Global Trends by Martin Khor

Monday 1 May 2006

Meeting of world’s top economic agencies

A one-day meeting at the United Nations brought together representatives of the world’s top economic and social agencies for a dialogue with government diplomats.  It was an attempt by the UN to re-build its role as an eminent development forum and policy maker.

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For one rather unique day each year, representatives of the world’s leading economic and social organizations come together to review the state of the global economy and to dialogue with governments and civil society.

On 24 April, this happened at the United Nations headquarters in New York, at the meeting of the UN’s Economic and Social Council (ECOSOC) with the International Monetary Fund, the World Bank and the World Trade Organisation and the UN Conference on Trade and Development (UNCTAD).

In attendance were hundreds of government diplomats, international agency officials and a sprinkling of non-governmental groups.

The meeting marks the attempt of the UN system to regain some of the important role it used to have in guiding the world economy, and in providing economic advice to developing countries.

This role had been gradually eroded with the rise of the IMF, World Bank and the WTO in the past two decades, as the developed countries control and thus prefer these organizations.  They engineered reforms to shift powers away from the UN towards the other agencies.

ECOSOC is the UN’s main umbrella organization for all economic and social affairs.  As the meeting opened, its President, Ali Hachani of Tunisia, stressed that the world leaders at the UN World Summit in 2005 had assigned new functions to ECOSOC.

This, he said, had placed it at the centre of the effort to monitor and advance implementation of the global development agenda. 

But it remains to be seen if the UN can rebuild its previously eminent role. It will be a long hard struggle. The meeting was a small step in that.

UN Secretary General Kofi Annan kicked off the dialogue by warning that stalling of world trade talks were “perilous” and called on rich countries to do more by eliminating agricultural subsidies and deal with the costs borne by developing countries in adjusting to a new trade regime.

He welcomed discussions at the IMF to increase the voice of developing countries in the Fund’s decision-making.   “I urge the Fund to use its meeting in Singapore in September to give a real voice to the developing world,” he said.  “This is a matter of both principle and effectiveness.  I also hope other intergovernmental bodies -- not least our own Security Council -- will follow this lead and render their membership, and their procedures, more representative of today’s realities.”

Annan said last September’s World Summit triggered positive steps on aid, and debt relief.  The aid amount has almost doubled and debt servicing by the highly indebted poor countries has declined, and further progress is expected, but more must be done.

IMF Deputy Managing Director Augustin Carstens reported on the recent IMF spring meeting, which noted  risks to the world economy risks from high oil prices, possible global financial market instability,  a rise in protectionism, and a possible avian flu pandemic. 

The IMF meeting highlighted the need to solve global financial imbalances.  Measures needed include reducing the budget deficit, boostinbg domestic demand in Europe, further structural reforms in Japan; and more exchange rate flexibility in some Asian countries.

Touching on the IMF’s credibility (which has eroded as it is seen as a rich-country tool), he said the IMF members had agreed on the need for basic reforms to the decision-making system by reviewing the system of quotas (determining the voting rights of countries).  He was referring to proposals to increase the shares to developing countries such as China.

Alberto Barrera, Colombi’a Finance Minister and Chairman of the World Bank’s Development Committee said poverty reduction remained uneven. East Asia had already reached the target, and South Asia would soon do it, but Latin America was slightly off target and very few African countries would reach the poverty Millennium Goal.

Ransford Smith, President of the UNCTAD Trade and Development Board, stressed the central role of national development strategies and the need for international negotiations to respect the developing countries’ right to have space to choose alternative policy options.

Commenting on the latest initiatiative at the WTO on “Aid for Trade”, he said this must reflect recipients’ priorities, and cover adjustment and compliance costs of developing countries implementing new WTO agreements, and for building production capacity to benefit from the trading system.

WTO deputy director general Valentine Rugwabiza said all hopes were pinned on the chance for a global trade deal in the foreseeable future.  Failure means a grim future for multilateral trade.  But above all, the development objective must be at the heart of the talks, and be its benchmark of success. 

Four roundtables were held on national development strategies, debt and trade and middle-income counties.  Among the interesting conclusions were:

-- The “Aid for Trade” initiative should help developing countries’ ability to produce for export and also compensate them for costs they incur to adjust to new trade rules.  Such aid should however not divert from the rich countries’ need to reform, for example to eliminate their agricultural subsidies. 

-- In the current UN reform process, there is need to examine the relationship of the UN’s ECOSOC, the IMF, World Bank, WTO and UNCTAD.  The need for coherence, transparency, monitoring and accountability was stressed. 

-- Debt relief for poor countries should be additional to and not be at the expense of aid.  Steps should be taken to prevent new unsustainable debt and to minimize the risk of countries facing debt distress in the future.  

--  Middle income developing countries also need attention and assistance as many also have problems such as poverty, excessive debt, social inequities and vulnerability to external shocks.

In closing, the ECOSOC President, Ali Hachani of Tunisia, said strong action was needed on the ideas given and he will consult on how ECOSOC could follow up on the key recommendations.