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  Introduction

The United Nations Conference on Trade and Development (UNCTAD) held the 49th session of its Trade and Development Board from 7-18 October 2002 in Geneva. The two-week meeting examined some critical issues on the global trade agenda, notably:

— Ongoing multilateral trade negotiations at the World Trade Organization (WTO) in the context of the work programme adopted at the Fourth WTO Ministerial Conference in Doha (Qatar) in late 2001; and
— Declining terms of trade for developing countries' growing share of manufacturing exports, based on analysis produced by the UNCTAD secretariat's Trade and Development Report, 2002.

Among other issues on the agenda was a review of a new report by UNCTAD, entitled From Adjustment to Poverty Reduction:What is New?, which calls for a major overhaul of the mainstream international policy approach to African development (Go Between 94). 

As in previous years, UNCTAD's Trade and Development Board acted as a forum for discussion on the interrelated components of globalization, particularly from the perspective of developing countries. As UNCTAD Secretary-General Rubens Ricupero reminded delegates during the Board's High-Level Segment on 7 October, it provided conditions for more relaxed discussions and for consensus-building in a manner that was not constrained by immediate negotiating positions. He also emphasized the special nature of UNCTAD, which is not a specialized agency, but a product and integral part of the UN General Assembly—and, in this connection, is an important vehicle for promoting the “necessary coherence” of negotiations and implementation across the spectrum of interrelated multilateral agendas, including trade, finance, technology, and sustainable development. 

“How can the post-Doha process work best for development?” provided the focus for the Board's High-Level Segment, which was conducted through a dialogue with the new WTO Director-General, Supachai Panitchpakdi, who took office on 1 September 2002. Among his functions, Dr. Supachai is also Chairperson of the WTO's Trade Negotiations Committee (TNC) that oversees the negotiating agenda set out in Doha. The discussion during the High-Level Segment—much of which focused on the widely shared objective of improving coherence across different parts of the multilateral system—also included representatives of the UN General Assembly through a video linkup with UN headquarters in New York.

A dominant recurring theme running through the discussions on current trade negotiations was how to overcome the current deadlock on Special and Differential Treatment (S&D) for developing countries. S&D, widely recognized as one of the key development issues on the post-Doha agenda, is linked to the question of how to ensure that multilateral trade disciplines do not stifle the policy space that may be required to pursue national development and poverty reduction objectives, but on the contrary, how they can be supportive of such objectives.

The disconcerting evidence produced in this year's Trade and Development Report on declining terms of trade in developing countries' manufacturing exports (analyzed in relation to international production networks of transnational corporations) led to frank and insightful discussions on the possible extension of the WTO into new areas such as investment and competition policy.

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 The Dangers of a "New Cold War"

The Board's discussions took place in the context of a worsening global geo-political climate. In his opening remarks to the Board, Mr. Ricupero noted with concern that the so-called “post-cold-war period” had now come to an end. The new period, he said, seemed to be ushering in a new kind of cold war, but in contrast with the former period, actual war was no longer improbable. This meant that yesterday's subjects were losing their importance, practically by the day. For example, globalization was not going to go away, but the debate about globalization was fast losing its importance for the simple reason that geo-political considerations were again reasserting their primacy over the economic sphere. A war against Iraq would certainly have an impact on the world economy, but this was not regarded as the central issue in the debate, because other considerations, closely related to security and political matters were receiving more attention.

Mr. Ricupero suggested that the best image of the new phase of history now starting was the building of new walls (in contrast to the tearing down of walls at the end the cold war)—physical walls designed to prevent the infiltration of terrorists; legal and political walls against immigrants or economic refugees; trade and economic barriers against specific products, particularly sensitive agriculture products from developing countries; and walls against anti-globalization demonstrators, as seen every time there was a major conference. In many cases, he added, walls might be necessary, but they were usually the expression of a failure to solve problems. Of course, real threats had to be taken seriously, he said, but the problem went far beyond terrorism, and was the expression of something much larger, namely insecurity. The roots of today's insecurity were multiple and the solidarity required to face up to it must be indivisible if it was to exist at all, he stressed. 

In this context, Mr. Ricupero insisted that the economy should not be seen as indifferent to moral and ethical values. One of the excesses of the period of illusion about globalization, he said, had been precisely the idea that the economy was like astronomy or physics, that is, completely neutral in terms of moral or ethical values. However, corruption was there to disprove that, and it affected not only governments but also markets. Markets could not operate when they were dominated by opportunist inside traders and players, while governments could not operate as they ought to when dominated by the behaviour of the corrupt and the greedy. Many aspects of the so-called failure of development during the past fifty years, he argued, could be readily explained if that precept was borne in mind. 

The one comforting fact, he said, was that in international trade, it had been possible so far to preserve multilateral structures, and it would be important to ensure that the multilateral approach concentrated on removing barriers and not erecting new ones.

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   Taking Stock of the Post-Doha Negotiations

In addressing the Board, Dr. Supachai stressed his intention to consolidate working relations between the WTO and UNCTAD. He noted that UNCTAD had much better capacity than the WTO to carry out research and technical cooperation activities aimed at enhancing the understanding of trade-related development issues of interest to developing countries. Such a cooperative effort, he said, was part of a wider strategy to involve all relevant stakeholders (multilateral and specialized institutions) committed to fulfilling the Millennium Development Goals (MDGs, see NGLS Roundup 98). The WTO's contribution in this regard was to increase the predictability of the global economy in a time of great economic uncertainty, through its combined focus on strengthening multilateral rules, dispute settlement and opening economic opportunities for developing countries.

Dr. Supachai flagged the WTO's Trade Negotiations Committee (TNC), which had met the preceding week, as a landmark discussion on the content of the Doha agenda. Agriculture had been widely perceived as the “prominent core” of the negotiations. However, there was a pressing need to know as early as possible member countries' positions on the highly diverse issues falling under what is known as the “single undertaking,” adopted at Doha. He said that under such an undertaking (whereby “nothing is agreed until everything is agreed”), “delaying tactics” would not work. The fifth WTO Ministerial Conference, to be held in Cancun (Mexico) in September 2003, could be seen as “mid-term review” of the Doha negotiations. By then, he said, members should have succeeded in meeting all the agreed deadlines. “If we leave too many issues for Cancun,” he warned, “we will not finish the negotiations in time.” The Doha round of negotiations is supposed to be completed by 1 January 2005. 

In this context, Dr. Supachai said that the more advanced countries have to take the lead in ensuring that development issues on the Doha agenda are dealt with early in the process if the Doha programme of work is really to be considered a “development agenda.” He grouped these development priorities into four main clusters, namely:

— Agriculture (in particular commitments by developed countries to reduce all forms of export subsidies, “with a view to phasing [them] out” and to substantially reduce domestic support measures, as well as addressing the food security and rural development concerns of developing countries);
— Special and Differential Treatment (S&D) for developing countries (reflecting their need for flexibility and political space for development policies);
— “Implementation” issues (referring to some 50 unresolved issues pertaining to implementation of the earlier Uruguay Round, ranging from difficulties by developing countries to fulfil their existing WTO obligations—which are linked to S&D questions—to lack of progress on developed countries' commitments, such as liberalization of their textiles and clothing sector); and
— TRIPs and public health (referring to the separate ministerial declaration adopted in Doha aimed at ensuring that implementation of the WTO agreement on Trade-Related Aspects of Intellectual Property (TRIPs) is supportive of WTO members' right to protect public health and promote access to medicine for all, such as through granting compulsory licenses to produce pharmaceuticals locally and authorizing parallel imports of medicines).

Dr. Supachai said that developing countries must know where they stand on these priority concerns for them before considering so-called “new issues.” The new issues refer to the most controversial aspect of the Doha programme of work. At Doha, ministers agreed to ambiguous language postponing the decision to the fifth WTO Ministerial Conference in 2003, as to whether and/or how they should extend the WTO negotiating agenda to include four new issues: 

— Investment; 
— Trade facilitation; 
— Competition policy; and 
— Transparency in government procurement.

Most developing countries have resisted extension of the WTO mandate in these areas, either because of a lack of capacity to cope with the extension of what they see as an already overburdened trade agenda, or because they question the necessity of developing multilateral rules in these areas in the WTO (see Go Between 89). For a number of years, many NGOs from developed and developing countries have been campaigning against the inclusion of such new issues in the WTO.

It is worth noting that the Doha agenda explicitly mentions the role of UNCTAD in providing enhanced technical assistance and capacity building to developing countries in the areas of investment and competition policy.

During the ensuing discussion at the Board's High-Level Segment, the representative of the European Commission (which leads the WTO negotiations on behalf of member countries of the European Union) said he agreed fully with “most” of what Dr. Supachai had said. He acknowledged that there were important development-related deadlines to be met and underlined the importance of S&D, implementation issues, and TRIPs and public health. He noted that the WTO is based on the assumption that progressive liberalization is inherently good for development and poverty alleviation. He placed emphasis on the word “progressive,” which he said related to increasing capacity to compete in the global marketplace. He added that he acknowledged that the European Union must open up its markets, but stressed that, while it does not expect full reciprocity from developing countries in this regard, it does expect progress on developing rules in new areas such as investment, competition and trade facilitation. 

Many developing countries expressed their appreciation for Dr. Supachai's support for emphasizing so openly the need for early progress on developing countries' priority concerns, although some raised questions as to what he meant when stating that S&D should “not become an escape clause” for developing countries to undertake their own reforms. In this regard, the Indian representative expressed the view that there was “less than serious engagement” on S&D by developing countries' trading partners (see detailed discussion on S&D below).

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Much of the interactive debate during the High-Level Segment focused on ways to strengthen coherence across the multilateral system, between trade, finance and sustainable development. In particular, a number of speakers stressed the need for coherence in implementing three major intergovernmental conference outcomes, namely: the Doha trade agenda; the Monterrey Consensus resulting from the March 2002 UN Conference on Financing for Development (see NGLS Roundup 91); and the Plan of Implementation adopted at the August-September 2002 Johannesburg World Summit on Sustainable Development (WSSD, see NGLS Roundup 96). 

Such a debate was viewed as taking place at an opportune time, since the UN General Assembly was about to address follow-up to Monterrey and WSSD. A Latin American representative to the General Assembly in New York argued that the “credibility of the multilateral system” was at stake in this regard, and that the United Nations, the Bretton Woods institutions and the WTO must be linked in a holistic way. 

Dr. Supachai said his commitment is not just to talk of coherence but to bring practical substance through what he called a “systemic global governance approach.” By way of example he cited his intention to make progress on the Integrated Framework (IF) for least developed countries (LDCs). The IF was initiated in late 1997 as a joint programme between UNCTAD, WTO, the International Trade Centre (ITC), the UN Development Programme (UNDP) and the Bretton Woods institutions to strengthen LDCs' trade capacities—but which has not made much progress thus far by way of implementation. He said that trade must be better integrated into the Poverty Reduction Strategy Papers (PRSPs) promoted by the Bretton Woods institutions, and the IF would be the appropriate vehicle for this. In outlining his vision of how the multilateral system can support development through trade, Dr. Supachai suggested that the WTO can play its part through improving market access opportunities, while the UN system (in the wider sense) can support the building of trading capacities in poor countries. In this regard, he noted that the World Bank is setting up a new department on trade and development.

He saw a role for multilateral cooperative efforts on technical cooperation in three overlapping stages:

— supporting the negotiating capacity of developing countries in the current trade talks (in particular helping them to fully understand the implications of a possible agreement they may sign up to); 
— supporting the ability of countries to implement the outcomes of the Doha talks (for instance how to make up for the shortfall of fiscal revenue resulting from further tariff cuts); and 
— building “trade potentials/capacities” by integrating trade in the development process (for example how to market products or overcome supply bottlenecks).

Regarding the promotion of coherence between implementation of the Johannesburg outcome and the Doha agenda, Dr. Supachai stressed his commitment to seek harmonization between WTO rules and multilateral environmental agreements (MEAs) to avoid possible conflicts between the two bodies of law, and said he was in favour of more information exchange and policy coordination with the MEA secretariats. He noted that the Doha agreement to clarify and improve WTO rules that apply to fisheries subsidies could contribute to fulfilling the Johannesburg target on restoring ocean fish stocks.

Another dimension of the quest for coherence was voiced by one developed country delegate who suggested that representatives of development-related ministries should actively participate in the WTO talks.

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Such difficulties and divergences of views were also manifest in the UNCTAD Board's discussions, where the debates raised a number of questions. Could S&D become an “escape clause” for developing countries to avoid undertaking trade-related reforms, or should the discussion move away from simply extending transition periods to addressing underlying development objectives, and ensuring that multilateral trade disciplines do not become an obstacle to fulfilling these objectives? Do the different stages of development among developing countries mean that there should be a system of graduation from S&D, or would such a move lead to further divergences among developing country members' negotiating positions? Where would a large middle-income developing economy with large pockets of poverty and very important economically vulnerable sectors fit under such a graduation scheme? Can S&D become the basis for a coherent paradigm to address key trade-related development issues?

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In one of the informal panel sessions, former Indian Secretary of State and Ambassador to the (pre-WTO) General Agreement on Tariffs and Trade (GATT), Mr. S.P. Shukla, made a passionate plea for the WTO's weaker members to reassert S&D rights in a manner that goes further than most mainstream discussions on the subject. He noted how the international trading system had changed from focusing solely on cross-border exchange transactions in the pre-Uruguay Round period to extending its remit into the domestic sphere through the harmonization of norms and standards for many domestic policies and regulations. He argued that the system is “subverting the economic sovereignty of its weaker members.…At best, it offers a few years' time for member countries to come to terms with the subversion, to digest it....In the expanded and transformed multilateral trading system, for the weaker members, S&D virtually stands for ‘Subversion and Domination.' To confront such a contingency, the weaker members may well define the optimal S&D for themselves as: ‘Selective Delinking.'”

Mr. Shukla called for the WTO, through a renewed collective lead by developing countries, to declare a “standstill” on the ongoing process of deeper integration. All new issues, such as a possible global investment regime, should be “placed under an embargo” for the time being, and further strengthening of TRIPs and the WTO agreement on Trade-Related Investment Measures (TRIMs) should be postponed. Such a standstill, he said, would provide an interval for the collective assessment of how the integration efforts to date have affected member countries, particularly those of the South and, among them, the poor and the LDCs. He said that it is possible that such an assessment “may produce sufficient material evidence and rationale for initiating a rollback of the integration process, where necessary.” 

A standstill on new issues in order to undertake an assessment of existing WTO agreements has been a campaigning priority for a very large number of NGOs and social movements since the 1999 Seattle Ministerial Conference, and has at times been openly voiced by some developing country governments.

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Linked to this is the increasing competition among developing countries to attract foreign investments as locations for labour-intensive processes of otherwise high-tech activities. Such competitive pressures, the report notes, are further compounded by the way labour markets in developing countries accommodate the additional supply of labour-intensive goods through flexible wages, allowing firms to compete on the basis of price without undermining profitability. “Competition among firms, including international firms, in developing countries becomes competition among labour located in different countries,” the report says.

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During the Board's formal discussions related to this year's TDR, the representative of Egypt, speaking on behalf of the Group of 77 and China, noted that export-oriented development strategies had led to a rise in developing countries' share of world trade in manufactures, but in many cases (unilateral) trade liberalization had also led to an increase in the import content of consumption, production, and of manufactured exports. Trade should not be considered an end in itself, the representative said, and successful participation in international trade (in terms of rising export volumes) was not necessarily equivalent to faster income growth. 

The terms-of-trade movement against Southern manufactures, as evidenced in this year's TDR, was a reason for serious concern, especially as a growing number of developing countries with large reserves of unskilled labour were adopting export-oriented strategies. TDR 2002 raised awareness among developing country policy makers of the need for measures to ensure that increasing manufactured exports was translated into domestic income growth and poverty reduction.

The representative of Indonesia, speaking on behalf of the Asian Group and China, expressed similar concerns at the evidence produced by TDR 2002, and suggested that past policies for industrialization had to be carefully reviewed, and where necessary, revised or complemented by new innovative measures securing a greater share in manufacturing value-added. It might be necessary to look more to domestic markets, and to strengthen regional and international cooperation among developing countries in order to reduce the risk of oversupply and falling prices, especially in the present phase of weak growth and high unemployment in the advanced industrial countries.

The representative of Trinidad and Tobago, speaking on behalf of the Latin American and Caribbean Group, said that the report raised very important questions concerning the dangers of “excessive reliance” on foreign direct investment (FDI), including more export-oriented FDI. Such arguments were familiar from an older development debate concerning the constraints on the export of primary commodities, a debate that had very much centred on the Latin American experience.

The representative of Bangladesh said that the report's recommendation to developing countries to seek wider policy space to nurture their domestic industries was important but difficult to realize in the present system. While the WTO championed “the virtues of free trade,” he said that trade flows were governed by protectionist trade policies of the major industrial countries and the global strategies of transnational corporations.

The analyses in the report indicate quite clearly that “getting the most out of the international trading system is no longer just a matter of shifting away from commodity exports.” Nor is it enough, in terms of the post-Doha negotiations, for developing countries to simply bargain for more market access in the protected markets of industrialized countries. It notes that the outcome of the new round of trade negotiations “will be judged by the extent to which developing counties achieve greater market access without their policy options being restricted.” 

The report stresses this point particularly in relation to possible negotiations on the new issues. “These issues,” it says, “move the WTO negotiations further into domestic policy, and it is reasonable to believe that a successful outcome will be conditional on establishing the development content of these issues from the outset, and ensuring appropriate policy space for national development strategies.” On investment specifically, the report stresses that a key question will be the extent to which developing countries will be allowed to continue to impose conditions on foreign investors and to provide support to domestic firms.

In one of the informal sessions, the representative of a large developing country said that, as one decides whether to continue proceeding with issues that go beyond cross-border flows, it is important to “pre-empt” a situation like TRIPs from occurring again—that is, to avoid dealing with the undesired consequences of an agreement after the fact. “Let us have an honest discussion now rather than later,” he said. “The Trade and Development Board offers space for discussing how costly mistakes in the past can be avoided in the future.”

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