REVISED PRE-CONFERENCE TEXT FOR UNCTAD-IX

8:40 AM Mar 19, 1996

REVISED PRE-CONFERENCE TEXT FOR UNCTAD-IX
Geneva 18 Mar (Chakravarthi Raghavan) -- The UNCTAD Trade and Development Board, meeting as a Committee of the Whole in executive session, is to resume Wednesday consideration of a revised pre-conference text of the final outcome of UNCTAD-IX.

An earlier version, dated 29 February, met with criticism from the European Union and other developed countries as well as the developing countries, with none of them, though for opposing reasons, ready to use it as a basis for further negotiations.

The developing countries were critical of the old text and what they saw as an imbalance in the long formulations devoted to enterprise development and trade efficiency and other donor-driven technical assistance projects and much elss to development programmes and activities.

The EU and the US were critical of the what they saw as overlapping on the trade areas and the focus on old mandates and programmes.

The secretariat was asked to prepare a new revised text.

Several Third World delegations said they would be tabling their amendments to the new revised text, but were doubtful whether there was enough time to negotiate a final text. This task they thought would now have to go to senior officials from capitals attending UNCTAD-IX.

The Board, and the COW, under its tentative schedule, was expected to complete this process by end of March.

The revised text suggests that the UNCTAD secretariat would be reorganized into broad divisions dealing with globalization and development; enterprise development, investments and technology flows; trading issues including commodities, and new multilateral negotiations on trade, investment, competition, environment and technology; services and trade competitivity in areas such as transport, efficiency and related services; and technical cooperation programmes.

Some of the existing units like those on economic cooperation among developing countries and the least developed countries might disappear, and their substantive work would be subsumed in the new divisions.

The revised text, put forward on 15 March, after consultations by the secretariat officials with key delegations and groups of them, while meeting some of the criticisms of the developed and developing countries, and improving on the old in terms of specifically addressing the 'development' question, however appears to be somewhat weaker, particularly on the new trade agenda and UNCTAD work in this area.

While it speaks of partnership for development, and involving the new actors (NGOs, enterprises etc), there is some vagueness in terms of the international actions and commitments.

The old text, in terms of the new trade agenda and the mandate given by the UN General Assembly to the UNCTAD Secretariat to prepare and present a report for the first Ministerial Meeting of the WTO at Singapore, had left these issues open.

On the investment question, the new text is capable of interpretation as pre-judging the outcome in favour of a multilateral framework on investment, viewing the TNCs and their role through rose-tinted glasses -- and in terms of what TNCs 'can' do, but not why they don't and how these "dont's" can be cured.

It wants UNCTAD to "contribute to identifying and clarifying issues relevant to a multilateral framework on investment, in particular development aspects".

While broad enough to accommodate the differing viewpoints, the formulation, if accepted and adopted as such by UNCTAD-IX, may imply an apriori acceptance of the need for a multilateral framework on investment and identify UNCTAD's role as merely one of identifying and clarifying the relevant issues, and in particular development aspects.

When UNCTAD, almost two years ago, formulated the 'globalization theme', the Washington consensus for a neo-liberal order and the Fund/Bank/WTO neo-classical prescriptions for integrating developing counties into the world economy through the TNC-driven globalization process were unchallenged dogma, and the donor-driven technical assistance programmes within the UN system were doing the running in line with this dogma.

Since then, and more so after the Mexican peso crisis, very respectable bodies of economists and academic institutions, and even some within the World Bank, have been doing some rethinking and questioning these prescriptions. While accepting the need for and the useful role that FDI could play in developing countries, they clearly see the weaknesses and limitations of FDI in promoting domestic savings and investment in developing countries and furthering structural change for industrialization and self-sustained development.

But the EU's Executive Commission, which is pushing the Multilateral Investment Agreement in the WTO, wants UNCTAD to promote the view that TNCs and FDI would resolve the development problems of the developing world, and that the best way to do it is through an MIA that would give foreigners a 'right of investment' in any country in any sector of activity and the right to get at least treatment equal to those given to a domestic investor, and all foreign investors getting an most-favoured-nation treatment.

There are others who think that while developing countries need FDI, an MIA and creating a level playing field, and putting fledgling domestic industries and investors and powerful foreigners in the same league, may not be the best way for development, and that it would not result in FDI going to countries now marginalised, such as Africa. And, in a situation of level playing field and investors having the right to go anywhere in search of profits, countries chasing FDI would have to give more incentives, rather than eliminate competitive incentives.

The formulations in the revised text may not foreclose these issues. But in terms of future work, much would depend on how this would be interpreted by the secretariat and whether it would change the present focus of UNCTAD's division on Transnational Corporations and investment, and whether it would merely continue uncrtically to promote TNCs or inject a so far absent development dimension into this area. This in turn would depend on the analytical ability and capacity of those undertaking the research work and directing it.

Nevertheless, some developing country delegates seemed not happy with the formulation, though they welcomed the emphasis on clarifying the development aspects of investment. The earlier formulations merely spoke analysis of "the complex relationship between investment, technology and trade".

If the program is not donor-driven, an analysis weighed on the development side would bring out need for the rights of investors to be balanced by their obligations, the obligations of host countries to foreign investors to be balanced by obligations of home countries to ensure good behaviour of their investors abroad, and provide for measures to ensure that foreign investments do not merely end up in transferring technologies within firms but result in economy-wide diffusion of the technology in the host countries through contractual obligations on investors and home countries.

The introduction in the revised document, affirms that the complex problem of promoting development would not be served by one-sided explanations and divisive recipes but on an acknowledgment that economic development, social development and environmental protection are interdependent and mutually reinforcing components of sustainable development.

But then it goes on to assert the one-sided view that the work of UNCTAD should continue to be "an efficient but reduced role of the State". However, and more so in the African context, there is growing body of opinion, state-bashing should come to an end and state institutions would need to be created and strengthened to play their proper, and differing roles depending on the state of the country and its stage of economic development.

The document while reiterating the responsibility of countries, affirms the need for a supportive external economic environment and an international system capable of accelerating growth in a stable and sustainable way worldwide, and that the external environment must provide countries with open and competitive access to basic elements of sustainable development i.e. markets, financing, investment, technology and financial and technical assistance, and these must remain fundamental priorities of UNCTAD's work. In reiterating the benefits that could flow from the Uruguay Round, as well as the significant transitional costs that could confront LDCs and net-food importing countries and need to implement the special Marrakesh decisions on these, the text agrees that challenges facing developing countries in the context of globalization and liberalization are not confined to identifying trading opportunities created by the Uruguay Round, but also areas where future multilateral action is needed.

The revised text addresses recommendations to national governments in terms of development strategies, commodities and enterprise development.

In terms of recommendations to the international community it calls for increased ODA to LDCs, for a comprehensive effort to address the external debt burden of countries whose growth prospects are affected by this, and for special attention to small and vulnerable economies in Latin America and the Caribbean.

On Trade and Commodities, the inability of the economic community to deal with the problems of the commodity sector and the failure of the international community to come to grips with these questions of international cooperation is reflected in the generally vague formulations.

The text calls for implementation of Uruguay Round commitments and for autonomous measures by all countries to provide greater market access, technical cooperation assistance to members and non-members of WTO to enable their greater participation in the international trading system.

UNCTAD is also asked to take further action to reduce instability and risks faced by commodity-export-dependent developing countries including exchange of information and voluntary cooperation among producers to help bring better balance between supply and demand; examination of feasibility of establishing a facility to enhance availability of securitized commodity financing using ware-house receipts; and provide developing country producers assistance to make use of risk limiting instruments.

On Globalization and development, the paper calls for monitoring by UNCTAD of how some of the basic elements for sustainable development -- trade, finance, investment and technology -- evolve and interact in an increasingly globalizing world economy and track changes in their interactions. UNCTAD is also asked to evaluate the impact of these elements on development process, seek opportunities for furthering development resulting from globalization and liberalization and provide policy approaches and actions to help developing countries.

In support of this, UNCTAD is asked to operate at both macro and micro levels, engage in action-oriented analysis, policy dialogue and consensus-building and, based on examination of successful development experiences, design appropriate development strategies.

It also calls for design of internationally more competitive and efficient service structure, and asks UNCTAD to provide a forum to assess implications for development of evolution of systems governing international transactions.

While stressing that the primary responsibility of each State to promote development and effective participation in the global economy, UNCTAD is asked to provide a forum for exchange of national development experiences, bearing in mind increasing diversity of development performances and problems. In the area of investment, technology and enterprise, the document speaks of UNCTAD's important role to foster development and expansion of internationally competitive enterprises, including small- and medium-sized enterprises, and the process requiring attraction of FDI and generation of indigenous investment and technological capacity building.

This, the document says, could be done by UNCTAD among others:

* by providing for detailed exchange of experiences in public and private sector dialogue and enterprise development strategies,

* assisting countries in undertaking science, technology and innovation reviews to draw up action-oriented policy lessons,

* assisting developing countries to implement the TRIPs agreement, and

* examine in detail special contribution that FDI can make to indigenous enterprise development.

In the trade area, the UNCTAD intergovernmental machinery is asked among other things to

* devise ways and means for developing countries to derive maximum benefits from the trading opportunities provided by the Uruguay Round and overcome any impediments to translating these results into concrete benefits, and identify trading opportunities, including on sectoral basis, arising from implementation of GATS,

* identify areas for future trade liberalization and improved disciplines to provide additional benefits to developing countries including through GSP improvements and application of GATS Art. IV for increasing opportunities of developing countries to participate in world trade in services,

* integration of trade, environment and development,

* identifying developing country interests in new and emerging issues, such as trade and competition policy, trade and investment and trade and environment, and the development implications of various scenarios for negotiation of new multilateral disciplines,

* identifying measures to assist LDCs and net food importing countries to adjust the new trade obligations.

UNCTAD is also asked to

* initiate preparatory work to clarify issues related to the interface between competition and trade policy and help build the consensus needed to integrate competition policy in the international trading system;

* identify conditions necessary to ensure regional arrangements complement and strengthen the multilateral trading system;

* examine issues related to full integration of interested economies in transition into the world economy;

* identify main bottle-necks including tariff escalation affecting exports of developing countries in non-traditional natural and processed products;

* continue its special role in the field of trade and environment, including analytical and empirical work, policy analysis and consensus-building, in close cooperation with UNEP and WTO;

* carry out technical assistance in trade and services in close cooperation with WTO and the International Trade Centre (ITC).

In accordance with the recommendations and decisions of special session of the UNCTAD Trade and Development Board in December last year, the document calls for the conference decision on an intergovernment machinery consisting of the Trade and Development Board and for Commissions on Trade, Services for Development, International Investment and Enterprise. The future of the Commission on Science and Technology for Development is to be reviewed in order to align its relationship with UNCTAD.

For the involvement of nongovernmental sectors in UNCTAD's operational activities, the document suggests the establishment of a 'Development Senate' within UNCTAD. Mandated to focus on operational activities undertaken within UNCTAD, the Development Senate is to have advisory functions and report to the Trade and Development Board. Its membership is to comprise representatives of NGOs, the private sector (with adequate of representation to small and medium-sized enterprises) and governments. Particular attention is to be given to ensuring presence of members from developing countries.