November 10, 2021
Institute for New Economic Thinking, November 10, 2021
ALAI, November 16, 2021
Developing countries have been devastated economically by the COVID-19 crisis, in many cases far worse than they were hit by the global recession of 2008, and without the massive financial support mobilized by developed countries to protect their citizens from the economic damage caused by COVID-19.
This was the message from the UN Conference on Trade and Development (UNCTAD), as governments from around the world gathered, virtually and in Barbados, last month for the institution’s fifteenth conference. UNCTAD plays a unique role in the international economic governance ecosystem as the focal point for trade and development, acknowledging that trade doesn’t occur in a vacuum. The interrelated issues of finance, technology, investment, and sustainable development must also be addressed in a holistic manner for countries to be able to benefit from integration into the global economy and to achieve the Sustainable Development Goals (SDGs).
At the conference, member states finalized negotiations on the mandate of UNCTAD’s next four years.
This was one of the first opportunities for the international community to step up to the plate to ensure that millions — possibly billions — of people would not remain impoverished by the economic tsunami wrought by the COVID-19 crisis. While the mandate does clearly lay out the multiple and overlapping health, economic, and social crises faced by developing countries at this point, it unfortunately falls short of meeting the moment. In particular, a few developed countries, led by the European Union (EU) delegation, blocked what could have been a bold agreement to strengthen the role of UNCTAD in shaping a transformative agenda in tune with the challenges facing policymakers across the developing world.
Solutions to Transform Development Opportunities and Build Back Better
UNCTAD is one of the only international economic agencies that has analyzed the biases and asymmetries in the current corporate-led model of hyper-globalization, exposing its over-financialization and increasingly monopolistic practices. It has instead advocated for a people-and-planet-focused system of economic global governance. Over time, however, like many UN agencies, some of its divisions have become increasingly dependent on donor funding, and have thus turned away from development-centered models toward more mainstream or corporate-friendly trade and economic policies.
UNCTAD’s research, however, has consistently put forward alternative development strategies, policy proposals, and reform measures that could rebalance the international division of labor and help developing countries to bridge the economic and technological gaps with advanced economies. More recently, it has offered a comprehensive, extremely workable plan to address the profound economic, social, and environmental crises into which developing countries have been plunged by recurrent external shocks and tightening constraints — dubbed a “Global Green New Deal” (GGND).
This involves a new development model that could address the interconnected crises holding back developing countries through a range of institutional reforms, at the national and international levels, along with a series of macroeconomic, structural, and financial measures, including, most recently, the provision of trillions of new Special Drawing Rights (SDRs) by the International Monetary Fund (IMF). This would represent zero cost to developed countries, and yet would provide developing countries with trillions of dollars in assets. These assets could be invested in development projects, such as for their health ministries to combat COVID-19, as well as to improve their credit standing so as to access cheaper borrowing on international markets.
A GGND would also include the transformation of the existing debt management regime, including creating a new sovereign debt workout mechanism that UNCTAD has long advocated. It also includes the cancellation, or sustainable restructuring, of existing debt; new debt sustainability analysis mechanisms to ensure that debt restructurings would result in actual sustainability instead of just kicking the can down the road; and other measures.
A GGND would also necessitate the transformation of existing trade and investment regimes. Current regimes privilege transnational corporations over public interests and the right to develop and have been an underlying factor in the acceleration of inequality that has been a defining feature across the global economy over the last four decades. The transformation of these regimes would include the abrogation of various bilateral investment treaties, as well as the cancellation or replacement of various bilateral or regional “free trade agreements.” It would also include the conclusion of the development agenda in the World Trade Organization (WTO), including strengthening flexibilities for developing countries to actually use trade for their development. And it would most definitely include waiving barriers of “intellectual property” rules for products to prevent, treat, or contain COVID-19.
The Path to Get There: UNCTAD’s Mandate
For developing countries to be able to achieve the transformations indicated by the evidence-based research, UNCTAD must be mandated to provide technical assistance toward those goals — as well as build international consensus toward the required solutions.
The vast majority of UNCTAD member states are developing countries, which work together through the G77 group. They tabled proposals which, if they had been adopted, would have restored the original (and rightful) role of UNCTAD in global economic governance.
Even though UNCTAD is designed to focus on trade for development, all UN countries can be members. And unfortunately, at every turn during the last year of negotiations, the EU delegation sought to diminish, constrain, or limit the ability of UNCTAD to assist developing countries in adjusting to the multiple crises and in transforming the current system.
Instead, they sought to ensure that the current economic, investment, finance, and debt regimes were portrayed as functional and workable, with the only problem being that some developing countries have not yet integrated enough into these global regimes so as to access their benefits.
The EU in particular fought to curtail UNCTAD’s work on the most important development issues in today’s global economy. This included constraining UNCTAD’s work toward a sovereign debt workout mechanism; combating illicit financial flows (IFFs) and tax havens; improving global taxation; and constraining UNCTAD’s work to assist developing countries in transforming the current trade regime into one that actually benefits them.
Instead, the EU, aided sometimes by other developed countries, sought to ensure that UNCTAD’s role was limited to simply assisting developing countries to adjust to the current unfair and antidevelopment debt, finance, investment, trade, and other global regimes.
Unfortunately, the EU was abetted by the fact that UNCTAD’s secretary-general exited the organization in March, and was temporarily replaced by an acting secretary-general, from Belgium, who did little to correct the misleading claims made by the EU about UNCTAD’s longstanding mandate on development issues or to provide the G77 and China with the secretariat support needed to advance its positive agenda for the institution.
One of the acting secretary-general’s strategies was to work together with the head of outreach to block, rather than facilitate, civil society organizations (CSOs) from providing their expertise on various issues and assist member states in their deliberations.
In spite of the official blocking, civil society took action. An International Civil Society Facilitation Group (ICSFG), hosted by the Barbados-based Caribbean Policy Development Centre, organized a Civil Society Forum in which groups working with the Civil Society Financing for Development (FfD) Group and the Our World Is Not for Sale (OWINFS) global network presented their vision for UNCTAD’s role, including on major panels covering a range of issues from trade, investment, technology, and structural transformation to debt, finance, tax, and the reform of international financial institutions.
When civil society organizations following the mandate negotiations first got access to the negotiating texts, they sent a memo to member states outlining their concerns with regard to controversies in the mandate on all of the above issues. They followed up with a sign-on “Letter on Trade, Investment, Digitalization, [and] Climate Issues in the UNCTAD Mandate” endorsed by key trade groups. The Gender and Trade Coalition called for an UNCTAD mandate focusing on a feminist economy.
The International Trade Union Confederation (ITUC), representing 200 million workers in 163 countries and territories through 332 national affiliates, and its counterpart, the European Trade Union Confederation (ETUC), also sent a letter to the European Commission and the members of the European Parliament in charge of trade policy, outlining the ways in which the EU’s negotiating stance has constrained workers’ right to development. Public Services International (PSI), a global union federation representing 20 million workers in 154 countries around the world, sent a letter, together with their counterpart of the European Public Services Union (EPSU), grounding their call for a strong mandate for UNCTAD on debt, trade, digitalization, and other issues in developing countries’ obligations to provide quality, accessible public services to their populations.
Renowned economists Jeffrey Sachs and Mark Weisbrot sent a letter underscoring the need to strengthen UNCTAD’s mandate on unilateral coercive measures, which are by definition illegal under international law. These trade and financial measures by powerful states seek to impose so much economic harm on developing countries that their populations will change their governments to the powerful states’ liking.
The Civil Society Declaration for UNCTAD XV provides a blueprint for a much stronger vision for UNCTAD moving forward across a broad range of economic issues.
The final Bridgetown Covenant assesses the major global challenges of growing inequality and vulnerabilities, including high levels of unsustainable debt; accelerating climate change and environmental degradation; and the widening digital divide and uneven speed of digital transformation. It identifies four major transformations needed to move to a “more resilient, digital and inclusive world of shared prosperity: transforming economies through diversification; fostering a more sustainable and more resilient economy; improving the way development is financed; and revitalizing multilateralism.” The Covenant then details how each transformative strategy can be realized and mandates UNCTAD to play a role through its analysis, capacity-building, and consensus-building pillars to achieve these strategies, toward achieving the SDGs.
In the end, thanks to the hard work of some negotiators in the G77 and China, the agreement preserves UNCTAD’s mandate on key issues, and particularly those advocated for by civil society, such as its work on debt, IFFs, and taxation, which will be essential for developing countries to recover from the COVID-induced economic crisis.
Now that the negotiations on the mandate are concluded, it will be up to the incoming secretary-general, Rebeca Grynspan, and her staff to oversee its implementation. SG Grynspan is off to a good start in recognizing some of the most important issues to developing countries, such as SDRs; debt sustainability analysis and restructuring; stemming the hemorrhaging caused by illicit financial flows such as was revealed in the Pandora Papers; and recognizing the importance of research and evidence-based policies to inform the technical cooperation and consensus-building pillars, especially in UNCTAD’s work on trade and technology. She also seems to be breathing fresh air into UNCTAD’s collaboration with civil society, which will benefit members’ ability to access their expertise.
The world needs UNCTAD now more than ever. Civil society is poised to work with the institution to transform global finance and trade regimes. Governments and CSOs must work together with UNCTAD to provide developing countries the tools — and the transformed governance regimes — they need to “build back better” through these challenging and difficult times.