The Hindu Business Line : Unctad: For a new agenda

With protests against globalisation rising all around, and widespread discontent against the WTO, particularly among the developing countries, people are looking for a suitable alternative. Recently, an initiative was taken by some quarters to revive Unctad, which is perceived by many of the less privileged countries as their own forum. Understandably, its eleventh session (Unctad-XI), now on in Sao Paulo (June 13-18) has generated huge enthusiasm among a section of academia and policy-makers of developing countries.

THE United Nations Conference on Trade and Development (Unctad) celebrates its 40th anniversary (1964-2004) at a time when the world trading system is at the crossroads. The World Trade Organisation (WTO), a rule-based multilateral organisation, established in January 1995, now regulates the world trade. Though some of the declared objectives of the WTO are to expand the production of trade in goods and services, and to raise standards of economy, there is a genuine apprehension among a large number of the 147 member-countries about its ability to address the increasingly complex and perennially unequal trade issues.

Protest against globalisation is rising all around. There is widespread discontent against the WTO, particularly among the developing countries. People are looking for a suitable alternative.

Recently, an initiative was taken by some quarters to revive Unctad, which is perceived by many of the less privileged countries, as their own forum. Its eleventh session (Unctad-XI), now on in Sao Paulo (June 13-18) has already generated huge enthusiasm among a section of academia and policy-makers of developing countries.

In 1964, Unctad-I provided developing countries a forum to evolve a common position on matters related to trade. Subsequently, it was institutionalised as a permanent organ in the General Assembly of the United Nations. In the early decades of its operation, Unctad launched a few initiatives such as the Generalised System of Preference (GSP) whereby the developed countries granted improved market access to exports from the developing countries.

However, in the WTO arrangement this preferential tariff level has got eroded. As a general reduction in tariff has been agreed upon in the WTO, the tariff preference in favour of developing countries, as per the GSP, has got drastically reduced. Automatically the GSP has become defunct.

In the 1980s, there was a significant transformation in the economic thinking of Unctad. Development strategies had become more market-oriented, focussing on trade liberalisation and privatisation of state enterprises. Towards the end of that decade (1989), Unctad enacted the Globalised System of Trade Preferences among developing countries to promote South-South cooperation.

The GSTP was initiated by the Group of 77 at their Ministerial Meeting in New Delhi in July 1985 and at the Belgrade Ministerial Meeting in April 1988, a full-fledged international legal treaty was concluded, which provided a multilateral framework for the developing countries to strengthen their mutual trade and economic co-operation.

But the GSTP was a non-starter. In the last 15 years, only 44 countries have ratified it and like its predecessor GSP, the GSTP has also become defunct in the post-WTO era. Huge efforts put by the leaders of the developing world have failed to generate fruitful result. It is perhaps time to retrospect if the right initiatives were taken in the right forum.

This is important because in the past two decades, Unctad, which was formed to highlight the concerns of developing countries, has changed considerably. In the late-1990s, the International Chambers of Commerce (ICC) had entered into a partnership with the UN, resulting in several joint projects between business and various UN agencies. Specifically, Unctad and the UN Development Programme (UNDP) have embarked upon highly controversial projects with the ICC and individual corporations.

The first of a series of dialogues took place in February 1998, when 25 ICC business leaders met a high-profile UN delegation headed by its chief, Dr Kofi Annan, and agreed to forge a close global partnership to secure greater business input into the world's economic decision-making and boost the private sector in the least developed countries. A few months later (September 1998), the ICC organised the Geneva Business Dialogue (GBD), where high-level officials from the WTO, the UN, the EU and the World Bank, and other top decision-makers met with 450 global business leaders. Unctad and the ICC worked together on a set of guidelines to assist less developed countries attract corporate investment. Accordingly, multinational corporations (MNCs) were to assist these countries in identifying best practices and optimal conditions to create a favourable climate for FDI. It was also decided that Unctad and the ICC would work together to help these countries formulate competition and consumer protection laws and policies.

Critics then argued that ICC's attempts to establish strong working relations with Unctad would affect the latter's stated role of promoting the interests of developing countries. The present move to revive this body to initiate among others, a third and more ambitious round of GSTP, creates few apprehensions.

Some of the contentious issues such as a competition policy and investment, on which many developing countries including India have successfully registered their protest in the WTO, are already on the Unctad agenda. Its $17.5-million post-Doha plan of technical assistance has allocated almost 50 per cent ($8.2 million) to a single issue — investment. If we add other Singapore issues such as competition policy and trade facilitation to the investment budget, this share rises to 60 per cent. Such allocation definitely is not in line with the developing countries' priorities such as agriculture, implementation issues, market access, services, industrial tariffs and TRIPS.

A new debate in Unctad on these issues, which are low priority for the South countries, will diffuse the resistance of the developing countries in the WTO forum. The epicentre of protests will shift to Unctad.

While developing countries debate in the Unctad on few non-issues and focus on South-South cooperation (North-South dialogue on market access automatically takes a back seat) through a revived GSTP, the WTO, with all its aberrations, functions as usual to the best interest of few developed countries.

In the last ten years, developing countries, as agreed in the WTO, have made all the necessary adjustments for the protection of intellectual properties of MNCs; opened up their services sector; dismantled import quotas and reduced tariffs, exposing their nascent domestic industries to uneven global competition. They have not received any perceptible benefit from the system, till date.

Now, pressure is to be built, against the developed countries to fulfil their commitments, in the WTO, from within, not from outside. There is no point in reviving Unctad, which does not have much legal authority on the various trade agreements that regulate global trade now. Multiplicity of regulatory bodies would not help developing countries. The WTO is a reality now and it is expanding its scope.

Warts and all, the WTO is a democratic organisation. Unlike other multilateral institutions, such as the World Bank or the International Monetary Fund (IMF), where the voting rights of the members are linked to their economic power (and in the UN, members of the Security Council have veto power), in the WTO each member has only one vote.

There is ample scope of collective bargaining in WTO set up, as the developing countries (G-20) found at Cancun. Developing countries may well remain focused on the WTO and consolidate their efforts. A new agenda in Unctad, where the ICC influences its key policies now, will keep it confined to South-South issues only.

(The author is Faculty Member, ICFAI Business School, Kolkata.)