New International Economic Order and Monetary Law

The New International Economic Order (NIEO) was proposed to post the second world war. Its main objective was to bring reform in the governance of the world economy and enable the integration of the recently decolonized nations. It was based on certain essential principles of public international law. As a result, it significantly affected the global monetary system and law.

New International Economic Order 

Developing countries proposed the NIEO to end economic colonialism and dependency on developed nations. The developing nations believed that the then prevalent international economic order was established when many countries had not attained independence. 

Therefore, it led to inequality. Despite the end of colonialism, there was no real economic independence. The developing nations lagged behind other developed countries, far more advanced.

Therefore, the NIEO proposed industrialization, agricultural production, and economic changes. In addition, NIEO sought reform in how international trade took place and the flow of capital and technology so that the developing countries could also be equally benefited. 

The NIEO is different from other economic programs. It aims to improve the present international monetary system and expand its purpose. It aims to bring about global economic development where even the least developed countries are benefited. 

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Origin and Development

The origin of the NIEO began at the end of World War II. The entire world economic system had been disrupted due to the War, and the international monetary system had broken down. Due to this, the gap between developed and developing countries widened even more. 

The main forum responsible for the idea of the NIEO was the Non-Aligned Movement. The Non-Aligned Movement was formed during the Cold War. It is a group of 120 countries that are aligned neither with the Western Bloc (USA) nor with the Eastern Bloc (USSR). 

The chairman of the Non-Aligned Movement in 1973 requested the Secretary-General of the UN to convene a Special Session of the General Assembly to study problems related to raw materials and economic development. Thus, in September 1973, the UN General Assembly adopted the ‘Programme of Action on the Establishment of a New International Economic Order.’

The UN General Assembly later adopted the Charter of Economic Rights and Duties of States on 12 December 1974. Although there have been many meetings to bring the NIEO to fruition, it has not been done yet. In 2018, the UN General Assembly adopted another resolution, ‘Towards a New International Economic Order,’ which recognized the need to continue working for the development of the NIEO.  

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Founding Principles

The NIEO was adopted while keeping in mind the principles of the United Nations Charter to promote the economic and social advancement of all. The fundamental founding principles of the NIEO were:

1. All nations are sovereign and equal. The people in these nations have a right to self-determination, and no country can interfere in the internal affairs of another nation. 
2. There should be peaceful cooperation between all member countries. 
3. All countries will participate fully and equally in creating the NIEO and solving world economic problems to accelerate the development and growth of all developing countries.
4. Special measures will be adopted to develop countries adversely affected by economic crises and natural calamities.
5. Every country has the right to adopt an economic and social system according to its wishes. 
6. Every state has the exclusive right over its natural resources and all economic activities.
7. A country has the right to get full compensation for the exploitation and damage its natural resources caused due to colonialism. 
8. Assistance will be provided to developing countries under colonial rule to control their natural resources and economic activities.
9. The NIEO will maintain just and fair prices of raw materials and manufactured goods imported and exported, improve trade terms, and expand the world economy.
10.  An international monetary system will be developed, ensuring assistance to least developed countries by transferring financial resources. 
11. The developing countries will be given access to modern science and technology, and technology transfer will be promoted. 

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Monetary Law

NIEO is based on the public international law principles of sovereign equality, interdependence, and cooperation among all States, despite economic and social differences among countries. 

The NIEO proposed a reform in the present international monetary system and law through new international commodity agreements and commodity price stabilization through a common international fund. In addition, it aimed to reform global trade by improving trade terms for developing nations. 

It proposed integrating developing countries into regional zones where free trade could further reduce the taxes imposed by developed countries and other trade barriers. 

According to the NIEO, the laws of international trade, especially those concerning raw materials, food, commodity agreements, transportation, and insurance, needed to be reformed. This included reform in the Bretton Woods system. 

The Bretton Woods Agreement was signed in 1944. It led to a new international monetary system that replaced the global currency from gold to the US dollar. Due to this, the USA became an economic superpower. 

The Bretton Woods Agreement also led to the creation of the World Bank and the International Monetary Fund (IMF). These financial organizations are also controlled by the USA and Western Europe, while other developing countries have very little say. 

Thus, the NIEO proposed giving control to developing countries themselves and increasing the rate of economic development and market share among developing countries. Instead of getting financial aid from the developed countries and these financial institutions, the developing countries rallied under the principle of ‘Trade not Aid.’ 

This led to developing countries participating in the Tokyo Round of trade negotiations which was the birth stage of the World Trade Organization (WTO). The formation of the WTO resulted in reduced tariffs and the establishment of new regulations for controlling the proliferation of non-tariff barriers (NTBs) and voluntary export restrictions. 

Conclusion  

The developing countries proposed the NIEO post the second world war to gain political and economic freedom from colonial rule. It aimed to give developing countries control over their natural resources and financial affairs without interference from other nations. Although NIEO has not been formally enforced yet, the need for a new economic system is still felt in the world economy.