[ UNCTAD XI ]

Economic space, political space and development

[ By Rolf Drescher ]

First and foremost: the decision which will be of greatest importance for the future work of UNCTAD was not on the agenda in São Paulo, but will be taken in New York in the coming months. Rubens Ricupero’s term of office as UNCTAD secretary general will end in September after nine years. His successor will be named by UN Secretary General Kofi Annan. The new head will come from Asia, as required by regional proportional representation. Plenty of names are being discussed, but it is yet to be seen who will be the successor.

The theme of UNCTAD XI was “enhancing coherence between national development strategies and global economic processes towards economic growth and development”. It was not about establishing new basic goals, but about what contribution
UNCTAD can make to the international development agenda and the Millennium Development Goals. There was not much left to discuss in São Paulo. The negotiators had already reached agreement on most of the almost 120 paragraphs in the meeting’s main document in the lead-up at the UNCTAD headquarters in Geneva. The issues still to be decided were worked through fairly quickly and with little controversy.

The chapter on trade in the “São Paulo Consensus” adopted by UNCTAD XI dominated the preparatory talks in Geneva. The USA more than any other party feared that a new negotiation forum for trade issues separate from the WTO might be created. The USA had consistently pressed to delete any statements referring to the WTO from the draft for the final declaration. The European Union had been much more flexible in Geneva. The final document, in accordance with the EU position, stated that UNCTAD is indeed not a negotiation forum. However, as a discussion forum on trade and development, it has an important role in promoting consensus in WTO negotiations.

However, to fulfil this role, UNCTAD must thoroughly review and redefine its role. The environment has fundamentally changed since UNCTAD was established forty years ago. The exclusive club of 23 founding members of the General Agreement on Tariffs and Trade (GATT) has become the WTO, an almost universal organisation with more than 140 member states. The Uruguay Round, from which the WTO emerged, also brought a considerable expansion in topics. Ever since, services, intellectual property and agriculture form part of the multilateral trade system. In addition, the Doha Round placed development concerns at the centre of discussions for the first time – at least on paper. Moreover, the Doha ministerial declaration specifically recognises technical cooperation as a key element in the development dimension of the multilateral trade system. The Doha Development Agenda Global Trust Fund established at the end of 2001 by the WTO Secretariat gives the WTO the financial resources to expand considerably its trade-related technical assistance. These basic changes over the last ten years increasingly shifted the discussion on trade and development to the WTO. Accordingly, cooperation between the two organisations must be realigned. UNCTAD has not yet found a convincing answer.


Strengthening South-South trade

In São Paulo, industrial and developing countries alike advocated for South-South trade to be strengthened. Trade between developing countries currently makes up 12 percent of global trade. It is showing a growth trend and has huge potential. Under the slogan “new global trade geography”, Brazilian president Lula da Silva in particular had for weeks promoted a new (third) round of talks under the General System of Trade Preferences among Developing Countries (GSTP) as “trade round for the poor”.

The GSTP, established in 1989 as part of UNCTAD, has, so far, not gained great importance. The declaration adopted in São Paulo says the 43 current member states are seeking an increase in the number of members (membership of GSTP is open to all members of the G77/China group) and significant tariff reductions for a wide range of products, with special preference to be given to least developed countries. Negotiations are expected to start in November 2004. South Africa has indicated it will join, but China is keeping quiet. It is currently difficult to predict whether the GSTP will develop into a key player for trade liberalisation among developing countries. The “São Paulo Declaration” is no more than a declaration of intention without concrete goals. However, one should not draw rash conclusions from the disappointing results of the first two rounds of talks about the approaching third round. Currently, more than 40 percent of developing countries’ exports go to other developing countries. Increasing preferences would give South-South trade additional impetus and open up trade potential and therefore serves the interests of developing countries.

The most interesting and far-reaching discussion during the negotiations on the “São Paulo Consensus” centred on the issue of policy space for developing countries. The concern of industrial countries: the concept of policy space could challenge binding international commitments. While the European Union had already shown in Geneva that it was ready for talks, the USA was less prepared to discuss the issue. The final document now says that it is for each government to evaluate the trade-off between the benefits of international commitments and the constraints posed by loss of policy space. It is particularly important for the developing countries that all states consider the need for an appropriate balance between national policy space and international commitments.

The discussion is not really new. Recognition of a national policy space marks the departure from the Washington Consensus and its “one-size-fits-all” approach. The “Monterrey Consensus” of the UN-Conference on Finance for Development specifically recognises a pluralism of political concepts. The report submitted in February 2004 by the World Commission on the Social Dimension of Globalization, established by the International Labour Organisation, had clearly criticised the cutback of national policy spaces by WTO rules, and demanded a review. The “São Paulo Consensus” does not go this far. However, the reference to policy space is important for UNCTAD, because it gives it the mandate to propose policy alternatives to developing countries.


Reform of UNCTAD

In the forty years since it was set up, UNCTAD has shown that it is remarkably adaptive. It has understood the basic change from the philosophy of “economic nationalism” prevailing in the 1960s to the economic concept of globalisation which has dominated since the 1990s. It thereby affirmed its position as adviser to developing countries on trade and development issues. However, UNCTAD is no longer the think tank of developing countries that it used to be.

If UNCTAD wants to secure its position under the changed institutional and economic conditions, it must reposition and reform itself in cooperation with the WTO. Necessary above all are: clearly setting priorities, which take into account the personnel and financial resources available; greater inner coherence, i.e. the use of synergy effects between the three pillars of UNCTAD’s work – research and analysis, consensus building and technical assistance; a strong results-focussed management and modernisation of management structures; and more co-operation with other international organisations.

The EU clearly addressed the steps required in its Council conclusions on UNCTAD XI. Developing countries should not refuse the necessary reforms, and should take to heart the words of Norway’s International Development Minister, Hilde Johnson, who said in São Paulo: “Without further steps in this direction, UNCTAD’s program will remain small, almost marginal to the global efforts to reduce world poverty.”