New International Economic Order
Encyclopedia
The New International Economic Order (NIEO) was a set of proposals put forward during the 1970s by some developing countries through the United Nations Conference on Trade and Development
United Nations Conference on Trade and Development
The United Nations Conference on Trade and Development was established in 1964 as a permanent intergovernmental body. It is the principal organ of the United Nations General Assembly dealing with trade, investment, and development issues....

 to promote their interests by improving their terms of trade
Terms of trade
In international economics and international trade, terms of trade or TOT is /. In layman's terms it means what quantity of imports can be purchased through the sale of a fixed quantity of exports...

, increasing development assistance, developed-country tariff reductions, and other means. It was meant to be a revision of the international economic system in favour of Third World
Third World
The term Third World arose during the Cold War to define countries that remained non-aligned with either capitalism and NATO , or communism and the Soviet Union...

 countries, replacing the Bretton Woods system
Bretton Woods system
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century...

, which had benefited the leading states that had created it–especially the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

.

History

The term was derived from the Declaration for the Establishment of a New International Economic Order, adopted by the United Nations General Assembly in 1974, and referred to a wide range of trade, financial, commodity, and debt-related issues (1 May 1974, A/RES/S-6/3201). This followed an agenda for discussions between industrial and developing countries, focusing on restructuring of the world's economy to permit greater participation by and benefits to developing countries
Developing country
A developing country, also known as a less-developed country, is a nation with a low level of material well-being. Since no single definition of the term developing country is recognized internationally, the levels of development may vary widely within so-called developing countries...

 (also known as the "North-South Dialogue"). Along with the declaration, a Programme of Action and a Charter of Economic Rights and Duties of States were also adopted.

In the 1970s and 1980s, the developing countries pushed for NIEO and an accompanying set of documents to be adopted by the UN General Assembly. Subsequently, however, these norms became only of rhetoric
Rhetoric
Rhetoric is the art of discourse, an art that aims to improve the facility of speakers or writers who attempt to inform, persuade, or motivate particular audiences in specific situations. As a subject of formal study and a productive civic practice, rhetoric has played a central role in the Western...

al and political value, except for some partly viable mechanisms, such as the non-legal, non-binding Restrictive Business Practice Code adopted in 1980 and the Common Fund for Commodities
Common Fund for Commodities
The Common Fund for Commodities is an inter-governmental financial institution established within the framework of the United Nations. It is a vestige of the proposed New International Economic Order.-External links:*...

 which came in force in 1989.

Tenets

The main tenets of NIEO were:
  1. Developing countries must be entitled to regulate and control the activities of multinational corporation
    Multinational corporation
    A multi national corporation or enterprise , is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation...

    s operating within their territory.
  2. They must be free to nationalize or expropriate foreign property
    Property
    Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...

     on conditions favourable to them.
  3. They must be free to set up associations
    Voluntary association
    A voluntary association or union is a group of individuals who enter into an agreement as volunteers to form a body to accomplish a purpose.Strictly speaking, in many jurisdictions no formalities are necessary to start an association...

     of primary commodities producers similar to the OPEC
    OPEC
    OPEC is an intergovernmental organization of twelve developing countries made up of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. OPEC has maintained its headquarters in Vienna since 1965, and hosts regular meetings...

    ; all other States
    Sovereign state
    A sovereign state, or simply, state, is a state with a defined territory on which it exercises internal and external sovereignty, a permanent population, a government, and the capacity to enter into relations with other sovereign states. It is also normally understood to be a state which is neither...

     must recognize this right
    Right
    Rights are legal, social, or ethical principles of freedom or entitlement; that is, rights are the fundamental normative rules about what is allowed of people or owed to people, according to some legal system, social convention, or ethical theory...

     and refrain from taking economic, military
    Military
    A military is an organization authorized by its greater society to use lethal force, usually including use of weapons, in defending its country by combating actual or perceived threats. The military may have additional functions of use to its greater society, such as advancing a political agenda e.g...

    , or political measures calculated to restrict it.
  4. International trade
    International trade
    International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...

     should be based on the need to ensure stable, equitable
    Equitable
    -Companies:*Scottish Equitable, is an investment company located in Edinburgh*Equitable PCI Bank*The Equitable Life Assurance Society, life insurance company in the United Kingdom...

    , and remunerative prices for raw material
    Raw material
    A raw material or feedstock is the basic material from which a product is manufactured or made, frequently used with an extended meaning. For example, the term is used to denote material that came from nature and is in an unprocessed or minimally processed state. Latex, iron ore, logs, and crude...

    s, generalized non-reciprocal and non-discriminatory tariff
    Tariff
    A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....

     preferences, as well as transfer of technology to developing countries; and should provide economic and technical assistance without any strings attached
    Conditionality
    Conditionality is a concept in international development, political economy and international relations and describes the use of conditions attached to a loan, debt relief, bilateral aid or membership of international organizations, typically by the international financial institutions, regional...

    .

Resource allocation mechanisms

Haggard and Simmons claimed that:
A number of social mechanisms are possible to effect resource allocation
Resource allocation
Resource allocation is used to assign the available resources in an economic way. It is part of resource management. In project management, resource allocation is the scheduling of activities and the resources required by those activities while taking into consideration both the resource...

 in any economic order. An authoritative allocation mechanism involves direct control of resources while, at the other end of the spectrum, more market-oriented private allocation mechanisms are possible. Most of the debates within the NIEO occurred over allocation mechanisms, with the southern hemisphere countries favoring authoritative solutions.

Mercantilist Ideas

NIEO is based on the (French) mercantilist idea that international trade would be a zero-sum game (i.e., causes no net benefits), and on the view that it benefits the rich at the expense of the poor. Some American economists challenge the idea of trade as a zero-sum game transaction.

Central planning vs. free markets

NIEO also proposes central planning, as opposed to free markets.

Legacy

In Matsushita et al.'s World Trade Organization, the authors explained part of the legacy of the NIEO:
... tensions and disagreements between developed and developing countries continue: the latter expect a greater degree of special treatment than industrialized countries have afforded them. This demand was expressed comprehensively in the New International Economic Order and the Charter of Economic Rights and Duties of States promoted by UNCTAD in the 1970s. Although the Charter was never accepted by developing [sic] countries and is now dead, the political, economic, and social concerns that inspired it are still present. The Charter called for restitution for the economic and social costs of colonialism, racial discrimination, and foreign domination. It would have imposed a duty on all states to adjust the prices of exports to their imports. The realization of the New International Economic Order was an impetus for developing country support for the Tokyo Round of trade negotiations. Critics of the WTO
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...

 continue to state that little of substance for developing countries came out of either the Tokyo or Uruguay Round
Uruguay Round
The Uruguay Round was the 8th round of Multilateral trade negotiations conducted within the framework of the General Agreement on Tariffs and Trade , spanning from 1986-1994 and embracing 123 countries as “contracting parties”. The Round transformed the GATT into the World Trade Organization...

s.

Price regulation is inefficient

The powerful countries of North America and Western Europe felt threatened by the NIEO and continuously tried to criticize and minimize it; according to professor Harry Johnson, the most efficient way to help the poor is to transfer resources from those most able to pay to those most in need. Instead of this, NIEO proposes that those poor countries that have monopoly power should be able to extort these transfers. In practice such power has caused most harm to other poor countries.

Commanding prices above their natural level
Market price
In economics, market price is the economic price for which a good or service is offered in the marketplace. It is of interest mainly in the study of microeconomics...

 usually reduces consumption and thus causes unemployment among producers. Moreover, price regulation typically gives the extra income to those in control of who is allowed to produce, e.g., to governments or land-owners.

Further reading

  • Rist, Gilbert
    Gilbert Rist
    Gilbert Rist was a professor at the institut universitaire d'études du développement in Geneva. He is best known for his ground-breaking study of the concept and practice of development.-Writings:English...

    : Le développement, Histoire d'une croyance occidentale, Presses de Sciences Po, Paris, 1996 - engl. The History of Development: From Western Origins to Global Faith, 3rd edition, London: Zed Books, 2008, ISBN 1848131895- Chapter 9
  • The Darker Nations: A People's History of the Third World by Vijay Prashad and Howard Zinn
    Howard Zinn
    Howard Zinn was an American historian, academic, author, playwright, and social activist. Before and during his tenure as a political science professor at Boston University from 1964-88 he wrote more than 20 books, which included his best-selling and influential A People's History of the United...

     (Editor) A "people's history
    People's history
    A people's history or history from below is a type of historical narrative which attempts to account for historical events from the perspective of common people rather than political and other leaders.-Description:...

    " of the world's impoverished countries and their failures to oppose to the United States and Soviet spheres of economic influence following World War II to the present. ISBN 1565847857

See also

  • Fairtrade certification; fair trade
    Fair trade
    Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...

  • liberal international economic order
    Liberal international economic order
    In international relations, the liberal international economic order is the global free trade establishment. Critics sometimes refer to LIEO as the Washington Consensus, which implies that this system works mostly in the favor of the United States at the expense of smaller countries.LIEO is said...

  • New World Information and Communication Order
  • trade justice
    Trade justice
    Trade justice is a campaign by non-governmental organisations lobbying for changes to the rules and practices of world trade so that poor people and the environment benefit...

    ; Trade Justice Movement
    Trade Justice Movement
    The Trade Justice Movement is a British coalition, founded in 2000, of more than 80 organizations campaigning for trade justice.The coalition has a particular focus on UK and EU trade policies...

  • Washington Consensus
    Washington Consensus
    The term Washington Consensus was coined in 1989 by the economist John Williamson to describe a set of ten relatively specific economic policy prescriptions that he considered constituted the "standard" reform package promoted for crisis-wracked developing countries...

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