UNCTAD: The South stands up to the North

The battle over UNCTAD's mandate revealed a fundamental difference between the South and the North on state policy and development, says Vijay Prashad.

ON the eve of the 13th UN Conference on Trade and Development (UNCTAD XIII) at Doha, Qatar, UNCTAD Secretary-General Dr Supachai Panitchpakdi drew a picture of the relationship between finance and development. 'Finance should not be the master of development,' he said. 'Whether it be slave of development is something else, but finance should serve development.' Inside this small gesture (to invert the relationship between finance and development) lies an enormous controversy.

From the negotiating bloc that represents the Global North (Group B) came a major push-back against the idea that UNCTAD or any other global agency should or could regulate finance. In the negotiations toward a consensus document for UNCTAD XIII, the North put up as many obstacles as possible. Its seasoned negotiators fought to remove all reference to the financial crisis from the document, and to insist that UNCTAD deal only with its core mandate. They expanded the draft text from 24,000 words to 30,000 words with issues having to do with the World Bank's favourite idea, 'good governance'. Each paragraph had to be minutely scrutinised by the North's negotiators, slowing down the process.

On 19 March, the Swiss Ambassador to UNCTAD Luzius Wasescha pointed out that at the rate of progress (3 hours per paragraph) it would take 487.5 negotiation days to get through the draft. This was the strategy of what he called 'creating chaos'. The US statement on 19 March was as cutting: 'The [UNCTAD] Secretariat should not pursue issues outside UNCTAD's mandate - such as the reform of global financial systems. Not only does this particular issue stray far beyond UNCTAD's mandate and its expertise, it also faces strong opposition by many members,' namely the United States.

The North's position rankled former staff members of UNCTAD who released a statement on 11 April entitled 'Silencing the message or the messenger..or both?' The signatories once held senior UNCTAD posts, including that of Secretary-General (Rubens Ricupero). 'When I arrived at UNCTAD in 1995,' Ricupero told the Inter Press Service news agency, 'there was already a conspiracy afoot by the "usual suspects", the rich countries - not to change the mandate as they want to now, but to simply suppress the organisation that they have never accepted since its inception.'

Two days later, the negotiating bloc of the South (the G77 and China) released a very strong statement. Pisanu Chanvitan, the Thai head of the bloc, noted that the North had 'regressed to behaviour perhaps more appropriate for the founding days of UNCTAD, when countries of the North felt they could dictate and marginalise developing countries from informed decision-making'. The North's behaviour, Chanvitan noted, 'seems to indicate a desire for the dawn of a new neo-colonialism'.

UNCTAD's birth and paralysis

UNCTAD, based in Geneva, was formed in 1964 through the efforts of the newly created Non-Aligned Movement (NAM). Confident new states no longer wanted to be second-class citizens to the Atlantic world (the United States and Europe) which dominated the international economic institutions, such as the International Monetary Fund, the World Bank and the General Agreement on Tariffs and Trade. Unable to make space for themselves in these venues, the new states of Africa, Asia and Latin America pushed for the creation of UNCTAD.

It was always a feisty organisation, advocating for the interests of what would later be called the Global South against the Global North. The 77 countries of the South formed their Group of 77 to work within the UN institutions, including UNCTAD and the General Assembly. They were the pressure group of the South (there are now over 130 countries in the G77). UNCTAD was both a forum for negotiation between South and North, and a research unit with a sophistication that was as yet not possible in the ministries of the individual states. The high point of UNCTAD was in 1974, when the UN General Assembly voted in a resolution for a New International Economic Order (NIEO).

To counter the NIEO, the states of the Global North formed the G7 in 1974. It was set up to undermine the power of the South. The debt crisis of the 1980s sapped the South of its power, and left it prone for the agenda of the North. Sustained attack on UNCTAD by the Atlantic powers since the 1980s pushed it into a corner, and made it largely irrelevant as the Atlantic world took its business into forums such as the World Trade Organisation (WTO), where it was able to rule the day.

After a contentious election that pitted New Zealand's Mike Moore against Thailand's Supachai Panitchpakdi, the WTO hierarchy decided to split the third term of the WTO head between the two. Moore ran the WTO between 1999 and 2002, following from an Italian and, before him, an Irish Director-General. After Moore came Dr Supachai, who was Director-General from 2002 to 2005.

During Dr Supachai's tenure at the WTO, the Doha Development Round of trade talks floundered at a Canc£n meeting in 2003. Agricultural subsidies in the North scuttled the discussion (the US had a $180 billion Farm Bill to subsidise US agro-business, and the Europeans refused to reform their Common Agricultural Policy). The recalcitrance of the North, as one person put it, 'made a mockery of the idea that the Doha round was to be a development round'. The US refused to budge on cotton subsidies, which condemned Africa's Cotton Four (Benin, Burkina Faso, Chad and Mali) to acute economic crisis. 'We are used to hardship, disease and famine,' said a member of the Cotton Four. 'Now the WTO is against us as well.' Dr Supachai's attempt at consensus failed. It would mark the rest of his tenure at the WTO.

By the time Dr Supachai moved from the WTO to UNCTAD in 2005, the Doha Development Round had been on life-support, and multilateral negotiations elsewhere, including on the crucial issue of climate change, had been set aside in favour of a North-driven agenda. The US administration of George W Bush had an adverse relationship to multilateralism, having brushed off the Kyoto Protocol on climate change and the Rome Statute on the International Criminal Court. An aggressive use of the UN Security Council on Iraq had embittered the relationship between South and North. Under Dr Supachai, UNCTAD held its 12th conference at Accra, Ghana in 2008. Little was expected of this conference, and indeed not much was delivered. The most novel approach was UNCTAD's entry into the climate debate. Paragraph 100 of the Accra Accord indicated that UNCTAD should consider climate change in its work on development-related trade and investment policies.

Buried in the Accra Accord was an indication of the philosophical difference between the South and the North on state policy and development. The North preferred the 'market' as the conductor of social affairs, while UNCTAD indicated that 'developing countries should pursue development strategies that are compatible with their specific conditions within the framework of an enabling State'. This 'enabling State' was to deploy 'its administrative and political means for the task of economic development, efficiently focusing human and financial resources'.

The opportunity of the financial crisis

The financial crisis struck after UNCTAD XII. As the delegates left Accra and went off to digest their compromises, the toxic banking sector reared its head. UNCTAD had warned about toxic finance for about a generation, but few paid heed to its Cassandra-like persistence. In 2009, the North made at least two important concessions to the South in exchange for Indian and Chinese financial contributions to the IMF and other multilateral agencies: first, that the G8 would be wound up in favour of the G20, and second, that the international financial architecture would be reformed. As confidence returned to the North, however, it has reneged on both these promises.

UNCTAD's Trade and Development Report 2011 produced a carefully argued analysis of the power and influence of finance capital. In Chapter 5, on commodity markets, UNCTAD argues that the commodity boom cannot be explained by rising demand from the BRICS states (Brazil, Russia, India, China and South Africa). Instead, the culprit can be found amongst the index investors, the speculators whose commodity trades are motivated by 'factors totally unrelated to commodity market fundamentals'. What explains the rise in commodity prices, including food and oil, is 'the greater presence of financial investors, who consider commodity futures as an alternative to financial assets in their portfolio management decisions. While these market participants have no interest in the physical commodity, and do not trade on the basis of fundamental supply and demand relationships, they may hold - individually or as a group - very large positions in commodity markets, and can thereby exert considerable influence on the functioning of these markets.' There could be no development agenda without a serious consideration of financial reform.

At Doha

Once in Doha, the Global North went at UNCTAD from many directions. It tried to use the question of internal reform of the organisation as a threat against the staff. Complaints about duplication in the UN system go back to the 1960s, when the US tried at that time to prevent UNCTAD from being born. The North suggested that UNCTAD's budget could be trimmed so that it might return to work on its mandate and not take up issues already dealt with in other UN organisations. Here the Global North neglected to note that the 'other' UN organisations, such as the International Monetary Fund and the World Bank, are closely aligned to the US and Europe and are not beholden to the South.

Such a push-back against UNCTAD has not been seen since at least the 1970s. Unfortunately for the Global North, the main countries of the South gathered together to defend UNCTAD. The most important outcome of Doha was not the final document, but the emergence of the South as a potent force.

The negotiations on the final document went on till the last day, holding up the closing ceremony as the text had to be translated. The final document, 'The Doha Mandate', is optimistically named. Coming out of such a contentious process, with the North smarting, the Doha Mandate was nonetheless quite an achievement. All the sections that the North attempted to strike down (on hunger and food security) made their way into the final document. The North wanted to walk away from one particular paragraph that was in the final document of the 2008 UNCTAD XII:

'Developing countries should pursue development strategies that are compatible with their specific conditions within the framework of an enabling State, which is a State that deploys its administrative and political means for the task of economic development, efficiently focusing human and financial resources. Such a State should also provide for the positive interaction between the public and private sectors' (paragraph 115, Accra Accord).

Part of the fight at Doha was over the ratification of the Accra Accord and, centrally, whether this philosophical attitude to the 'enabling State' should be accepted. Along the grain of the dominant neoliberal thinking, the North wanted to substitute this interventionist idea with a more laissez-faire notion of the State. The North's draft suggested that rather than an 'enabling State', UNCTAD should be tasked with the promotion of 'an effective State, working with private, non-profit and other stakeholders' to 'help forge a coherent development strategy and provide the right enabling environment for productive economic activity'. The debate between the 'effective' State and the 'enabling' State fractured along North-South lines. The final text was a compromise, with neither side able to fully get its way:

'Each country has the primary responsibility for its own economic and social development, and national development efforts need to be supported by an enabling international economic environment. The State, having an important role to play, working with private, non-profit and other stakeholders, can help forge a coherent development strategy and provide an enabling environment for productive economic activity' (paragraph 12, Doha Mandate).

Fragments from each draft entered the paragraph, with the argument unsettled. Given the poor negotiating position of the G77 and China, the main negotiating arm of the South, this is however quite a feat. As Norman Girvan, former board member of the South Centre and former Secretary-General of the Association of Caribbean States, told me, 'In the context of the sustained efforts of the North in the run-up to the Conference to emasculate UNCTAD's mandate, and taking into account the formidable political and economic resources at their disposal to divide the South, I share the view of those who judge it to be a victory for the South. It only goes to show that maintaining a firm, united position by the South is the only way to win even modest gains in global forums. Division is fatal.'

The G77 was able to stave off the strongarm tactics of the North and leave intact UNCTAD's original mandate, including its ability to conduct research that would 'enable' a better understanding of the financial crisis and provide policy tools for States to intervene toward people-centred development and not finance-centred globalisation.

'The highlight of the Conference,' Heiner Flassbeck, director of UNCTAD's Division on Globalisation and Development Strategies, told me, 'was the fiercely contested negotiation of the Doha Mandate. Regardless of the specifics of the text as adopted, for me the process that created it was more significant.' The specifics were not so central because the real debate was not on practical policy matters. It was on the broader principle of how to understand the international framework for economic policy and what UNCTAD should be permitted to do to make that framework amenable to genuine people-centred development. 'The attempt that was mounted to exclude UNCTAD from working on global macroeconomic, financial and monetary issues was not new,' Flassbeck said, 'but its advocates came out much more aggressive than ever before. I cannot but conclude that UNCTAD's work, and here mainly the work of my division, has been perceived as professionally strong, but too critical to be allowed in the international chorus of Washington Consensus-like voices.'

The North's cavil about UNCTAD's duplication of the work of the WTO or the IMF was specious. Unlike the WTO and the IMF, sections within UNCTAD, such as Flassbeck's division, produce high-level empirical work that is grounded in a theoretical framework unwilling to cheerlead for neoliberal policy making and for finance-driven globalisation. The North had a political objection to UNCTAD and not a bureaucratic one.

During the debt crisis of the 1980s, a weakened Global South saw UNCTAD's secretariat partly sequestered to the interests of the Global North. From 1974, the UN Centre for Transnational Corporations (UNCTC) had been hard at work building up a database on transnational corporations and setting up a Code of Conduct for such firms. By 1992, the UNCTC was brought into UNCTAD where its mandate was radically transformed. Instead of being a watchdog of transnational firms, the UNCTC directed its resources toward helping transnational firms enter the South. It was in this period that vast sections of UNCTAD became invested in channelling foreign direct investment (FDI) into the South. At Doha, many of the seminars were precisely on this theme, providing technical and political support for transnational firms and for FDI into the countries of the South. Some of this work is done by the International Trade Centre, a joint project of the WTO and UNCTAD. By the 1990s and into the 2000s, UNCTAD's core positions were whittled down, as it absorbed the general neoliberal orientation. It was no surprise when Dr Supachai left the directorship of the WTO in 2005 to head UNCTAD.

While the Doha Mandate strengthens Flassbeck's Division on Globalisation and Development Strategies, it does not weaken the general thrust of this other side of UNCTAD. Flassbeck tells me that the difficult negotiations at Doha might be seen by 'responsible people in UNCTAD as an opportunity for renewing UNCTAD and indeed for revitalising the G77, which has rediscovered the value of UNCTAD as a source of second opinion on global economic issues, or a "think-tank for developing countries", as one delegate put it in the closing ceremony.'

If Flassbeck is correct, then the larger countries of the South, namely India and China as well as Brazil and South Africa, might bring this new political will to bear on other aspects of the North's policy agenda and on a rehabilitation of the critical work on transnational corporations and FDI. None of these states have demonstrated an appetite to challenge the neoliberal policy agenda of the North. What they have done, however, is to resist the North's attempt to shape the trade environment more fundamentally to the advantage of transnational firms than to the farmers and miners of raw materials and primary commodities in the South.

On to the G20

After Doha the next major event to pick up these themes will be the  meeting of the G20 major economies in Los Cabos, Mexico on 18-19 June. The leaked agenda for that meeting was drafted by Pascal Lamy, the head of the WTO, and Angel Gurria, the head of the North-dominated Organisation for Economic Co-operation and Development (OECD). This agenda seeks to provide a 'new trade narrative'. This new narrative will try to strengthen 'global supply chains and value addition' while 'moving away from the "give and take" setting in which trade discussions happen'. In other words, the G20 meeting is to create a paradigm that avoids negotiations ('give and take') and to establish a climate that benefits smooth global value chains - which would benefit the transnational firms.

A preview of the debate took place at Doha, where Costa Rica's Minister of Trade Anabel Gonzalez Campabadal argued that her country's success in the microchip sector was predicated on easy entry into the supply chains. The WTO's Lamy concurred, saying that these value chains reduce the price of the 'entry ticket' for countries like Costa Rica to enter international trade networks. It is perhaps important to mention that Minister Gonzalez worked at the WTO as the Director of the Agriculture and Commodities Division before assuming her government post. The South African Minister of Trade Rob Davies entered the discussion to point out that these value chains have a tendency to perpetuate the old divides, with the South producing primary goods and consuming finished goods. The WTO ambassadors from Brazil and India agreed with Davies. They prefer to see manufacturing within the South as a driver of development, the core position established by UNCTAD.

UNCTAD XIII was memorable for a revitalised G77 and for the growing confidence from Brazil, India, China and South Africa to stand up for a Southern consensus. It will be seen if this awakening remains at Los Cabos and into next year, when the WTO will seek a new head after Lamy leaves office. Having failed to unite behind a candidate from the South for the IMF, for the World Bank and (seemingly) for the International Labour Organisation (whose election is on 28 May), it will be notable to see if the momentum of Doha propels the South to select their candidate for the WTO.                                                           

Vijay Prashad is the author of The Darker Nations: A People's History of the Third World. The second volume of that work, The Poorer Nations: A Possible History of the Global South, will be out in January 2013 from Verso. This essay is adapted from his reporting for Frontline (India) and Asia Times (Hong Kong).

*Third World Resurgence No. 260, April 2012, pp 9-12