[ UN LDC3 ]
[ RIO+10 ]
[ Qatar/WTO ]
[ FfDevelopment ]
The Big Four: MERCOSUR, ECOWAS Tales, and NAFTA
Summary, Overview & Development Report 1.4
The Case for Regional Trade: July 2001
By Emmanuel.K.Bensah, ICDA Secretariat
As globalisation is taking the world by storm, so are regional blocs proving to be panaceas to full integration into the world economy. In July's WTOIL, we covered a few of these blocs - EU; APEC; ECOWAS; MERCOSUR; COMESA; NAFTA - and found articles that gave some insight into their workings.
In July 19's WTOIL, the document from the University of Melbourne explained that there were different types of regional trade agreements (RTA): the PTA (Preferential Trade Agreement); Free Trade Agreements (FTA); Customs Unions and Economic Unions. Examples of regional blocs that correspond to the above category are listed below:
PTA: (non-reciprocal); trade barriers among members lowered. Papua New Guinea Australia Trade and Commercial Relations Agreement (PATCRA II), since 1977.
FTA: (reciprocal); trade barriers abolished; NAFTA, since 1994.
CUSTOMS UNION: all members adopt common external trade policy; MERCOSUR since 1995.
EU: further integration methods adopted to facilitate free movement of labour, capital and harmonization.
ECOWAS: all of the above, according to J.A.Aremu, who argues that « the theoretical framework for economic integration of the mandate implies a free trade area, a customs union, a common market and an economic union. »
As the document goes on to argue, RTAs "may not always be beneficial to the global economy, but they are both beneficial and logical in a domestic sense."
Who's afraid of the FTA...?
The title of an article on the "allafrica.com" Website perhaps said it all by begging to differ - "Have we rushed into the FTA?" it wondered. Though the article dates from January when the FTA was launched in Lusaka, with over 160 companies from COMESA and the EU witnessing the occasion, this did not prevent the questions. One came especially from the Zambian manufacturing sector, which argued that its sector would need (further) strengthening before it joined the grouping of COMESA.
A Zambian economist echoed his ambivalence when he stated that "if regionalism is a chain around our necks, let's not have it." Though he argued that Latin America best exemplifies (successful) regional blocs, he argued that "for smooth regionalism to take place, there was need for a membership criteria and clear leadership."
...Certainly not the USA!
In July's WTOIL, we also took a brief look at NAFTA, and Mexico. In the first article - of July 12 - the article lent support to the idea that Mexico was coping very well, thankyou, on its own, given the very different circumstances in which it became aligned with the more prosperous and powerful countries of Canada and the U.S. In a later WTOIL, specifically that of July 26, another article indicated that Mexico was suffering the consequences of being part of NAFTA.
More precisely, the three-group regional bloc is making Mexican peasants landless; and creating more poorly paid jobs in maquiladoras (situated along the US-Mexican border). This prompted a brief speculation on how harmonization is paramount in regional trade. Looking at examples of how the Economic Community of West African States' (ECOWAS) dream has fared, notwithstanding criticism of NAFTA's impact on Mexico, it was not difficult to draw the conclusion that harmonization is fundamental. If not within NAFTA, more crucially within ECOWAS, the 16-member grouping established since 1975.
One of the reasons why harmonization is paramount for mutually beneficial trade is because conflict has often mired the members of this grouping. One need look no further than Sierra Leone, and Liberia - members of ECOWAS - to see how problematic it is for such a regional organization with lofty ideas to move forward if two of its members are embroiled in conflict. Though harmonization is crucial, even more important should be what Aremu calls "potential incidence of that trade" being substantial. In other words, despite independence, many of the West African countries continue to maintain more links and trading relations with former colonial powers in Europe than with other closer West African countries. This is not to suggest a policy of insularity on part of ECOWAS members, but it does beg the question that perhaps it is time intra-community trade - not only within the West African sub-regional organization of ECOWAS, but within other African regional blocs - was increased exponentially.
Here come the Big Four, plus Two
This, however, is not the situation in Latin America. Mercosur, credited as the "fourth largest trade bloc in the world in order of economic importance", is shoring up its strength in order to counter-balance the potentially adverse ramifications of the FTAA - scheduled for 2005 -- on its economies.
Mercosur groups Argentina, Brazil Paraguay and Uruguay as members, and Chile and Bolivia as associates. According to "Nafta on Steroids", featured in the WTOIL of 26 July, it is foreseen that members "will have shared tariffs, coordinated taxes and a common currency." Collectively, the population of this grouping runs to a vertiginous 225 million people, with a combined GDP of an estimated $1.2 trillion.
The article suggests that Mercosur could potentially stymie, among other things, the deregulation by NAFTA that has "emasculated the authority of national governments." Moreover, the inclusion of Brazil is important as it is pushing to transform Mercosur into a powerful market "capable of sparring with its formidable Northern neighbour - NAFTA".
In EUROPE, the EU is keen to move forward with further trade liberalization, as exemplified by EU Trade Commissioner Pascal Lamy entertaining trade negotiations with MERCOSUR.
UK Chancellor of the Exchequer/Finance Minister is pushing prudence aside this time and going full swing with the idea of an Atlantic Free Trade Zone. Whether it pulls off better than his "prudent" economic policy that has seen in more privatization than ever witnessed under a Labour government, is a moot point.
In AFRICA, ECOWAS is also keen on negotiating with MERCOSUR officials. The South-South collaboration could quite possibly upset both EU and US officials.
ECOWAS' recent Trade Liberalization Scheme will benefit traders of palm oil; milk; sauces; scouring powder; plastics, and clothing materials. A total of 167 new products will be exempted, subject to approval by the ECOWAS' executive arm, the Council of Ministers. The objective of this measure is to boost intra-community trade.
In LATIN AMERICA, Venezuela President Hugo Chavez makes the daily "Independent" paper's international section when the paper makes reference to the Head of State's welcoming of his Mexican and Colombian counterparts in April. Actually, Chavez is on a mission to resuscitate a moribund trade bloc called the Group of Three, and hopes that the bringing together of the corporate-friendly Vicente Fox, and Andrès Pastranos can form a potential power in the region.
Though the paper argues that the summit is an opportunity for the president to "trumpet his vision of a unified Latin America", his motivation stems from a greater desire to strengthen Latin American trade blocs before the creation of the Free Trade Area of the Americas. It is estimated that the FTAA would "create a single $1.3 trillion dollar market from Alaska to Argentina".
Summary, Overview & Development Report 1.1
The Case for United Nations LDC3: July 2001
By Emmanuel.K.Bensah, ICDA Secretariat
Sins of the Father
It is not implausible to think that Africans are probably being punished for some evil deed one of their own committed several centuries ago. Considering the sobering statistics that filled the pages of last month's Impact List, no one could probably be blamed if they arrived at such a conclusion. Nothing can explain why to this day, there are 49 countries - crudely classified as LDCs - that effectively face the prospect of marginalization unless they hang on to the across-the-board-liberalisation dogma that neo-liberals like to promulgate.
In any event, July's WTOIL made considerable reference to the plight of the poor, despite the overshadowing of Genoa violence over a Zanzibar conference on LDCs (to prepare themselves for upcoming WTOMC). Their plight is a very fundamental one - obtaining their daily bread, as well as ensuring that the food they eat does not become an economic burden, but a right as fundamental as is one's personal security.
In July 9's WTOIL, two West African countries - Ghana and Nigeria - were in the spotlight. We read how despite high rising prices in Ghana -brought about by the ineptitude of the previous government - a retired Minister of Food and Agriculture is seeing to the dire food situation. He will be opening a six-month course to further investigate the systemic causes of food insecurity.
In Nigeria, too, a government official highlights how for Nigeria - biggest financial contributor to ECOWAS - to grow industrially, she needs to pay particular attention to developing her food industry.
A possible solution could come from two unlikely bedfellows - the regional group of 16 countries, ECOWAS, and the UN's own Food and Agriculture Organization (FAO). In fact, ECOWAS Executive Secretary, Lansuna Kouyate, emphasised that agriculture is paramount for West Africa's development "as 70% of the sub-regions' population resides in the agricultural sector." In what was the third meeting between the two organisations, it was agreed that both "will work towards harmonising legislation and regulations, co-ordinate and integrated institutions dealing with agricultural matters." It eventuated that a regional/continental approach will bring about quick results - and one of these could be a Common Agricultural Policy exclusively for West Africa.
According to the article in 23 July's WTOIL - "Agricultural Exports of Developed Countries" -- agriculture is the cornerstone of not only many a developing country's economy, but also LDCs.
Compared to the industrialised countries' - especially the EU and its CAP (not excluding the US and its subsidising of farmers) - whose many agricultural subsidies, the article continues, "undermine the competitiveness of developing country products", the LDCs are lagging way behind. The statistic is staggering -- the subsidies of these economies yield nearly $1billion a day. On an annual basis, these subsidies surpass the combined GDP of all 49 LDCs. According to "Empty Promises don't Feed Poor Children", (July 9 WTOIL), both the EU and the US spend more on agricultural subsidies today than they were spending at the start of the Uruguay Round of world talks in 1986.
Paying Lip Service...
Once could be forgiven for thinking that this in itself would be enough to generate some concern for First World officials that something needs to be done. How far this issue has been mooted is questionable. According to "Trade-related Technical Assistance to LDCs" - featured in July 9's WTOIL - as far back as October 1997, a high-level meeting on Integrated Initiatives for LDCs Trade Development took place. The meeting supported proposals for "increased technical assistance efforts by the WTO itself, autonomous action by WTO members to improve market access for imports from the LDCs and the establishment by six international organisations of an Integrated Framework for their trade-related technical assistance to LDCs."
Proposed in 1997, there were high hopes for a constructive outcome. The framework was intended to co-ordinate the activities of WTO, UNCTAD, UNDP, ITC, World Bank, and IMF. The agencies actually agreed to co-ordinate assistance to LDCs for trade-related activities. Yet, when it came to the crunch, the agencies themselves had no funds allocated for the Integrated Framework. Put simply, the initiative was made abortive by lack of organisation and political will. Those organisations that had pledged funding no longer showed interest in helping push the project forward. Consequently, there has been no significant funding, which the authors of the article consider "all deeply disappointing", as it brings home "how trade-related proposals fail so miserably do fit into broader development plans."
...And Selling an Empty Box
WTO Officials like Philippe Legrain, until recently special adviser to Mike Moore, would have us believe that developing countries "are attracting investment not by lowering their standards, but because they are making the best of their comparative advantage"(WTOIL of 16 July). This basic tenet of economics in this context remains as specious as the arguments peddled by WTO-philes that "if you hate capitalism, you will probably never support the WTO."
To use the statistics that GDP per person fell by 1% a year in the '90s in non-globalising developing countries, while it rose by 5% a year in globalising ones, is making a mockery of those who argue otherwise -- such as Green Left Weekly. They argued that HDR 2000 statistics are nothing but a litany of lies. According to this article, one set of World Bank data indicates that the ratio of incomes of 20% of the world's population living in the richest countries to those of the 20% in the poorest was 13:1 in 1960; 18:1 in 1991, but fell to 16:1 in 1997.
Green Left Weekly argues this is biased data, for it includes rapidly industrialising China, with its 1.2 billion people. But an even more sobering statistic hits us in this WTOIL: average per capita GDP of an OECD country was 16 times greater than that of the average LDC in 1985, and 19 times greater in 1998.
Perhaps the most glaring indictment of the UN's HDR comes from two articles - in 16 July and 23 July's WTOIL. The first, by New Delhi-based food and trade policy analyst Dr.Devinder Sharma, entitled "Biotechnology Will Bypass the Hungry", argues that UNDP's annual Human Development Report 2001, "Making New Technologies Work for Human Development", remains "another biotechnology industry-sponsored study" that sings the praises of market-led technology at the expense of the poor - "all in the name of eradicating hunger and poverty." He maintains that "the reality of hunger and malnutrition is too harsh to be even properly understood." His argument is that biotechnology, far from assisting the poor, will further entrap them.
Sharmas' criticism is incisive. He writes: "the deft manipulation of the prestigious UNDP's HDR to push forth the US farm interests, however, will cast a shadow over the credibility of future UN programmes for human development.
Faiza Rady, writing in the second article, echoes a similar sentiment when she writes of how ever since the UN formed alliances with corporations, which partially finance the international organisations' operations, it has been forced by dint of this association to sing their praises. Ultimately, this chorus of approval for biotechnology remains unequivocally corporate-led, with a mere UN mask. The UN, it appears, feels it has no choice. In what many see as a volte-face by the usually Southern-friendly and apolitical - and indeed a-corporate (as suggested by my colleague Julio) - United Nations, the HDR is, put simply, seeking "highly controversial solutions" - as exemplified by its promotion of Genetically Modified Organisms - to the very complex problems of food security and hunger in the South. That the
UN is now toeing the transnational line is a moot point. If the UN of all organisations has succumbed to the charms - whether by dint of pragmatism or expediency - and strength of private finance, who is to stop these multinationals leaving indefinitely the box that Pandora never closed?
© E.K.Bensah, 2001
Summary, Overview & Development Report 1.3
The Case for Qatar/WTO: July 2001
By Hannes Huhtaniemi, ICDA Secretariat
July was the month in which the WTO Impact List began its daily focus on five diverse, but highly crosscutting, issue areas. Today we bring you the synopsis of what appeared in July's Qatar Impact Lists.
Large emphasis lay on the prospects of launching a new round of trade liberalization talks at Doha. The quotes below highlight some of the most recurring concerns brought up.
"The new round of WTO talks, then, should not be regarded as a fight over more rights and privileges but, if it is to be successful, should endeavour to formulate a uniform criteria for all, as well as awarding much needed relative advantages to developing countries. Only then will the historic imbalance debilitating the position of the developing countries begin to be redressed." (From WTOIL 18 July - WTO PROSPECTS
Date: 5 - 11 July 2001
By: Aziza Sami // Al-Ahram Weekly Online )
« EU negotiators favour some level of concessions to Third World governments to get them on side. They are also far keener to get the round off the ground, as the EU needs gains on new issues, such as investment and competition, to offset what it will likely have to give away in the ongoing negotiations on agriculture, which the EU massively protected under its Common Agricultural Policy.
Southern governments have been able to force discussions on implementation issues within the WTO, but Quad negotiators have brushed their concerns aside and have conceded nothing substantial to date.
The negotiating position of the "like-minded nations" group, which includes major Third World trading nations such as Brazil, Egypt and India, is to threaten to oppose a new comprehensive round outright unless they receive tangible concessions on implementation issues before the Qatar conference and unless issues of interest to them, such as anti-dumping policies and export subsidies, are part of the round. Many Southern governments are also dead-set against adding new issues like investment to the agenda.
The US for its part has said that it will not, under any circumstances, submit its export subsidy or anti-dumping policies, by means of which it massively aids both its exporting and import competing companies, to negotiation. »
(From WTOIL 18 July - WTO TRADE ROUND ON THE ROCKS
Date: April 25, 2001 issue --
By: Sean Healy)
The logic of the "trade game" - the secretive wheeling and dealing that goes on in the Green Room and which makes a mockery of the principle of decision making by consensus - was put bluntly by WTO Director General Mike Moore in WTOIL July 4.
"It is through a round that developing countries can obtain the leverage
that is necessary to engage effectively with the more powerful nations. Only
a broad round offers the sort of trade-offs that are necessary to bring
about an outcome where all member nations win,"
(MOORE LENDS WEIGHT TO DEVELOPING COUNTRIES
Date: June 15, 2001
By: Zimbabwe Independent (Harare); Dumisani Ndlela in Geneva)
Now, questioning such lofty statements as "where all member nations win" is what we like to do best. "Engaging effectively" with developed nations in this horse-trading is a tall order for poor states, which have had a dangerous deficit of trade negotiating cunning and expertise ever since they were formally included in the process in the Uruguay Round. So-called "consensus" decisions in effect mask an ugly tradition of pressure build-up and arm-twisting of developing countries.
All the same, we had run something on the previous day's WTOIL from the "pro-round, pro-WTO" camp, which highlighted features of the global economic context in which the Qatar-round is being hastened off the ground, as well as some improvements the WTO can claim on other Bretton Woods offspring institutions. The author clearly understood the necessity of approaching the prospect of a new round with modest proposals (and hence with fewer opportunities for manoeuvring away the developing countries' trading futures), and the need for a conciliatory tone in trade talks to bring the multilateral system to the service of those who need it most.
"Does (the fact that agreement on the substance of Doha is lacking) matter? After all, world trade seems to be bowling along nicely without the negotiators. Last year's phenomenal growth in merchandise trade over 12 per cent, in dollar terms matches anything we have seen in the past 50 years. It was, admittedly, boosted by the rising price of oil, driving Middle Eastern exports up in value by over 50 per cent. But even in volume terms, trade grew spectacularly: the rising price of oil went hand in hand with a fall in the price of manufactured goods for the fifth year in succession. Other regions enjoyed a trade bonanza. Only in Western Europe were both growth and trade sluggish. So who needs another trade round?
Well: one group of countries clearly does. Of all the complaints at Seattle, the most rational came from the developing world, which believes the trade playing-field is still stacked against it. Turning against the WTO was, however, an irrational response, since this fragile institution is the only weapon small economies have.
The difficulty is that the "trade game" involves cross-industry bargaining, with each country discarding some restrictions in return for market access elsewhere. This has been vividly illustrated in the trade regime's greatest success story over the past year, the negotiations with China. While the rich world's protesters berate the WTO as a lackey of the "new colonialism", the Chinese government remains keen to join. Last week's negotiations with the United States had truly remarkable results, not least an agreement to reduce China's agricultural tariffs to single figures. In the previous phase of these negotiations, the European Union did even better than the United States; they now also have to close the deal, but if they can, the path to China's entry looks clear.
For the future of international trade, this would be far more important than anything else that is likely to be agreed at Geneva or Doha. In the struggle to set a new agenda, the WTO will be wise not to be too ambitious. Yet some sense of momentum is important, lest commitment simply drains away.
For all the criticism, the WTO has some claim to be the most functional (or least dysfunctional) of all international economic organisations. It is the youngest. It is the leanest. It can only change by consensus. It cannot invent theories of development, embark on large-scale lending or tell governments what to do with their currencies and interest rates. It can only arbitrate between members on the basis of rules that they themselves have written. It is the least dominated by the United States: neither the International Monetary Fund nor the World Bank has any sway over their host country, but WTO panels have found against the US more than once. Mr Moore may be pushing it a bit to describe the WTO the "final nail in the coffin of imperial and domestic privilege", but he is right to remind us of its essential neutrality.
The WTO has been set up for a bruising year of exhortation and negotiation with a grumpy membership, without strong leadership from the major economies and against a background of popular discontent. At the end of the day, let's hope the world remembers to keep tight hold of Nurse. There is something worse."
(From WHO WANTS TO LEAD THE WORLD's NEXT TRADE ROUND?
Date: 18 June 2001
By: Sarah Hogg, Chairman of Frontier Economics)
Summary, Overview & Development Report 1.5
The Case for Financing for Development: July 2001
By Hannes Huhtaniemi, ICDA Secretariat
July's Financing for Development (FfD) WTOILs tried to shed light on the various dimensions the subject features in. How to finance development is a highly crosscutting question, to which adequate proposals must incorporate the wisdom of sustainability and trade in development, as well as the more direct financial instances of debt management, investment mobilisation and foreign aid. In other words, the upcoming FfD conference in March 2002 in Mexico can little afford to neglect any domain of development. Ranging from safeguarding communities to learning the intricacies of macroeconomics, from protecting property rights to embracing the wider opportunities presented by globalisation, viable and sustainable patterns of financing social, economic and human development depend on solid understanding of the various aspects of capital formation, market psychology and economic innovation. It is a long-overdue conference, one which can nonetheless benefit from the years of accumulated knowledge of how to link all these together.
The preparations for the conference itself have roughly divided the subject matter into six areas. First, there is the matter of how best to mobilise domestic resources, including how to create an overall favourable environment for the raising of capital through existing assets backed by strong public finances, legal and tax systems. Second, the conference intends to focus on mobilising international resources for the benefit of developing countries, including private flows and official development assistance (ODA). Third comes the question of how to improve market access for developing country products, if necessary through special and differential (S&D) arrangements. Fourth, the conference will explore new innovative ways of FfD. Fifth, if will seek to propose solutions for the crippling debt conditions of many countries. And finally, in terms of creating enabling global regimes for FfD, attention will be placed on so-called "systemic" issues relating to the international trading and financial architectures, with the possibility of reinvigorating the role of the UN in the process. Emphasis rests with the necessity of considering these topics together and in a mutually supportive way.
In WTOIL 6 July, there appeared an article on a UN FfD panel report which briefly touched on some of these very questions.
"The panel report says that primary responsibility for securing economic growth and equity lies with national governments, and urges developing countries to undertake balanced fiscal policies, macroeconomic discipline, fair and effective governance, secure tax bases, support for human capital and the installation or strengthening of pension plans. While welcoming current mechanisms to reduce the debt burden of the poorest countries, the panel warns that debt relief by itself is not sufficient to move countries forward. The report urges a renewed push toward the target of devoting 0.7 per cent of donor country gross national product (GNP) to official development assistance, and advocates various mechanisms to target resources more effectively towards the poorest sectors of the population."
HIGH-LEVEL PANEL ON DEVELOPMENT FINANCING...
Date: June 28, 2001
By: United Nations (New York)
Indicating the World Bank policy line on debt management, we then pasted this the following week. It lays out the economic arguments advanced by developed countries in their reluctance to grant comprehensive debt relief.
"Commenting on the Heavily Indebted Poor Countries (HIPC) initiative, Wolfensohn expressed satisfaction with the progress thus far. (…) HIPC has also reduced debt service requirements from around 7% of GDP to 2%, freeing about $1.7 billion per year that can be utilized for social programs in these countries. (…) While the World Bank calculates it has reserves on paper which could go toward more debt forgiveness, the dilemma is that donor countries rely on these repayments to replenish IDA so that the Bank can continue to lend to poor countries in the future. (…) "The other important point is that debt forgiveness alone is not the key to sustainability, in terms of poverty alleviation programs or economic stability," said Wolfensohn. "As you move forward, what you must have is the host of programs that go with it.""
VIEWS FROM THE INTERNATIONAL FINANCIAL INSTITUTIONS
Date: April 27, 2001
By: Bretton Woods Committee Annual Meeting 2001
Concerning other changes initiated in the international financial institutions with respect to their lending programs and the conditions they attach to these - especially the poverty reduction strategy papers - much criticism centred on the deplorable similarity between the new programs, and the old, discredited lending facilities. This, from WTOIL 13 July:
"A statement from thirty-nine organisations and regional networks from fifteen African countries agreed at a meeting in Kampala, Uganda, in May that PRSPs were simply window-dressing to improve the IMF and World Bank's declining legitimacy. The content of PRSPs continues to put corporate rights before social, human and environmental rights. Rather than enable local people to decide their content, PRSPs meant more IMF and World Bank control "not only over financial and economic policies but over every aspect and detail of all our national policies and programmes", said the statement. In particular, the participants noted that the macroeconomic programme was still not open for discussion, and that "anti-poverty programmes are expected to be consistent with the neo-liberal paradigm including privatisation, deregulation, budgetary constraints and trade and financial liberalisation. Yet these ignore the role of international/global factors and forces in creating economic crises and poverty.""
PRSPs JUST PR, SAY CIVIL SOCIETY GROUPS
Date: N/A - Topics section
By: Please see above
Regarding the G8 Genoa summit's conclusions on recognising and resolving problems relating to FfD, we posted up the World Development Movement's reactions in WTOIL 27 July.
"It is good news that the G8 recognised their responsibility and the need for decisive action, but shameful that they did not deliver any. Despite the world economic slowdown, the recent financial crises and the gap between rich and poor, the G8's approach remains the same. The G8 continue to believe that extending neo-liberalism and tweaking the current system, offer the best way forward.
The G8 suggested that the debt relief initiative is progressing well - all that needs to happen is to continue along this path. The G8 leaders referred to progress, but WDM believes that this has been too slow. Of the $100billion of debt stock cancellation offered at the Cologne G8 Summit in 1999, only $2.6 billion has been cancelled in the last two years. Analysis by the World Bank shows that the HIPC Initiative does not deliver a lasting exit from unsustainable debt. Even after receiving debt relief sixteen countries still have to spend larger amounts on debt service than on health and education. WDM is also concerned that the liberalisation and privatisation policies demanded in exchange for debt relief are a continuation of the structural adjustment policies that hurt, rather than helped, the poor in the past.
The G8's collective aid to the developing world is declining. The G8 said nothing about extra funding to reverse the decline in their aid, nor about time scales for rich countries to reach the UN target of 0.7% GNP devoted to aid. WDM welcomes the untying of aid, but again regrets that the G8 set no timetable for implementation."
WDM'S RESPONSE TO THE G8 GENOA SUMMIT COMMUNIQUE - extracts
From: World Development Movement-http://www.wdm.org.uk
Date: 27 July 2001
By: Alison Marshall
We also ran a few articles on capital flows, always a seasonable topic.
"It is clear developing countries should not view international capital markets as ever-increasing, predictable, or reliable sources of long-term financing for development. Moreover, capital-account liberalization can have an adverse impact on financing for development by facilitating capital outflows and capital flight, and undermining domestic financial stability." (From WTOIL 20 July)
FINANCING INTERNATIONAL DEVELOPMENT
Date: Oct. 28, 1999
By: The North-South Institute; Roy Culpeper
"In the face of some 1.2 billion people living in abject poverty on less than $1 a day, international organizations (mainly IMF, World Bank and WTO) and government leaders continue to focus on economic growth as the most effective way to reduce poverty. With official development assistance (ODA) in 2000 still below 1995 levels (last year, the average donor country provided only 0.24 percent of its gross national product in foreign aid), trade and financial liberalization - both domestic financial and capital account liberalization (CAL) - are touted as the "inevitable"(IMF economic counselor Michael Mussa) prerequisite for developing countries to partake in the open world economic system and to achieve poverty alleviation through economic growth."
"…the discussion centered on the question whether CAL supports or restrains other policies aimed specifically at reducing poverty (f. ex. by prohibiting developing country governments from using pro-poor spending)…"
"the shortfall of government revenues created by CAL needs to be accounted for, especially since financial liberalization, according to several UNDP studies, has failed to deliver on the promise of contributing to higher economic growth rates, which could have contributed to increased government revenues. On the contrary, because CAL demands strict market discipline with an inherent deflationary bias, governments in effect have to slow down growth, so that potential growth benefits of CAL can only be realised in the short-term."
"…CAL in the short-run constitutes a source of wage inequality (with the wages of skilled labor, which compliments capital, rising faster than those of unskilled labor, thus widening the income gap). Therefore, attention has to be given to the question of how to broaden access to capital in order to reach a "complementarity between human and physical capital."
"(Is it the case that) capital account liberalisation is to some extent unavoidable if countries have liberalised trade accounts, since with liberalised trade accounts money can be easily transferred abroad? Therefore, maybe the appropriate discussion about the connection between CAL and poverty has to centre more on the question of how far and how fast capital accounts should be liberalised as well as the question of how to ensure that countries benefit equally and evenly."
"Krishna Srinivasan from the IMF suggested that the possible loss of government revenue after implementing CAL would be offset by efficiency gains… He commented that tax holidays had little impact on foreign direct investments (FDI) and that the IMF did not support them… ODA as well as private capital flows are pro-cyclical, confounding the dilemma for developing countries in need of foreign capital. ... While the private capital flows to developing countries have increased, most of the money goes to only a few countries and within those countries mostly to financial institutions with a "frightening maturity structure" of less than one year of most bank flows."
"Tim Kessler from the Initiative for Policy Dialogue pointed out that capital flows will only benefit the poor if they go to the disadvantaged in the form of direct loans. This is particularly important since pro-poor sectors of a national economy, for example agriculture usually don't attract foreign investment. However, schemes to direct credit are often hampered by the International Financial Institutions (IFIs) and private foreign capital"
CAPITAL ACCOUNT LIBERALIZATION & POVERTY
Date: April 24th,, 2001
By: Liane Schalatek, Heinrich Böll Foundation Washington
(From WTOILs July 13 and 20)
And thus, returning to our original contention, that FfD is a formidable and multifaceted issue, we take up the challenge in rendering it a little more in months to come.
Summary, Overview & Development Report 1.2
The Case for RIO+10: July 2001
By Julio Montes de Oca, ICDA Secretariat
During the month of July, the Rio+10 WTOILs touched on subjects related directly or indirectly with the 2002 WSSD, including current UN initiatives, as well as with topics of interaction between trade, the environment and sustainable development.
KYOTO PROTOCOL / BONN CONFERENCE
The most prominent topic in the news for the month of July was the climate change talks at the Bonn Conference of Parties-6. The global initiatives on climate change will proceed under the basic framework set by in the 1997 Kyoto Protocol after an 11-th hour deal prevented the initiative from being shelved. In the aftermath, there are widely varying perspectives on what Kyoto being "kept alive" really means. We provided a wide sample of all the views expressed post-Bonn in order to identify the different dimensions of the debate. The complete list of articles in the July WTOIL included:
July 24 -
1) BONN CONFERENCE ANALYSIS
2) UNEP ON BONN CONFERENCE
July 31 -
1) HISTORIC VICTORY FOR THE CLIMATE AND FOR COMMON SENSE
2) KYOTO RESCUED
3) REVISED KYOTO PROTOCOL SEEN AS LESS RIGID
4) PRONK FORECASTS US RETURN TO KYOTO PROTOCOL
5) JAPAN CALLS FOR USA TO MAKE COUNTERPROPOSAL ON KYOTO PROTOCOL
6) GUESSING GAME ON US REVIEW OF REJECTION OF KYOTO
The first dimension on the meaning of the Bonn Conference outcome is political. The political debate was sparked a few months back when the United States announced it would not ratify the Protocol, with President Bush calling it "fatally flawed". However, the deal reached in Bonn to keep the process going was considered as extremely positive for various concerned parties and actors, including the WWF ["Historic Victory..."-WTOIL, July 31], UNEP and the Conference Chairman/Dutch Environment Minister Jan Pronk ["UNEP on Bonn Conference"-WTOIL, July 31]
The "victory" consists firstly on having built a wider consensus by bringing part of the "umbrella group" countries on board, including Japan, Canada, and New Zealand. Secondly, the US rejectionist position is isolated further.
A more skeptical view provided in The Economist ["Kyoto Rescued?"-WTOIL, July 31] points out that this wider consensus was achieved via compromises that water down the treaty and essentially nullifies its actual effectiveness. Additionally, implementation raises another important issue: how to strike a balance between the need for reversing the effects of climate change and the economic cost that the initiative implies? Is economic feasibility the most important criteria to determine the success of the protocol? This certainly seems to be the position of the US.
Related to this last point, what next for the US? Having rejected Kyoto, the United States has not come out with any constructive proposals [JAPAN CALLS FOR USA…]. But will US proposals be made within the UNFCCC framework or will they insist on a separate track for action? Dutch Minister Jan Pronk argues that after the "victory" of Bonn, the US might even be compelled to return to the Kyoto family [July 31- "PRONK FORECASTS US RETURN…]. The question remains if this would require further compromises and watering down of the treaty.
Developing countries have some general concerns about the possible launch of a new trade round in the next WTO Trade Ministerial in Qatar. African countries in particular have been engaged in preparations [July 3- "AFRICAN TRADE NEGOTIATORS PREPARE"] for the meeting. Among other chief concerns of the continent are WTO rule implementation, consideration of labor and environmental standards in any new trade round, and the role of international financial institutions in Africa's future development.
From the Addis Tribune we presented an interesting view on the intricate problems of governance that Ethiopia currently faces [July 3- "THE PUZZLING NOTION OF GOVERNANCE"]. Their problems are extremely complex - catalyzed by years of political instability - and are enhanced by lack of infrastructure, and lack of integration of the different ethnic groups that make up its population. While the author does not suggest the concrete steps to be taken, he gives an important starting point for future discussions.
The final Africa-related note refers to an environmentally-friendly production initiative coming from the South [July 24 - "UGANDA CERTIFIED ORGANIC COFFEE"]. A simple example of the possibility for sustainable agricultural practices even where conditions are most difficult and resources more scarce. Productive initiatives from developing countries could satisfy the rapidly increasing market for organic products in Europe. However, the article does not bring up another related issue of international trade: the "fairness" in the North-South exchange.
July 3's "WHO WANTS TO LEAD THE WORLD'S NEXT TRADE ROUND?" highlights the lingering differences between Europe and America, in particular with respect to agricultural trade. With the Trade Ministerial looming, the article also makes a strong argument for developing countries not to discount what the WTO can do for them. In essence, a portrayal of the WTO as the lesser of two evils, the other one being an anarchical state with no rules, where the strongest corporations can really run rampant.
Coming back to current United States trade and other multilateral policies, the conservative environmental NGO Environmental Defense Fund criticized the Bush administration recent actions [July 3- "CRITICISM OF BUSH TRADE POLICIES"]. The criticism centers mostly on the lack of coordination between trade and environment policies. Chief amongst them is the rejection of the Kyoto Protocol, as detailed previously. Bush's disregard for multilateral environmental initiatives has caused EDF to question how well the President can conduct US trade policy in light of the possible conflicts that arise with respect to the environment.
In the run up to the Qatar WTO Ministerial, the WWF expressed their position to WTO member states at the Symposium on Issues Confronting the World Trading System, in Geneva at the beginning of July [July 24- "WWF ON WTO"]. WWF highlights that consideration of developing country positions as well as those of concerned citizens all over the world are key for the WTO to seriously address global problems of poverty, economic inequity, and the environment. The World Wildlife Fund recognized five key areas that should be prioritized:
1-Respect and prevalence of multilateral environmental agreements over trade rules.
2-Insistence on achieving "triple-win" scenarios between trade, environment and development.
3-Increased participation and transparency in WTO processes, including coordination at national level.
4-Increased capacity-building for developing countries to achieve efficient participation in WTO discussions and negotiations.
5-No new negotiation of rules on foreign direct investment within the WTO framework.
ENVIRONMENT, DEVELOPMENT AND POLITICS
African countries were called upon to provide accurate and timely reporting on ozone depleting substance use in the continent by UNEP [July 3- "UNEP WARNS AFRICANS ON OZONE"]. While receiving funding for phasing out ODSs, it is critical that the correct information is relayed to UNEP as part of an effective strategy to achieve the goals of the Montreal Protocol.
A recent EU-UN meeting pointed out some of the most pressing global issues for the next 15 years [July 3 - "STATES SAID TO LAG ON FOOD SECURITY"]. The most recognized area for action seems to be poverty reduction, although not enough is being done in one of its main manifestations - food insecurity. The coming Food Summit+5 (in Rome) needs to assess the progress achieved up to now, as well as support the implementation of constructive initiatives.
Green Left presented a stinging criticism on the German Greens [July 10- "GERMAN GREENS--BETTER THAN NOTHING/WORSE THAN USELESS?"] based on their position with respect to the movement of nuclear wastes from France to Germany for reprocessing. The article points out the policy inconsistency of the German Coalition government (of which the Greens are part of). Germany was already committed to admitting back the reprocessing wastes, thus avoiding "NIMBY" criticism at least. However, that was the pre-condition for being allowed to send more fuel for reprocessing to France and the U.K. Finally, the article points out that "the waste is not a 'French' problem or a 'German' problem", but rather that it points to the global need for the nuclear industry to provide feasible options for reprocessing and disposal.
From Earth Times we presented an interview with Anita Bay Bundegaard, Minister for Development Cooperation [July 17- "INTERVIEW WITH..."]. Ms. Bundegaard came across as very enthusiastic on the effect of her position, which is supported by the traditionally cooperative Danish government. She mentioned the importance of working with NGOs both in Denmark and in the South. With respect to next year's World Summit on SD, she highlighted the need for not only setting appropriate goals but also assessing their chance for success. The issue of financial assistance is key, as implementation of goals and initiatives will be highly dependent on the contribution from donor countries.
Water resources use and management is an area that is getting increasing attention on the global agenda. Is commodification of water and privatization of its management the most beneficial practice? We presented a report from the "Blue Planet Conference" [July 17-
"BLUE PLANET TARGETS COMMODIFICATION OF WATER"], that explores the question. The arguments are kept on an ideological plain, without taking the discussion to its practical implication and solutions. Room for further exploration here in the future!.
BIO-PROSPECTING/NATURAL RESOURCE USE/IPR
There are a growing number of worldwide efforts to find new biological material for pharmaceutical and agricultural research. [July 3- THE NEW SHOPFRONTS FOR BIO-PROSPECTORS]. The Australian government is launching investigations on the bio-prospecting industry, as well as on the establishment of appropriate laws. Still it remains to be seen if a proper balance between a private company's use of "public assets" and protection of marine/land flora and fauna.
An interview with the head of the Least Developed Countries Unit of the World Intellectual Property Organization (WIPO) [July 10-THE WEST HAS BEEN STEALING AFRICAS IP] brings to the table the significant problems that many African countries face in this respect. It is argued that implementation of property rights does not necessarily imply preferential protection of foreign interest, and does bring much needed foreign direct investment. However, it also points out the infrastructural and administrative inadequacies in least-developed countries that are unable to protect their knowledge and resources from foreign plunder. The arguments were also discussed during the OAU/UPOV/WIPO May meeting [July 10-"IPR AGENTS TRY TO DERAIL OAU PROCESS"]. The meeting discussed the OAU Model Law that seeks to protect the rights to biodiversity of local communities, farmers and breeders. However, it became apparent that OAU and WIPO do not see eye to eye, especially with respect to patents on life. Further conflict was
generated by the Union for the Protection of New Plant Varieties (UPOV), which essentially tried to discredit the OAU initiative. Some of the most relevant unresolved issued in the debate include how property rights could affect (positively or negatively) food security, and if existing IPR laws subordinates farmers' rights to breeders' rights.
BUSINESS AND SUSTAINABLE DEVELOPMENT
Business involvement with sustainable development initiatives is another extremely controversial subject. The business sector considers it a "win-win situation", while hardcore environmentalists and development advocates call it "corporate greenwashing". An article on the "win-win" side of the debate [July 10- NEW SD AWARD FOR COMPANIES] advocates the creation of a Sustainable Development Award for "companies that have proven that sustainable development can be profitable". While their heart seems to be in the right place, there are intrinsic difficulties in placing a sustainable development banner over a company. The definition of sustainable development can take varying shapes and forms, for one. Also, would complete consideration be given to a company's way of conducting business, or simply to specific green initiatives they perform? This more skeptical view is also shared by the Corporate Europe Observer [July 17- "RIO+10 FREE MARKET ENVIRONMENTALISM"]. The article chronicles the development of the
business sector's involvement with sustainable development, from the creation of the Business Council on SD to current efforts in the lead-up to the Rio+10 meeting. But in the end, it is up to the business community to "put up or shut up" with effective wide-ranging strategies, not only strategical initiatives that merely serve PR-purposes. Additionally, it is up to NGOs to ensure that the business sector does deliver concrete promises, and to educate the public in order to balance the sometimes one-sided information coming from the media.
One final article from Green Left Weekly [July 17- "COULD CAPITALISM EVER BE ENVIRONMENTALLY STABLE?"] brings into question our dominant economic doctrine. Before diving into a more ideological discussion, the authors point out that the core of the problems resides in the Northern definition of "well-being", consumerism, and the unfeasibility of "green consumption" on a global scale.