Global Trends by Martin
Monday 22 May 2006
Battle of wills on “policy space”
Do developing countries
have the right to the “policy space” to determine their own economic
and social strategies? This question is testing the political wills
of developed and developing countries. Last week a United Nations meeting
collapsed after strong disagreement on this issue.
A battle in diplomatic circles
on whether developing countries have the right to “policy space” to
formulate their own development strategies is coming to a head.
On one side are the developing
countries, under the umbrella of the Group of 77. They argue that they
must have the right to choose the economic and social policies that
are suitable for their national conditions and goals.
In the past two decades,
this right has been whittled away by at least three factors: the conditions
that the International Monetary Fund and World Bank attach to their
loans; the rules of the World Trade Organisation; and the dictates
of the global financial markets.
Many developing countries
have been pressurized by the rich nations to accept orthodox free-market
policies such as sudden liberalization of imports, unrestricted flow
of capital and wholesale privatisation (often to foreigners).
These countries’ policies
stopped being made by their own leaders or parliaments, but were dictated
by bureaucrats from the IMF or World Bank, or else their national laws
and policies had to be changed to fit the WTO’s rules.
For most developing countries,
the policies did not work. The East Asian countries had their own bitter
taste of the IMF medicine during the 1997-1999 financial crisis, and
have vowed “never again” would they get into a situation of having to
borrow from it.
Many African and Latin American
countries are however still in the IMF’s grip. And the developing countries
are finding that many of the WTO’s rules (for example on intellectual
property or services) are constraining their ability to promote their
They have spoken in international
fora to get the developed countries to recognize their need for “policy
space”, or the freedom to choose between different policy options, so
that each country can formulate the mix of policies that best suit it.
This implies that the international
agencies have to relax their policy conditions or change their rules
to enable developing countries to adopt pro-development policies.
However, this movement for
policy space has been resisted by the developed countries, particularly
the United States. They fear it may loosen their grip over the international
organizations that they use to continue their global economic domination.
In 2004, the developing countries
won the first battle when they succeeded in getting the ministerial
meeting of UNCTAD (UN Conference on Trade and Development) held at Sao
Paulo to adopt a resolution that included a recognition of the importance
of policy space for developing countries. And this was endorsed by
the UN World Summit in New York in September 2005.
But the US has never been
happy with this. A week ago, it tried to reverse the decision on policy
space by objecting to having any reference to the term in the conclusions
of an important UNCTAD meeting in Geneva that is reviewing its future
work and mandate.
The G77, which speaks for
over 130 developing countries, strongly advocated that policy space
be a central principle to guide all of UNCTAD’s activities.
But the US said it always
had doubts about the “policy space” concept and it now insisted the
term should not appear in the document that will guide UNCTAD’s future
What was to have been a simple
meeting turned into a battle of political wills over the future direction
of the United Nations’ economic and social role.
The G77, to its credit, refused
to give in for doing so would be to condemn UNCTAD and the UN system
to irrelevancy, or so the group felt.
On the other hand, the US
would not budge. Earlier in New York, its delegation had also stated
that in future UNCTAD should not focus on policy research but should
focus on technical aid to the poorest countries.
Near midnight on 11 May the
UNCTAD review meeting collapsed, without any agreed draft on UNCTAD’s
work for the next two years.
This has plunged the UN agency
into a crisis, since it has to come up with a workplan by September.
If the deadlock continues, it could become easier prey to those who
want to close it down in the framework of the UN reform process.
The G77 want UNCTAD to be
saved, for it is an organization the developing countries created more
than 40 years ago. But they want it to be a useful agency, and not
a toothless animal.
What is happening at UNCTAD
is an example of the current battles at the UN as a whole as the Western
countries try to use the banner of “reform” to further erode the once
powerful influence of the UN system on economic and social affairs.
Whether the developing countries can fight back successfully remains
to be seen.
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