Finding place for a progressive trade agenda in the FfD process

Resources to achieve development goals can also be raised through international trade. Developing countries thus need to step up engagement in the UN Financing for Development talks – where trade issues have been given relatively short shrift – in order to enhance the capacity of trade as an engine of development.

Ranja Sengupta

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THE Financing for Development (FfD) review forum 2023 was held on 17-20 April at the United Nations headquarters in New York. The objective of this annual forum is to review the progress under the Addis Ababa Action Agenda agreed by UN member states in 2015 as well as commitments made under the Monterrey Consensus. The Addis Ababa Action Agenda¹ is the outcome of the third conference in the FfD process, which was kicked off with the adoption of the Monterrey Consensus at the first International Conference on Financing for Development, held in Monterrey in 2002.

The FfD process recognises the ‘principle of a holistic and integrated approach to the multidimensional nature of the global development challenge’ and aims to provide financial and non-financial tools to governments, especially developing-country governments, to meet their development objectives. This process is of special significance to developing countries as it is meant to help them supplement resources and foster global cooperation on development issues, especially those that require supra-national efforts. 

Trade in FfD: A neglected child

Since providing globally relevant solutions to global development challenges lies at the core of the FfD process, international trade by its very nature is an important part of the framework. Trade can be a means to generate resources for achieving development objectives, as well as a direct or indirect barrier to development tools and policies. Right from the Monterrey conference, this has been recognised, and accordingly, recommendations on international trade form a key part of all outcome documents from the FfD process. Investment also remains an important issue that is placed mainly under private finance. Trade and investment together are also significantly interlinked with the other pillars of the FfD process, namely, private and public finance including tax, debt, technology, data and systemic issues.

Paragraphs 79-92 of the Addis Agenda cover ‘international trade as an engine of development’ and urge actions on many issues of significant interest for developing countries. The section talks of promoting a ‘universal, rules-based, open, transparent, predictable, inclusive, non-discriminatory and equitable multilateral trading system under the World Trade Organization (WTO)’. It mentions the importance of: implementing the WTO’s Bali Package and the food security decision on public stockholding of importance for developing countries; trade finance for developing countries; the need for participation of least developed countries (LDCs), landlocked developing countries, small island developing states and Africa; TRIPS (Trade-Related Aspects of Intellectual Property Rights, the WTO agreement on intellectual property rights) flexibilities and public health; ensuring duty-free-quota-free access for LDCs and promoting their exports including the adoption of simpler rules of origin; aid for trade; and also the critical issue of special and differential treatment for developing countries and LDCs.

In a significant development, Paragraph 83 of the Addis Agenda calls on WTO member states to ‘promptly conclude the negotiations on the Doha Development Agenda and reiterate[s] that development concerns form an integral part of the Doha Development Agenda, which places the needs and interests of developing countries, including least developed countries, at the heart of the Doha Work Programme’.

However, unlike the more finance-oriented pillars of the FfD process, such as public and private finance, debt and international development cooperation (aid), trade is rather a neglected pillar. The key reason behind this is that trade is seen to have other spaces such as the WTO where binding trade rules are made. In addition, legally binding bilateral or regional free trade agreements (FTAs) as well as investment treaties are being negotiated between governments. The UN, in comparison, is seen to not have much traction in this area. This idea also gains ground because the UN Conference on Trade and Development (UNCTAD), created in 1964 under the UN system to support developing countries’ efforts to ensure their trade policies work for their development objectives, has increasingly been neutralised through a forced shift in its mandate and a takeover of its core objective. The Addis Agenda provided a strengthened mandate for UNCTAD in Paragraph 88, ‘as the focal point within the United Nations system for the integrated treatment of trade and development and interrelated issues in the areas of finance, technology, investment and sustainable development’ (emphasis added). But this mandate is increasingly under threat.

Many of the other areas have seen much more action and have better engaged global civil society groups because these areas do not have other progressive global spaces that ensure such tools are deployed with development as their target. The FfD process remains one of the only tracks, along with work in tandem in the UN’s Economic and Social Council (ECOSOC) and General Assembly, that can hope to deliver substantive outcomes.

The political dynamics of the IATF reports

Another key output to watch for in the FfD context is the report of the Inter-agency Task Force (IATF), the body put together to provide expert analyses of current trends ahead of the FfD review forum each year. While some of the information and analysis on the trade and investment segment in the successive reports has been useful, several of the recommendations over the years have, at the minimum, been insensitive to developing-country needs. The reporting highlights the gains for the developed countries as gains for the entire world – for example, the outcomes from the 12th WTO Ministerial Conference (MC12) in 2022 on agriculture, fisheries and the pandemic response (IATF report, 2023²) – rather than take a critical look at current trends which could have been helpful for developing countries. There has been criticism that the reports have, especially of late, worked against a progressive trade agenda for the South and helped entrench the North-South divide rather than address it. The consistent pitching of a Northern agenda in the reports may be the result of strong pressure exerted by the developed countries or an inevitable outcome of the political views of the experts enlisted, or a mix of both.

One case in point is that of e-commerce. Heavy espousing of the benefits of liberalising e-commerce has been one of the persistent strains across the last few reports. This in effect calls for deregulation of the entire digital economy of developing countries. For example, while the 2023 report points to the benefits of cross-border e-commerce on ‘SMEs [small and medium-sized enterprises], women and marginalised groups’, it is silent on the risks of such liberalisation, especially where regulatory policies in the digital arena are not yet fully developed.

The IATF reports are useful for the trade discourse in one sense. They indicate to a certain extent which way the developed countries want to take the trade agenda, either in terms of current issues on the table at the WTO or in FTAs, or in terms of a future agenda that the developed countries are incrementally aiming for. While this may sound the alarm bell, it can also perhaps signal the need to prepare a development-friendly narrative and counter-agenda.

The 2023 report, for example, highlights the issue of industrial policy and its linkage to trade. While developing-country efforts to bring this to the table have repeatedly failed, the recent interest of developed countries in this issue seems to have ignited a revival of the discourse. There is also a proposal tabled at the WTO by the African Group of countries related to industrial policy.³ 

However, it is clear that the needs and demands of developed and developing countries are highly different and most often in direct conflict. At the same time, the current trade paradigm of the WTO and the FTAs blocks efforts by developing countries to achieve industrial transformation. While developed countries have been articulating the need for access to raw material and minerals from developing countries, the industrial policy needs of developing countries will require them to restrict outflow of such valuable resources in order to promote their own industrialisation. Similarly, developed countries want liberalisation of e-commerce and government procurement in developing countries in order to gain access to their markets, while this clearly goes against developing countries’ industrial policy needs as they would be conceding market access without effectively receiving any in return. On the other hand, while developed countries want developing countries to lower import tariffs, they are themselves voicing the need for protecting their own producers and production through the use of higher import duties. ‘Protection’ has indeed been the biggest doublespeak in the trade discourse. In addition, as raised in the African Group proposal, the stricter intellectual property standards demanded by developed countries run contrary to the industrial policy needs of the Global South and hinder the much-needed transfer of technology.

While the IATF’s 2023 report falls short of articulating a clear industrial policy framework and a supportive trade framework for developing countries, it does mention the need to address inequity by addressing the special needs of LDCs and the impact of some developed-country measures (such as the EU’s proposed Carbon Border Adjustment Mechanism) on developing-country exports. While the emergence of the industrial policy debate in the report may augur a push by developed countries for certain policies at the WTO and at other fora such as the FfD process, it can also facilitate a strengthening of developing-country positions and their articulation.

FfD outcome documents: Help or hindrance for development?

Given the apparent lack of engagement on trade issues, among both developing countries and civil society organisations, there has been a deterioration in the language and substance in FfD outcomes over successive years from a development perspective. Key issues of interest to developing countries have either failed to make it into the outcome documents or been twisted to create disadvantage for developing countries.

The most notable is of course the conclusion of the WTO’s Doha Development Agenda, which was strongly mandated by both the Addis Agenda (Paragraph 83) and the 2030 Agenda for Sustainable Development (Paragraph 17.10). In spite of such commitments, it has not really made much headway in the FfD discussions, which is not surprising given that the developed countries have refused to implement this Agenda at the WTO, rendering it virtually dead.

Another prime example is the waiver of intellectual property rights enshrined in the WTO’s TRIPS Agreement. The waiver was proposed and supported by about a hundred developing countries at the WTO before its 12th Ministerial Conference. The objective was to enable developing countries to obtain supplies of the vaccines, tests and treatments needed to deal with the COVID-19 pandemic. However, it failed to make an entry into the FfD outcome document in 2022 or even in 2023. It is important to remember that Paragraph 86 of the Addis Agenda highlighted the importance of TRIPS flexibilities and of protecting public health in the implementation of the TRIPS Agreement. The waiver was finally adopted at MC12.⁴ Even though this decision fell far short of the ambitious coverage developing countries had demanded and included only very limited flexibility on vaccines (not diagnostics or therapeutics), it was nevertheless a milestone in the problematic issue of intellectual property rights at the WTO but one which the FfD process has ignored.

Even issues such as food security, of key interest to developing countries, have often been addressed in the FfD outcomes in such a manner as to reflect the interest of developed rather than developing countries. For example, the very limited MC12 decision on World Food Programme purchases was welcomed in the outcome document of 2023 (Paragraph 58),⁵ while issues of critical interest for developing countries – such as a permanent solution on public food stockholding (PSH) that has been proposed by 80 developing countries at the WTO,⁶ or the Special Safeguard Mechanism, or disciplines on domestic cotton subsidies in the North – have all been ignored in successive outcome documents. In fact, the PSH issue is mandated in Paragraph 80 of the Addis Agenda.

Another issue is WTO reform, which has been of key interest to the developed countries at the WTO and is being used to propose negotiations to form rules on new, unmandated issues as well as to turn the WTO process against developing countries. This found its way into the 2023 FfD outcome document (Paragraph 55). But including special and differential treatment (S&D), a key principle that ensures preferential treatment for developing countries and LDCs to help them catch up on their development trajectories, has been a difficult battle. Paragraph 84 of the Addis Agenda strongly mandates the implementation of S&D provisions in the WTO as well as ‘strengthening them and making them more precise, effective and operational’. But even when S&D was included in Paragraph 54 of the 2023 FfD outcome document – which was one of only two constructive paragraphs reflecting the interests of developing countries – it was qualified with conditionalities that developing countries are opposing at the WTO.

In contrast, an issue such as e-commerce liberalisation which could narrow developing countries’ policymaking space, has found multiple encouraging mentions in successive outcome documents.

Another issue, of much interest to developing countries, is investment treaty reform, in particular reform of the infamous investor-state dispute settlement (ISDS) mechanism established in many of these treaties. Many developing-country governments have been at the losing end of ISDS arbitration cases and have not only had to pay billions of dollars in compensation but also lost significant policy space in the areas of environmental conservation, sustainable development, labour rights, public health and sectoral policies. Paragraph 91 of the Addis Agenda specifically mentions the need to ensure that ‘the goal of protecting and encouraging investment should not affect our ability to pursue public policy objectives. We will endeavour to craft trade and investment agreements with appropriate safeguards so as not to constrain domestic policies and regulation in the public interest’. Even the IATF reports, in particular the 2023 one, have pointed to the loss of policy space and the declining number of new investment treaties due to their predatory nature. However, efforts by civil society groups and some developing countries to bring this issue into the FfD outcome documents have not made much headway.

In a positive turn, one continuing issue of concern for developing countries, dependence on primary and low-value commodity exports, which has seen very little constructive discussion in the WTO recently, did find its way into the 2023 FfD outcome document. Paragraph 59 says, ‘We call upon the international community to support the efforts of and foster cooperation with commodity-dependent developing countries to address the factors that create structural barriers to international trade and impede diversification.’ Whether this can pave the way for radical solutions through the UN system to help developing countries bound to the low end of the value chain in terms of their production and exports, as well as being forced to export their critical raw material and minerals, remains to be seen.

In lieu of a conclusion

Notwithstanding the challenges, the FfD process actually remains very important for global trade policymaking. The WTO seems to have long relinquished its role as an institution that will deliver on its development promises. Meanwhile, the bilateral and regional FTAs are increasingly expansive and, coupled with a slew of bilateral investment treaties (BITs) and international investment agreements (IIAs), are intruding deep into the development policy space of governments across the Global South. Therefore, the FfD space seems one of the scant few that can still hope to deliver on a progressive development agenda which integrates both trade and investment issues. It is important to ensure that progressive and development-friendly principles and tools come out of the FfD process, as well as to prevent language and commitments disadvantageous to developing countries from being agreed at the FfD forum.

In addition, the role of UNCTAD as the trade institution that is mandated to support developing- and least-developed-country efforts in trade policymaking, needs to be strengthened. UNCTAD also has a mandate on FfD and can play a more effective role in the FfD process as a facilitator of developing-country trade positions rather than desperately claiming to balance North-South needs. Currently, with the notable exception of the Division on Globalization and Development Strategies, most of the divisions working on trade in UNCTAD do not seem to cater to UNCTAD’s main mandate.

Overall, a vibrant FfD process must bring in key concerns of developing countries related to trade and investment, and integrate these into the other streams of work. An active and informed engagement of developing-country delegates on trade issues on the FfD front will also add much more value to the process and help advance their trade agenda in the WTO and other trade fora.                                       

Ranja Sengupta is a senior researcher with the Third World Network.

Notes

1.   ‘Addis Ababa Action Agenda of the Third International Conference on Financing for Development’, United Nations, 2015 (endorsed by the UN General Assembly in its resolution 69/313 of 27 July 2015), https://sustainabledevelopment.un.org/content/documents/2051AAAA_Outcome.pdf

2.   Financing for Sustainable Development Report 2023: Financing Sustainable Transformations, Inter-agency Task Force on Financing for Development, https://desapublications.un.org/publications/financing-sustainable-development-report-2023

3.   ‘The Role of Transfer of Technology in Resilience Building: The TRIPS Agreement’, communication from the African Group, WTO document WT/GC/W/884, 5 July 2023.

4.   ‘Ministerial Decision on the TRIPS Agreement’, WTO document WT/MIN(22)/30 WT/L/1141, 22 June 2022, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/
WT/MIN22/30.pdf&Open=True

5.   ‘Outcome Document of the 2023 ECOSOC Forum on Financing for Development follow-up’, UN document E/FFDF/2023/L.1, 20 April 2023, https://financing.desa.un.org/sites/default/files/2023-05/E-FFDF-2023-L.1_Advance%20unedited%20version%20-%20corrected_0.pdf

6.   ‘Public Stockholding for Food Security Purposes’, proposal by the African Group, the ACP, and G33, WTO document JOB/AG/229, 31 May 2022.

*Third World Resurgence No. 356, 2023, pp 26-29