The West almost succeeds in marginalizing the UN Conference on Trade and Development

Robert Wade, Guest Blogger

When the UN Conference on Trade and Development (UNCTAD) was being established in 1964 in Geneva as a kind of think tank for developing countries, developing countries argued that it must have a mandate for financial issues because of the close link between finance and trade. Western states said “over our dead bodies”: finance is for us and our organizations.

The deadlock was broken at the last minute when Ted Heath, then President of the British Board of Trade (later Prime Minister) came to Geneva for the final round of negotiations and met up with one of the leaders of the developing country side, an Algerian who had been his Oxford college mate years before. They went into a small private room and emerged with a compromise: that UNCTAD could appropriately concern itself with the “invisible account” in the balance of payments as it related to trade. The invisible account included finance. The western side reluctantly agreed.

Over the 2000s, through its annual Trade and Development Reports, and other publications, UNCTAD produced sustained empirical analyses of global macroeconomic issues and often offered “second opinions” to those of the IMF and the World Bank and the leading western states. Before and more forcefully than the IMF, its publications warned of the dangers of the prevailing “Great Moderation” narrative. They emphasized rising financial fragility due to the interaction between high private debt to GDP ratios and high current account deficits to GDP in several major western economies, and the absence of incentives on countries running external surpluses to reduce them  (Wade 2009a, 2009b, 2011). It has not hesitated to point to destabilizing government policies, including those of western governments.

For most of its history, western states and western-dominated international organizations have ignored UNCTAD or treated it with the annoyance one might direct towards a fly. Western states have less leverage over it than over most international organizations, because its budget comes mostly out of the overall UN budget. This means that western states are less able to use conditional financial payments to make UNCTAD say and do what they want, as they can with UNDP and the Bretton Woods organizations, among others.

However, UNCTAD’s governance requires that ministers from its member countries approve a quadrennial mandate and work program for the following four years.  In the run-up to the thirteenth ministerial quadrennial conference in Doha in April 2012, western states made a concerted effort to stop UNCTAD from working on global macroeconomic and financial issues.

As a senior US delegate declared in one of the last negotiating sessions in Doha, “We don’t want UNCTAD providing intellectual competition with the IMF and the World Bank.”  Another western delegate said that while UNCTAD had been ahead of the curve on important issues in the past the IMF had now “caught up” with UNCTAD, so further UNCTAD work on global macroeconomics and financial crisis was no longer needed.

The developing countries were grouped into what is called the G77 + China (G77/C).  As the negotiations over the mandate went on in Geneva from January 2012 onwards, the G77/C, led by their coordinator (Thailand), played an accommodative and moderate game so as not to appear to be the difficult party. As the negotiations went on and the western states dug in their heels, a subset of G77 countries emerged ( the “hardliners”), which resisted most of the concessions being made by the Thai coordinator.

China was quietly influential behind the scenes; it leaned towards the “hard-liners” more than towards the “moderates,” but was more concerned than others to maintain consensus within the G77/C.  People paid careful attention to what its delegation said, even when they had to read between lines.

The negotiations in Doha fractured repeatedly on North-South lines, and until the last moment it looked as though, for the first time since UNCTAD VI in 1983 (the sixth quadrennial ministerial conference), there would be no consensus on UNCTAD XIII’s mandate.  Just a few days before the start of the Doha negotiations, the Summit of the Americas ended for the first time ever without a consensus declaration because of unbridgeable North-South differences. Doha looked set to repeat the outcome of the Summit of the Americas.

One of the key issues was a paragraph in the draft text giving UNCTAD a role to “contribute to the work of the United Nations in addressing the root causes and the impacts of the global economic and financial crisis.” The West objected to UNCTAD working on “root causes” (which might point to the West); it wanted UNCTAD limited to “impacts on developing countries”.  The western groups hoped that by stipulating “developing countries” they would be able to keep UNCTAD silent about their role in the crisis.

The western states also objected to any mention in the Doha Mandate of several issues that UNCTAD had sanction to work on in the previous Accra Mandate of 2008: issues such as “policy space”, “macroeconomic and development policy,” “systemic coherence” and “regional financial and monetary coherence”.  In effect, the West said, “We do not want UNCTAD to discuss any of these issues, because UNCTAD is not competent to do so. They are for the G20 and IMF. ”

In the final hours of the negotiations, the Swiss ambassador, leading the negotiations for Group B, said he would accept “reaffirm and build on” if the G77/C substantially watered down the wording in paragraphs on the US embargo of Cuba and the Israel/Palestine issue. He did not expect the G77/C to agree. But five minutes later in walked the Cuban delegate to say that he and the American delegate had agreed language on the Cuban paragraph. Shortly after in walked the Palestinian delegate to say he and the Israeli representative had just agreed language on the Israel/Palestine paragraph.

In the final hours of many months-long negotiations, China, Brazil and South Africa climbed into the driving seat on the G77 side and made the deals with JZ and EU. At 5am on the final morning – with a press conference scheduled for 10am — a mandate and work program for the next four years were finally agreed by consensus. The outcome represents a draw between North and South.

However, the mandate and work program are actually of secondary importance, for all the protracted agony of the negotiations. The main issue is personnel. Who will be appointed as director of the key Division of Globalization and Development Strategies, under whose protection the Trade and Development Report is prepared, when the present incumbent retires at the end of 2012? Who will be appointed as secretary-general when the present incumbent (from Asia) finishes his term in 2013? By the traditional rule of regional rotation the search is already on for a new secretary-general from Africa.

If the western states succeed in getting the “right” people into these key positions not even the Doha compromise mandate will give the organization much protection from being railroaded into safe issues sanctioned by the West—like FDI-friendly investment climate, strong intellectual property protection, good governance, youth, and gender. In the months following the Doha conference (to late 2012, the time of writing) UNCTAD lost momentum as the G77 became re-lethargized; the EU and JZ groupings again gave it the cold shoulder; and the Secretary-General, his termination in sight, disengaged. This is a victory of sorts for the West.

Robert H. Wade is professor of political economy at the London School of Economics. In 2008, Triple Crisis blog partner GDAE gave Wade its prestigious Leontief Prize for Advancing the Frontiers of Economic Thought for his outstanding contributions to the economics of development.

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