An important fight between rich countries and developing countries over the question of UN involvement in researching and advocating for a new global financial architecture has spilled into the open in the weeks leading up to the April 21-26 quadrennial ministerial meeting in Doha, Qatar, of the United Nations Conference on Trade and Development (UNCTAD). At issue are apparent efforts by the rich countries to water down and block the key planks of UNCTAD’s proposed work plan related to needed reforms in finance and the global financial architecture. The proposed work agenda for the next four years is set to be approved in Doha. However, in an unprecedented step, nearly 50 former UNCTAD officials and staff recently issued a public letter of concern expressing alarm at the degree of pressure being placed on UNCTAD by the industrialized countries, which have long been critical of UNCTAD’s policy advice to developing nations. According to trade officials from developing countries, industrialized countries such as the United States and the EU believe that UNCTAD’s advice on finance, environment, food security, intellectual property rights and development clashes with their agenda for free trade and free markets.
As currently drafted, UNCTAD’s next four-year work plan outlines its proposed research and policy advice on subjects including the current economic recession, exchange rate misalignments, the volatility and financialization of commodity markets, special and differential treatment for developing countries, regional financial and monetary cooperation, and the need for the reform of the international financial and economic architecture. UNCTAD has called for a paradigmatic shift to development-oriented growth that would bring about sustainable and inclusive economic and social change in the world’s least-developed countries (LDCs), including a host of alternative macroeconomic development policies and a range of broad reforms to the global financial architecture.
However, former UNCTAD officials, including one former secretary-general (Rubens Ricupero), and two former deputy secretaries-general (Carlos Fortin and Jan Pronk), are claiming that the rich countries are now trying to block UNCTAD from undertaking work in the areas of finance, governance of international finance, the exchange rate in the international monetary system and reform of the international financial architecture. According to Ylimaz Akyuz, former chief economist at UNCTAD and now chief economist at the South Centre, the rich countries, “don’t want to see the word ‘finance’ in the agreed text defining the mandate of UNCTAD”; rather, they want to keep the issues regarding finance restricted to spaces they control, such as the International Monetary Fund (IMF) and the G20 – and out of the UN system, not just out of UNCTAD.
John Burley, one of the signatories to the statement, said that an attempt is going to be made in the Doha meeting, “to change UNCTAD’s mandate by denying the organization the right to continue – and I emphasize, to continue – to analyze and report on global macroeconomic issues, including the role of global finance in development.” This would constitute a major break with UNCTAD’s traditional interdependence approach, in which it analyzes the relationship among the various flows of trade, finance and technology, and how that relationship affects development.
The developed countries have previously argued that trade and development issues can be handled by the World Trade Organization (WTO) and the World Bank, respectively, and that global financial reform can be left to the IMF and G20 task forces. But if the claim is that UNCTAD has been made redundant by these other international bodies, it would be a hard case to make. In fact, over the last 30 years, as the free trade and free market policies of the Washington Consensus came into political ascendancy, UNCTAD has been a steady voice arguing for the consideration of alternatives. According to Akyuz, since the collapse of the Berlin Wall, the major Organization for Economic Cooperation and Development (OECD) countries, “have become increasingly intolerant to diversity of views and indeed wanted the Washington consensus to become a global consensus. They have seldom engaged in constructive dialogue in UNCTAD over policy options and ignored UNCTAD research findings even when they are proven right.”
In recent years, UNCTAD has set itself apart from the IMF and World Bank and other western aid donors by calling for an overhaul of the global financial system to benefit developing countries, for rethinking the dominant export-led growth model for developing countries, and it has urged the poorest countries to prioritize domestic economic growth over exports. In a major breach with the Washington consensus model, it has called for developing countries to use a strong “developmental state” which can effectively pursue an industrial policy to build up manufacturing and services sectors over time. It has called for a range of alternative fiscal, monetary and financial policies targeted at better scaling up long-term public investment and employment. Dr. Matern Yakobo Christian Lumbanga, Tanzania’s ambassador to the UN and WTO, said, “UNCTAD’s assistance in different policy areas is vital for developing countries and it has rightly advised us not to depend on one or two areas of exports or raw materials,” but to realize the benefits of diversification.
UNCTAD was the first to call for a debt cancellation initiative, even when it was still taboo. It was the first to argue for orderly workout mechanisms for sovereign debt, more than a decade before it came to be put on the IMF’s agenda (though those mechanisms are still not established). UNCTAD has been ahead of the curve in its warnings of how global finance was trumping the real economy, both nationally and internationally. It forecast financial crises in Mexico in 1994 and 1995), warned of the 1997 East Asian crisis and the 2001 Argentinean crisis, and has consistently sounded the alarm of the dangers of excessive deregulation of financial markets and stressed the perils of rapid, nonreciprocal trade liberalization by developing countries.
Today more than ever, UNCTAD’s overt call for moving away from the current finance-driven globalization is at odds with the policy advice of the IMF and World Bank and with the proliferation of regional and bilateral investment treaties (BITs) and free trade agreements (FTAs) being negotiated between industrialized and developing countries. UNCTAD has predicted and recognized the need for reform of the international financial architecture and the need to manage international capital flows – indeed, UNCTAD’s longstanding call for the use of capital controls is today being vociferously called for by the BRIC countries (Brazil, Russia, India and China). As the role of macroeconomic imbalances in triggering the current economic crisis has been increasingly acknowledged, UNCTAD was once again proven correct with its longstanding call for a system or agreement by major economies to manage exchange rates within certain bounds and its emphasis on the need to deal with the lack of coherence between the trading and monetary systems in the global financial architecture.
The former UNCTAD officials and staff said they issued the public statement of concern because of two principles: the need to protect UNCTAD’s freedom of speech and integrity as an independent research organization, and because the United States and EU should be welcoming a broad array of alternative economic policy approaches today more than ever – as we are still experiencing the consequences of excessive financial deregulation – rather than seeking to silence a dissenting voice.