repatriation of revenues/capital; entry of managers; limits on confiscatory taxation). Finally, the Treaty squarely adopts the "Hull-rule", i.e. the most extreme Western position, with respect to ationalisation and compensation. The major innovation in this Treaty is the novel, unique and potentially far-reaching introduction of a right of investors to litigate for breach of these duties against governments before, at investors' choice, international arbitral tribunals. While under international human rights law, there has been a cautious and partial introduction of individuals' procedural rights against states and while the 1966 ICSID-Convention does recognise investor against state arbitration, the Energy Charter Treaty in essence provides a very powerful instrument to hold states accountable for their obligations under the chapter III (Treatment of investments made) obligations of the Treaty (Art. 26). The Treaty, signed under the 1991 Charter declaration, is not complete: Entry/access ("making of investments") is treated only in legally unclear "soft-law" formulations and is to be handled by a supplemental treaty for which negotiations have started. The significance of the Energy Charter Treaty has so far not been appreciated: It embodies the first multilateral investment convention; it is no longer a government "club convention" as the OECD Codes nor a collection of pious resolutions as most earlier Codes and General Assembly resolutions - but a treaty with sharp teeth.
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To be enforced by international arbitral tribunals outside the control of governments and the European Commission and with its open-ended provisions very open to expansive interpretation, it significantly weakens the sovereign prerogatives of governments vis-a-vis foreign investors. In a way, it constitutes the current apex of the pendulum's swing from state sovereignty towards the international marketplace.
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National Developments The new paradigm viewing foreign investment and multinational companies as an overwhelmingly positive factor for development is influencing international as well as national developments. There is no doubt that current government policies are characterised by liberalisation of foreign investment regimes and their convergence towards rather similar, broadly promotional standards. Liberalisation can be understood as the array of government policies which implements the new overwhelmingly positive view of the role of foreign investment: It consists in lifting of restrictions on entry and operations of multinational companies in investment, tax and sectorspecific (e.g. petroleum and mining) laws. While many ifs and buts remain - including in Western countries - the trend is towards free access, unhindered operations, elimination of screening and approval requirements involving protracted bureaucratic procedures and subjective judgement, guarantees of repatriation of capital and profits. Government majority quirements are fading out and divestment requirements have virtually disappeared. What this means in effect is that the need and scope for "negotiation" between foreign investors and national government shrinks - with a tendency towards disappearance. Negotiation was, as we have discussed earlier, the keyword for the "1970s model" of government - "transnational corporations" relationship.

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It expressed the gateway control of Third World bureaucratic elites, the state classes, over access and the exploitation of such access to "negotiate" with the multinational corporation a partition of rent, with the state share largely channelled to support the state class requirements. Negotiation did not meet closure - but it meant extracting the state classes' toll for its control over the entry gates to the country and its resources. Negotiation was perhaps the favourite term in the discourse of the United Nations and its subsidiary organs, of most government agencies dealing with foreign investment and the large machinery of Western foreign aid and technical assistance. What has always been omit d is that the requirement to negotiate gave power and thereupon benefits to the country negotiators; the need to negotiate entry implies all kinds of compromises born out of the negotiation process which increases cost. The negotiation process itself generates considerable transaction cost, delays, break-downs and as a result makes the institutionally weakest governments, i.e. those least likely to develop an effective negotiation machinery, least attractive. Liberalisation means that that tollgate on the access road to a country is taken away. It is not surprising that such action is resisted by those who profit - the negotiating bureaucracies and the protected domestic industries. The most conspicuous contrast is that between the Chilean Investment Code No. 600 of 1976 and Decision 24 of the Andean Pact: While the Andean Pact meant intensive and all-encompassing negotiations, the Chilean approach meant that there was no need for negotiation - except a standardised procedure to obtain uniform investme guarantees (tax stabilisation; foreign exchange repatriation) to counteract the perception of political risk. It is this approach minimisation of government/investor negotiation and reliance on a general, standardised framework which is now prevailing. Liberalisation does not, however, means complete evaporation of the national legal framework as is sometimes understood under the concept of "extreme liberalisation": Economic development, and particularly so in the liberal concept of economy based on Adam Smith, requires a strong state providing both effective public services and a robust system of law and enforcement: Any long-term orientated economic activity requires a firm foundation - consisting of contract,
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property (including intellectual property), company, tort, bankruptcy law, a set of laws meant to assure the functioning of an effective market - capital markets, competition law, and finally a system to maintain the social stability of society - e.g. consumer protection, labour and now environmental protection and safety law.
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Liberalisation does hence not result in the disappearance of the state, but in the concentration of the state on guaranteeing the foundation and framework of market activities which might otherwise degenerate into a mafi type anarchic culture of short-term commercial transactions outside the bounds of state-issued law. The current key concept in the evolution and discussion of foreign investment standard is the notion of "national treatment", i.e. the non-discrimination between foreign and national companies. National treatment is referred to in all current influential international and most national instruments of foreign investment policy. National, non-discriminatory treatment is again in full contrast to the concept of discrimination between multinational companies and - protected - national and regional companies which permeated Decision 24 of the Andean Pact and most foreign investment codes of that period. Change, however, is usually more rapid with respect to declarations of broad policy and principles, and much slower with respect to specific regulation, administrative and commercial practices which tend to be imbued - as much of the bureaucratic and political culture of developing countries - by the approaches of NIEO. "National" i.e. equal treatment between unlike foreign and national companies is by no me s a clear-cut criterium. A recent OECD study has identified access to capital markets, taxation (in particular for dividends), subsidies, government procurement, licensing for tightly regulated industries (banking, insurance, portfolio investment, energy, public infrastructure) and access to communications and distribution networks as major areas where foreign companies may suffer discrimination in comparison to national, in particular state-owned companies and companies with state-issued public concessions. The principle of national treatment and non-discrimination raises immediately the question of legitimacy of criteria for treating foreign and national investors differently. In addition, "national

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treatment" means little to a foreign investor if the treatment meted out to national companies is below reasonable standards of state regulation ("international minimum standards") in developed countries. The criterium of national treatment, in our view, is therefore only a stopover on the way to establis ent of a competitive market economy with a level playing field between companies, foreign or national, public or private. The efforts most worth watching are made by the Commission of the European Union which has been trying - since 1956 and with renewed effort under the Single European Act of 1986 - to create an integrated, competitive market allowing free movement of goods, services and people within the Community. The decades' long effort at creating an integrated market has led - and continues to lead - to an attack on all sorts of discrimination - regulatory, administrative and hidden - preventing companies from other EC member states to compete effectively. The criterium of "national treatment" leads unavoidably on to the concept of a fully competitive and integrated operating under a framework of business law which is general and neither negatively discriminates against foreign investors nor positively privileges them. The NIEO perspective was to focus on abuse by transnational corporations - political interference, transfer pricing, restrictive business practices and notably bribery of host country officials by companies were singled out. It is interesting and in fact curious to note the complete reversal in current debate: Rather than abuse by transnational corporations, corruption - in lowprofile terminology "lack of transparency" - is now viewed rather as a feature of deficient government policy. Bribery though - like sex - really needs two colluding parties even if the desire and pressure by one party is greater than with the other party. When the earlier emphasis was on the greed of foreign companies, it is now rather on government policies of screening, approving and granting incentives linked to conditions where "regardless of intention or fairness" the "case-by-case treatment does not provide adequate predictability to investors and has in itself the potential for arbitrary action". The issue is hence re-defi d as a matter of host country responsibility - law, regulations, bureaucratic practices and national culture are now the focus of attention.
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The current debate leads ultimately to the question if the NIEO approach of considering foreign investment as a specific activity, requiring particular regulatory attention and institutions, is still justified. While the NIEO perspective distinguished sharply between foreign investment policy and what could be termed generally applicable commercial and economic law, we believe that this distinction is increasingly becoming blurred. It is now being recognised that economic development is very much a matter of a solid legal and institutional foundation, political stability and a culture of social discipline and commercial enterprise. Foreign investment is sometimes overrated in its contribution to economic development; only in very capital-intensive and export-oriented industries (such as petroleum or mining) it seems to exceed 5% of national investment. Countries - particularly socialist countries in their terminal stages or transition economies - often have unrealistic expectations from foreign investmen perhaps mirroring the earlier exaggerated condemnations of multinational companies. Ultimately, it is the establishment of a functioning national economy and much less foreign investment which are the deciding factors for economic success. As NIEO exaggerated the fears over the impact of foreign investment, so we may now witness exaggerated expectations. For both - national business and foreign investors alike - it is the legal and institutional culture, the commercial opportunities and the socio-commercial culture of a country which constitutes the "investment climate" decisive for long-term investment decisions. While foreign investors - entering with risk capital - may have some particular concerns, they are likely to share most of the concerns and requirements of national companies as well. Even their specific and distinctive conditions - mainly repatriation and international arbitration are more or less identical to national business concerns: The need for a system of monetary convertibility or least reasonable and practical monetary procedures and reliable and fair access to justice. In fact, in societies where these conditions are met - such as in most Western countries - there is no need and no demand for special foreign investors' privileges such as international arbitration against governments, stabilisation clauses or foreign exchange privileges. It may therefore be argued with justification that "foreign investment law" is the legal expression in a particular period of the institutional weakness of developing and transition economies and
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the heightened tension between state sovereignty and investors' property rights during this period of institutional weakness. With the emergence of mature systems of economic and commercial law co-existing with a mature commercial and institutional culture, foreign investment law will wither away and fuse into a developed system of commercial law and regulation of the economy.
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Countries have then no reason to provide a distinctive treatment for foreign vestors and foreign investors have no reason to insist on particular privileges and guarantees any longer. This point, while relatively close to attainment in the developed Western market economies, is still remote for many developing countries, particularly in Africa and for all of the transition economies in the former Soviet Union. Commercial companies - as well as governments and multi-country economic blocks such as the European Union - share at the moment one important concern: The need to become globally competitive. Global competitivenessis to a significant extent conditioned by the regulatory and institutional framework provided by the state. Regulations, administrative procedures in the government - investor interaction and sociocommercial culture generate significant "transaction cost", i.e. the cost of preparing for, adapting to and dealing with regulations and government intervention, the cost of negotiating commercial and financial transactions. The challenge to governments - and societies - is to respond to the competitive race in the world economy by creating a business climate which is conducive to greater competitiveness. Transparency, socio-commercial culture, regulation and government-business interaction in whatever form contribute significantly towards competitiveness without regard if business decisions are mad by national or foreign-owned corporations. With competitiveness, we believe, a new dominant paradigm has entered the debate and perception towards the end of the century. It is a paradigm which is the opposite of the inward-looking, social welfare and state oriented and discriminatory approach of NIEO since it is premised on opening up national economies and exposing them to global competition. Given the success of many developing countries, in particular from Asia, in challenging the Western world, and in view of the internal tensions of

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the comfortably off, and perhaps no longer competitive, welfare societies of Europe, competitiveness has now become a theme for both developing and developed nations.

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Conclusion

The progress toward the creation of the NIEO as has been observed is generally slow as a result of the reticence of the developed countries apprehensive of the disruption in the long established world economic mechanism which has thus far given them considerable benefits and enhanced their advantageous position. But the deterioration in the economic situation of most developing countries is not likely to be arrested as long as permanent solutions remain elusive to the problems in the expansion of their foreign trade and payments and to the inflow of foreign financial and technological assistance. For example, the reduction of protectionism, both tariff and non-tariff, on the exports, both in agricultural and manufactured goods of the developing countries, represents a critical factor for the latter's trade expansion and sustained economic development. The lack of progress toward the creation of the NIEO however does not necessarily indicate that it should be completely abandoned, rather it calls for renewed efforts. Demands for changes in the mechanisms governing the economic relationships between the developed and the developing countries have been made as far back as the mid 1960s in the area of international trade and aid. But, the little results thus far secured for these demands had not meant a complete loss of hope. So long as the present world economic recession remains unabated, the NIEO demands will continue to feature prominently in all agenda of discussions of world problems in all international fora. The NIEO can be achieved once it is perceived that its benefits are universal and can reach all segments of the world's population, that its costs do not outweigh its benefits, that its regulatory mechanisms are legitimate, there is real 'sense of moral responsibility among states and there is sufficient political support for its measures nationally and internationally.

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