Transforming trade, backing productive capacities is key to fixing global economy

17 December 2020
News

? Ummananda pics

UNCTAD Secretary-General sets down roadmap for health, productivity, prosperity and fixing a fractured global economy scarred by the coronavirus pandemic ahead of its October 2021 quadrennial conference in Barbados.

The COVID-19 crisis has been both an accelerator and a decelerator for already rooted trends in the global economy. On the downside, the pandemic hit amidst widening inequality, declining economic prospects, mounting vulnerabilities to climate change, and a weakened multilateralism.

But there is a solid route out of a fractured picture: expanding the transformative productive capacities of all could form the core of a new, more resilient multilateral consensus for accelerating achievement of the Sustainable Development Goals (SDGs).

This according to UNCTAD¡¯s Secretary-General, Mukhisa Kituyi, who outlined that the pandemic demands new economic and intellectual beginnings in his new report to member States. The report sets the scene for the UN trade and development body¡¯s quadrennial conference due to take place next year in Barbados.

"Building productive capacities that facilitate structural transformation and economic diversification will be vital to overcoming the current fractured global economic landscape and addressing the new challenges posed by the COVID-19 pandemic," said Dr. Kituyi.

In his report, Transforming Trade and Development in a Fractured, Post-Pandemic World, Dr. Kituyi lays out the key issues on which UNCTAD member States could find consensus and frames the discussion for the fifteenth session of the United Nations Conference on Trade and Development, or UNCTAD 15, where the organization¡¯s mandate is updated and adapted to new and emerging needs.

Postponed by one year, UNCTAD 15 will now be held from 3 to 8 October 2021 in Bridgetown, Barbados.

In the report, Dr. Kituyi warns that achieving the SDGs needs a new multilateralism for a changed globalization. He calls for the mass mobilization of resources to achieve the global goals and a move in international support from band-aids to better aid.

¡°Since the last session of the UNCTAD conference four years ago, fractures and fault lines have deepened across the world economy, compromising the achievement of the SDGs,¡± Dr. Kituyi said.

¡°These fractures include widening inequalities that have fueled popular discontent with globalization, deepening digital divides and uneven vulnerabilities to climate change.¡±

¡°These fractures also include a growing disconnect between investment in the real economy and exuberant financial markets that have left the 2030 Agenda for Sustainable Development underfinanced and yet have kept debt burdens growing and illicit financial flows rising,¡± he added.

¡°The multilateral system has itself shown increasing signs of fracturing, as it has come under mounting stress due to tensions over trade and technology and rising economic nationalism.¡±

The answer, Dr. Kituyi says, lies in fostering inclusive structural transformation, building wealth while respecting planetary boundaries, and improving fiscal space and access to international liquidity for developing countries.

What¡¯s needed to achieve Bridgetown breakthroughs

Presenting his report to member States on 11 December, Dr. Kituyi urged nations to use UNCTAD 15 as an opportunity to heal multilateral wounds, build a ¡°resilient multilateralism¡±, and address economic fractures that have allowed the COVID-19 pandemic to impact ambitions for achieving the 2030 Agenda for Sustainable Development.

¡°I believe there is hope for a way forward. The strong national policy responses to the COVID-19 pandemic are accelerating a revival of needed industrial policies and suggest a changing paradigm that reaffirms strong developmental States,¡± Dr. Kituyi said.

The report describes how capturing new opportunities in international production will imply rebalancing development strategies between global, regional and domestic demand.

For example, the report calls for the Bridgetown deliberations to embrace decarbonization and digitalization alike as a form of global structural change that puts transformative productive capacities at the heart of adaptation and prosperity.

In this way, pandemic-related stimulus could play an important role in channelling green investment towards renewable energy generation, clean transportation and energy-efficient construction.

Dr. Kituyi says there could also be an emphasis on blue recovery efforts, especially given the grave challenges faced by small island developing States, with the collapse of tourism and explosion of debt burdens that have accompanied COVID-19.

In addition, UNCTAD 15 will need to focus on stepping up efforts at improving fiscal space and access to international liquidity for developing countries, including by using all parts of the development finance architecture and making it work more effectively as a system.

It also means advancing UNCTAD proposals for improving debt restructuring, new issuance of special drawing rights and supporting a global ¡°health Marshall Plan¡±.

Rethinking globalization

The new task ahead of multilateralism will be reconciling resurgent state involvement in the economy, which has been catalyzed by national pandemic responses, with the need for a ¡°better-governed globalization¡± and a stronger international response.

Recent efforts to reform the United Nations development system are only now starting to make use of the full breadth of the organization¡¯s economic expertise, including that of UNCTAD, on progress towards achieving the global goals, Dr. Kituyi said, adding that an enabling global economic environment for the SDGs is more than the sum of collective national and individual agency efforts.

It requires a strengthened United Nations focus on the productive side of economic sustainability that fully uses the global expertise of all to support the achievement of the SDGs of all countries, he said.

Commit to the SDGs, move from band-aids to better aid

The pandemic has further set back efforts towards achieving the 17 SDGs. Despite UNCTAD and many other organizations, sounding the alarm well ahead of the pandemic, deepening fractures in global economic conditions have thwarted progress.

In 2014, UNCTAD put a price tag on the investment gap needed to achieve the goals in developing countries. Then it was $2.5 trillion. COVID-19 risks widening this already vast funding rift.

¡°The significant additional resources needed have simply not been forthcoming over the past four years,¡± Dr. Kituyi said.

Today, there is a demonstrated lack of adequate progress in investing in the 10 major relevant sectors. While progress has been evident across some sectors, including climate change mitigation, food and agriculture, and health, for example, it has been not enough to trigger the transformations needed.

The United Nations Inter-Agency Task Force on Financing for Development has also consistently underlined that mobilizing resources remains a major challenge in implementing the 2030 Agenda.

On balance, the available evidence suggests that this has been largely due to the lack of collective efforts to meet the economic targets under SDGs.

This insufficient progress on economic sustainability appears to be partly the consequence of fragmenting international solidarity and a lack of collective political will generated by the crisis in multilateralism. 

Global approaches to the productive side of economic issues have an appropriate place in the reformed United Nations development system, the report says.

This means appealing to donor countries to recognize that official development assistance and international support are best directed at addressing the underlying conditions and root causes of underdevelopment, rather than merely serving as band-aids to its symptoms.

The report makes a call for all countries, developed and developing alike, to recognize the common challenges being faced given the changes underway in globalization.

The Bridgetown outcome would need to link with wider United Nations efforts ¨C such as the dialogue on financing for development in the era of COVID-19, already supported by UNCTAD ¨C and beyond.

Finally, Dr. Kituyi said the United Nations and UNCTAD were up to the challenge of reviving trust in multilateralism, by considering how to deal with globalization forces that have fostered inequality and vulnerability, to right the ship in the direction of prosperity for all.