TWN Info Service on WTO Issues (June04/13)

19 June 2004

Third World Network

UNCTAD XI consensus Declaration adopted after lengthy tussles  

UNCTAD XI ended with the adoption of the Sao Paulo Consensus, which is in effect the Declaration of the conference, at a closing ceremony on 18 June.

The 24-page Consensus document had been the subject for lengthy and intense tussles on  North-South lines controversial issues over the past nine months and for three days in Sao Paulo.

It contains policy analysis and responses needed in relation to four topics:  development strategies in a globalizing world, building productive capacities and international competitiveness;  assuring development gains from the international t6rading system and trade negotiations; and partnership for development. 

The main issues of contention had been policy space, governance, corporate responsibility, innovative financial mechanisms, coercive and unilateral trade action, and the role of UNCTAD in the UN reform process.

Below is a TWN report by Meena Raman on the main issues of contention and how they were finally resolved.

With best wishes

Martin Khor





UNCTAD XI consensus Declaration adopted after lengthy tussles  

TWN Report by Meena Raman, Sao Paulo, 18 June 2004


After lengthy tussles on controversial issues over the past nine months, UNCTAD XI has adopted the main text, called the Sao Paulo Consensus, which in effect is the Declaration of the eleventh session of the United Nations Conference on Trade and Development (UNCTAD XI).  It was adopted at the closing session on 18 June.   

The ‘Sao Paulo Consensus’ has emerged from the “draft negotiated text” which has been the subject of intense discussion among the member states over the past many  months in Geneva and over four days at UNCTAD XI..

The Sao Paulo Consensus is a 24 page document which contains policy analysis and responses needed in relation to four topics:  development strategies in a globalizing world, building productive capacities and international competitiveness; assuring development gains from the international t6rading system and trade negotiations; and partnership for development. 

From Tuesday to Thursday this week, there were negotiations on the uncompleted 18 paragraphs of the draft negotiated text which have been in brackets.  Work on the last of these were completed Thursday.  Diplomats from developing countries were quite satisfied with the results. 

Perhaps the most important outcome relates to the issue of “policy space”.  Developing countries have been arguing that they require the space and flexibility to carry out national development policies and that this space had recently been constrained and narrowed by international rules, and may become even more limited by future international rules.  

The developing countries had called for a recognition of their right to this policy space and thus a better balance between this policy space and international rules.

Developed countries, especially the United States, were 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, and through IMF-World Bank loan conditionalities or through aid conditionalities.

This issue was resolved under paragraph 8, which now acknowledges that “it is particularly important for developing countries, bearing in mind their development goals and objectives, that all countries take into account the need for appropriate balance between national policy space and international disciplines and commitments.”

The text also states that “the increasing interdependence in a globalizing 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 the benefits of accepting international rules and commitments and the constraints posed by the loss of policy space.”

According to some diplomats from developing countries, the paragraph on “policy space” was an important development in UNCTAD XI as it was the first time that the concept of the developing countries’ need for policy space (and especially in the context of international rules and disciplines) had been had been recognized in an inter-governmental consensus document. 

There were also two other controversial paragraphs in the chapeau that deal with the institutional issues affecting the role or operations of UNCTAD. The option favoured by the developing countries was finally accepted with some modification.

This is reflected in para 10 of the final text which now states that UNCTAD should continue to contribute to, and participate effectively in, the ongoing United Nations reform process, which is aimed at deepening coherence and enhancing the effectiveness and impact of UN development activities. The organization’s participation in that reform process will be reviewed through the existing intergovernmental mechanisms of UNCTAD.

Para 10 also states that as the designated focal point for the integrated treatment of trade and development, UNCTAD has a special responsibility to contribute to the achievement of the international development goals, including those contained in the Millennium Declaration. Interagency collaboration, within the UN mechanisms, should be enhanced.  These processes will be guided by the relevant General Assembly resolutions.  Technical assistance activities implemented by UNCTAD require an appropriate follow-up.

This is seen as a positive outcome by the developing countries, as the original proposals by the developed countries were 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 present text 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 the UN reform process accountable to UNCTAD’s own reporting mechanisms.  

Para 11, which was originally entirely in square brackets has now been accepted with a significant modification.  The final version states that “UNCTAD and other international organizations should continue to cooperate closely, within their respective mandates, to enhance synergies, consistency, complementarity, coherance and mutual supportiveness of policies to strengthen multilateral cooperation for development of developing countries while avoiding duplication of work.”   This cooperation should take into account the mandates, expertise and experience of respective organizations and create genuine partnerships.

The previous text of 17 May (which was brought to Sao Paulo for further work) had asked 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 were generally concerned that this text could 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.

The revised text incorporates new language, which stresses that the cooperation should be “within the respective mandates” of the organizations  and that it should take into account the mandates and expertise of the respective organizations.

Another major disagreement that was resolved relates to the issue of  “good governance”.   Para 21 originally stated that “at the national level, the important elements for growth and development include political stability, transparent and accountable governance, and the rule of law.” 

Developing countries were 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 was not given similar attention in the text, thus causing an imbalance.

This disagreement was resolved with major amendments to the para which now acknowledges that “good governance within each country and at the international level is essential for sustained growth and development.”   Several elements that are needed for growth, poverty eradication and employment creation have also now been added to the text, including sound economic policies, democratic institutions, infrastructure, freedom, peace, domestic stability, respect for human rights including the right to development, gender equality.

The text also adds that “transparency in the financial, monetary and trading systems, and full and effective participation of developing countries in global decision-making, are essential to good governance and to development and poverty eradication.”

The developing countries had wanted this line to make clear that what was meant were the international systems, or that at least the international systems would be included, whilst developed countries were more interested in referring to national systems. Some developed countries wanted the removal of the word “the” before mention of the systems, so that the meaning would be more general.  The eventual outcome was acceptable to developing countries as it is clear that the line can be taken to include transparency in the international systems.   

Another significant point of contention revolved around the issue of corporate responsibility, contained in paras 45, 58 and 89.

Developing countries were 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.

Many civil society groups had expressed concern that even these paras contained language that was too mild and watered-down and did not go far enough as compared to the far stronger language on corporate responsibility in the Plan of Action in the Johannesburg World Summit on Sustainable Development which is far stronger. But the US was strongly opposed to even the mild language of the 17 May text.

Despite the mild language, the US was strongly opposed to the 17 May text.  At Sao Paulo, the US opposition led to further dilution of the text.

The final para 45 now states that “corporate actors, especially TNCs,  have an important role in technology transfer, supplier linkages and the provision of access to export markets for developing countries.  Corporate responsibility was recognized at the Johannesburg World Summit on Sustainable Development.” 

The text adds that in this regard, corporate actors have [the developing countries’ proposal was 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.”

The original contested para 58 called 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.

The revised text has further diluted the role of UNCTAD by removing the proposed mandate to develop guidelines on good corporate practices. It also restricts UNCTAD to drawing lessons with regard to the trade and development dimension.

The final text states that “UNCTAD should carry out analytical work with a view towards facilitating and enhancing positive corporate contributions to the economic and social development of host developing countries.”  UNCTAD should also consult with all interested parties (in particular UNCTAD’s private sector business partners) in carrying out this work.  Taking into account existing international initiatives in this area, UNCTAD should draw lessons as far as the trade and development dimension is concerned and make the outcome available.

A more positive outcome is that the final text in para 89 (previously 90) maintains the call that “efforts should be made to prevent and dismantle anti-competitive structures and practices and promote responsibility and accountability of corporate actors at both the national and international level, thereby enabling developing countries’ producers, enterprises and consumers to take advantage of trade liberalization.”   The words “and promote responsibility and accountability of corporate actors” had been in brackets and were removed.

There were also three paragraphs (22, 69, 81 in the May 17 text), 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).

Para 22 has been accepted in the final text which now provides that States are strongly urged to take steps with a view to the avoidance of, and refrain from, any unilateral measure not in accordance with international law and the UN Charter.

In para 80 (formerly 81), the final text states that the use of unilateral actions that are inconsistent with WTO rules can have a negative effect on efforts to move towards a truly non-discriminatory and open system. But the May 17 text on para 69 on coercive economic measures and unilateral trade sanctions has been deleted.

Para 20 also drew much attention and discussion among negotiators as it dealt with proposals on innovative approaches for financing for development. The final text states that developed countries should assist developing countries in attaining international development goals consistent with the Monterrey Consensus by providing adequate technical and financial assistance and by making concrete efforts towards the targets for ODA of 0.7% of GNP to developing countries and 0.15% to 0.2% of GNP to least developed countries.

It adds that donors should be encouraged to take steps to ensure that resources provided for debt relief do not detract from ODA resources intended to be available for developing countries.

Developing countries during this week at Sao Paulo proposed to insert a line at the end of the para that “in addition, national and international innovative financial mechanisms supportive of efforts to achieve sustained growth, development and poverty eradication in developing countries should be supported” was resisted by the US. The US concern appeared to stem from the non-specific nature of the term “innovative financial mechanisms”, which could include measures such as the use of Tobin tax and other innovative measures.

The impasse was resolved with compromise language, which states that  “In addition, voluntary financial mechanisms supportive of efforts to achieve sustained growth, development and poverty eradication should be explored.”