United Nations Conference on Trade and Development (UNCTAD)

Ian Taylor, Karen Smith

• Publisher: Routledge
• Year: 2007
• ISBN:
  9781134199747
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Ian Taylor and Karen Smith present a much-needed and full examination of the United Nations Conference on Trade and Development (UNCTAD), covering its history and current activities. All the key areas are covered by accessibly written chapters, including:

• an overview of UNCTAD: what it is, why it was formed and why it is important
• how the organization operates today: what it does and how it does it
• key criticisms made against the organization: is it relevant in today's world?
• emerging issues within the organization and its future direction.

In the current era of globalization and what appears to be the dominance of neo-liberal economic thought, UNCTAD has sought to make itself germane to ongoing international debates. The implications of this for the organization's key remit, namely making the world a fairer place, are something that this book unpacks.

1 Historical background

UNCTAD’s founding reflected the growth in membership of newly independent states within the United Nations (UN). A large number of the elites of these new entities keenly felt the iniquity of the world order upon which they had been launched. UNCTAD and the later call for a ‘‘New International Economic Order’’ (NIEO) therefore was a rejoinder to problems encountered by developing countries as a result of the creation and operation of the Bretton Woods Institutions (BWIs).¹ The history of UNCTAD stakes out the rise of these positions in global diplomacy and equally, their effective demise.

Indeed, the very raison d’etre of UNCTAD sprang from developments after World War II, when the BWIs were established as a means to avoid crises of the type that had characterized the 1930s and, it was believed, had led to World War II. The key principle behind the BWIs was to promote ‘‘free trade’’ and dismantle trade barriers and restrictions on commerce, while promoting the global ‘‘free market.’’ For the most part, issues regarding international trade were addressed within the BWIs—particularly the General Agreement on Tariffs and Trade (GATT)—on the principle of ‘‘most favored nation’’ (MFN), with a strong emphasis on the ideas of give-and-take and reciprocity, as well as non-discrimination against fellow members. GATT itself was initially signed in 1947 and was intended to make available an international forum to encourage ‘‘free trade’’ between member states by regulating and reducing tariffs on products that were traded, as well as developing an instrument for settling trade disputes.

In 1948, the Havana Charter established an International Trade Organization (ITO) to regulate global trade and to oversee issues pertaining to commodities. Latin American countries, many of which formed the core of the original GATT, had been promoting the establishment of a multilateral trading regime to advance their own economies. However, the United States never ratified the Havana Charter and as a consequence, the ITO failed to gain the requisite number of signatories and thus did not come into existence. In contrast to the planned ITO, the GATT did not include terms regarding commodity accords or foreign investment rules or preferential trading systems for the developing world. Issues pertaining to trade in commodities (originally a remit of the ITO) were actually assumed by the United Nations Economic and Social Council (ECOSOC). At the same time, the Interim Coordinating Committee on International Commodity Agreements (ICCICA) was established to manage action on international commodity issues. Later, in 1954, the Commission on International Commodity Trade (CICT) was created within the ICCICA to examine ways to stabilize commodity prices and their production for the global market. Meanwhile, multilateral developmental assistance was mainly supervised by the World Bank, while the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) handled bilateral aid. Issues pertaining to monetary collaboration at the international level were largely confined to the remit of the International Monetary Fund (IMF). In other words, global trade and development governance were fairly well covered by an array of organizations and institutions.

Yet, all these institutions worked within a milieu where the number of newly independent, post-colonial states—with all their attendant developmental issues and, in the case of many, dependence on commodities—was growing and where the coherence (and relevance) of this plethora of institutions was deemed problematic. Indeed, the newly emergent states quickly realized that all of these separate multilateral bodies were highly relevant to their future development, yet remained institutionally disconnected. The need for a coherent body to bring together the various issues handled separately by the above organizations was deemed more and more important by the new countries within the UN. Furthermore, the GATT system and its process of trade negotiations was seen by many to reproduce the power asymmetries in global commerce, with GATT talks invariably being conducted between the main producers and consumers for each separate product. Such a situation meant that the bargaining power of the producers (i.e. the developing world) was greatly lessened as in the main developing countries seldom made up the chief market shares as producers. As a result, power within the negotiating structures of the GATT was invariably in the hands of the developed world and was viewed by the new nations, as well as the Latin Americans, as inimical to their development.

Initially, the concerns of the developing world were expressed at and through the Asian-African Conference, convened in Bandung, Indonesia, 18–24 April 1955. The Asian-African Conference was a seminal event in the history of the post-colonial world for it was at Bandung that African and Asian nations first made tentative links within a political setting. Bandung itself had sprung from a concept that had first been suggested at a meeting of the Prime Ministers of Burma, Ceylon, India, Indonesia and Pakistan in Colombo, Ceylon in April 1953. This was formalized by the so-called ‘‘Colombo Powers’’ on 29 December 1954. Twenty-nine countries attended Bandung, a nascent bloc of developing world nations, and for many writers, the Asian- African Conference was of great and lasting importance in setting up the conditions for greater unity among the developing world.²

Bandung has since been described as ‘‘in essence a celebration of the wave of independence that had swept across Asia and was then cresting in Africa.’’³ The motives for convening such a conference varied widely among the elites attending, as did their economic and political orientations. Nonetheless, Bandung did adopt a number of resolutions that have been described as ‘‘an augur of a future protest against the subordinating stays of the developing countries in the international system,’’ and which established a set of normative values which aimed at a more equitable world order.⁴ Interestingly, the GATT began to be aware of the issues being raised at Bandung. In 1958, the so-called ‘‘Haberler Report,’’ in honor of Professor Gottfried Haberler, the chair of the panel of economists mandated by the GATT to examine why less-developed countries were failing to develop as rapidly as industrial nations, was published. The report, officially titled Trends in International Trade, offered guidelines for the GATT, and a number of changes, including a Declaration on the Promotion of Trade of Less-Developed Countries, were later adopted.

Bandung was followed by the Belgrade Conference of 1961 where the Non-Aligned Movement (NAM) was officially launched. At Belgrade a declaration containing the common views of delegates on international problems was issued that was in line with the general Bandung position, and an agreement on the summits of NAM being triennial was reached. The NAM was established as a loose multilateralist project with very little formal organization and this resulted in conference diplomacy becoming a specific characteristic and feature of non-alignment.⁵ By confirming the ‘‘Spirit of Bandung’’ in 1961, the NAM also adopted a posture that rejected the bilateralist impulses that dominated the world through the system of Cold War alliances. Indeed, the ‘‘Bandung Era’’ lasted until approximately the formation of UNCTAD and was, during this period, the flag-carrier for the concerns and aspirations—as well as the flexing of muscles—of the newly post-colonial state elites.

This became more and more apparent as Africa and Asia emerged from colonialism. Indeed, in 1960, nearly 20 African states achieved independence. This massively augmented the ranks of those countries that had identified themselves with the Bandung message and swung the balance of numbers within the UN General Assembly (UNGA) in the favor of the developing world. Thus, as the 1960s progressed and the number of independent nations in the ‘‘Third World’’ grew, rising attention had to be paid to the problems being encountered by a growing number of UN members, problems that Bandung had highlighted and which the increased presence of new nations increasingly vocalized. As a consequence, the demands of the developing world began to take up more time and attention of the various bodies within the UN system. This was further stimulated by material conditions within the South as conditions for commodity prices became unstable in the 1960s. A demand for action by the UN on behalf of the new nations thus became ever more urgent.⁶

Equally, the BWIs were condemned for their oversight regarding the issues facing the new states and also because the status and standing of the socialist states of Eastern Europe was generally neglected. In short, the BWIs were in a weak position to safeguard the developmental aspirations of a growing portion of the world. And the fragmented nature of existing institutions for global governance stimulated a growing coalition within the newly independent nations for something to be done vis-a`-vis the setting up of a unified body to consider their particular problems and prospects.

The above broad environment saw, in 1962, the Conference on Problems of Developing Countries, held in Cairo and attended by 36 country delegations. This Cairo meeting appealed for an international conference on ‘‘all vital questions relating to international trade, primary commodity trade and economic relations between developing and developed countries,’’ the discussion of which was to take place within the UN.⁷ The socialist states of Eastern Europe threw their weight behind this call and as a consequence ECOSOC made two crucial resolutions—917(XXXIV) and 963(XXXV), which requested such a meeting. Later, a resolution within the UN General Assembly, Resolution 1785(XVII), also demanded a conference on trade and development, and established a preparatory committee for this. This determination can be seen as a diplomatic victory for the developing countries, against the broad resistance of the developed states who eventually gave up their opposition to such calls for two key reasons. First, a Soviet threat to create an international trade organization convinced the West that it would be a strategic error to allow the developing world to set up such a body—sponsored by and with the active involvement of the Warsaw Pact countries—with no input or presence of the capitalist countries of the developed world. Second, and perhaps more importantly, the increasing majority of the developing countries in the UN left them with very few choices.⁸ This then was the basic background to the establishment of UNCTAD, an event that was to take place two years after the Cairo Declaration.

The formation

The 1964 Conference (known as UNCTAD I) was held in Geneva, Switzerland from 23 March to 16 June 1964. Representatives of 120 countries took part, along with a variety of international organizations. The main negotiations were clustered into six agenda items:

1. expansion of international trade and its significance for economic development;
2. global commodity problems;
3. trade in manufactured and semi-manufactured products;
4. improvement of the ‘‘invisible trade’’ of developing nations;
5. the development of regional economic groupings;
6. tnstitutional activities and methods to put into practice measures regarding the growth of international trade.

These agenda items were separated into five committees, whose conclusions were reported back to the Conference.

The Conference adopted the Final Act, setting out the principles upon which UNCTAD was to be based, which contained 15 General and 13 Special Principles to govern trade relations and policies (see p. 12). The underpinnings of these Principles were grounded in Rau´ l Prebisch’s work.⁹ Of note, the Principles were adopted by roll call and a number of developed countries voted against some or many of the Principles (others abstained). Those most systematically opposed to the Principles included Australia, Canada, the United Kingdom and the United States, while other developed nations also voted against specific Principles.

Overall, the Final Act grounded the future organization in promoting increased market access for exports from the developing world by using preferential access and dismantling protectionism for agricultural products in the developed world; regulating and steadying the international market for primary commodities, in order to counterbalance the diminishing terms of trade for the developing countries; and approving policies to boost financial flows to the post-colonial world.

The hand of Rau´ l Prebisch, the first secretary-general of UNCTAD, was very much in evidence in these Principles. In his report to the first plenary session of UNCTAD I in 1964, Prebisch had stated that the GATT had not been ‘‘efficacious’’ for the developing countries because it ‘‘is based upon the classic concept that the free play of international economic forces by itself leads to the optimum expansion of trade and the most efficient utilization of the world’s productive resources.’’¹⁰ Consequently, ‘‘the international community [i.e., the Western, capitalist economies] should recognize that it has a clear responsibility towards developing countries that have suffered deterioration in terms of trade in the same way as governments recognize a similar responsibility toward their domestic primary producers.’’¹¹

Prebisch grounded his argument on the disparities between the nature of the demand for primary commodities and manufactured goods, i.e. low price and fluctuating incomes from the former. Prebisch argued that the prices that could be commanded for primary goods were so lacking in elasticity that relatively, it did not matter what producers did vis-a`-vis increased efficiency, productivity or other means, increases in quantities exported would not result in greater receipts to the producers. This was compounded by the growth in technological innovation in the developed world, which meant that primary products and commodity-based economies were progressively being replaced by man-made products. Thus the demand and hence price for commodities was in perpetual decline. Prebisch warned that this would get worse for the developing world as time progressed and technology improved and that this meant that the gap between rich and poor in global terms would become more, not less. The message from Prebisch was that unless there were greater flows of developmental assistance, coupled with comprehensive commodity deals and implementation of compensatory financing systems (as a way of transferring income), the newly independent nations would be trapped at the bottom of the global division of labor in perpetuity. Simply dismantling barriers to trade, as per the GATT’s remit, would not be sufficient to reverse this process. Preferential access of processed goods from the developing world to the North was what was needed, with tariff preferences in the North assisting, as well as aid.¹² This was not charity, but ‘‘compensation, a rebate to the Third World for the years of declining commodity purchasing power.’’¹³

Predictably, such rhetoric attracted a great deal of opposition from the developed world, who sought to block such positions being advanced. However, the majority of developing countries at UNCTAD I passed a set of resolutions that established the aforementioned Principles. The key Principles are summarized below and are important to note for their assertion of equality, sovereignty and the placing of development onto the central agenda of the international community:

General Principle One Economic relations between countries shall be based on respect for the principle of sovereign equality of all states, self-determination and non-interference in domestic affairs.

General Principle Three Every country has the sovereign right freely to trade with other countries, and freely to dispose of its natural resources in the interest of the economic development and well-being of its own people.

General Principle Four Economic development and social progress should be the common concern of the whole international community.

General Principle Five Developed countries should assist developing countries to speed up their economic and social progress and should encourage appropriate adjustments in their own economies to this end.

General Principle Fifteen The adoption of international policies and measures for the economic development of the developing countries shall take into account the individual characteristics and different stages of development of the developing countries, special attention being paid to the less developed among them, as an effective means of ensuring sustained growth with equitable opportunity for each developing country.

The Principles above set out UNCTAD’s basic position. Following on from this, a decision was made at Geneva to convert UNCTAD into a permanent international institution and not just a one-off conference (as indeed the actual name of the organization, even today, implies). At Geneva there was a discussion over what type of body UNCTAD should become—whether it should be an organ of the UNGA (the developing world’s position) or whether it should be under the ambit of ECOSOC (the developed world’s favored solution). The developing world’s opinion eventually triumphed, with the argument being that ECOSOC membership was inadequate and that not only did it not represent the developing world but also that its past energies in resolving concerns and issues of the developing world had been lackluster and wholly unproductive. The developing world in particular was keen to gain the backing and legitimization that only being an organ of the General Assembly could grant the new forum.¹⁴

Indeed, what came out of Geneva was a vision that saw UNCTAD being the main site where debate and discussion over policy regarding international trade and development issues might be thrashed out as a means by which consensus over such issues might be reached—and all backed by the UNGA.

The early years

As a permanent organization, UNCTAD was established as a formal organ of the UNGA on 30 December 1964 by the General Assembly through Resolution 1995(XIX). In this resolution, the mandate and the structure of UNCTAD were established. As part of this structure, Article Two of the resolution stated that the conference would be called together ‘‘at intervals of not more than three years.’’ The highest decision-making body of UNCTAD is the ministerial conference, at which member states make evaluations of current trade and development issues, confer regarding policy choices and put together global policy responses. The conference also ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Foreword
• Acknowledgments
• Abbreviations
• Introduction
• 1 Historical background
• 2 UNCTAD’s Secretariat structure
• 3 Research, analysis and major publications
• 4 ‘‘Golden years,’’ 1960s–1970s
• 5 UNCTAD’s crisis, retreat and reinvention: 1980s onwards
• 6 The multilateral trading system and the future: Where does UNCTAD fit into the WTO?
• Conclusion
• Notes
• Select bibliography