Sean Woolfrey, tralac Researcher, discusses the findings of UNCTAD’s Trade and Development Report, 2014: Global governance and policy space for development

Last week the United Nations Conference on Trade and Development (UNCTAD) released the 2014 edition of its annual Trade and Development Report. The theme of this year’s Report is ‘global governance and policy space for development’, and the Report’s focus on the importance of policy space at the domestic level carries much resonance for southern Africa, especially in light of recent developments in trade and investment governance in the region. The Report begins by noting that the global economy is still struggling to recover from the recent global economic and financial crisis, and that efforts to establish a new sustainable growth regime have not yet borne fruit. The Report argues that many of the policies designed to support recovery do not sufficiently address the root causes of the crisis, such as the “steady erosion” of policy space at the domestic level, and that macroeconomic policy is “tacking uncomfortably close to the ‘business-as-usual’ strategy of the pre-crisis years”.

One of the central arguments of the Report is that in order for developing countries to effectively advance their own development agendas, they require more policy space than is currently advocated by economic orthodoxy. Policy space is understood in the Report as involving the freedom to pursue “the most appropriate mix of economic and social policies to achieve equitable and sustainable development” in the national context and as part of an interdependent global economy.

The Report’s emphasis on policy space echoes various arguments that have been put forward in southern Africa in recent years. For example, one of the main sticking points in the long-running Economic Partnership Agreement (EPA) negotiations between the European Union (EU) and the Southern African Development Community (SADC) was the insistence by a number of SADC EPA countries that the EPA should not completely remove the possibility for them to use certain policy tools, such as export taxes, to promote industrial development. Similarly, the South African government has recently terminated a number of its bilateral investment treaties with European countries on the basis that these agreements have a negative impact on its ability to use particular policy tools to achieve national policy objectives and sustainable development goals.

Even in the context of trade relations between southern African countries themselves, the issue of policy space is much emphasised. Both the SADC Trade Protocol and the Southern African Customs Union (SACU) Agreement of 2002 make provision for derogations or flexibilities allowing for the maintenance of policy space in certain areas. The SACU Agreement, for instance, allows Botswana, Lesotho, Namibia and Swaziland to levy additional duties on imports from within the SACU Common Customs Area if this is done in order to protect a local infant industry.

While there are valid reasons for thinking that in some areas, such as global investment governance and, in particular, international investor-state dispute settlement, reform of prevailing institutions so as to secure or recover greater policy space for national governments may be beneficial from a development perspective, a blind adherence to the notion that international trade and investment agreements should always maximise policy space for developing countries is potentially problematic, not least in the context of trade and investment relations between developing countries.

As the UNCTAD Report notes, economic actors require a “framework of rules, restraints and norms” in order to operate effectively. This is true at the domestic level and at the regional and global levels. In the context of developing country regions, such as southern Africa, these institutional frameworks are often lacking, and regional integration is viewed as an important mechanism to create or improve the institutional environment for economic actors. While formal rules-based regional integration through regional trade agreements brings numerous benefits to the citizens and economies of participating states, it also generally entails disciplines which by their nature limit domestic policy space. While these disciplines are not always effective in practice, they are a crucial element of regional integration as in theory they prevent individual states from pursuing policies which, while rational from the point of view of the individual state or national government, serve to undermine regional integration processes.

The levying of surtaxes by the Zimbabwean government on imports from other SADC member states is a recent example of such a policy. While these surtaxes have an obvious domestic policy rationale, given the Zimbabwean government’s need to find new sources of revenue, the implementation of such measures raises concerns about the commitment of member states to predictable, rules-based regional integration arrangements in southern Africa. This may not be in the long run interest of Zimbabwe itself.

States would naturally prefer to maintain full policy autonomy while simultaneously deriving the benefits associated with predictable, rules based international governance regimes, whether multilateral, regional or bilateral. However, this is simply not possible. As the UNCTAD Report notes, in weighing up the importance of domestic policy space and the potential benefits of regional integration, states need to decide how much of their own policy autonomy they are willing to trade for the benefits associated with international rules, disciplines and supports. Policy space may be important, but it should not the be all and end all of the development agendas in southern Africa.

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Source

United Nations Conference on Trade and Development (UNCTAD). 2014. Trade and Development Report, 2014: Global governance and policy space for development. Available: http://www.tralac.org/images/docs/6228/trade-and-development-report-2014.pdf