A few weeks ago, key officers of the UN Conference on Trade and Development (UNCTAD) visited Manila to consult with Philippine government officials on the agenda for the 15th Conference of UNCTAD, to be held in Barbados in 2020. UNCTAD is a UN agency that reports to the UN General Assembly and the UN Economic and Social Council on trade and development issues affecting developing countries. Accordingly, the goals of UNCTAD are 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”.
Established in 1964, UNCTAD helped develop the “System of General Preferences”, a system formulated by the developed countries to boost the trading capacity of the least developed countries by giving the latter’s export products special tariff treatment. In the 1970s, UNCTAD’s deliberations focused heavily on the proposals of developing countries for a “New International Economic Order” (NIEO). The NIEO idea was partly inspired by the success of the oil-producing developing countries in asserting their rights over the production, trading and pricing of petroleum products. According to the proponents of NIEO, the world economic order was unequal because the metropolis (primarily North America and Europe) was able to reduce the Third World (a popular term then for developing countries) into “hewers of wood and carriers of water” through an unequal and unjust global trade arrangement. The neo-colonial trade order then was a legacy of the pre-war colonial arrangement in the three A’s – Asia, Africa and Latin America.
The NIEO framework calls for fair pricing for the primary or raw material products of developing countries as well as assistance for the accelerated industrial transformation of these countries. Most of the NIEO supporters were active members of the so-called Group of 77 developing countries (the number has doubled since) and the anti-imperialist Non-Aligned Movement or NAM.
Manila hosted the UNCTAD V Conference in 1979. Then President Ferdinand Marcos openly aligned the Philippines with the G77 and NAM and the cause of “Third Worldism”. In his keynote speech, Marcos called for the “restructuring of an antiquated economic order”. The speech was long in rhetorics but short on the specifics on how global economic restructuring could or should be done.
The irony is that in 1979, Marcos technocrats were negotiating with the IMF-World Bank on a comprehensive “structural adjustment program” (SAP) aimed at a total overhaul of the supposedly “protectionist” Philippine economic policy regime. SAP included the downward restructuring of tariffs, liberalization of the rules on the entry of foreign investments and privatization of a number of government corporations and services. As an economic policy package, SAP was based on the neo-liberal theoretical assumption that an all-out program of trade and investment liberalization makes the economy more outward-looking, more efficient and more job-creating. In brief, the SAP program was the opposite of the NIEO idea, which sought greater protection to the home industry and agriculture of developing countries and adoption of industrial catch-up programs to gain parity with the West, now popularly referred to by CSOs as the “North”.
Somehow the NIEO idea and commodity nationalism espoused by the G77 and NAM countries died down in the 1980s-1990s. Instead, neo-liberal economic thinking, alternately called as the “Washington Consensus”, became dominant in policy circles. The 1980s-1990s also witnessed the Reagan/Thatcher-led “privatization” counter-revolution against any government involvement in the market. This was followed by the fall of the Berlin Wall and the disintegration of the Soviet bloc in Eastern Europe. These developments were accompanied by the adoption by China, Vietnam and other formerly socialist countries of marketization as their development framework. And in 1994-1995, the World Trade Organization (WTO) was established to promote the freer movement of goods, services and capital across national boundaries of member countries. Global capitalism was triumphant in these decades.
However, not everyone is happy with globalization. Joseph Stiglitz, a former World Bank Chief Economist and economic adviser of President Bill Clinton, wrote in Globalization and Its Discontents (2002) that some of the neo-liberal ideas that guided the IMF, World Bank and the WTO were flawed. Laissez-faire economics was at the roots of the 1997-1998 Asian financial crisis, the Russian economic collapse (under the IMF’s “shock therapy” treatment), and the widening poverty among the working people because the neo-liberal “trickle-down economics” hardly trickles down. Neo-liberalism leads to greater concentration of capital and inequality in society. Stiglitz argued that the “profit motive”, guided by the “invisible hand” of the market, does not always lead to “efficient outcomes”, especially if “information is imperfect and markets incomplete”, which is often the case in developing countries.
The reality is that globalization has generated so much discontents across the globe, in both developed and developing countries. Globalization is good for the multinationals with a “global reach” but is bad for the millions of workers in virtually all countries. The International Trade Union Council criticized globalization because of the Race-to-the-Bottom phenomenon, which results from the efforts of multinationals and big corporations to roll back workers’ rights wherever the MNCs or subsidiaries operate, subvert unionism and evade paying minimum wages and other labor entitlements. Thus, in 1999, the combined force of the trade unions, farmer associations, civil society organizations, Church groups and governments of some developing countries shut down the WTO Ministerial in Seattle, in what has been hailed as the “Seattle Revolt”.
Subsequent WTO Ministerials in Cancun, Hong Kong and so on were also shut down despite a re-baptized WTO program called as “Development Round” for developing countries. And the latest ironic development: the President of the WTO’s founding country, the United States, is now openly attacking the WTO and is subverting WTO’s viability by withdrawing support to the WTO’s dispute settlement body.
Clearly, globalization, as envisioned by the neo-liberalizers in the 1980s-1990s, has lost its appeal. The neo-liberal world economic order is in disarray.
Now back to UNCTAD 2020. To the trade unions and CSOs consulted by the UNCTAD representatives, a major proposal raised is for UNCTAD 2020 to tackle the needed transformation agenda. The challenge today is how to transform existing globalization by making global trade fair, balanced and inclusive. The free-trade one-size-fits-all liberalization formula is clearly a narrow anti-development formula. The world should cast aside the neo-liberal ideology of unregulated markets in favor of a more flexible, balanced and calibrated program of liberalization and protection in the economy on a sector-by-sector basis as needed.
This, in essence, is the meaning of the “special and differential treatment” (SDT), a proviso in the WTO repeated nearly a hundred times in the WTO’s own founding document. SDT means not all countries are created equally and each has the right to pursue and plan development based on one’s level of development. This means trading arrangements should be concluded based on the principle of mutually-beneficial exchanges, not an abstract free-trade system or an inflexible zero-for-zero tariff system, which benefits mainly the big and powerful. This also means investment programming and campaign for FDI should be based on a country’s real development needs for technology, market, value addition, etc.
A guiding reform principle should be how to put people at the center of development. This means officially abandoning the neo-liberal Friedmanesque framework of economic planning and programming based literally on the abstract notion of free trade, on the so-called free interplay of global market forces unmindful of the impact of such interplay on people’s lives and jobs. Putting people at the center means there should be policy coherence in terms of economic, social, labor and, yes, environmental policies. Putting people at the center means there should be policy coherence at the national, regional and global levels. For example, global labor, human and environmental standards should be enshrined in regional trade agreements like the Asean + 3 (Ten Asean countries plus China, Japan and Korea) or Asean +3 + 3 (including Australia, New Zealand and India). These standards should have enabling national laws and programs in the individual countries.
Putting people at the center means the global and regional financial institutions such as the World Bank, IMF and ADB should likewise change their lending policies by adopting the above principles as lending guidelines. Lending should be in support of people’s development and capacity building, not lending to squeeze developing countries further through onerous debt obligations and policy conditionalities. Likewise, there should be bolder and more pro-people reforms in the financial system at the national, regional and global levels. The primary purpose of financial institutions must be to provide responsible and sustainable financial services for society, not to make profits for shareholders. This means bringing back the original purpose of banking as a mediator of financial service in support of productive consumption, production and circulation in the economy. There should be greater transparency in the operations and supervision of financial institutions, which can be achieved at minimal cost if the financial employees and their unions are mobilized for this purpose. One approach is the taxation of short-term selling as such activity is obviously speculative and subversive of economic stability; on the other hand, society can provide incentives to investments that are truly directed toward job-creating productive activities.
In short, UNCTAD 2020 should try to look for pro-people solutions in changing the architecture of global trade, finance and development. There should be a people-centered re-balancing of the economy – at the industry, national, regional and global levels.