TWN Info Service on WTO and Trade Issues (Oct06/08)

10 October 2006

Report 7 of UNCTAD meetings

Supachai outlines reform measures at UNCTAD MTR meeting
By Martin Khor (TWN):  Geneva, 4 Oct 2006

A brief outline of how he intends to undertake some internal reforms in UNCTAD was given by its Secretary-General Supachai Panitchpakdi at the policy dialogue of UNCTAD's Mid-Term Review on 4 October.

The MTR is a special session of the Trade and Development Board and its outcome is meant to review the implementation of UNCTAD XI (Sao Paulo 2004) and guide its work before UNCTAD XII (Ghana 2008).

At the end of the opening session this morning, Supachai made four points on UNCTAD reform. First, on the eminent persons' report (EPR) on UNCTAD's work, which he had arranged for, Supachai said that he had started consultations on the follow-up.

There would be a full-fledged Trade and Development Board session in November to discuss the report's contents and its 21 proposals. There would then be a working group on institutional changes that needs members' agreement before preparing for UNCTAD XII and that Ministers would have to endorse there.

Second, on the internal restructuring process, Supachai said there were different views. UNCTAD was told to be "leaner and meaner" (referring to the comment by Finland's Trade Minister), "but we are also told [that] we must abide by our core mandate."

He said UNCTAD must be true to its mandate, yet be more efficient. He added that UNCTAD is planning to set up a unit to look at harmonizing its technical assistance work, so as to coordinate technical assistance with research and the inter-governmental machine. He said a working group would help him set up the unit.

Third, is the question of how to focus UNCTAD's work to be results-oriented and that meets demand. For example, many developing countries wanted UNCTAD to undertake investment policy reviews but due to limited resources, UNCTAD could only cover 2 or 3 such reviews a year.

Fourth, some delegations had mentioned that this is not the time for UNCTAD to fail but time for it to pick up pieces so as to ride to reforms. One way to fail is if members cannot agree on guiding UNCTAD on what work it should do.

Supachai said UNCTAD would do research, including on sensitive areas, but it needed discussion and not confrontation. It needed inter-governmental agreement to indicate guidance.

Earlier, in his opening statement, Supachai said that globalization is not as global as it may look, that many countries could not take advantage of it, and many are increasingly marginalized from the entire process.

The dramatic disparity has one basic cause: countries not benefiting from globalization simply lack the capacity to do so. UNCTAD's trade and development index shows that even in those countries that have most opened their markets and received significant market access, there has not been a positive impact on development.

"Openness and market access have not been enough to make trade truly an engine for national development," said Supachai. "And in fact, some have argued that trade liberalization has in some cases resulted in deindustrialization and even grater poverty."

He added that efforts are under way, including AGOA, EBA and Doha negotiations, to improve the trading environment for developing countries. "These efforts notwithstanding, only a handful of developing countries are benefiting.

"Among the explanations are restrictive rules of origin, insufficient product coverage, but also and most important, supply-side constraints. The international will may be present but in too many instances the national response to that will is insufficient."

He said aid for trade could help developing countries to build infrastructure, create supply capacity and cover adjustment costs to trade reform. There must be a large increase in productive investment in three areas - investments to improve basic resources of production, to strengthening entrepreneurial and technological capabilities and establishing strong production linkages.

Productive capacity development also requires a larger share of ODA to be allocated to the productive sector. Investment in the social sector is important but not sufficient. ODA in the productive sector has fallen in a recent 10-year period from 48% to only 24%. Only investment in this sector will create employment, increase household income and reduce poverty in the long term.

After the three keynote speeches (see separate article), there was an interactive debate. The Philippines said that for UNCTAD to thrive it must enjoy confidence especially of the developing countries. UNCTAD had a role to manage globalization; it might not be able to control globalisation but it could guide the progress of globalisation.

It agreed that UNCTAD should play an important role in good governance, but there was a gap in its work on governance at the global level. It proposed that UNCTAD work on a global economic architecture in which developing countries participate in global decision-making.

It said UNCTAD had done good work in the past on finance, for example, during the Asian financial crisis, but that its capacity had diminished in this area and it should do more. It also requested UNCTAD to play an active role in the UN Financing for Development process.

On UNCTAD's future, it said efforts to strengthen UNCTAD within the broader UN reform should be Geneva-driven. This strengthening of UNCTAD must ensure that its integrity is maintained and also its central place in the hearts and minds of developing countries.

Pakistan stressed the need for UNCTAD to maintain its intellectual integrity. UNCTAD should complement the work of other organizations from the development perspective, and its uniqueness lies in this. UNCTAD's work, it stressed, is to address this development dimension, and it would stay relevant if it does that.

Referring to Finland's Trade Minister that there were two C's needed regarding UNCTAD (commitment and concern), Pakistan added a third 'C', i. e. confidence. It said UNCTAD would succeed if it has the confidence of developing countries which were its main constituency.

Brazil referred to the importance of South-South trade and asked what can be done to attract LDCs to join the GSTP scheme, as there were only 7 LDCs in the GSTP before Sao Paulo's UNCTAD XI and another 7 LDCs were now in the process of accession.