TWN Info Service on WTO Issues (June04/6)

12 June 2004

Third World Network



UNCTAD XI or the eleventh session of the UN Conference on Trade and Development begins on 14 June.

A key issue that is yet to be resolved in the main text to be approved is the right of developing countries to have “policy space” to choose between options in their economic and social policies.

This policy space has been narrowed in recent years due to global rules and commitments, including under the auspices of the WTO, IMF and World Bank.

There are 18 paragraphs that are still to be resolved in the text.

The paper below gives s preview of UNCTAD XI, including the issues that have yet to be resolved.

This is the first of a series on UNCTAD XI.

With best wishes

Martin Khor









By Martin Khor, Third World Network, Sao Paulo 12 June 2004


The eleventh session of the United Nations Conference on Trade and Development (UNCTAD XI) meeting this week in Sao Paulo will discuss the problems and prospects that developing countries face in a rapidly globalising world.  Developing countries say their freedom to have policies promoting development is being curbed by too many global rules that work against them.  They are fighting for their right to “policy space” to be recognized.

This year’s most important United Nations conference opens on 14 June to discuss the development prospects and problems of developing countries in a rapidly globalising world.

The meeting will see some tensions between developing and developed countries as they hammer out a declaration focusing on globalisation, trade and development strategies.

UNCTAD is the UN’s premier organization dealing with development issues, and used to be the main world body dealing with trade.  Today, however, it lives under the shadow of the World Trade Organisation, where most trade negotiations are now taking place.

Still, the developing countries generally consider UNCTAD to be “their” organization, as its birth in 1964 arose from demands of the poorer countries to establish a trade and development body dedicated to their needs.

With the WTO’s talks having slowed down recently, more attention has shifted to UNCTAD’s activities and potential.  

In recent months, there were intense negotiations among the governments to prepare the UNCTAD XI declaration.  They were marked by many controversies along North-South lines on what policies the developing countries should have and should be allowed to have in a world dominated by globalisation and global rules.

Of the 119 paragraphs of the “Draft UNCTAD XI Negotiated Text”, as the declaration is now called, 18 are in or contain square brackets, denoting that further discussion is needed.

Besides wrangling over the draft, delegates will spend the week in plenary and workshop sessions to debate issues ranging from trade policy, globalisation and development strategies, and competitiveness.

An eagerly anticipated event will be the re-launching of a South-South trade initiative, the Global System of Trade Preferences for developing countries (GSTP).   Under this, developing countries negotiate to give trade preferences, or lower tariffs for one another’s products.

The earlier two rounds of talks under the GSTP were not very successful.  The third round will be launched on 16 June and this time some countries are determined to make it work.

A Ministerial meeting of the Group of 20 developing countries (that formed to fight on agriculture issues in the WTO) was also held last Saturday on the margins of the UNCTAD meeting.  Its aim was to solidify its common positions to be taken at the WTO.

There was also a special Ministerial meeting of the Group of 77 developing countries to commemorate their 40th anniversary.

These moves towards South-South solidarity moves have worried some developed countries that fear that the developing countries will strengthen their bargaining power in global relations, in particular at the WTO..

“The rich countries are afraid that the occasion of UNCTAD XI will be used by the G20 to promote their cause, and by the G77 to promote South-South trade and solidarity,” said a diplomat.   “They will try to discourage this from happening.”

The underlying North-South tension has already been evident in the intense negotiations in the past few months in Geneva over the Draft UNCTAD XI Negotiated Text.  It still has many unresolved issues.

The most difficult unresolved issues to resolve are in the Chapeau or introduction section.

Perhaps the most substantively controversial issue concerns the need strongly felt by  developing countries for “policy space” to carry out national development policies which has recently been constrained and narrowed by international rules, and may become even more limited by future international rules.   The developing countries are calling for a recognition of their right to this policy space and thus a better balance between this policy space and international rules.

However, the developed countries, especially the United States, are concerned that recognition (through an intergovernmental consensus such as at UNCTAD XI) of the right of developing countries to such “policy space” would enable the latter to strengthen their bargaining position to elude the rich countries’ pressures for them to undertake more liberalization and privatization commitments, especially at the WTO, through IMF-World Bank loan conditionalities or through aid conditionalities.

The issue is to be resolved under the bracketed para 18.   This states that increasing interdependence in a globalising world and the emergence of rule-based international economic regimes have meant that the space for national economic policy (especially in trade, investment and industrial development) is now often framed by international

disciplines, commitments and global market considerations.

It is for each government to evaluate the trade-off between accepting international rules and the constraints posed by the loss of policy space, says the text, adding that it is incumbent on the international community to consider the “appropriate balance” between national policy space and international disciplines and commitments when deciding on future disciplines and commitments and on implementing and interpreting existing ones.  This should not affect the integrity of rules and commitments entered into through international negotiations, adds the text.

There are also two other bracketed paras in the chapeau that deal with the institutional issues affecting the role or operations of UNCTAD.

For para 10, there is an option between two separate alternatives, as well as contention between countries within each option.   The first option, favoured by developed countries, asks UNCTAD to participate in the reform of UN operational activities, aimed at improving the UN system’s assistance at the country level, and referring to the UN Development Assistance Framework, national development strategies and the UN Development Group, and “strengthened collaboration” with other organizations.

This option is generally seen by developing countries as pushing UNCTAD into more of a technical assistance role at national level (rather than its role of policy research and analysis on global issues for reform at global level), and for over-constraining UNCTAD’s functioning at that national level to be within existing policy frameworks such as the UN development assistance framework and aligned to “relevant national development strategies”, which can be seen as a code for the PRSP process among other things.

The second option has more general language, which does not constrain the functioning of UNCTAD within pre-existing frameworks of other organizations or processes.  It also makes UNCTAD’s role in UN reform accountable to UNCTAD’s own reporting mechanisms.  

The option states that UNCTAD should continue to participate in the UN reform process and technical assistance activities (including UNCTAD’s) require examination to make them more cost-effective.  As the focal point for trade and development, UNCTAD has a special responsibility to international development goals, and its contribution to the UN reform process will be reviewed by UNCTAD’s existing reporting mechanisms.

Para 11, also entirely in square brackets, asks UNCTAD, in fulfilling its mandate, to take account of the work of and cooperate closely with other international organizations to “enhance synergies, consistency, complementarity and mutual supportiveness of policies and to avoid duplication.”   

Developing countries are generally concerned that reference to synergies and consistency with policies of other agencies could be aimed at or result in the diminishing of UNCTAD’s independent role especially in research and analysis vis-à-vis the Bretton Woods institutions or other agencies, whilst the reference to “avoiding duplication” could also result in the diminishing or removal of some of UNCTAD’s present areas of work.

Another disagreement on North-South lines is over the “good governance issue,” which had also figured significantly in UNCTAD-X negotiations in Bangkok.  The fully bracketed para 21 states that “at the national level, the important elements for growth and development include political stability, transparent and accountable governance, and the rule of law.” 

It adds that these “basic factors” need complementing by policies to promote investment, building local capabilities and successful integration of developing countries in the global economy, and to enhance the efficacy and coherence of macroeconomic policies.   

Developing countries are concerned that the developed countries’ insistence on such references to national-level “governance” issues as being the important elements for development can add to pressures for further conditionality or commitments on them.  And that, in contrast, the absence of good governance or democracy at international level (which goes against developing countries’ interests and hinders national development policies) is not given similar attention in the text, thus causing an imbalance.

Another significant point of contention revolves around the issue of corporate responsibility.  Two related paras (45, 58) on this are fully bracketed.   Developing countries are advocating UNCTAD XI’s recognition of the responsibility of corporate actors, especially TNCs, towards the economic development of host countries , and also the need to improve international instruments to increase corporations’ contribution to development.

Para 45 states that corporate actors, especially TNCs play an important role in technology transfer, supplier linkages and access to markets for developing countries, and that corporate responsibility entails a positive role in stimulating economic development of host countries, and in supporting social and environmental development and competitiveness of local enterprises.  There are various voluntary international instruments that could be improved and made more coherent to increase the contribution of corporate actors especially TNCs to advance development goals.

Para 58 calls on UNCTAD to provide policy analysis on ways to promote a positive corporate contribution to development of host countries, taking into account existing international initiatives and developing precepts or guidelines on good corporate practices.

However even the mild and watered-down language now in the two paras is being opposed by some developed countries, especially the US.  It should be noted that the language on corporate responsibility in the Plan of Action in the Johannesburg World Summit on Sustainable Development is far stronger than the bracketed texts of paras 45 and 58, and yet some developed countries are seeking to further dilute the draft.

There are also three paragraphs (22, 69, 81), proposed by the G77 but opposed principally by the United States, on the need to eliminate the continuing use of coercive economic and trade measures against developing countries, including through economic and trade sanctions, and new attempts at extraterritorial application of domestic law, which violate the UN Charter and WTO rules (para 22) and which contravene the basic principles of the multilateral trading system (para 81).

Three other paras regarding landlocked and transit economies (paras 33, 66 and 85) and one paragraph regaring UNCTAD”s support for oil-exporting developing countries (para 99) also contain brackets and remain to be resolved.