July 25, 2016
The Huffington Post, July 22, 2016
In the realm of institutions that govern the global economy, the United Nations Conference on Trade and Development (UNCTAD) stands out. While the International Monetary Fund (IMF), the World Bank, the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) and others adhere to a rigid “neoliberal” ideology that favors deregulation, privatization, and the interests of the global North and the private sector over the poor, UNCTAD has a rich history of favoring people-centered development, promoting interests of the global South, and being a voice of the poor majority in international forums. It has been a strong critic of finance-led globalization and has played a unique role thanks to its focus on the interdependence of trade, finance, investment, macroeconomics, and technology as they affect the growth and development prospects of developing countries.
Every four years, member states meet to decide on the mandate of the organization’s work plan for the next four years. And each time (as we wrote four years ago here), rich countries try to erode the development mandate of the organization, and transform it instead into an institution focused on simply building capacity for developing countries to implement trade (and investment) agreements negotiated elsewhere — whether or not those agreements actually function in the interests of development.With regard to each of the main areas of work, on trade, investment, debt, and tax, as well as other related issues, this week in Nairobi, Kenya, at the 14th UNCTAD was no different. The group of more than 100 developing countries united together in the G77 waged a heroic battle, and won on several important fronts, despite the arrogant negotiation tactics and antidevelopment positions of the rich countries.
Civil society organizations, including trade unions and NGOs working on tax, debt, trade, investment, and other related areas, were incredibly unified in advocating for a strong mandate for UNCTAD this week on these issues. We are disappointed that, overall, UNCTAD 14 did not rise to the level of ambition required to face challenges in the current scenario of global economic, ecological and humanitarian crises. Yet the resulting document recognized several of those challenges, and importantly, affirmed previous mandates.
Throughout the week, developed countries blocked a call for a resolution to the development mandate in multilateral trade negotiations. It is despicable that in a conference focused on trade and development, rich countries successfully prevented UNCTAD from calling for changes to the WTO, to allow more flexibility for development in poor countries. They even successfully blocked a call for a resolution to trade-distorting subsidies in agriculture that damage developing countries every day. Instead of calling for global trade rules to be centered in development and for UNCTAD to play a larger role, they affirmed the primacy of the WTO. The hypocrisy of the United States, the European Union, and other developed economies in opposing trade for development in the heart of the UNCTAD mandate has been breathtaking.
The EU, US and other developed countries sought to use the UNCTAD meeting to sneak in so-called “new approaches” — to abandon entirely the demands of developing countries in the WTO for the last 20 years, and instead bring in new corporate policies from other “free trade” agreements — an effort that developing countries successfully opposed. Developed countries were also successful in affirming UNCTAD’s role in helping to implement WTO agreements — a very questionable role for a trade and development agency.
The EU and US even opposed inclusion of “Special and Differential Treatment” — the simple historical recognition of the fact that rich and poor countries have different economic capacities and need different rules to promote prosperity — although this was finally included.
Throughout the text, the positive aspects of how trade can be used to promote development were highlighted, but without commensurate critique of the corporate-dominated model of trade agreements that currently exists, including in the WTO.
With regard to non-WTO trade agreements, incredibly, developed countries also tried to oppose helping developing countries evaluate the potential (positive as well as negative) implications of trade agreements, while wanting to ensure that UNCTAD “help[s] developing countries take advantage of trade agreements” — i.e., only acknowledging benefits without acknowledging costs. While the final text concedes that these agreements have implications for multilateralism, it does not mandate that member states or UNCTAD take into account their effects on development. Developed countries were also opposed to UNCTAD helping countries advance their interests within trade deals, although this mandate was affirmed.
UNCTAD’s important work supporting Least Developed Countries (LDCs) and other vulnerable countries was strengthened, but weak agreements to change the rules to increase their participation in global trade were merely “affirmed,” meaning that developed countries did not commit to strengthen them.
There are increasing efforts with global value chains, and a stronger mandate to work on their governance, so as to address unfair distribution of gains across the chain and the resulting detrimental impacts on employment conditions and inclusive growth .
The G77 also fought hard to ensure that unilateral trade measures that violate multilateral trade rules and damage developing countries’ development prospects (in particular, the embargo against Cuba) must be condemned. In the end, states were “strongly urged to refrain” from applying them.
While developing countries need capital to invest in infrastructure and other development priorities, for many years the “neoliberal” ideology has flipped this issue on its head, replacing the urgent need to ensure that investment is channeled to development priorities with the goal of simply increasing investment flows. After the filing of more than 600 known lawsuits under Investor-State Dispute Settlements (ISDS) rules, by private corporations against sovereign states, the vast majority of which have been against developing countries and have been based on health and environmental measures, it is obvious that investment rules and agreements must be fundamentally overhauled.
UNCTAD played a major role historically in pressuring developing countries to sign the more than 3,000 (total) international investment agreements (IIAs) in existence. The organization has yet to acknowledge this colossal error, which also signals a need for change. As demanded in a letter endorsed by over 331 civil society organizations in advance of the conference, UNCTAD shouldstart helping developing countries work to unwind, or get out of these agreements. At the very least, UNCTAD’s work to reform IIAs and ensure that investment policy follows development policy has been affirmed, and its “research and policy analysis on the development impact of foreign direct investment, and the activities of multinational enterprises” will continue.
Shockingly, developed countries even opposed inclusion of the issue of policy space. What is policy space? By this we mean that developing countries must be free from imposed international strictures and rules that go against their development needs. They need to be able to implement industrial policy to create jobs; to support public services; to use fiscal and tax policies to ensure that they have the resources for a developmental state and can achieve the Sustainable Development Goals (SDGs), and to ensure their peoples’ human, economic, social and cultural rights — essentially, the policies that developed countries used in their economic development. Directly following after the adoption of the 2030 SDGs, the Financing for Development (FfD) process, both significant global agreements from 2015 that emphasize the importance of international cooperation and as well as the importance of the state in delivering achievements on human and economic rights, it is outrageous that developed countries still had to fight extremely hard for the inclusion of this basic concept, which appears only once and in nonoperational language.
UNCTAD has played a unique role in the international community in helping countries manage sovereign debt. They have played a leading role in filling a glaring gap in the international financial architecture: the lack of an international mechanism for the resolving of unsustainable sovereign debt. UNCTAD has also taken steps to help developing countries deal with overspills from problems created by developed countries’ macroeconomic and fiscal policies, such as the devastation caused in the global South from the US-induced global financial and economic crisis of 2008.
Unfortunately, developed countries tried to constrain UNCTAD’s mandate simply to “sustainable debt management” rather than “sovereign debt crisis prevention and resolution”; thus arguing that UNCTAD should be involved in helping countries manage their debt problems but not to prevent or resolve them! After this conference, no country from the EU, nor the US or other developed countries, can claim to be in favor of developing countries’ escaping the debt treadmill.
In addition, developed countries worked to undermine UNCTAD’s mandate on debt by demanding that it must involve the IMF and World Bank. Since these countries are the original source of much of the debt, as well as of many of the neoliberal policy prescriptions that keep countries indebted, this only makes sense if the IMF and World Bank must follow the policy prescriptions of UNCTAD, rather than vice versa. Debt justice groups worked through the night to successfully ensure that this link was weakened.
In the end, the document included important references to that fact that “there is scope for further work with a view to facilitate fair burden-sharing, improve predictability and promote an orderly, timely and efficient restructuring,” although in nonoperational language, and the mandate continues UNCTAD’s work on debt issues, including the promotion of policies for responsible sovereign borrowing and lending.
Given that the billions lost each year by developing countries to transnational corporations due to tax evasion and aggressive tax avoidance far outweigh flows from Official Development Assistance (ODA), many economic justice organizations have taken up the issue of fiscal justice in recent years. Unfortunately, the rich countries’ club of the OECD has thus far dominated international discussions on taxation, which leave out developing countries and their development concerns.
On taxation, UNCTAD 14 sadly became yet another example of how determined rich countries are to ensure the exclusion of developing countries, not just from decision making on tax matters, but also from the possibility of getting independent advice on how to stop the enormous losses of money they suffer from illicit financial flows, including tax avoidance and evasion, by deleting proposed references to expanding the mandate of UNCTAD on tax issues. Particularly in the aftermath of the Panama Papers, there remains a huge gap in global governance on this key issue.
Members of the Africa Trade Network had produced a trenchant analysis of the need for UNCTAD to deliver on policy analysis and capacity building toward the structural transformation of Africa. They made specific recommendations with regard to addressing imbalances in the international trade regime, the need for “financial, fiscal, and other relevant policies that stop the net transfer of capital, illicit financial flows and other leakages of economic resources from Africa”; and several other key demands on technology transfers, and gender-sensitive and equitable and rights-based development.
UNCTAD’s mandate on these issues was strengthened, but not to the extent that it could have been had developed countries not opposed many of the trade, tax, and other issues detailed above.
UNCTAD also performs important policy analysis and technical cooperation to help alleviate the damaging socioeconomic conditions imposed on the Palestinian people. This was opposed by the developed countries, but affirmed in the final mandate, along with a commitment to strengthen its program with adequate resources.
Many of us working at UNCTAD this week were impressed by the incredible achievements the G77 has made. We remain committed to keep working together for development around the world — together with the G77, allies in developed countries, and a strengthened UNCTAD.
Deborah James facilitates the Our World Is Not for Sale (OWINFS) global network of NGOs and social movements working for a sustainable, socially just, and democratic multilateral trading system. She is the Director of International Programs at the Center for Economic and Policy Research in Washington, DC.