<incom> UNCTAD Update

[Soenke Zehle]

Khor on what's up at "the world's development conscience" and the debate 
over UNCTAD's position on "policy autonomy"; additional posts in the 
SEATINI archive, as well as more info on the important UNCTAD 2006 Trade 
and Development Report that also addresses IPR issues, Soenke

<http://www.unctad.org/>
<http://www.seatini.org/>
<http://groups.yahoo.com/group/seatini/>

Reports on UNCTAD's Annual Board (TDB) Session:
Report 1` on the Opening session on 27 Sept 2006

By Martin Khor (TWN):  Geneva 27 Sept 2006

The UN Trade and Development Board's annual session started today with 
UNCTAD Secretary-General Dr Supachai Panitchpakdi giving his opening 
statement as scheduled.

This fact in itself was the most significant event in an eventful first 
day of the TDB's 53rd session, as there had been speculation in the 
mainstream media in the past two days that Supachai had been offered the 
post of interim Prime Minister of Thailand.

Several ambassadors came up to congratulate him, assuming that he had 
been offered and had accepted the job of interim PM.

However, Supachai laughingly brushed aside the offered congratulations, 
saying that he was "still here".

Supachai made an opening address, and also made a statement at the first 
substantive session, which was on the current WTO situation, and which 
was also addressed by WTO Director-General Pascal Lamy.

In the general debate of the opening session, the G77 and China and the 
regional developing-country groupings commended UNCTAD for its recent 
work, including on policy space, and asked that its mandate be 
strengthened and not weakened through the UN reform process.

However, the US, Japan and the European Union indicated their 
displeasure with parts of UNCTAD's latest Trade and Development Report, 
the focus of which is on policy space.

In his opening statement to the TDB, Supachai said UNCTAD must keep the 
development perspective foremost so as to make its work useful for 
developing countries. "We must stay ahead of the curve, tackle difficult 
issues in a fresh and clear-headed manner and do so by pushing beyond 
current boundaries."

He then highlighted how UNCTAD's recent analytical work contributes to 
development policy dialogue. On interdependence and global economic 
issues, the Trade and Development Report 2006 looks at how to strike a 
balance between national policy autonomy and effective global 
governance, given the needs of different developing countries.

"Such a balance may require not only a strong development dimension in 
the multilateral trading system but also an improvement in the global 
governance of international monetary and financial relations."

UNCTAD's LDC Report 2006 suggests that LDCs must develop their 
productive capacities if growth and poverty reduction are to be 
addressed. The report calls for a paradigm shift from a 
consumption-oriented and exchange-oriented approach to poverty reduction 
towards a production-oriented and employment-oriented approach.

In UNCTAD's latest report on Economic Development in Africa, some bold 
proposals are made, said Supachai. "The report finds that the current 
aid system lacks coherence and is uncoordinated, costly to manage and 
often based more on donors' preferences than on the requirements and 
priorities of the recipients.

"It then proposes a new architecture for international aid, drawing 
lessons from the positive elements of the Marshall Plan and other 
success stories but adding a much greater multilateral element. This 
would be based on programmes presented by aid recipients, and would 
assure greater predictability through multi-year financing."

Supachai added that the report also suggests establishing a UN-related 
fund for Africa's economic development, with resources provided mostly 
in grants, and provide budget support to recipient countries. The fund 
would reduce the cost of aid delivery, be less prone to donor references 
and pressures and "make recipient countries responsible to their people 
and electorate rather than to international financial institutions and 
donors."

The Group of 77 and China, represented by Pakistan, said UNCTAD's future 
as the principal UN organization for trade and development and other 
related areas has come under recent scrutiny. The TDB must send a clear 
signal that UNCTAD must and intends to play a central role in the UN 
development machinery, and the mandate of UNCTAD "must not be diluted, 
supplanted or subsumed during the UN reform process."

"It need not be reinvented but must be revitalized to act as the world's 
development conscience. Only by using the development lens in the work 
of all three pillars can UNCTAD retain its relevance and enjoy the 
developing countries' confidence."

The G77 said that development optimism has been marred by the suspension 
of the WTO negotiations. UNCTAD has an important role in situations like 
this. UNCTAD's normative role as a catalyst of multilateral action from 
a development perspective could advance consensus building in other 
international institutions.

The regional group of Latin America and the Caribbean (GRULAC), 
represented by Argentina, said the Doha negotiations' suspension was of 
concern. Though there was goodwill, it has not borne fruit so far. The 
group called for a balance result. The suspension can jeopardize the 
Round but if the talks resume, development must be the main thrust.

GRULAC said the Doha Round cannot produce the same type of outcome as 
the Uruguay Round where developing countries had to endure high 
adjustment cost and reduction of policy space, with no benefit to 
developing countries. The trade distortions by developed countries 
continue. Results like these cannot be accepted by developing countries.

The group said that in agriculture, if there is no result in terms of 
true commercial value it would be very difficult to conclude the Round. 
The agreement on export subsidy elimination must be complied with. On 
industrial products, countries in the region had undertaken unilateral 
liberalization. The region had also liberalized considerably in services 
but the offers of developed countries did not satisfy the region. The 
Round hinges on the will of developed countries and whether it can cater 
to the legitimate aspirations of developing countries.

On the Trade and Development Report, Argentina said that it rightly 
focused on the policy space issue. The present financial system does not 
have enough room for developing countries to manoeuver. The same rules 
are applied to all countries but this may restrict development in 
developing countries. It also approved of the report's references to the 
need for developing countries to select their exchange rate system, and 
also that there should not be pro-cyclical bias in macro-economic 
policies as in the IMF programmes.

The Africa Group, represented by Angola, regretted the suspension of the 
Doha negotiations. Key African concerns include reductions in trade 
barriers, elimination of agricultural export subsidies and domestic 
support, and enhancement of domestic policy space and greater discretion 
in the use of a range of policy measures for building and strengthening 
supply capacity.

The Group also highlighted the commodity problem and asked UNCTAD to 
play a more active role, especially that resources are provided to it so 
that its task force on commodities can become operational.

The Asian Group, represented by Afghanistan, said that market access 
conditions in developed countries continue to be biased against 
developing countries and this issue must be boldly addressed. The 
globalization process has been so far unbalanced and needs to be 
redirected and better managed to facilitate development.

UNCTAD's role and mandate needs to be reinvigorated in the UN reform 
process. "This is especially necessary in light of the suspension of the 
WTO negotiations which is due in large part to the intransigence of 
major trading nations and blocs."

The European Union, represented by Finland, said UNCTAD has an important 
role in regional integration and South-South cooperation and helping 
developing countries out of commodity dependence. It also has a natural 
role in integration of trade, growth and investment into national 
development plans and poverty reduction strategies. UNCTAD can work 
stronger in these areas.

The EU said the Trade and Development Report covers a wide range of 
issues which also tries to offer solutions and practical policy 
prescriptions. It has been able to pinpoint some specific problems and 
its suggestions will spark a lively debate.

The EU said it would not agree with the report's implied finding that 
multilateral rules are inimical to development. "Some parts of the 
report seem to suggest that the sole remedy to many problems is 
increased policy flexibility per se. We dispute this. The problem facing 
us as a global economy are far more complicated than the report suggests."

The EU said the UNCTAD report on Africa (focusing on aid) is useful as 
it raises in frank terms fundamental questions on the way aid is 
distributed and its quality. It also welcomed the LDC 2006 report of UNCTAD.

The United States said it had "serious concerns" about the Trade and 
Development Report. Japan spoke in the same lines, saying the report 
took an imbalanced position, and should have been more balanced.

Representing civil society, the Uganda Consumers' Protection Association 
said that UNCTAD's partnership with civil society organizations must be 
upgraded to a more proactive, strategic and consistent level so that 
grass-roots views can be channeled into global processes.

"So far trade liberalization has in many cases led to job destruction, 
uneven income distribution and weakening of workers' bargaining power. 
UNCTAD should work to promote more policy space for developing countries 
including the possibility to use tariffs and ensure proper assessment of 
trade policy measures before implementation."

Later, the Board discussed the agenda item on the WTO's current 
situation. Both Supachai and the WTO Director-General Pascal Lamy 
addressed this issue, and several regional groupings and countries spoke 
on the issue.

TWN Info Service on WTO and Trade Issues (Oct06/05)
10 October 2006
Third World Network
www.twnside.org.sg

Report 4 on UNCTAD meetings

Lively UNCTAD debate on policy space, development strategy
By Martin Khor (TWN):  Geneva, 29 Sept 2006

An interesting debate took place at the Trade and Development Board 
(TDB) of UNCTAD on the question of "policy space", on the imbalances of 
existing multilateral rules in some areas and their absence in others, 
and the impact of this on developing countries' ability to formulate 
national development policies.

Many developing country delegations supported the work of UNCTAD on 
these issues, particularly its 2006 Trade and Development Report, which 
had focused on policy space and on whether and how multilateral rules 
restrict national policy options.

However, several developed countries, including the United States, the 
European Union and Australia, questioned some conclusions drawn by the 
report.

UNCTAD officials - Secretary-General Dr Supachai Panitchpakdi and Heiner 
Flassbeck, officer in charge of the Globalisation and Development 
Strategies Division - presented and defended the report.

Opening the TDB's session on interdependence and global economic issues 
on 28 September, Supachai referred to the comments made the day before 
by WTO Director-General Pascal Lamy that trade is a crucial ingredient 
in a policy mix which however must contain other ingredients if it is to 
contribute to development and poverty alleviation.

As Lamy said, this means no blind adherence to free trade but also no 
blind adherence to governments doing pretty much anything including 
protectionism. "We totally agree," said Supachai.

But, asked Supachai, if trade liberalisation is insufficient to achieve 
growth needed to reduce poverty, then what other policies (industrial or 
otherwise) will do so? Many developing countries need to grow 7-8% 
annually to achieve the MDGs by 2015. How can they acquire the 
productive and trade capacity to cope with global economic interdependence?

This is what the TDR addresses. It explores policies that worked in some 
countries and identified why they did not succeed elsewhere, and what 
might work instead.

Over 15 years of traditional trade reforms have produced a number of 
positive outcomes but also instances of reduced growth rates and even 
declining GDP, with serious output and employment losses in the 
industrial sector. By contrast, some countries that took a more cautious 
approach to reform and used pro-active industrial policies have enjoyed 
remarkable success.

Supachai said that the TDR focused on pro-active industrial policies 
with cases in both North and South where the use of subsidies and 
tariffs has helped in the past. It also looks at how WTO rules affect 
the application of such policies. "We do this not for the sake of 
controversy but to learn from what works and what does not."

Addressing what is needed to lift the productive and trade capacities of 
developing countries, the TDR intended to identify policies from recent 
and earlier experiences that will assist developing countries.

Supachai concluded that there may be disagreements with some of the 
policy options identified but that is the point of the debate and as the 
Sao Paulo Consensus confirmed, there is no one-size-fits-all approach. 
After choosing policy instruments, there is also a need to address the 
questions of the right dosage, timing and sequencing.

Presenting the TDR 2006, Flassbeck said a more flexible and pro-active 
macroeconomic policy should: (1) Put monetary policy at the service of 
investment and growth, not only price stability, and this requires 
non-monetary instruments to control inflation; (2) Target a real 
exchange rate consistent with external competitiveness, which requires 
pragmatic use of "intermediary" exchange rate regimes.

He added that additional policy space may also be gained through 
temporary capital controls.

Flassbeck stressed the need to re-orientate development policy, as 
market-oriented reforms in the past 25 years did not deliver the 
expected results. More attention is needed on enhancing productive 
capacity and technological change, and this requires a reform of 
macroeconomic and industrial policies.

At the same time, he added, developing countries have lost their policy 
autonomy. Having "good governance" is not enough to attain development 
success.

He said that industrial policies should aim at solving information and 
coordination problems in the investment process and at ensuring that 
production experience is translated into productivity gains.

There should be complementary trade policies aimed at achieving 
international competitiveness in increasingly sophisticated products. 
This is not a protectionist approach but an element of strategic trade 
integration.

Flassbeck concluded that there is a need for more coherence in 
multilateral rules and disciplines. There is an asymmetry in that while 
there are rules in the trading system, there is an absence in the area 
of international finance.

He cited a statement made in Singapore recently by retired senior IMF 
official Anne Krueger that "the absence of a multilateral framework 
governing international capital flows (and exchange rate mechanisms) is 
an important gap in the multilateral economic system."

According to Flassbeck, the "bottom line conclusions" are that:

* More rules are needed in international monetary and financial 
relations, but more flexibility is needed in the multilateral trading 
system.

* Multilateral rules and disciplines must be strengthened in the area of 
macroeconomic, capital account and exchange rate policies to avoid ever 
growing imbalances.

* Provisions on special and differential treatment could be made an 
integral part of WTO rules and disciplines rather than treated as 
exceptions; the level playing field is not sufficient to foster 
development and catching up.

In the debate that followed, many developing countries expressed 
appreciation of the TDR and UNCTAD's work on policy space. The G77 and 
China, represented by Pakistan, stressed the crucial importance to 
developing countries of both the policy space and of making it a 
priority issue for UNCTAD to work on in the future.

India agreed with the TDR's conclusion that an effective system of 
global governance must take into account developing countries' needs, 
ensuring the right balance between sovereignty in national economic 
policy making on one hand and multilateral disciplines and collective 
governance on the other.

India has argued for recognition of developing countries' need to have 
the space to choose what national strategy is most appropriate for their 
development within the framework of international disciplines. While the 
concept and specificities of "policy space" needs greater understanding, 
the concept itself should not be seen as inimical to international 
economic relations.

Commenting on the TDR's reference to current imbalances in the 
international financial architecture, India said it is essential to 
expand democratic functioning of the Bretton Woods institutions.

Iran called for a comprehensive assessment of the existing disciplines 
and arrangements in the international trade, monetary and financial 
systems to evaluate to what extent they are coping with the 
globalisation process and addressing developing countries' needs.

The TDR, which goes beyond conventional wisdom, will provoke debate at 
all levels, and it is the type of report expected of UNCTAD's analytical 
pillar. It appreciated the report's focus on redressing global economic 
imbalances. Due to asymmetries in global economic governance, 
international rules mainly address developed countries' priorities and 
leave little policy space for developing countries.

Argentina, on behalf of the Latin American and Caribbean Group, brought 
up the proposals by developed countries on cutting industrial tariffs in 
developing countries as an example of restricting policy space. If these 
NAMA proposals are adopted, what freedom will the developing countries 
have in the future to adjust their already low applied tariff rates 
upwards, asked Argentina.

Sri Lanka said the TDR was a very good intellectual work, and agreed 
with its key observations, referring especially to its conclusions that 
market-oriented reforms have not worked well and that pro-active 
government intervention is needed.

Egypt said the TDR shows the gap between the existence of rigid rules of 
the multilateral trading system and the lack of multilateral rules in 
the financial system. This enables the financial institutions to use 
their power without taking account of the interests of developing 
countries. The conditions imposed on aid and loans shackle the hands of 
governments and hinder development.

China praised the TDR as being a very good report, with very interesting 
conclusions that correspond to the realities of developing countries. 
Such studies can assist developing countries to get better insight into 
their problems.

The EU, represented by Finland, said it appreciates the TDR 2006 as a 
"thought provoking input" to the debate. However, it disagreed with the 
report's implied finding that multilateral rules are inimical to 
development. It disputed the suggestion that the sole remedy to many 
problems is increased policy space per se.

The EU also briefly registered its disagreement with the report's 
sections on subsidies, intellectual property rights, TRIMs and export 
subsidies.

The United States regretted that several recommendations of the TDR run 
counter to the sound policy and research of other organisations. On the 
TDR's attempt to operationalise the policy space concept, the US said it 
was not a useful concept and can be harmful as it perceives that 
developing countries should opt out of multilateral obligations. It 
added that the report wrongly says that the free trade agreements' 
intellectual property section has negative effects.

Australia also criticised the TDR for having a one-sided view on IPRs, 
whereas it should take a balanced view on the lively debate on the issue 
of IPRs and development.

In response to the comments, Flassbeck refuted the criticisms that on 
policy space the report suggested that developing countries should opt 
out of international disciplines.

"We say there's a trade-off between multilateral rules and policy space. 
To say that we don't recognise this is not true. The point is that 
policy space can only be matched to benefit development if the rules are 
fair."

Flassbeck said the report asked whether some of the rules are fair in 
terms of their economic impact. Examples were given based on empirical 
evidence and logical thinking.

For example, on TRIPS, while the IP protection aspect is on the basis of 
binding rules, the technology transfer aspect is on only a best 
endeavour basis, and thus there was asymmetry.

He added that the report was not questioning the need for multilateral 
rules, but the current asymmetrical situation. There is need for more 
multilateral rules. There should not be a situation, as now, where you 
are punished if you violate rules in some areas (such as trade), but in 
other areas such as finance they can do as they want as there are no 
rules there.