UNCTAD Review talks collapse without agreed text

The first session of the Md-Term Review (MTR) of UNCTAD-XI broke up near midnight on Thursday 11 May without an agreed conclusion after acrimonious negotiations that centred on the issue of "policy space."

The collapse of the talks have generated shockwaves as governments and the Secretariat ponder over the implications and the next steps not only for the MTR exercise but for UNCTAD's future activities, and even its mandate.

The impasse is coming at a critical juncture for UNCTAD, as the United Nations reform process, taking place mainly in New York, is currently reviewing the mandate of UN departments and agencies. Another part of the process involves exploring "system-wide coherence", that could include restructuring or merging of the UN's many agencies and units.

Some developed countries have already made known their intention of having UNCTAD merge with other organisations, and of clipping its activities, while the G77 and China has stoutly defended the need to strengthen, not weaken, UNCTAD's mandate.

The developments in New York on UN reform threw a long shadow over the week's debates at the MTR, particularly on the issue of policy space and UNCTAD's future work.

The immediate cause of the crisis was the wrangling between the developing countries (led by the Group of 77 and China) and the developed countries (primarily the United States) on whether UNCTAD should undertake future activities on "policy space."

To the G77 and China, the reference to "policy space" was the most significant outcome of UNCTAD XI in Sao Paulo in 2004, and the Group proposed that the concept must be operationalised in all of UNCTAD's future work, and that this be reflected in the agreed outcome of the meeting.

However, the US objected not only to the G77's proposal, but to having any mention at all on "policy space" in the text.

The differences were irreconcilable even after many hours of negotiations, and a decision was taken near midnight to end the meeting without any agreed conclusion.

In closing speeches, Pakistan (the coordinator of the G77 and China) and several other G77 members made clear their anger at what to them was an unreasonable and unacceptable position by the US.

They said they had been close to taking a decision to call for a vote on the document but had withheld this in the spirit of cooperation. The G77 implied that it may have to resort to calling for a vote in a future session of the MTR.

Voting would have broken the longstanding tradition in UNCTAD that decisions be taken on the basis of consensus. The previous week, a vote was taken in the Fifth Committee of the General Assembly in New York on a resolution of the G77 and China on UN management reforms proposed by the UN Secretary General, and another vote was taken by the General Assembly on the same issue. The resolution was passed by a wide margin.

The UNCTAD meeting, which started on Monday, was to have concluded on Thursday afternoon with the adoption of "Agreed Outcomes". The document was to have been sent on to the third and final session of the MTR in September/October to be part of the final outcome.

A second MTR meeting, scheduled for June, is to discuss the three pillars of UNCTAD's work: research, consensus-building and technical assistance. But with the collapse of the first MTR session, there is scepticism by some countries as to whether the June session can accomplish anything positive.

"There has been a breakdown of the intergovernmental process, with no consensus possible on the most important and most basic issue of UNCTAD XI,"
said a leading G77 diplomat on Friday. "What now can we discuss on UNCTAD's consensus building role, unless the crisis is overcome?"

The MTR is aimed at reviewing the implementation of the outcome of UNCTAD's eleventh session at Sao Paulo in 2004 (especially the Sao Paulo Consensus) and to give directions to UNCTAD's work for the next two years until UNCTAD XII in 2008.

A draft of the Agreed Outcomes was circulated on Thursday morning. A second draft which included amendments by countries was discussed in the afternoon, and a third draft issued at 9.30 p.m.

The original draft did not include any reference to policy space, which surprised the G77 members, as the MTR discussions had in fact been dominated by this issue.

In these discussions, the G77 and China and their members had stressed the significance of the paragraph on policy space in the Sao Paulo Consensus, and expressed "shock" and disappointment that the Secretariat documents reporting on implementation of UNCTAD XI outcomes had made no mention of issues raised in the Preamble, especially policy space and the policy coherence of UNCTAD's work, including with other organisations.

At the opening plenary itself, the G77 and China chairperson, Ambassador Masood Khan of Pakistan, identified "shrinking policy space for developing countries in the wake of increasing interdependence and rule-based regimes of international economic relations" as one of the most important cross-cutting issues in the Chapeau.

Many G77 members gave examples of how certain events or policy tools (such as structural adjustment programmes, the South-to-North flow of financial resources, the Doha Declaration on TRIPS and Health, and the G8's debt cancellation for some poor countries) had either positive or negative effects on the policy space of developing countries.

The US took the opposite view, calling policy space a "concept of dubious value" which cannot be a "roadmap" for UNCTAD's activities. Countries are sovereign in policy making and it is by their own choice that they limit their policy options, said the US.

On Thursday afternoon, discussions began on the draft outcome. It soon became stuck on the policy space issue.

The G77 proposed to include a paragraph, that the Trade and Development Board "decides that the developing countries' need for appropriate balance between national policy space and international disciplines and commitments must be fully integrated, horizontally streamlined and effectively operationalised in all of UNCTAD's work, particularly in its activities on research and policy analysis as well as in technical assistance."

Another contentious issue was a paragraph requesting UNCTAD to continue to provide assistance to the Palestinian people. The Palestine delegation, backed by the G77, proposed to include "and intensify" after the word "provide", but this was opposed by the US.

The plenary meeting was suspended at about 6pm at the suggestion of the Trade and Development Board President, Ambassador Ransford Smith of Jamaica, for some members to hold a meeting to resolve the issue.

When the meeting resumed at 10pm it became clear that no agreement was possible. While the G77 insisted that there had to be text included on policy space (with a possibility to negotiate its proposed language), the US position was that there be no reference to policy space at all. The US made it clear that its stand on policy space was not negotiable, according to diplomatic sources.

In a closing statement, the G77 and China, represented by Pakistan, recounted how the Group had engaged in the MTR process in a positive spirit and had made concessions including on modalities of the process. However, it was disappointed that one delegation was not in the mood to have the process succeed.

Referring to the policy space issue, the Group said it was not asking for much, as its proposed language was based on what had been agreed to by Trade Ministers in UNCTAD XI and subsequently by the political leaders at the 2005 World Summit. To take a position that this outcome could now not be included in the MTR outcome was not comprehensible.

The Group added that it does not take high IQ to know that the G77's proposed language was already a lowering of its views and position. Yet even this diluted version could not be accepted as a starting point for discussion on the text.

The G77 said that this attitude colours the atmosphere of the MTR process.
It referred also to certain recent developments in New York which it said was astonishing, and which affected the mood.

To save the document (the draft agreed outcome) the G77 had tried all options, said Pakistan and the Group had considered the option of asking for a vote. However, it had stopped short of this extreme measure in the interest of wanting to maintain the consensus system.

The G77 expressed that its members were both disappointed and angry at the turn of events, and it would have to consider all the options on how to proceed, and what measures to take at the next sessions, implying that voting may then have to be considered.

According to diplomatic sources, tempers were flared and emotions were running very high as several of the G77 delegates (including the Philippines, India, Iran, Zimbabwe) made their closing statements.

The US and EU made brief statements, to the effect that they tried their best to make progress but it didn't work, and lessons should be drawn and taken to the next stage.

G77 delegations said that while the developed countries said they wanted to cooperate to make UNCTAD stronger, at the same time they refused to accept the G77's proposals, and while they claimed to be constructive in effect they were not.

The "astonishing developments in New York" referred to by Pakistan was in relation to a speech by US Ambassador Mark Wallace at an informal UN General Assembly plenary session on mandate review on 8 May in which he said "we would like to see UNCTAD eliminate or reduce policy dialogue activities.
Instead of conducting policy-oriented studies on the Doha Round, we believe that focusing on technical assistance to individual countries would help them. UNCTAD's policy dialogue should not seek to influence WTO negotiations."

G77 delegations reacted with shock and anger when they saw the Wallace statement. They did not refer to it directly, but clearly alluded to it in their statements at the MTR, especially on Thursday night.

Another significant development at the MTR was the seeming turn-around from the traditional dynamic in the relation between the G77, the developed countries (Group B) and the UNCTAD Secretariat.

For the past many years, the Secretariat would issue reports and then draft resolutions, which would generally be supported by the G77 and China, and individual developing countries, but objected to in parts by Group B. The
G77 would then come to the defence of the Secretariat and its documents.

At this MTR session, it was the G77 that strongly criticised the Secretariat for omitting reference to the Chapeau of the Sao Paulo Consensus in its stocktaking report of activities to implement the UNCTAD XI outcome. The G77 saw this omission as an indication from the Secretariat that it had not implemented activities relating to the most important part of the UNCTAD XI, especially the hard-fought paragraph on policy space, and that it was not planning to give priority to this issue.

Ironically, it was Group B members that came to the Secretariat's defence.
The US for example said that the preamble was not the most important part of the Sao Paulo Consensus but merely contained "a hodgepodge of issues we didn't know where else to put."

The G77 was again disappointed when the draft of the "agreed outcome" of this first MTR meeting once again omitted any reference to the policy space issue.

Some G77 delegations have privately raised concerns that parts of the Secretariat seemed to be more eager to be seen to please Group B than in implementing their mandate to assist developing countries.

Ambassador Masood Khan, coordinator of te G77, stressed the organic link between the G77 and UNCTAD, and also expressed concern about the "diminishing development orientation of the work of different divisions in UNCTAD" and called for UNCTAD's "development orientation and intellectual integrity to be upheld especially when it challenges conventional wisdom."

Some delegations were disappointed also that when the negotiations became complicated and heated on Thursday late afternoon through to midnight, neither the UNCTAD Secretary-General nor the Deputy Secretary-General were present at the meeting.

They recalled that previously, either one or both of the most senior officials would be present or at hand at important meetings of the organisation, particularly when the negotiating situation became complicated, and that they would attempt to at least improve the situation, if not to come to a successful conclusion.