Economy & Trade, Europe, Financial Crisis, Headlines

Finland Joins Call for Financial Market Tax

HELSINKI, Feb 15 2012 (IPS) - In the midst of the debt and financial crises plaguing key European countries, Finnish Foreign Minister Erkki Tuomioja has joined a growing international chorus calling for the introduction of a global financial market tax and the shutting down of tax havens, saying all that is needed is the political will to do it.

Tuomioja was addressing participants at an international conference in the Finnish capital Tuesday, convened to review the ideas and proposals of the Helsinki Process launched ten years ago. The two-day conference was attended by a broad range of international financial experts, academics and representatives of international civil society organisations.

The minister said the EU is now in the midst of an intense debate on a financial tax that is no longer an intellectual discussion of the issues but a more serious political attempt to introduce a tax of this kind at the European level.

And public support for the measure is stronger than ever before among the European public, he stressed.

Tuomioja’s call comes on the heels of open declarations of support for the tax by French President Nicolas Sarkozy and German Chancellor Angela Merkel. However, there is not yet a consensus in the EU, with Britain being the staunchest opponent.

“Two key areas of the global economy where determined and concrete measures are required to enhance stability and inequity are the regulation of the financial markets and particularly issues related to taxation and tax flows,” the foreign minister said.


“Neither of these is impossible; everything depends on political will,” he told IPS.

“The Finnish government is committed to work towards increased stability, transparency and accountability of the international financial markets. We urge that an international financial market tax be introduced on as wide a geographical basis as possible,” said Tuomioja.

The other key area, he said, is the establishment of a global investment agreement negotiated with the full participation of developing countries and taking into account the needs of the environment, consumer protection, human rights and core labour standards in accordance with the International Labour Organisation (ILO) conventions and other international agreements.

The Finnish government, according to Tuomioja, will advocate the closure of tax havens by requiring, for instance, strict obligatory reporting by multilateral enterprises and exchange of information between public authorities.

“We are in favour of a stricter control of the financial markets, tighter solvency regulations and the prevention of non-transparent accumulation of risks,” he said.

Launched in 2002, the Helsinki Process on Globalisation and Democracy was a joint initiative of the Finnish and Tanzanian governments based on the premises that different stakeholders all have a role to play in solving global problems. A final report of the process was submitted to the U.N. secretary-general in September 2008.

The Helsinki Process aspired to go beyond traditional international decision-making and find ways of engaging stakeholders in open dialogue.

As a contribution to global problem-solving, it sought to provide a new kind of equal forum for all stakeholders from the industrialised North and developing South to discuss common issues of concern and devise practical and feasible proposals for addressing the issues identified and mobilising the political will and resources to implement the proposal.

In spite of incremental steps forward, participants agreed that the Helsinki Process has not changed the world or radically transformed the multilateral system, although its unique strategy of using a multi-stakeholder approach to international dialogue is an important legacy left to international diplomacy.

According to Tanzanian Foreign Minister Bernard Membe, one success story of the Helsinki Process is the multi-stakeholder approach that has been used as the principal tool to resolve international crises.

The approach relies on inclusive participation by civil society, academia, the media and governments to seek answers to international issues.

“It is one achievement of the Helsinki Process; we have set in motion a strategy to resolve issues and it has stood the test of time,” Membe said.

“The Helsinki Process is not dead, there is trust in it, and there is confidence, and it needs to be kept alive,” he added.

Tuomioja reminded participants that at the very inception of the Helsinki Process, one of the practical recommendations put forward in 2005 on the new approaches to global problem-solving was the replacement of the G7 (Group of Seven most industrialised nations) with a broader group of countries, the G20, which holds an annual summit of the leading governments of the North and South.

It was suggested that this leader-level group could act as an effective coordination mechanism for global economic governance with coherence and legitimacy.

“It would be a slight exaggeration,” said Tuomioja, “to claim that the Helsinki Process was the initial cradle of the idea of the G20 summit concept, but definitely it was put on the global agenda.”

The G20 is now a reality, he said, and the focus is now on how to make it more legitimate.

While some steps have been taken by the G20 in various areas, analysts agree that they have been far too few and have had a limited effect on the harsh realities of the global economy. Nonetheless it is clear that the emergence of the G20 constitutes a stride forward in establishing a coherent mechanism for global economic governance.

According to Tuomioja, a global tax on financial market transactions is within the spirit of the Helsinki Process, in the search for a solution to global economic governance.

Participants also agreed that one other concrete achievement of the Helsinki Process is the establishment of the Institute of African Leadership for Sustainable Development in Dar es Salaam, which according to Membe was “a dignified exit of the Helsinki Process.”

One of the goals of the Institute, which was launched in 2010, is to support African leaders in striving to attain sustainable development in their countries. It seeks to build the skills and knowledge of African leaders and policy-makers so that they may define development policies which are tailored to their country’s identity, vision and specific needs.

However, Susan George of the Amsterdam-based think tank Transnational Institute said the G20 has been too timid to do anything for regulating financial regulation, because the financial industry spends five billion dollars a year lobbying against regulation.

“Finance cannot self-regulate,” she said.

In order to avoid a future global financial crisis of similar magnitude to the current one, Professor Tony Addison of the World Institute of Development Economic Research (WIDER), which forms part of the United Nations University, suggested that governments should reduce the size of individual private banks, which are considered too numerous and too big to fail.

Instead, what is needed are more public development banks which serve public and social needs, he said.

“The Financial Transaction Tax is no panacea to what we are faced with today if too many private banks are allowed to exist and yet are considered too big to fail,” he said.

Tuomioja also raised concern over the need for a global agreement on investment, the absence of which is hurting small, powerless developing countries.

“In the absence of a global agreement on investment we have seen an immense proliferation of bilateral investment agreements. Now we are faced with a virtual jungle of thousands of investment agreements, and it is always the weaker parties who are the ones suffering from this situation,” the minister said.

He argued that an investment agreement negotiated with the full participation of developing countries, with the right balance regarding the rights of governments, and taking into proper account the need to ensure respect for environmental, consumer and labour standards as well as corporate social responsibility, is very much needed.

The Helsinki Process was launched in the aftermath of the MAI – the ill-fated Multilateral Agreement on Investment which was negotiated in secret within the Organisation for Economic Cooperation and Development (OECD) but eventually abandoned due to fierce civil society opposition.

According to Tuomioja, the MAI was an example of how multilateral processes can fail, partly due to a complete lack of multi-stakeholder dialogue and cooperation.

But while agreeing on the need for an investment agreement that properly takes into account the needs of developing countries, Martin Khor, executive director of the South Centre, a Geneva-based inter-governmental think tank for developing countries, called instead for reforms of existing rules on investment which have already been negotiated at the bilateral level, which he said is doable from the start.

He also called for emergency financing for developing countries when they are hit with an international crisis that causes their export earnings or commodity prices to collapse through no fault of their own.

In addition, Khor called for the regulation of international capital flows because, he stated, they are the gateway for speculation into developing countries, which he said should be provided with the policy space to control such flows.

Tuomioja said that “In terms of achievements, whether it (the Helsinki Process) is half-empty or half-full, at least the glass is there and we have to continue filling it on the basis of the ideas we have.”

 
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