UNCTAD: Time to Lead, Time to Challenge the WTO

by Walden Bello*

UNCTAD X is being held at a very auspicious moment for the South. Two central institutions of the Northern-dominated system of economic global governance, the International Monetary Fund (IMF) and the World Bank, are undergoing a severe crisis of legitimacy and have, at least temporarily, lost their sense of direction. The South has the opportunity to seize the initiative, frame the terms of debate on the future of global governance, and push for the creation or institutions that will truly serve its interests. UNCTAD can serve as the catalyst for this process.

A Backward Glance

To envision a strategy for the future, it is essential to glance back at the past, to reclaim the best in UNCTAD's history and to avoid its mistakes.

The place to begin this analysis is the period of decolonization in the 1950s and 1960s. The emergence of scores of newly independent states took place in the politically charged atmosphere of the Cold War, but although they were often split between East and West in their political alliances, Third World countries gravitated toward an economic agenda that had two underlying thrusts: rapid development and a global redistribution of wealth.

While the more radical expression of this agenda in the shape of the Leninist theory of imperialism drew much attention and, needless to say, condemnation in some quarters, it was the more moderate version that was most influential in drawing otherwise politically diverse Third World governments into a common front. This was the vision, analysis, and program of action forged by Raul Prebisch, an Argentine economist who, from his base at the United Economic Commission for Latin America (CEPAL), won a global following with his numerous writings.

Developed in the late 1950s and early 1960s, Prebisch's theory centered on the worsening terms of trade between industrialized and non-industrialized countries, an equation which posited that more and more of the South's raw materials and agricultural products were needed to purchase fewer and fewer of the North's manufactured products. Moreover, the trading relationship was likely to get worse since Northern producers were developing substitutes for raw materials from the South, and Northern consumers, according to Engels' Law, would spend a decreasing proportion of their income on agricultural products from the South. (1)

Known in development circles as "structuralism," Prebisch's theory of "bloodless but inexorable exploitation," as one writer described it, (2) served as the inspiration for Third World organizations, formations, and programs which sprang up in the 1960s and 1970s, including the Non-Aligned Movement, Group of 77, Organization of Petroleum Exporting Countries (OPEC), and the New International Economic Order (NIEO). It was also central to the establishment of the UN Conference on Trade and Development (UNCTAD) in 1964, which became over the next decade the principal vehicle used by the Third World countries in their effort to restructure the world economy.

With Prebisch as its first Secretary General, UNCTAD advanced a global reform strategy with three main prongs. The first was commodity price stabilization through the negotiation of price floors below which commodity prices would not be allowed to fall. The second was a scheme of preferential tariffs, or allowing Third World exports of manufactures, in the name of development, to enter First World markets at lower tariff rates than those applied to exports from other industrialized countries. The third was an expansion and acceleration of foreign assistance, which, in UNCTAD's view, was not charity but "compensation, a rebate to the Third World for the years of declining commodity purchasing power." (3) UNCTAD also sought to gain legitimacy for the Southern countries' use of protectionist trade policy as a mechanism for industrialization and demanded accelerated transfer of technology to the South.

UNCTAD at its Apogee

To a greater or lesser degree, the structuralist critique came to be reflected in the approaches of other key economic agencies of the United Nations secretariat, such as the Economic and Social Council (ECOSOC) and the United Nations Development Program (UNDP), and it became the dominant viewpoint among the majority at the General Assembly.

Instead of promoting aid, UNCTAD focused on changing the rules of international trade, and in this enterprise it registered some successes. During the fourth conference of UNCTAD (UNCTAD IV) in Nairobi in 1976, agreement was reached, without dissent from the developed countries, on the Integrated Program for Commodities (IPC). The IPC stipulated that agreements for 18 specified commodities would be negotiated or renegotiated with the principal aim of avoiding excessive price fluctuations and stabilizing commodity prices at levels remunerative to the producers and equitable to consumers. It was also agreed that a Common Fund would be set up that would regulate prices when they either fell below or climbed too far above the negotiated price targets.

UNCTAD and Group of 77 pressure was also central to the IMF's establishing a new window, the Compensatory Financing Facility (CFF), which was meant to assist Third World countries in managing foreign exchange crises created by sharp falls in the prices of the primary commodities they exported. Another UNCTAD achievement was getting the industrialized countries to accept the principle of preferential tariffs for developing countries. Some 26 developed countries were involved in 16 separate "General System of Preferences" schemes by the early 1980s.

These concessions were, of course, limited. In the case of commodity price stabilization, it soon became apparent that the rich countries had replaced a strategy of confrontation with a Fabian, or evasive, strategy of frustrating concrete agreements. A decade after UNCTAD IV, only one new commodity stabilization agreement, for natural rubber, had been negotiated; an existing agreement on cocoa was not operative; and agreements on tin and sugar had collapsed. (4)

Right-wing Reaction and the Demonization of the UN

By the late seventies, however, even such small concessions were viewed with alarm by increasingly influential sectors of the U.S. establishment. Such concessions within the UN system were seen in the context of other developments in North-South relations, which appeared to show that the strategy of liberal containment promoted by Washington's liberal internationalists, who held sway for most of the post-war period up to the late seventies, had not produced what it promised to deliver: security for Western interests in the South through the co-optation of Third World elites. The United Nations system was a central feature of the demonology of the South that right-wing circles articulated in the late seventies and early eighties. In their view, the UN had become the main vehicle for the South's strategy to bring about the New International Economic Order. As the right-wing think tank Heritage Foundation saw it, the governments of the South devoted "enormous time and resources to spreading the NIEO ideology throughout the UN system and beyond. Virtually no UN agencies and bureaus have been spared." (5) The South's effort to redistribute global economic power via UN mechanisms was viewed as a concerted one:

"Private business data flows are under attack internationally and by individual Third World countries; proposals for strict controls of the international pharmaceutical trade are pending before more than one UN body; other international agencies are drafting restrictive codes of conduct for multina- tional corporations; and UNESCO has proposed international restraints on the press." (6)

Especially threatening to the Foundation was the effort by the Third World to "redistribute natural resources" by

"bringing the seabed, space, and Antarctica under their control through Law of the Sea Treaty, the Agreement Governing Activities of States on the Moon and Other Celestial Bodies (called the "Moon Treaty"), and an ongoing UN study and debate over Antarctica. Malaysian Prime Minister Mahathir Bin Mohamad, the principal architect of the effort to get the UN to claim Antartica, told the General Assembly "all the un-claimed wealth of this earth" is the "common heritage of mankind," and therefore subject to the political control of the Third World."(7)

Crisis of the UN Development System

As the 1980s unfolded, the North's drive to discipline the South escalated. Taking advantage of the Third World debt crisis, the IMF and the World Bank subjected over 70 countries to structural adjustment programs, the main elements of which were radical deregulation, liberalization, and privatization. This was accompanied by a major effort to emasculate the United Nations as a vehicle for the Southern agenda. Wielding the power of the purse, the United States, whose contribution funds some 20-25 per cent of the UN budget, moved to silence NIEO rhetoric in all the key UN institutions dealing with the North-South divide: the Economic and Social Council (ECOSOC), the United Nations Development Program, and the General Assembly. US pressure resulted as well in the effective dismantling of the UN Center on Transnational Corporations, whose high quality work in tracking the activities of the TNCs in the South, had earned the ire of the TNCs. Also abolished was the post of Director-General for International Economic Cooperation and Development, which "had been one of the few concrete outcomes, and certainly the most noteworthy, of the efforts of the developing countries during the NIEO negotiations to secure a stronger UN presence in support of international economic cooperation and development." (8)

But the focus of the Northern counteroffensive was the defanging, if not dismantling of UNCTAD. After giving in to the South during the UNCTAD IV negotiations in Nairobi in 1976 by agreeing to the creation of the commodity stabilization scheme known as the Integrated Program for Commodities, the North, during UNCTAD V in Belgrade, refused the South's program of debt forgiveness and other measures intended to revive Third World economies and thus contribute to global recovery at a time of worldwide recession. (9) The northern offensive escalated during UNCTAD VIII, held in Cartagena in 1992. At this watershed meeting, the North successfully opposed all linkages of UNCTAD discussions with the Uruguay Round negotiations of the GATT and managed to erode UNCTAD's negotiation functions, thus calling its existence into question. (10)

This drastic curtailing of UNCTAD's scope was apparently not enough for certain Northern interests. For instance, the Geneva-based Independent Commission on Global Governance identified UNCTAD as one of agencies that could be abolished in order to streamline the UN system. (11) The Commission's views apparently coincided with that of Karl Theodor Paschke, head of the newly created UN Office of Internal Oversight Services, who was quoted by Stern Magazine as saying that UNCTAD had been made obsolete by the creation of the World Trade Organization. (12)

UNCTAD on the Defensive

During UNCTAD VIII, the North pushed to limit UNCTAD's functions to "analysis, consensus building on some trade related issues, and technical assistance." (13) But even in this limited role, UNCTAD managed during the late eighties and nineties to perform indispensable tasks for the South. Among other things, UNCTAD's research and analytical work:

* showed that structural adjustment was leading to stagnation, not to the promised growth path promised by the World Bank and the IMF;

* underlined the crippling debt overhang that made any development impossible, and thus provided the intellectual ammunition for the Jubilee campaign;

* continued to remind the world that a great cause of the crisis of Third World countries was not their lack of liberalization but the plunging prices of their raw material and agricultural exports and the continuing deterioration of the terms of trade against them;

* pointed to the tremendous potential instability posed by unregulated global financial flows and the threat posed by the liberalization of the capital accounts of developing countries.

* emphasized the continuing critical role of activist state policies in sustaining development at a time that the reigning neoliberal ideology sought to reduce the state's role to providing the legal framework to promote the unfettered flow of goods and capital;

* underlined the many biases against developing countries of the GATT-Uruguay Round and showed how, when it came to such agreements as the Agreement on Agriculture and the Agreement on Textiles and Garments, the developed countries were not delivering on their commitments.

Together with the United Nations Development Program's Human Development Report, UNCTAD publications provided unassailable empirical evidence that globalization was spawning greater inequalities between and within countries. The annual Trade and Development Report served as a healthy antidote to the paeans to the free market and free trade coming out of World Bank and WTO publications such as the World Bank Development Report.

Opportunity Awaits Seizure

The collapse of the Third WTO Ministerial in Seattle provides an opportunity for UNCTAD to reclaim a central role in setting the rules for global trade and development. But this cannot be on the basis of the old paradigm and old practices that have marked the UNCTAD approach. For example, the old assumption that underlay the Prebischian model that full integration of the developing countries into the world economy is the way to prosperity must be questioned in light of the many negative consequences of globalization which have become painfully evident, including the dangers that accompany the loss of self-reliance in agricultural and industrial production owing to the volatility of the global economy, such as the erosion of food security in developing countries where agriculture focuses on export-oriented production.

This is related to the need for UNCTAD to incorporate many of the insights of ecological economics, which sees global trade, whether managed or free, as one of the key factors destabilizing the national and global environment. It must give serious consideration to the principle of subsidiarity in production and trade-that whatever can be produced locally with reasonable cost should be produced and traded locally--as a way of preserving or enhancing the health of both environment and society.

Ecological economics and feminist economics drive home the point that "efficiency" or the pursuit of reduction of unit cost-the driving value of neoclassical economics-must be questioned, if not displaced, and UNCTAD must elaborate a different paradigm that subordinates narrow efficiency to the values of social solidarity, social equity, gender equity, and environmental integrity. UNCTAD's analysis must also move away from an overwhelming focus on international trade as the key factor in development and pay greater attention to both the economic and social measures that would allow for greater reliance on the internal market, including asset and income redistribution, such as land reform, that would create the economically empowered citizen consumers that would serve as the engine of the local economy. The indispensable and necessary links between growth, national sovereignty, and social reform must be placed at the center of trade and development policy.

The absence of serious attention to internal social reform owes itself to a simplistic North-South view of international economic relations. But equally important, UNCTAD has been too long a club of Southern governments and states that are uncomfortable at the examination of their internal political and economic arrangements. UNCTAD, in other words, must see that its constituency goes beyond governments to include, more fundamentally, their citizens. Thus, UNCTAD must not only solicit input from civil society and non-governmental organizations but also open up its decision-making processes to them.

In this regard, the words of Rubens Ricupero, UNCTAD's managing director, apply not only to the WTO but to the organization he leads. Decrying the "persisitent inability" of international organizations to engage civil society, he warns that,

"the net result is that frustration, fears, and concerns finally find expression in a confrontational and sometimes violent attitude, often leading to disruption and a feeling of confusion. There is a clear need to reach out to the concerned individuals and organizations, to offer them an opportunity to be heard by governments not only when they march and protest in the streets, to start a process of ordered and respected dialogue with those who want to debate the central issues related to trade, investment, financial crisis, job insecurity, growing inequality inside nations and among them." (14)

Moving to Center-stage

Institutional and analytical reinvigoration is essential if UNCTAD is to break out of the cage that the rich countries have fashioned for it and carve out a much more powerful role in trade and development issues. Also essential is the will and the vision to accompany this process.

In this regard, both the draft "Plan of Action" and "Bangkok Consensus" are disappointing. Both documents broadly adhere to the North's limiting UNCTAD's mandate to "research and policy analysis; consensus-building; and the provision of policy advice and technical assistance aimed primarily at capacity building." (15) Such an approach does not go beyond the "positive agenda" of the last few years, which put the emphasis on enhancing, via technical advice, the capacity of developing countries in the context of WTO negotiations. That role was essentially one of holding the hands of developing countries as they integrated into the WTO. It was also a role that led to UNCTAD being deployed as a "fixer" for the WTO in controversial issues, such as the way it was recruited to become part of a WTO working party on investment during the Singapore Ministerial in 1996 in order to legitimize the process of bringing investment into the jurisdiction of the WTO.

What UNCTAD should be doing, in the aftermath of Seattle, is challenging the role of the WTO as the ultimate arbiter of trade and development issues. UNCTAD should instead be putting forward an arrangement where trade, development, and environment issues must formulated and interpreted by a wider body of global organizations, including UNCTAD, ILO, the implementing bodies of multilateral environmental agreements, and regional economic blocs, interacting as equals to clarify, define, and implement international economic policies.

UNCTAD, in particular, should push to become not just a forum for the discussion of policies. UNCTAD should become, as Secretary General Ricupero put it recently in Berlin, a "world parliament on globalization."(16) But this should be a parliament with teeth, with actual legislative power and executive power in the nexus of trade, finance, development, and environment. It was under the aegis of UNCTAD that international agreements on stabilizing commodity prices and setting up a Common Fund to support countries suffering from price fluctuations for their exports were forged in the seventies. It was also negotiations carried out under the UNCTAD umbrella that led to the establishment of GSPs or preferential systems for Third World imports. This activist, decision-making role is one that UNCTAD must reclaim.

There are many areas that demand UNCTAD intervention, but three in particular urgently demand broad global agreements:

* There is an urgent need for such an agreement on the "Special and Differential Treatment" that must be accorded to developing countries in global trade, investment, and finance. Such an agreement would specify both positive and negative measures to protect developing economies from the perils of indiscriminate liberalization, support their efforts to develop or industrialize through the use of trade and investment policy, and secure their preferential access to Northern markets. Such an UNCTAD-sponsored agreement would serve as overarching convention that would guide the actions of the WTO, IMF, European Union and all other major international economic actors.

* UNCTAD could also play a key role in addressing the critical nexus of trade and environment. Together with the UN Environmental Program and UNDP, UNCTAD could lead in drafting an agreement specifying broad but binding guidelines and a pluralistic mechanism, involving civil society actors, that would judge on the conflicting claims of the WTO, multilateral environmental agreements, governments, and NGOs.

* In light of the failure of the G-7 to seriously respond to the crying need for a reformed global financial, UNCTAD should seize leadership in this area and forge an agreement among its 180-plus member countries that would put such a system in place. Such a system could involve Tobin taxes, regional capital controls, and national capital controls, and a pluralistic set of regulatory institutions- innovations that are necessary for global financial stability but which are resisted by the banks, hedge funds, the IMF, and the US Treasury Department.

* UNCTAD could also lead in forging a "New Deal" for agriculture in developing countries. The emphasis of such a convention would not be the integration of agriculture into world trade but the integration of trade into a development strategy that will put the emphasis on raising incomes and employment in the agricultural sector, achieving food security through a significant degree of food self-sufficiency, and promoting ecologically sustainable production.

UNCTAD in a Pluralistic System of Global Economic Governance

All this is not to suggest replacing the WTO and the IMF with UNCTAD. But it does mean UNCTAD taking an active role in a process of reducing the powers of the WTO and the IMF.

It is not surprising that both the WTO and IMF are currently mired in a severe crisis of legitimacy. Both are highly centralized, highly unaccountable, highly non-transparent global institutions that seek to subjugate, control, or harness vast swathes of global economic, social, political, and environmental processes to the needs and interests of a global minority of states, elites, and TNCs. The dynamics of such institutions clash with the burgeoning democratic aspirations of peoples, countries, and communities in both the North and the South. The centralizing thrust of these institutions clash with the efforts of communities and nations to regain control of their fate and achieve a modicum of security by deconcentrating and decentralizing economic and political power. In other words, these are Jurassic institutions in an age of participatory political and economic democracy.

UNCTAD may not have the material resources of these institutions, but it has something that the billions of dollars of the World Bank and IMF could not buy: legitimacy among developing countries. A vigorous UNCTAD that competes in the process of defining global rules for trade, finance, investment, and sustainable development is essential in a pluralistic global economic regime where global institutions, organizations, and agreements complement as well as check one another. It is in such a more fluid, less structured, more pluralistic world with multiple checks and balances that the nations and communities of the South will be able to carve out the space to develop based on their values, their rhythms, and the strategies of their choice. UNCTAD has a critical contribution to make in the emergence of such a system of global governance.

* Dr. Walden Bello is professor of sociology and public administration at the University of the Philippines as well as the executive director of Focus on the Global South, a program of research, analysis, and advocacy based at the Chulalongkorn University in Bangkok. He is the author or co- author of 10 books and numerous articles on global and Asian economics and politics, including Iron Cage: The WTO, the Bretton Woods Institutions, and the South (Bangkok: Focus on the Global South, 1999).

  1. See, among other works, A New Trade Policy for Development (NY: UNCTAD, 1964).
  2. Bernard Nossiter, The Global Struggle for More (New York: Harper and Row, 1987), pp. 42-43.
  3. Ibid., p. 45.
  4. Alfred Maizels, "Reforming the World Commodity Economy," in Michael Cutajar, ed., UNCTAD and the North-South Dialogue (New York: Pergamon Press, 1985, p. 108; United Nations, World Economic Survey (New York: United Nations, 1988), p. 42
  5. Doug Bandow, "The US Role in Promoting Third World Development," in Heritage Foundation, US Aid to the Developing World: A Free Market Agenda (Washington: Heritage Foundation, 1985), p. xxii.
  6. Ibid., p. xxiv
  7. Ibid., pp. Xxiii-xxiv.
  8. Adams, p. 43.
  9. South Commission, The Challenge to the South (New York: Oxford University Press, 1991), p. 217.
  10. Myriam Van der Stichele, "World Trade-Free Trade for Whom, Fair for Whom?," in Childers, p. 69.
  11. "South Decries Moves to Close UNCTAD, UNIDO," Third World Resurgence, No. 56, p. 41.
  12. Ibid.
  13. Ibid.
  14. Quoted in UNCTAD X-"World Parliament on Globalization?", SUNS, No. 4584, Jan. 14, 2000.
  15. Ninth Ministerial Meeting of the Group of 77 and China, "Draft Bangkok Consensus," Marrakech, Morocco, Sept. 13-16, 1999.
  16. Quoted in "UNCTAD X- "World Parliament on Globalization?", SUNS, No. 4584, Jan. 14, 2000.