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Beyond Trade: Broadening the Globalisation Governance Agenda

Pierre Marc Johnson1
with Karel Mayrand

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IV. The Building Blocks of "Globalisation Governance": Charting the Non-Trade World

The trade-accelerating international negotiations have not been accomplished in isolation. Parallel to this activity catering to the goals of prosperity of nations, a fairly large set of international instruments has been developed that purports to respond to other goals and aspirations. These environmental, socioeconomic, and scientific conventions participate in a wide movement to find a better balanced development, to ensure stability, and, ultimately, to secure peace. Increased participation by civil society and new governance initiatives are intimately linked to this peace, security, and development agenda. They support the expression of non-state, yet essential interests, and allow for a more stable environment for the expression of both trade and non-trade aspects of globalisation.

Implementing the 1990s Conferences, Action Plans, and Environmental Conventions

In one of his last interventions before stepping down as the director of the International Monetary Fund (IMF), Michel Camdessus addressed UNCTAD X delegates and called for international mobilisation to implement the action plans of the 1990s United Nations conferences and summits. This important statement recognises the need for active co-operation to raise environmental and social standards and achieve a sustainable globalisation model. The 1990s global summits and conferences were instrumental in reaching consensus on a series of issues related to human and sustainable development, and establishing priorities that were assembled in coherent and extensive action plans. An impressive number of conferences collectively contributed to the articulation of the non-trade agenda for globalisation. These include:

Moreover, many MEAs have been concluded in the last 15 years, including:

In addition, instruments have been elaborated in the forests and water sectors.34

Most of these multilateral instruments contain common strategies and principles that will have to be fully implemented if their substance is to be given meaning. These strategies include co-operation, technological and scientific transfers, capacity building, differentiated commitments, and the principle of equity between developed and developing countries. Funding for these measures, financial transfers, and the participation of NGOs and the private sector will be addressed below.

Co-operation and Joint Implementation

Co-operation and joint implementation are two key strategies in UN action plans and MEAs. These activities focus on the economic and developmental implications of international instruments and on the identification of appropriate timetables and environmental management strategies. Domestic and regional joint implementation allow for synergies and a generally more efficient allocation of scarce co-operation and state resources. Existing MEA secretariats and IGOs such as UNEP, UNDP, UNCTAD, international financing institutions, and other organisations in the UN system can be brought together in multilateral co-operation deployment. UNEP has recently created the Group of Experts on Enforcement and Implementation of Environmental Conventions. Significant South-South and North-South co-operation also takes place at the regional level between countries, with the support of regional organisations, NGOs, and the private sector.

Co-operation can play an important role in integrating trade and environment policies through the harmonisation of environmental regulations and policies. Flexible harmonisation is key to preventing trade disputes in the process of trade liberalisation. For example, the Tuna-Dolphin trade dispute between Mexico and the United States was resolved through the 1992 International Agreement for the Reduction of Dolphin Mortality, which aimed at harmonising fishing methods and was signed by 12 countries.35 Institutions such as the Commission for Environmental Co-operation, created under the North American Free Trade Agreement's (NAFTA) parallel agreement on the environment, can play an important role in integrating environment and trade regimes, supporting upward harmonisation of environmental policies, and preventing trade disputes.36

Scientific and Technological Transfers

Scientific knowledge transfers are promoted throughout international action plans, often discussed in both capacity-building and technological-transfer measures. Spreading knowledge is key to economic development, especially in the context of the transition to an information-based economy and of the looming digital divide. As noted in the UNCTAD X report of the Secretary General, "in a world economy in which knowledge is the critical component of economic success, countries without the skills to manipulate knowledge-based processes and to benefit from changes in technology fall behind even when the world economy grows vigorously". 37

Technological transfer is another related strategy for sustainable development, especially in the area of environmentally friendly technologies. UNCTAD X stressed that there needs to be a better understanding of the various channels for transfers of technology, such as FDI and trade. This position highlights the intimate relationship between the implementation of technology-transfer commitments on one side, and various provisions of the trade and investment regimes on the other. The international community is just beginning to address these links in order to facilitate technology transfers.

Capacity Building

Under most UN action plans and instruments, developing countries are to be given the financial resources, technologies, and institutional capacity to achieve the essential and complementary goals of economic development and environmental protection. This implies a series of technological and financial transfers, as well as sharing knowledge on environmental management strategies. A World Resource Institute study on the forests sector has demonstrated that trade liberalisation should be accompanied by capacity-building strategies to strengthen the framework for environmental protection. Capacity building could, in this respect, bridge environmental and trade regimes. UNEP and UNCTAD have recently launched a joint program to integrate trade and environment policies in developing countries. A major part of this program will consist of capacity-building activities such as training sessions, seminars, and workshops destined to allow policymakers, civil servants, and private-sector actors to expand their skills in maintaining essential resources and maximising benefits of increased trade.

Differentiated Commitments

The action plans developed by MEAs and UN conferences contain common but differentiated commitments for developed and developing countries. For example, under the Kyoto Protocol, developed countries have agreed to substantial reductions in greenhouse gas emissions, while developing countries did not subscribe to such commitments – reflecting a traditional approach of the G77. On the other side, developing countries must bear most of the costs of adaptation to climate change, and developed countries have the obligation under the Convention on Climate Change to co-operate with them to facilitate adaptation. In all negotiated agreements since Rio, developing countries requested developed countries to commit to the transfer of new and additional financial resources to support them in the implementation of these conventions.

Common but differentiated commitments are a fundamental principle of environmental regimes, a reality that trade regimes also take into account. But the establishment of different statuses under some agreements at times leads to North-South conflict. For example, the United States has been pressuring developing countries such as India and China to take a stiffer stance on air emissions reduction commitments under the Kyoto Protocol. Competitiveness and development issues are often closely related to these conflicts. As a result, differentiated commitments are required in close co-ordination with trade provisions, development co-operation activities, and development assistance programmes.

Equitable Sharing of Benefits

Issues of equity are fundamental in all major international instruments. In the regime of the Convention on Biological Diversity, the equitable sharing of benefits of biological diversity constitutes an essential part of the bargain. Developed countries are given access to developing countries biological and genetic resources, in exchange for which they agree to share equitably the benefits of commercial and non-commercial use of these resources. This principle is a central component of North-South relations, but its operationalisation constitutes a demanding challenge as it often implies a transfer of obligations to the private sector. It is also difficult to reconcile this principle with the WTO's TRIPs agreement. Equitable sharing of benefits is likely to be integrated into WTO's next round of negotiations and become one of the items that will underpin a new North-South bargain.

From Official Development Assistance to an Integrated Approach to Financial Transfers

In 1992, the annual cost of Agenda 21's implementation for developing countries was estimated to be US$600 billion, of which US$125 billion would have had to be provided by developed countries through new and additional resources.38 Only US$2 billion has been invested through the chosen financial vehicle, the Global Environmental Facility, since 1992. Other conferences also resulted in commitments of similar amounts, placing an impossible burden on the shoulders of traditional Official Development Assistance (ODA). In the actual globalisation process, it has become clear that the traditional ODA model cannot fulfil its promise of development. More innovative strategies must be employed. In the words of Kanbur and Sandler, "the aid delivery system of the last fifty years needs a change. It faces two challenges at the dawn of a new century. The first is disenchantment with conventional country-focussed assistance, based on the perceived failure of that aid in fulfilling the objectives of economic growth, development, and poverty reduction. The second is rise of transnational problems as major factors in global relations and the very process of development".39 Before outlining new strategies for the integration of development financing policies, it is useful to look at the current situation of financial transfers to developing countries.

Official Development Assistance and Other Financial Transfers

Total ODA fell to US$49.6 billion in 1997, down from a 1992 high of US$65 billion. In real terms, this constitutes a 30% reduction. The share of ODA in the GDP of donor countries has fallen to 0.22% in 1997, below the 0.33% average maintained in the 1970s and 1980s, and well under the OECD countries' commitment to allocate 0.7% of their GDP to ODA, of which 0.2% should go to the LDCs. Currently, total ODA is US$20 billion less than what it would be had this average level been maintained.40 On the positive side, the part of ODA that is tied to aid — that is, bilateral aid conditional on securing procurements from the donor country — has fallen from 50% of total ODA in 1979 to 20% in 1996, thus allowing for an allocation of resources increasingly driven by the domestic priorities of recipient countries. About three fifths of current aid volume is bilateral and two fifths is multilateral. The World Bank has estimated that the current volume of aid can lift 10 million people out of poverty every year.

While ODA has been reduced in the 1990s as a result of fiscal crisis, investment flows have undergone impressive growth in recent years as a consequence of financial market liberalisation. In 1990, total flows from developed to developing countries totalled US$100 billion, of which 57% was traditional official development assistance. In 1996, these flows had grown to US$338 billion, of which $299 billion came from private investment.41 By 1998, private capital flows were five times higher than ODA.42 In this context, private investment has become the most important source of financial transfers to developing countries. UNCTAD X recognises that strategies to channel this investment for implementing MEAs and UN conferences action plans are needed, as are policies to diversify FDI destination to more than just a few countries.

Debt-Relief Initiatives

The LDCs' external debt burden amounts to 90% of their combined GDP. Debt servicing consumes an important share their export revenues and state budget. Tanzania spends nine times more on debt servicing than on health care, and four times more than on education.43 In doing so, it sacrifices investment in human resources, which are the basis for future growth and development. In 1996, the World Bank and the IMF launched a special initiative for 41 Heavily Indebted Poor Countries (HIPC) — of which 33 are African. At the 1999 G7/8 Köln Summit, this initiative was strengthened to broaden admissibility, to accelerate the pace of debt relief, and to link debt relief more closely to poverty alleviation. It could still be improved, as the international community has shown its ability to move with much more depth in the case of the Asian crisis.

Special Needs of Least Developed Countries

The share of LDCs in total ODA fell from 33% in 1995 to 24% in 1997. For 14 out of 21 OECD donor countries, ODA to these countries was lower in 1996 than it was in 1990.44 A UN conference on LDCs is to be held in Brussels in 2001. Many development analysts argue that ODA should be targeted at LDCs. The WTO's February 2000 General Council adopted a package of measures to assist these countries with the objective of developing an integrated approach by all donors and international agencies. But many analysts argue that the most considerable potential gains for LDCs are to be not found in the form of improved ODA but rather as better market access. Reflecting this view, Mike Moore put forward a proposal for duty-free and quota-free market access for the 48 LDCs to attract foreign investment and sustain their economic development. Similarly, in Seattle the European Union proposed free access to essentially all products from LDCs but failed to reach consensus with Japan, Canada, and the United States, which wanted to exclude textiles from the deal.

The Financing for Development Initiative

The United Nations will hold the Global Conference on Financing for Development in 2001. Representatives from nation-states, Bretton Woods institutions, UN agencies, NGOs, and the private sector will attend. They will consider domestic financial resources, international resources (including FDI and other private flows), and international financial co-operation (including ODA and debt relief). Special attention will be given to the needs of African countries, LDCs, and small island states. The conference will aim at improving the coherence and consistency of the international monetary, financial, and trade regimes. To achieve this goal, it will consider market access, governance, and innovative sources of funding. The conference will for the first time address financial transfers in a broad and integrative manner, thereby constituting a unique opportunity to define new avenues for future financial structures designed to support non-trade agendas of globalisation.

Inter-Institutional Activities

Institutional co-ordination is of particular importance, given the growing number of international instruments and organisations world-wide. In the words of Klaus Toepfer, "the development of conventions and action plans, in particular, has been incremental, rather than strategic. It has not been based on an overarching blueprint for the evolution of international law and institutions into the 21st century. Meanwhile, environmental problems and their solutions are becoming ever more complex and interlinked. A more coherent strategy is needed for policy-making, scientific and technical assessment, and programming. In the current circumstances, one of the essential steps that can now be taken to advance the international environmental regime is to strengthen collaboration among the relevant agencies and conventions. Joining together is essential to ensuring that the voice of the environment is not drowned out in the debate over development, trade, and social issues. It is also vital to maintaining momentum and getting the most out of our scarce resources".45 Agenda 21 had already recognised this situation in 1992 by advocating better co-ordination of UN development and environment agencies in its section on international institutional arrangements.46

MEA secretariats and UN agencies have begun intensifying their collaboration through joint initiatives or joint-implementation programs. For example, the secretariats of the Convention of Biological Diversity and the Ramsar Convention on Wetlands have developed joint initiatives and action plans in the last two years. UNEP organised nine informal meetings of MEA secretariats between 1994 and 2000. In addition, UNEP is supporting joint implementation and co-ordinated reporting activities in developing countries to facilitate the implementation of MEA commitments.

Another important aspect of institutional co-ordination is the articulation of an integrated environmental position to serve as an input in the WTO's trade regime. UNEP has also developed an agreement between MEA secretariats and the WTO. It has been examining possibilities to establish an environmental database at the WTO to avoid conflicts between the two regimes. While the WTO administers 24 multilateral trade agreements in a centralised fashion, the environmental field is characterised by a fragmented structure. Some, such as Renato Ruggiero, former director of the WTO, have argued for the creation of a world environmental organisation that would act as a counterpart to the WTO. Fearing that the creation of a new organisation would contribute to more fragmentation instead of less — as it would simply be added on to existing structures — and that the structure of a new intergovernmental organisation would not be productive and efficient, the World Conservation Union (IUCN) and the International Institute for Sustainable Development have proposed the creation of a Standing Conference on Trade and the Environment.

This conference would be an open forum that would allow for the full participation of IGOs, NGOs, MEAs, International Financial Institutions (IFIs), and nation-states. Its mandate would be to articulate environmental policy as it relates to trade and to enter into a permanent dialogue with the WTO. The conference's influence would derive from its large representation and from the implementing capabilities of its member organisations. The World Conservation Union and International Institute for Sustainable Development thus support the creation of a powerful and well–co-ordinated forum that would allow energies and resources to cumulate effectively.47

Good Governance

Trade and economic growth have a better chance of being conducive to sustainable and human development if they are backed by appropriate policies. As mentioned in the UNCTAD X action plan, "Democracy, rule of law, transparent and accountable governance and administration, including combating and eliminating corruption, are indispensable foundations for the realisation of people-centred sustainable development".48 A WTO study has similarly concluded that accountability and good governance are critical variables to predict the positive impact of trade.49

The growth of FDI in the last few years makes this form of financial transfer an increasingly important driver of economic development. Apart from traditional indicators such as capital and economic growth, FDI can bring human resources development, management techniques, technology transfers, OECD market access, and environmentally sustainable practices. Appropriate policy intervention is needed to attract FDI and maximise its structural impact. FDI is attracted by sound economic policies that allow for long-term predictability and stability. Strong property rights, low levels of corruption, openness to foreign trade and investment, and macroeconomic stability are all fundamental aspects to be promoted. The development of policies that will maximise the impact of foreign direct investment in terms of knowledge and skills development, and access to technologies, is also of key importance.

The articulation of national and international policies is another important aspect of good governance. As mentioned in the UNCTAD report on economic governance, "a capacity-building approach focusses attention on the importance of reconciling the task of institution-building at the national level and the challenge of constructing governance institutions at the global level".50 This is especially true for the multilateral trade regime as the "effective operation of the WTO regime depends on encouraging and strengthening the growth of organisational capacities at the national level". The way in which trade and environmental policies are articulated at the domestic level is also important to achieve sustainable economic development. Particular attention is increasingly given to interdepartmental co-ordination within countries and to environmental reviews of trade agreements.

Good governance is often associated with fighting corruption and organised crime. This is not an easy task as international crime syndicates generate US$1,500 billion in revenues annually.51 Many have argued for an international convention on international organised crime. Such an instrument could include provisions to support developing countries that wish to combat corruption and crime and to raise transparency standards. It is becoming clear that repressive measures cannot alone succeed in eliminating this growing problem. Efforts are increasingly made to address the roots that feed this part of the informal economy.

Innovative Institutional Responses to the Challenges of Global Governance

Rubens Ricupero, Secretary General of UNCTAD, presented UNCTAD X, where 190 countries were represented, as a kind of "world parliament" where the post-Seattle "healing process" was to begin. But North-South divisions were still very apparent in February 2000, when developed countries made clear that they would refuse to strike a trade-oriented deal outside the WTO system, while developing countries showed hostility and cynicism toward the WTO. Moreover, OECD countries' top officials did not show up in Bangkok, highlighting the organisation's lack of support among developed countries. Consequently, Supachaï Panitchpakdi, Thailand's deputy prime minister and chair of UNCTAD X, and designated successor to Mike Moore as the WTO's director in 2002, abandoned plans to convene an informal meeting of trade ministers. In his closing statement, Mr. Ricupero said that UNCTAD X had been "instrumental in creating an atmosphere of greater mutual understanding of the complexities of the globalisation process. But much remains to be done in translating this into practical moves for institutional change at the international level".52

Many actors share the view that institutional change and new governance structures are needed to promote sustainable and human development in an increasingly integrated and complex world. The actual governance system suffers from a lack of clear jurisdictions, insufficient participation, and transparency, as well as from incoherence and lack of co-ordination. It also faces the persistent issue of the non-accountability of UN and UN-related bureaucracies. The 1999 Human Development Report prepared by the United Nations Development Program, has tried to answer some of these grievances by putting forward an ambitious plan to reform the international governance architecture.

Others argue that appropriate institutional structures are already in place but that they lack openness and proper co-ordination mechanisms. Opening existing institutions and creating new fora that would foster synergies within the actual structures are other strategies that may have better chances of success in the near term. Before resigning as IMF managing director, Michel Camdessus called for the creation of G30 summits, uniting the heads of States that sit as executive directors on the boards of the World Bank and IMF, and the Bretton Woods institutions and various UN agencies.

The recently created G20 brings together 18 countries53 (including the G7/8 and major developing countries), the Bretton Woods institutions, and the European Union. It is a promising organisation that could play a significant role in global governance. The G20 represents about 80% of world GDP and 65% of the world population, giving it considerable potential influence. As is the case for the G7/8, the G20 is the responsibility of the economic and finance departments of represented countries, a key feature that gives it special strength and influence. Its mandate focusses on good governance in financial markets and the reduction of vulnerability to international financial crises. But Paul Martin, Canada's finance minister and chairs of the G20, has stressed the flexible and comprehensive mandate of the group: "There is virtually no major aspect of the global economy or international financial system that will be outside of the group's purview".54 The G20 will already expand its focus and consider poverty reduction strategies at its next meeting in Canada in the autumn of 2000.

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