TWN Info Service on WTO Issues (Nov03/3)

5 November 2003

Third World Network

Dear friends and colleagues,


A one-day high level interactive dialogue took place on Financing for Development at the United Nations in New York on 30 October.  It was part of the follow up of the FFD Conference of Monterrey in March 2002.

The discussions covered a wide range of issues, including the reverse transfer of funds South to North, external debt, the trade system after Cancun, lack of participation of developing countries in decision-making, and the need for stronger follow-up mechanisms.

Below please find a report of the intreactive session.

In the next TWN Info is a report of the Conclusions of the meeting.

With best wishes

Martin Khor




‘Monterrey Sprit in search of a body to avoid being a ghost’

TWN Report by Martin Khor, New York, 31 October 2003


With the financing situation of developing countries worsening after the UN Conference on Financing for Development (FfD) in Monterrey in March 2002, steps must be taken to strengthen the UN mechanisms for monitoring and reviewing the implementation process.

Otherwise Monterrey would be another milestone on a road leading nowhere, lamented for being another “lost opportunity” in a world of many lost opportunities.

This has emerged after day-long discussions at the High Level Dialogue on FfD on 30 October,  particularly at the “interactive session” involving governments, international organizations, civil society and business groups.

A major weakness of the Monterrey Consensus is that it has a very weak follow-up mechanism, due largely to some major developed countries’ extreme reluctance to give a high profile to finance work at the UN.  The followup presently comprises a one-day annual dialogue between UN members and the secretariat heads of the IMF, World Bank and IMF;  and a three-day FfD Dialogue every two years.

The post-Monterrey process is suffering for that, as was clear from the first-ever Dialogue this week. As Roberto Bissio of Social Watch, representing the NGOs, put it to the delegates:  “The spirit of Monterrey that we all praise, needs to find a body to live in.  Otherwise it will remain a ghost.”

Among the key themes that emerged in the Dialogue are:

·        There is a most worrying trend of resources being transferred out instead of into developing countries, with net outflow rising from US$111 billion (annual average 1998-2000) to $193 billion in 2002.

·        There was a bright spot -  the decline in official aid was reversed, though the levels are still far too low.

·        The external debt situation remains critical, with the HIPC initiative proving inadequate for the poorest countries, and with no solutions for middle income countries.

·        Developing countries are still waiting for gains from the promised development aspects of the WTO’s Doha programme, the Cancun talks collapse was a setback, and negotiations should re-start soon. Many delegates called for Northern agriculture subsidies to be quickly removed.

·        There has been no progress towards a new international financial architecture.

·        Monterrey called for increased participation of developing countries in decision-making at international organizations like the international financial institutions and the WTO, but there has been little progress on this.

·        Monterrey was not an arrival point but only a point of departure and the work of implementation that has barely started has to be given an impetus.

·        The Financing for Development (FfD) follow-up process and institutions are very weak and they need to be strengthened if any serious follow up work on implementation is to be done.

·        The key problem, identified by many, is the lack of political will by the developed countries.  There was no agreement on how that can be strengthened.

The lack of participation of developing countries in decision-making, the structures and practices of the WTO, IMF and World Bank, came in for criticism.

In introducing Thursday’s interactive plenary,  the General Assembly President, Julian Hunte, Foreign Minister of St. Lucia, referred to the “burning question” of how to re-charge trade negotiations after Cancun.

“It seems that the difficulties of substance have been intertwined with difficulties in process,” he said.  “Let me recall that our governments agreed in Monterrey that any consultation process in the WTO should be representative of its full membership and that participation should be based on clear, simple and objective criteria.

“With concerns expressed after Cancun about appointment of the Chairs and facilitators of negotiating groups, selection of “Green Room” participants, and drafting of new texts, we appear to have a lot of work to do.  Where do we start?”

The Indian Minister of State for External Affairs, Mr. Vinod Khanna said the Monterrey consensus was only a “lowest common denominator” when compared to the recommendations of the Zedillo panel and projections of resource requirements to meet Millennium Development Goals. Monterrey was thus a beginning and not a final destination.

Many elements are yet to be implemented, for example there was little progress in implementing the agreement to enhance participation of developing countries and giving them a greater voice in decision-making processes of international trade, finance and monetary institutions.  It was extremely important to address this very early, as the trading and financial systems do not always take developing countries’ interests into account.

On the follow-up process, he asked the Secretary-General to provide an assessment report on why, despite the Monterrey commitments, the net transfer of resources to developing countries not only continue to be negative but is getting aggravated to an alarming extent.  Are trade factors, and continuing asymmetries and imbalances responsible?

Morocco’s Ambassador Mohamed Bennouna, speaking on behalf of G77 and China, said the Secretary General’s report showed that the reforms carried out by developing countries were not matched by fulfilment of commitments by rich countries and international financial institutions.  There was a low rate of capital flows and worsening of the negative financial flows.

The Cancun outcome did not allow for implementation of he Doha agenda. The developed countries need to open their markets to developing countries and eliminate their agriculture subsidies, he said.

Of the 42 HIPC candidate countries, only 8 reached the level allowing them to benefit from debt relief measures.  More flexibility is needed to help these and other developing countries resolve their debt.

The G77 and China regretted that there was no progress to review the capital structure and calculations of assessed contributions in the IMF and World Bank.  Such measures are the only ones that would allow developing countries increase their participation in decision-making.

Mexico said the main agenda in Cancun was how to reduce agriculture subsidies which tremendously distort trade, and restore equity in the system.  He suggested that the UN appeal to WTO members to re-start the debate in WTO on this subject so as to have fair trade without the distortions of these subsidies.

Brazil said that it and the group of developing countries (G-20) it represents was committed to restarting negotiations in WTO.  The contribution of trade to the Monterrey goals was significant as developing countries could gain US$400 billion in 2015 should agricultural trade be liberalized, and thus subsidies should be reduced.  South-South trade including through the GSTP scheme was very important.  He stressed the importance of policy coherence and the central role of the UN and ECOSOC.

China called for the removal of trade barriers such as abuse of Anti-Dumping, SPS and TBT measures, and for trade principles to be applied to agriculture, textiles and developing countries’ products. It called for a more binding mechanism for the FfD follow up, including the establishment of a monitoring and assessment framework for the Monterey Consensus overall, to be located in the UN.  There should also be a Financing for Development committee set up in the UN system.

Pakistan said the many good ideas should be fleshed out otherwise there will only be endless repetition by lip service to the commitments.  The follow up process must be re-visited.  “If we are not happy with the periodic lip service at the Spring meetingand this Dialogue, we need a more sustainable follow up.  Implementation is the buzz word, but where is the beef?  We need a rigorous follow up at expert level to review how countries have met their commitments, which can input the Spring meeting and Dialogue. There must be an expert review, and a monitoring follow up mechanism.”

Egypt agreed on the need to strengthen follow up mechanisms to ensure coordination, with a continuous system that can include the World Bank and IMF.

The World Bank representative suggested that in the Spring meeting of ECOSOC, the 54 members of ECOSOC should have a dialogue with the Executive Directors of the IMF and World Bank, and civil society and business.

Kenya asked for removal of agriculture subsidies. At present it was better to be a cow in Europe, enjoying $2 subsidy a day, than a person in a developing country where many live on below $1 a day, the Kenya representative said..  He also questioned what steps were taken by the IMF and World Bank to increase developing countries’ participation in decision-making.

Italy on behalf of the EU deeply regretted the Cancun failure.  The EU believed WTO negotiations must resume as soon as parties are ready.  He reiterated EU’s goal to collectively raise its ODA to 0.39% of GNP by 2006.

Norway’s Development Minister gave an account of how Norway had increased aid and cancelled all HIPC debt.  It now wanted to ensure coherence so that  various policies do not harm developing countries.  She stressed the need for political will if implementation is to progress.  She proposed an effective review and monitoring mechanism to address the shortcomings of developed countries.  The 2005 review must be a milestone to show political will to make things happen.

The US stressed the importance f domestic resources for development. Cancun was a missed opportunity especially for developing countries.  The US was willing to make deep tariff and subsidy cuts, but developing countries must also remove their trade barriers.

John Foster of the North-South Institute of Canada said with the Cancun collapse it was urgent that the assumptions and procedures of the trade system be reviewed. A one-size fits all approach to trade does not work.  Moreover the international financial institutions must cease their pressure to impose inappropriate liberalisation and privatization measures onto developing countries. The WTO needed to change its habits and end its manipulative and opaque processes.

On follow-up, he said the ECOSOC should be strengthened and coordinate activities and review policies including to make the IFIs and WTO accountable. The WTO should also be brought into the UN house.  A coordination structure for the FFD process is also required.

Roberto Bissio, on behalf of Social Watch and the International Facilitating Group of NGOs on the FfD follow-up, summarized the messages from the NGO Hearings held on Tuesday.

He said the Monterrey conference had been hailed as a success because it resulted in pledges of additional funds. And total ODA actually increased 5% in 2002. Yet this is an increase relative to the lowest levels of development aid contributions in history and it is a small fraction of the money deemed necessary to achieve the Millennium Development Goals. In the same year, before the Iraq war, military expenditure in the world grew by 6%, reaching $794 billion. Money still seems to be more easily available for war then for development.

“Several mechanisms to raise resources were identified by civil society organizations during the hearings, like for example the proposed International Finance Facility, taxes and levies on the utilization of the global commons, the proposed currency transaction tax and the recovery of assets taken out of our countries by corruption, which could be agreed in the framework of the FfD follow-up.

“The experience of Argentina was debated, as a dramatic example of how, once more, “model countries” failed dramatically. The consequences of these repeated failures were suffered by the people, and not by those that made the policies.

“The need for monitoring implementation of the pledges made in Monterrey has been repeatedly mentioned. In the “new contract” emerging from Monterrey, one side has still to meet its part of the deal. The developed countries are not meeting Goal 8 of the MDGs, and among them the members of G7 are those lagging behind. In fact there seems to be an inverse ratio, the greater and more powerful the country is, the slower it moves towards meeting its commitments.

“The promise of a development round made in Doha and praised in Monterrey failed to materialize in Cancun. The lack of agreement shows governance problems that have historic roots. The role of the UN has been reduced in the last two decades by a political decision of the G7. The Bretton Woods Institutions and the WTO have encroached in areas not in their original mandate.

“The WTO should do trade, and not services or health policies through TRIPs; the IMF should do finances - ensure stability, combat volatility and speculation, and not trade policies by demanding unilateral liberalization; the World Bank should support well designed projects and not impose structural adjustments.

“The United Nations should recover its role of setting normative standards, particularly in human rights, labour rights and social policies. There is a scandalous imbalance in the enforceability of corporate rights through trade sanctions and the lack of power of human right treaties, including the right to life itself.

“Finances, trade and development are inter-related, as Monterrey recognized, but nobody is looking at the relation. Concrete steps that can be taken are outlined in the paper of the NGO International Facilitating Group called “A political agenda for the reform of global governance”.

“Following the Monterrey recommendations, we need to change the voting powers in the Bretton Woods institutions, ensure more representation of developing countries in their boards and regular accountability towards the UN General Assembly. The WTO has to be brought into the UN family.

“There is a gap in global governance related to debt: All decisions on debt sustainability, amount and conditions of relief are done by the creditors. The world needs a UN led mechanism to ensure fair and balanced burden sharing. The civil society organizations therefore urge the General Assembly to adopt the recommendation made by the UN secretary general in paragraph 137 of his report to establish an expert group on debt.

“ECOSOC needs to be strengthened and the mentioned IFG document explains how.

Expert working groups with civil society participation can advise policy decisions.  A permanent ECOSOC executive committee needs to be set up as described in paragraph 182 of the secretary general report.

“In summary, the spirit of Monterrey that we all praise, needs to find a body to live in. The Monterrey summit was symbolized by an albatross, that contrary to all previsions could indeed fly. Now we need to make sure that by 2005 the albatross can find an appropriate nest to incubate her eggs.”