Global Trends by Martin Khor

Monday 14 June 2004

South fights for “policy space” at UN meeting

The United Nations Conference on Trade and Development (UNCTAD) 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 today (14 June) to discuss the development prospects and problems of developing countries in a rapidly globalising world.

Many government leaders are already arriving in Sao Paulo to attend the eleventh session of the UN Conference on Trade and Development (known as UNCTAD XI), which will be opened by Brazilian President Lula de Silva and UN Secretary General Kofi Annan.

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 controversial issue concerns the need strongly felt by  developing countries for “policy space” to carry out national development policies which has recently been constrained by international rules, and may become even more limited by future rules.   The developing countries are calling for a recognition of their right to this policy space, or the freedom to choose their own development strategies instead of being prevented from doing so by WTO rules or IMF policies.

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 policy conditions for loans and through aid.

The issue is to be resolved under the disputed 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.

Another issue is whether UNCTAD and its secretariat will be able to maintain its independent role in policy analysis in favour of developing countries.   Some disputed paragraphs in the draft are asking for some of UNCTAD’s future activities to be in line with the framework of other agencies.    

This is being resisted by developing countries, that want UNCTAD to retain its independence. 

Another disagreement is over the “good governance issue.”   The disputed text says 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. 

They further argue 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 point of contention is on corporate responsibility.  Developing countries are advocating UNCTAD XI’s recognition of the responsibility of corporate actors, especially transnationalo companies, towards the economic development of host countries , and also the need to improve international instruments to increase corporations’ contribution to development.

However even the mild language on this issue is opposed by some developed countries, especially the US. 

There are also three paragraphs proposed by the Group of 77 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.

It is expected, however, that the disputes over the draft will be resolved and that the declaration will be adopted at the close of the conference.