By R Nastranis
GENEVA (IDN) – The United Nations Conference on Trade and Development (UNCTAD) is living up to its name and mandate given 48 years ago. Its latest Trade and Development Report concludes that austerity measures have not led to economic growth, and recommends supportive government policies to get over the crisis. This pro-people approach corresponds with organization’s goals, explained on its website: to “maximize the trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world economy on an equitable basis.”
The establishment of UNCTAD in 1964 as a permanent intergovernmental body and the principal organ of the UN General Assembly dealing with trade, investment, and development issues, was rooted in developing countries’ concerns over the international market, multi-national corporations, and great disparity between the then developed nations and developing countries.
Expectedly, civil society organizations have welcomed the latest report and also contributed their share, which Secretary-General Supachai Panitchpakdi told representatives of key non-governmental organizations and networks, was crucial for the success of the 13th Ministerial Meeting (UNCTAD XIII) of this UN agency.
The report points out that, as predicted by UNCTAD economists, fiscal austerity and wage compression are further weakening growth in developed countries without achieving the expected results of reduced fiscal deficits, job creation, and renewed confidence of financial markets.
Global growth fell from 4.1 percent in 2010 to 2.7 percent in 2011, and is expected to decline to below 2.5 percent in 2012, according to the Report, subtitled ‘Policies for Inclusive and Balanced Growth’ and focused especially on income inequality. Reducing widening gaps in wealth and income will not only have social benefits, but will also lead to higher economic growth, it says.
The study notes that many developing countries are supporting domestic demand and growth with countercyclical economic policies. But it contends that they cannot avoid a slowdown and are vulnerable to a continuing deterioration in advanced economies.
Developing countries are still vulnerable to weakened demand for their exports from the developed economies, the report says, and that is likely to be the case as austerity programs continue, especially as they bite more deeply in Europe. The trend is already reflected in stagnating export volumes to developed-country markets and in a declining trend in commodity prices since the second quarter of 2011.
According to the UNCTAD, the paradigm of labour-market flexibility has not only failed to reduce unemployment, but tends to exacerbate it. By relying on wage compression as the main tool for expanding employment, such labour market reforms dismiss the important contribution of income distribution to demand growth and employment creation.
If overall productivity grows without a commensurate increase in wages, demand will eventually fall short of the production potential, thereby reducing capacity utilization, profits and investment, the report says.
This perception of the state of the world economy and its impact on developing and emerging economies, prompted civil society organizations to express appreciation for the research and analysis work presented in the report at a meeting in Geneva on September 27, 2012. In particular, they commended the report for explaining well what is happening on the ground.
Kinda Mohamadieh, Director of Programs at the Arab NGO Network for Development, remarked that the report stresses the centrality of reducing income inequality as a key factor to achieve development and a sustainable economic growth, as well as the development of local markets.
According to Mohamadieh, the report recommends the importance of reconsidering the basis of national economic policies and the role of productive capacities and policies of redistribution, including the role of fair income and progressive tax policies and existing policies to boost local demand.
“Such recommendations are of great importance to the Arab countries that are witnessing political leadership changes and that require a wide democratization process and re-establishment of political policies,” Mohamadieh affirmed. This development in the Arab world contributed to the deepening of disparities and inequalities and; therefore, must be addressed as part of re- establishment of their economic policies.
She concluded that “it is surprising how we are still seeing recommendations by financial institutions calling on Arab countries to strengthen their flexibility in wages and jobs protection as a means to rejuvenate the economies.”
These remarks corresponded with the warning by Director of UNCTAD’s Division on Globalization and Development Strategies Heiner Flassbeck at the UN General Assembly session in September 2012 that “misguided” steps are limiting recovery from the global slowdown. While briefing the Assembly on the Trade and Development Report 2012, he pleaded for measures to boost income equality so that consumer demand is stimulated.
“I know that my colleagues in the economics profession like to say that we are at a critical juncture,” said Flassbeck. “But this time it’s really true. If you look at the extraordinary measures that the world’s largest central banks have been taking for the last two years, and then consider that the world economy is continuing to slow down while unemployment stagnates at very high rates in both the developed and developing countries, and investment remains flat, you understand that we are living in truly extraordinary times.”
The representatives of non-governmental and civil society organizations active in the field of trade and development committed themselves to continue supporting the UNCTAD. They reiterated their intention to remain closely engaged in the implementation of the agency’s mandate and the work program emanating from UNCTAD XIII, held in Doha, Qatar in April 2012.
They also urged UNCTAD to be more present at the regional and field level, and for UN agencies to strive for coherence in the policy advice they give. They suggested a greater advocacy role for UNCTAD in the area of trade by helping developing countries “to change the global economic rules” and providing advice on economic partnership agreements and regional trading arrangements. The shift in emphasis towards sustainable development with the new investment framework was appreciated by the representatives.
State of the world economy
Briefing civil society organisations on UNCTAD’s work and on the state of the world economy, Supachai – a Thai national – said that the reform of global economic governance is a defining issue in the period leading up to the next conference (UNCTAD XIV) in 2016. The South not only needs to be given a greater say; it should also take bigger responsibility.
Policy advice, including from international organizations, may, for example, avert losses of trillions of dollars in losses, but that such advice is not always considered a measurable deliverable and is therefore not supported by some donors, the Secretary-General said.
Global value chains need to be looked at from the point of view of how a country can develop its own local industry, create employment, and diversify; and there is also merit in allowing countries more imports as they expand their exports, reports Social Watch quoting Supachai, who also stated that the quality of investments is important, and that each country needs to have its own national strategy to attract these.
UNCTAD Secretary-General Supachai warned about prejudice that still exists against unconventional thinking and in favour of orthodox approaches, and forecasted that next year could see an even worse downturn, because of both inaction and the enactment of inappropriate policies; growth via stimulus packages is unsustainable.
It is crucial to build up a correct understanding of the state of the world economy, and that is why research and analysis on key topical issues are of great importance, and welcomed that UNCTAD had received a strong mandate for the purpose at the Ministerial Meeting in Doha.
Speaking about the governance of UNCTAD, Supachai explained that the multi-stakeholder participation that defines its functioning must include NGOs. He also referred to their advocacy work, which he said was critical for the success of UNCTAD XIII, and that the Civil Society Declaration issued in Doha was both forceful and substantive.
As to further collaboration with civil society, Georgios Altintzis of the International Trade Union Confederation (ITUC) urged to continue and to increase the funds that civil society organizations receive in order to participate in civil society activities, including the Public Symposium.
The agency divisions could consult with civil society before major reports are released and published, and the non-governmental organizations and networks could be granted more time to share their views with plenary sessions of the Trade and Development Board (TDB), and could have some kind of status as observers on different committees, Altinzis added.
He proposed to mobilize funds to keep the UN-Non-Governmental Liaison Service (NGLS) functioning, and to continue holding consultations such as the current one (for example, around the time of the Public Symposium).
The civil society and non-governmental organizations which participated in the consultations were the following: Arab NGO Network for Development (represented by Kinda Mohamadieh); Center for Economic and Policy Research (Deborah James); Initiatives for Dialogue and Empowerment through Alternative Legal Service (Tony Salvador); International Trade Union Confederation (Georgios Altintzis); Instituto del Tercer Mundo / Social Watch Network (Roberto Bissio); Public Citizen (Melinda St. Louis); Southern and Eastern African Trade Information and Negotiations Institute (Nathan Irumba); Third World Network (Sanya Reid Smith). [IDN-InDepthNews – October 13, 2012]
Photo: Civil society representatives with UNCTAD’ Supachai | Credit: UNCTAD