Critics of a potential free trade agreement between the United States and European Union worry that such an agreement could lead to increased exportation of liquified natural gas from the U.S. Credit: Bigstock

Controversy is building following the announcement that negotiations will soon begin on a free trade agreement between the United States and European Union, with critics warning that any such agreement could negatively affect a host of regulatory concerns.

On Monday, during the Group of Eight (G8) summit held in Northern Ireland, the United States, European Commission and European Council jointly announced that negotiations will begin on Jul. 8 in Washington for what British Prime Minister David Cameron called “the biggest bilateral trade deal in history”.

Proponents characterise the Transatlantic Trade and Investment Partnership (T-TIP), also known as the Trans-Atlantic Free Agreement (TAFTA), as a way to improve the struggling economies of the United States and European Union.

“The whole point,” Cameron stated on Monday, “is to fire up our economies and drive growth and prosperity around the world – to do things that make a real difference to people’s lives. And there is no more powerful way to achieve that than by boosting trade.”

He asserted that the deal could “add as much as a 100 billion pounds to the EU economy, 80 billion pounds to the U.S. economy, and as much as 85 billion pounds to the rest of the world”.

Nevertheless, there is significant opposition to the proposed deal.

“The claims that this deal will somehow be an economic cure-all and generate significant growth are simply not supported by any reliable evidence,” Lori Wallach, director of Public Citizen‘s Global Trade Watch, a public interest watchdog group based in Washington, said Tuesday.

“But we do know that the talks are based on the demands of U.S. and EU corporations that have been pushing for decades to eliminate the best consumer, environmental and financial standards on either side of the Atlantic.”

Tariffs between the U.S. and E.U. are already low, and critics note that that what the deal really seeks to accomplish is the removal of “non tariff barriers” (also referred to as “trade irritants”).

“Non-tariff barriers is a commonly-used euphemism which refers to the array of financial, environmental, health and other policies which the public has put in place to safeguard its own interests,” Ben Beachy, a research director for Public Citizen, told IPS.

Under T-TIP, standards such as those mentioned by Beachy would be “converged”, so that regulations from state to state would be more closely aligned. Supporters of the deal say this uniformity would facilitate trade, but Beachy contended that the greater effect would be to lower regulation levels to a point that “democratic electorates would never stand for.”

“The resulting effect of ‘convergence’”, he said, “will be to limit the ability of democratic policymakers to establish their own preferred levels of regulation.”

Chilling effect

Environment groups are likewise worried that such harmonisation will allow for an increase in certain energy technologies, particularly the sudden prevalence in the United States of natural gas hydraulic fracturing or “fracking”.

Countries of the European Union currently restrict fracking within their own borders due to environmental concerns. But some analysts suggest these countries would be less averse to consuming imported gas fracked in the United States.

“There are concerns that the U.S. would become a major exporter of liquefied natural gas to the E.U.,” Ilana Solomon, of the Sierra Club, an environmental protection group, told IPS.

The United States recently approved private licenses for companies seeking to liquefy gas, indicating that in the future it will export liquefied natural gas, something it does not currently do.

Under free trade agreements in the past, Solomon noted, important regulatory reviews normally undertaken when considering the advantages of exportation have often been replaced by automatic approvals.

There are also health concerns related to the agreement. Some worry that food safety standards in the United States, for example, could be compromised if European exporters –  currently subject to lower standards – could deliver their, say, milk to U.S. stores.

Regardless of where U.S. standards stood, the less-well-regulated (and possibly less expensive) European milk would be available to U.S. consumers.

Another controversial aspect of the agreement would allow European privately owned corporations to challenge U.S. domestic laws that may negatively affect their profits or even expected profits.

In what are known as “investor-state” tribunals, foreign corporations would be eligible to receive compensation from taxpayers if the corporations could demonstrate that they lost money because of laws that inhibit trade.

Being subject to these tribunals could lead to what Public Citizen’s Beachy refers to as a “chilling effect”, meaning policymakers would be less likely to pass regulations because of perceived vulnerability.

Chipping away regulation

Beachy also noted the deal could carry “very real economic costs” if it undermines financial regulations and increases the risk of economic crisis.

According to a European Commission study, regulations that may be subject to “convergence” include financial safeguards such as those included in policies enacted by the United States following the economic crisis that began in 2008.

Last year, the Association of German Banks indicated what it hoped would emerge from any transatlantic deal regarding the aligning of U.S. and European standards.

“We would not like to see U.S. regulators applying standards to our banks that are extraterritorial, duplicative or discriminating … we have a number of such concerns regarding the ongoing implementation of the Dodd-Frank Act,” said the Association, referring to the most significant U.S. regulatory legislation passed in the aftermath of the financial crisis.

According to Beachy, it is doubtful that the free trade agreement could succeed in removing all its targeted “irritants”.

The European Commission study confirmed that this would be “unlikely”, noting that to do so in some cases would require “constitutional changes” and that “political sensitivities” might stand in the way.

Still, opponents worry that by specifically targeting these barriers, the broad agreement could succeed in chipping away at a significant number of them.

“The corporations that favour the agreement know they won’t get everything they want,” Beachy said. “But they think they can get a lot.”

Ensuring that women, youth and other marginalised groups are employed is a challenge in combating poverty. Credit: Naresh Newar/IPS

In the aftermath of the global economic crisis and with three years to go until the 2015 deadline of the Millennium Development Goals, global leaders are struggling to formulate a post-2015 agenda that can address the widespread dilemmas of employment and inclusive growth.

At a meeting attended by global leaders, ambassadors and civil society to discuss the post-2015 agenda last Friday, panellists agreed that better and more job opportunities are high priorities that must be included in the Millennium Development Goals (MDGs).

Created in 2000 at the Millennium Summit, the MDGs include eradicating extreme poverty, achieving universal primary education and improving maternal health.

At the meeting, speakers critiqued a report on jobs and growth issued by the high-level panel for post-2015, co-chaired by U.K. Prime Minister David Cameron, Liberian President Ellen Sirleaf and Indonesian President Susilo Bambang Yudhoyono.

Civil society leaders found the report too conservative, as it failed to properly address structural issues and income inequality.

For people under the age of 35, the desire for employment opportunities is particularly high. According to data from the International Labour Organisation (ILO), unemployment increased from 170 million people in 2007 to 200 million people in 2012, 75 million of them young people.

To give experts a better understanding of global workers’ views on employment and growth, people were consulted through World We Want, an online platform.

The information they shared was “well-rounded and insightful”, Selim Jahan, director of poverty practice at UNDP, told IPS, and revealed civil society’s seemingly inherent, if surprising, understanding of the risks and issues at hand regarding jobs and growth.

“These are no economists we are talking about. These are not policymakers. But people talked about macroeconomic policies and…different measures to deal with inequality, about measures to deal with education and skill training,” he said.

Their ideas and comments reveal the myriad and complex issues people face in securing and keeping a job. One World We Want user, an executive assistant from Brazil, believed a more open dialogue about HIV/AIDS to be vital in job development.

“[There should be] government incentive for companies [and] tax deduction to hire HIV employees. We still suffer [from] prejudice. We still need to keep this disease as a secret to maintain the job,” the user, who remained anonymous to protect his or her identity, said.

For another user from India, renewable energy was an integral part of future development.

Challenges to job creation

Strong population growth presents a huge challenge for future job creation. With the world labour force growing by 40 million people a year, according to the report, 470 million new jobs will have to be created from 2016-2030 to keep up with the demand for work.

Engaging women, youth and other marginalised groups in employment is another difficulty, with a huge gender disparity in some regions. In the Middle East and North Africa, the gaps are the biggest, with male employment at around 60 percent and female employment hovering around or below the 20 percent mark.

While bringing more women into employment could require a shift in cultural norms, the low numbers of employed women in the MENA region also has to do with the way data is collected, Martha Chen, international coordinator at Women in Informal Employment: Globalising and Organising (WIEGO), told IPS.

“In the MENA region, it may also be the case that there are a lot of women doing home-based work and other forms of [paid] employment that do not get captured in the official statistics,” Chen added. “So the gap may not be as big as we think, but the problem may be that women’s work is not being fully captured.”

“It’s a mindset of those who do the interviewing and those who design the questionnaires,” she pointed out. “It’s a mindset about what…work [is], and the fact that women can be doing work in the home.”

“I think there [are] probably a lot of women in their homes doing something for the market, not just for subsistence,” Chen noted.

Youth are not the only ones who will be vying for future jobs. An aging population means that older people will also be looking for work.

“Job training, education, jobs, these are all issues important to older people. We don’t just stop living when we reach age 60,” said James Collins, U.N. representative of the International Council on Social Welfare and chair of the Committee on Aging in New York.

“As governments raise the retirement age, it’s very important that at the same time, they improve access to employment for older people who want to work,” Collins added.

Some experts advocate a federal future for the European Union. Rock Cohen/CC-BY-2.0

Three different models for regional unification have been proposed by the movement for European integration since its inception. One vision is a league of states that preserve national sovereignty while committing themselves to follow specific policies agreed by consensus.

Then there is the functionalist model, where national states delegate common administration of their shared interests to a supranational authority.

Thirdly, the federalist model proposes conserving and respecting the sovereignty of national states for questions of national scope and character, while transferring to a European government sovereignty over matters of Europe-wide scope and character.

Federalist Altiero Spinelli defined European government as having limited but real powers, democratically controlled by a European parliament and operating in conformity with European laws.

In terms of political relations between communities of men and women there is only one possible reply to the question: “How should shared problems, which require shared, complex and permanent solutions, be faced?”

The answer is simple: entrust the function of addressing shared problems to a shared power.

That power might originate from the imposition of the strongest over the rest. This is the imperial, or hegemonic, response. Between 1945 and 1989, Europe lived in a geopolitical context characterised by the U.S. hegemony and Soviet imperialism.

But it can also arise from free consensus among partner countries and citizens for the creation of a shared power, parallel to their own powers, provided with specific procedures for reaching consensus and for the approval of federal policies, and to which limited competencies are transferred.

That is what federalists propose.

Another option would be the recognition of the existence of common problems which, however, would be identified each time the members decide by consensus that they should be addressed with a common response. In this variant, no transfer of power is required.

But when the achievement of a goal demands complex preparation, consensus-building and execution procedures, or when the goal is long-term and demands long-lasting shared action, this option is not rational and the outcome will almost certainly be unsuccessful.

The experience of the financial crisis that has buffeted Europe in the past few years confirms the irrationality of such a response.

The time has come for a comprehensive project that defines the degree of interdependence among the European Union, its citizens and member states (the creation of the United States of Europe) – a political method to create the necessary consensus (a democratic constituent assembly), and a timetable for the plan to take place within a politically feasible timespan.

Carrying out this project would require not only full enforcement of the Treaty of Lisbon, approved by the bloc in 2007, but also updating it with an agenda that extends beyond the May 2014 European elections. This will be a unique opportunity to resume the path toward a European constitution on a federalist basis.

Obviously, it is not enough for a federal organisation to have intrinsic merits. Building it demands permanent support from tremendous vital forces that feel the need for such an organisation and are prepared to act in order to sustain it. It would be a waste of time to build an edifice at a time when circumstances favour its building, if ultimately it cannot be maintained.

The European Union cannot be reduced to an economic and monetary union; it must also include the dimension of citizenship and human rights, social policies, domestic freedom and security, justice and foreign policy including defence.

The constitutional order must include budgetary issues (which items are the responsibility of national states and which of the European Union?), with a radically innovative focus on the concepts of federal budget costs and revenues. Debate should also be raised about the EU’s borders.

A political and legal solution should also be found for the problem of differentiated union or integration that allows states and citizens who want to advance faster than others to do so.

The initiative should come from the European Parliament and involve national legislatures in an inter-parliamentary conference, as proposed by then French president François Mitterrand (1981-1995) just before the fall of the Berlin Wall in 1989.

The natural goal of the conference is to attribute to the European Parliament the function of a constituent convention, as proposed by Jacques Delors, former president of the European Commission, and former German chancellor Gerhard Schroeder, and recommended in a March 2012 manifesto of the European Movement.

It will be the role of political parties and coalitions and civil society organisations to give next year’s election campaign a Europeanist focus.

Strong pressure is expected from populist movements advocating a regression to a Europe divided into separate nations.

All the more reason for innovators to act decisively so that Europeans take a leap forward, toward more democracy and greater solidarity.

(END/COPYRIGHT IPS)

One of the projected routes for Nicaragua’s interoceanic canal. Credit: National Assembly

A five-century wait could come to an end when the Nicaraguan government grants a concession this year to a Chinese company to build a canal between the Pacific and Atlantic oceans, despite local protests and international scepticism.

On Thursday, the single-chamber legislature gave fast-track approval to a controversial law that paves the way for the start next year of construction of a rival to the Panama Canal. The 100-year concession will go to the Hong Kong-based Chinese company HK Nicaragua Canal Development Investment Co. Ltd. (HKND Group).

The company was selected by the government of leftwing President Daniel Ortega to build the massive canal at an estimated cost of over 40 billion dollars.

But many voices in Nicaragua have called for greater transparency in the bidding process for the construction project that will bring to life a dream that has been cherished in this Central American country since the Spanish conquistadors first arrived.

One of the main criticisms is that the state of Nicaragua would grant complete rights over the canal for 50 years, with an option for another 50 years, to a company that was set up in October 2012 and established a holding company in the Cayman Islands that same year.

The Chinese company’s director, Wang Jing, is chairman of the Beijing-based Xinwei Telecom Enterprise Group, which was awarded a 300 million dollar telecommunications contract in Nicaragua in 2012. But Xinwei is at least four months behind in the investment pledged under the contract.

Construction of the canal is slated to begin in May 2014, and is expected to take 10 years. The feasibility studies are not yet ready, but according to the Sandinista National Liberation Front (FSLN) government, a London-based firm has been commissioned to carry them out.

The first legal step was taken in July 2012, when at Ortega’s initiative parliament passed the “law for the construction of the interoceanic canal” by a mixed public-private company.

The state would hold a 51 percent stake, and the remaining 49 percent would be in the hands of investors, which could be countries, international bodies, individuals or companies.

HKND plans to build the canal across 190 km of land, while 80 km of the route would go across Cocibolca lake. The canal will be 150 metres wide and will serve larger ships than the Panama Canal.

The project has the firm support of the Ortega administration, which sent the bill – the “special law for the development of Nicaraguan infrastructure and transportation involving the canal, free trade zones and associated infrastructure” – to the legislature on Jun. 5 for fast-track treatment.

The bill approved Thursday modifies the original “law for the construction of the interoceanic canal”, modifies the projected route, and grants the concession exclusively to the Chinese investors.

It also establishes that Nicaragua gives up any claim to or sovereignty over the concession for up to 100 years.

The text was approved by 61 votes in favour, 25 against, and one abstention, after a heated three-hour debate. But the opposition lawmakers withdrew immediately during the separate votes for each one of the law’s 25 articles, to protest what they considered insufficient debate on the bill.

The construction project approved by the new law includes the canal, two deep-water ports, an international airport, a “dry canal” freight railroad, a series of free-trade zones, and an oil pipeline.

Initial estimates indicate that the canal will have the capacity to handle 450 to 500 million metric tonnes of freight a year and ships of up to 250,000 tons that are 400 metres long, 59 metres wide, and with a berth-side depth of 22 metres.

By comparison, the Panama Canal can currently handle vessels 260 metres long, 32 metres wide, with a beam of 19 metres – a size known as Panamax. But the expansion project now underway will double the capacity of the Panama Canal by 2015.

The new law grants 100 percent of the shares to the Chinese investors and establishes that the transfer to Nicaragua will be gradual, starting 10 years after the canal begins to operate. Nicaragua will receive 10 million dollars a year until all of the shares have been handed over a century later.

The business chamber and investors in Nicaragua support the government’s plan, albeit with some reservations. But it is staunchly opposed by the rightwing opposition and Sandinista dissidents, as well as environmentalists.

Eduardo Montealegre, head of the opposition legislators, told IPS that Ortega and his officials were “selling out the country” with the broad concessions granted to foreign investors that, he said, hurt Nicaragua’s current and future interests.

Constitutional lawyer Gabriel Álvarez told IPS that the concession of the project to Chinese investors violated the constitutional article on national sovereignty, and left the country vulnerable to local or international legal action.

Biologist Salvador Montenegro, director of the Research Centre for Aquatic Resources of the National Autonomous University of Nicaragua, told IPS that any construction project involving Cocibolca lake endangered biodiversity, and Central American society as a whole.

The 8,624-km long lake in southwest Nicaragua is the region’s largest freshwater reserve.

The government’s secretary of public policies, Paul Oquist, dismissed the demands by environmentalists and politicians and anticipated that after construction of the canal started, GDP would grow 10.8 percent in 2014 and 15 percent in 2015, compared to the current four to five percent.

The government projects that GDP will climb from 10 billion dollars today to 24.7 billion dollars in 2018. But without the construction of the canal, GDP would stand at 14.9 billion dollars in 2018.

Ortega informally discussed the idea of the canal with U.S. President Barack Obama at the May 4 summit of presidents of the Central American Integration System in Costa Rica.

The initiative has not drawn official reactions, either positive or negative, from Nicaragua’s Central American neighbours.

Only Panamanian President Ricardo Martinelli congratulated Nicaragua for the plan and offered it technical assistance.

Food aid from the United States often travels thousands of miles before reaching its final destination. Credit: Ephraim Nsingo/IPS

Lawmakers attempted Wednesday to push along an ongoing effort to modernise U.S. international food aid policy amid mounting bipartisan support for the use of more locally grown food products over the long-standing practise of shipping U.S.-grown commodities.

The Food Aid Reform Act, introduced by House Foreign Affairs Chairman Representative Ed Royce and Africa Subcommittee Ranking Member Representative Karen Bass, would eliminate previous requirements that food assistance be grown in the United States and transported on U.S.-flagged ships. Advocates say the changes would deliver aid up to 14 weeks faster and reach an estimated two to four million more people.

“Increasing flexibility is extremely important in these programmes in order to reach more people and react to individual situations on the ground that require different solutions,” Katie Lee, advocacy and policy coordinator for international development at InterAction, a Washington-based network of U.S.-based NGOs, told IPS.

Implementing partners, too, have lined up behind the proposed changes.

In addition to such projections of increased efficiency, the proposed reforms would significantly decrease transportation costs for the United States. According to Royce, who spoke Wednesday in a conference of the House Committee on Foreign Affairs, 50 percent of the U.S. food aid budget is currently spent on shipping costs.

“You have to order the food in the Midwest, it gets put on a ship, it can go 7,000 miles to the other side of the world, put on to trucks, and then moved into the famine or emergency zone,” Andrew Natsios, a professor at Texas A&M University, testified during Wednesday’s discussions. “If the food is bought locally, you can avoid the 7,000-mile food chain.”

Throughout Wednesday’s Congressional discussions, experts highlighted the consequences of this food chain, particularly in war zones or emergency situations. According to Natsios, a regular strategy in a civil war is to starve the enemy by blowing up food trucks.

“The Syrian government is trying to starve the opposition into surrender,” he said. “The Sudanese government did the same thing in southern Sudan over the course of 22 years of civil war.”

Advocates add that the proposed reforms would have long-term benefits for both the U.S. and foreign economies.

“The future interest of U.S. agriculture is less in the provision of U.S. food aid and more in developing a thriving economy that can create new consumers for American productions,” said Dan Glickman, executive director of the Aspen Institute Congressional Program, an educational initiative for members of Congress.

The changes would allot a larger percent of the food aid budget as cash spent in local markets, which economists say would significantly stimulate local economies.

“Shipment devastated the Haitian rice farmers after the earthquake because we couldn’t buy it locally,” said Natsios. “But we couldn’t not give them food either, because they needed it.”

U.S. branding

On Monday, the Senate overwhelmingly passed a massive, five-year bill that covers much of U.S. agriculture and food-related policy and known as the Farm Bill. The focus now shifts to the House of Representatives to fashion a similar bill, expected to be voted upon later this month.

For now, the Senate bill would reduce overall spending by about 24 billion dollars over 10 years. But that legislation will have to be reconciled with whatever comes out of the House, where the Farm Bill battles are expected to be far more bitter.

Currently, the Food Aid Reform Act is a separate bill, but many observers assume that it will probably be tied into the House Farm Bill eventually. At the moment, experts project it to have less than a seven percent chance of being enacted on its own.

“We don’t expect this to pass free-standing – it’d be great, but that is probably unlikely,” Blake Selzer, a senior policy advocate at CARE, a humanitarian organisation, told IPS.

Still, many U.S. lawmakers and aid experts are concerned as to how the United States would continue to receive public credit for locally procured assistance – an important consideration in any foreign assistance programme. During Wednesday’s discussion, several House representatives expressed such concerns.

“Nobody is talking about going to a cash-only system – not the White House, not the chairman,” Glickman said, emphasising that under the current proposal, only a portion of the aid budget would go to a cash system and the rest would be U.S. shipped commodities.

“I would not support going to a cash only system, I don’t care what country does it. That would be a mistake.”

Indeed, according to USAID, the U.S. government’s main foreign aid arm, such branding has been important, at least in certain situations. U.S. approval ratings in Indonesia, for instance, are said to have nearly doubled, from 37 to 66 percent, following a large delivery prominently branded as U.S. aid.

Natsios emphasised repeatedly that in emergency situations it is very clear where assistance is coming from. “No one would argue that we should only provide aid if we get credit for it,” he said.

Developed countries must support more effective mitigation in all countries where emissions are either high or growing. Credit: Cam McGrath/IPS

Developed countries report that they delivered more than 33 billion dollars in Fast Start Finance (known as FSF), beyond the pledges they made at COP 15 in Copenhagen in 2009. Recent analysis suggests that the funding delivered may have exceeded 38 billion dollars.  But that is not the whole story.

The story behind the headline lies in how this money has been allocated. What has it supported, and how much of it represents new funding to support the additional challenges that climate change poses for development?

My colleagues at ODI in the United Kingdom, the World Resources Institute (WRI) in the United States, the Institute for Global Environmental Strategies (IGES) in Japan, Germanwatch in Germany and Cicero in Norway have analysed our countries’ FSF contributions to try and answer these questions. These countries’ climate finance contributions are among the largest.

In Copenhagen, four years ago, these and other developed countries promised to deliver 30 billion dollars from 2010 to 2012 as Fast Start Finance. This would kick-start the delivery of 100 billion dollars per year by 2020. A substantial share of this finance may flow through the Green Climate Fund, a new mechanism to deliver money to developing countries so they can mitigate and adapt to climate change. Now, what does all this mean in reality?

Climate finance contributions have increased

Our first message is a positive one: finance for climate-related activities in developing countries has increased significantly during the FSF period, despite unprecedented economic difficulties and austerity measures in developed countries brought on by the 2008 financial crisis. Indeed, this trend applies to all of the countries we reviewed. The UK, for example, appears to have increased its climate finance four-fold relative to environment-related spending before the FSF period.

A challenge, however, is that countries counted very different forms of finance, resulting in major differences between the scale and objectives of different contributions.

A large share of Germany’s 1.6-billion-dollar FSF contribution is directed through its International Climate Initiative, which is indirectly financed through revenues from emission trading. With the exception of its 615-million-dollar contribution to the Climate Investment Fund, Germany counts only grants towards its FSF. By contrast, Japan and the United States include as FSF a large share of export credit and development finance for low-carbon infrastructure. In Japan’s case, some efficient fossil fuel options are also counted. Japan has also reported on leveraged private finance in its total.

Many countries also seek FSF “credit” for projects and programmes that they were already supporting prior to the FSF period.

For instance, the United States counts its contribution to the Montreal Protocol Fund, which it has been supporting since the early 1990s, as FSF. A significant share of Japanese FSF was pledged prior to 2010 through initiatives such as the Cool Earth Partnership. All five countries count contributions to the Climate Investment Funds (CIFs) since 2010, although countries pledged to fund the CIFs at a cumulative level of at least 6.1 billion dollars in 2008.

These pledges were made in the context of efforts to scale up climate related finance in the lead up to Copenhagen. But while these are important programmes, for which sustained support is essential, the pledges are not technically “new” during the FSF period.

Of the five countries we studied, only Norway has met the international commitment to deliver 0.7 percent of its gross national income (GNI) as official development assistance (ODA) and can claim that its contribution was additional by this standard during the FSF period (although it has ramped up its domestic ODA commitment to one percent of GNI). Only Germany and Norway have clearly spelled out how they define “new and additional” in their self-reporting on climate finance.

Using climate finance effectively

There has been a strong focus on funding activities that can help developing countries reduce greenhouse gas emissions. This includes financing clean electricity from renewable energy, the use of more efficient technologies, and better public transport systems.

Such programmes can play a vital role in supporting countries to meet their basic infrastructure and energy needs without the emissions. Such finance is essential.

Emissions in many rapidly growing developing countries are rising fast. While they may bear less historical responsibility for climate change, today some of the largest emitters in the world are developing countries. There are abundant opportunities to take more climate compatible approaches to development – but they often pose additional costs or risks. International public finance can help countries seize such opportunities.

But the truth is that we are already feeling the impacts of climate change. These impacts will be particularly severe in poor countries. And global efforts to address climate change so far have been inadequate.

This reinforces the imperative to support more effective mitigation in all countries where emissions are either high or growing. But it also strengthens the case to scale up adaptation finance.

During the FSF period countries committed to scale up adaptation finance. Adaptation finance would focus on the developing countries that are most vulnerable to the impacts of climate change, including Least Developed Countries (LDCs), Small Island Developing States (SIDS), and African countries. About 12 percent of the total FSF contribution of the five countries we studied supported adaptation, with the share ranging from about seven percent in Norway to about 35 percent in the UK and Germany.

In practice, of course, adaptation and mitigation activities may be quite interlinked. Norway, for example, has prioritised efforts to reduce emissions from deforestation and degradation, particularly in tropical forests, which also have adaptation benefits.

Future public support for climate action, however, is highly uncertain. This is a substantial challenge. There is an urgent need for greater clarity on the level of public finance that developing countries can expect from the international community.

The FSF experience reinforces the importance of scaling up finance in order to meet the ever more urgent challenges of climate change. This will require political commitment and leadership at the national level, and enhanced global cooperation.

*This commentary is based on a joint analysis by Smita Nakhooda (ODI), and Taryn Fransen of the World Resources Institute (WRI), reflecting on the FSF experience on the occasion of the 38th sessions of the Subsidiary Body for Implementation and the Subsidiary Body for Scientific and Technological Advice, as well as the second part of the second session of the Ad Hoc Working Group on the Durban Platform for Enhanced Action, taking place from Jun. 3-14, 2013, in Bonn, Germany.

China has moved to investment-led growth, after its exports fell sharply in the aftermath of the global financial crisis. Credit: Bigstock

More than five years since the outbreak of the global financial crisis, the world economy has shown few signs of stabilising and moving towards strong and sustained growth.

While deleveraging continues to stifle private demand, economic activity is further restrained by a fiscal drag in the U.S. and Europe, as governments have turned to fiscal orthodoxy after an initial reflation. There has been excessive reliance on monetary policy, especially in the U.S., through provision of large amounts of liquidity to financial markets and institutions at close-to-zero interest rates, using unconventional means.

This has been largely ineffective in re-igniting bank lending and private spending, but has given rise to a search for yield in high-risk investments, increased leverage and boom in equity markets. It has also generated financial fragility and exchange rate instability in major developing countries.

The implications of an extended period of ultra-easy monetary policy in several reserve-currency issuers for future international financial stability remain highly uncertain since these are largely uncharted waters.

There have been strong spillovers from the crisis in advanced economies to developing countries.

Yilmaz Akyuz, chief economist of the Geneva-based South Centre.

Although conditions in international financial and commodity markets have generally remained favourable since 2009, the strong upward trends in capital flows and commodity prices that had started in the first half of the 2000s have come to an end and exports of developing countries to advanced economies have slowed considerably.

Furthermore, the one-off effects of countercyclical policies in developing countries have started fading and the policy space for further expansionary action has narrowed considerably.

Thus, growth in most major developing countries has now decelerated significantly. In Asia, the most dynamic developing region, growth in 2012 was some five percentage points below the rate achieved before the onset of the crisis; in Latin America it was reduced to almost half.

The world economy is facing under-consumption because of low and declining share of wages in national income in all major advanced economies, including the U.S., Germany and Japan, as well as China – countries that have a disproportionately large impact on global economic conditions.

There has also been an increased concentration of wealth and growing inequality in the distribution of income earned on real and financial assets. Financialisation, welfare state retrenchment and globalisation are the most important factors accounting for these trends.

In none of the major advanced economies and China is there a tendency for a significant reversal of the downward trend in the share of wages in national income and a more equitable allocation of wealth so as to allow rapid economic expansion based on income-supported, as opposed to debt-driven, household spending.

In the U.S. – where the downward trend in wage share started in the 1980s – in the past two decades consumption and property booms and economic expansions were driven primarily by asset and credit bubbles: first the dot-com bubble in the 1990s and then the subprime bubble in the 2000s.

The current crisis has led to a greater concentration of income and wealth. On current policies the U.S. cannot move to wage-led or export-led growth. Rather, it may succumb to the temptation of letting the current ultra-easy monetary policy degenerate into credit and asset bubbles in order to achieve a rapid expansion, very much in the same way as its policy response to the bursting of the dot-com bubble gave rise to the sub-prime boom, while exploiting the exorbitant privilege it enjoys as the issuer of the dominant reserve currency and running growing external deficits.

Whether or not it might help generate a strong expansion, such a return to business-as-usual could produce yet another boom-bust cycle. It could be more damaging than the present crisis, not only for the U.S. but the world economy at large.

If, on the other hand, asset and credit bubbles are not allowed to develop and boost aggregate spending, the outcome could be sluggish growth, sharply increased interest rates and a stronger dollar, a combination that often breeds problems for developing countries.

The eurozone appears to be mired in economic weakness for an indefinite period. Thus, the region cannot be expected to generate expansionary impulses for the rest of the world even if it manages to restore stability in the crisis-hit periphery.

China has moved to investment-led growth as its exports slowed sharply as a result of the crisis and contraction in advanced economies, and this has added to credit and property bubbles already under way. This pattern of growth cannot be sustained indefinitely. Despite the recognition of the need to raise the share of the household income in gross domestic product (GDP) and move to a consumption-led growth, the distributional rebalancing is progressing very slowly.

Whether or not China can avoid the bursting of the bubbles and a hard landing, over the medium term it is likely to settle on a lower growth path with a gradual rebalancing of external and domestic sources of demand and domestic investment and consumption.

All these imply that there will be no more Southern tail winds. Even if the crisis in the North is fully resolved, developing countries are likely to encounter a much less favourable global economic environment in the coming years than they did before the onset of the Great Recession.

Consequently, in order to repeat the spectacular growth they had enjoyed in the run-up to the crisis and catch up with the industrial world, developing countries need to improve their own growth fundamentals, rebalance domestic and external sources of growth and reduce dependence on foreign markets and capital. This requires, inter alia, abandoning neoliberal policies in practice, not just in rhetoric, and seeking strategic rather than full integration into the global economy.

(END/COPYRIGHT IPS)

The meeting, which opened Tuesday Jun. 4 in the colonial Guatemalan city of Antigua, on the theme “For a Comprehensive Policy against the World Drug Problem in the Americas,” will conclude Thursday Jun. 6 with a final declaration that, it is hoped, will express a consensus position on the most viable strategies to fight drug trafficking in the region.

However, in spite of agreement that the issue should be addressed from a public health standpoint instead of the law enforcement approach used in most countries in the region today, the draft Antigua Declaration of the General Assembly of the OAS does not include concrete actions, or even a vague road map for the future.

What remains contentious and what foreign ministers must resolve before the conclusion of the OAS meeting is the follow-up mechanism that should be implemented.

Fourteen countries are proposing that the OAS Permanent Council call an extraordinary General Assembly in 2014 in Guatemala, with the goal of moving forward in the debate on new strategies to combat drug trafficking and in the design of an action plan for the period 2016-2020.

Under this proposal, the Inter-American Drug Abuse Control Commission (CICAD) would be in charge of preparatory work for the meeting.

But the other 20 countries (Cuba has been suspended since the early 1960s) are opposed to the proposal, including the United States which is in favour of continuing to debate the drugs issue but is against an extraordinary assembly and CICAD involvement.

Canada is concretely proposing that the OAS Permanent Council, instead of CICAD, determine how the issue is followed up.

Another novelty is the incorporation of “a cross-cutting human rights perspective” and a gender perspective into public policies arising from the OAS summit, with the purpose of reducing demand and supply of illegal drugs.

Too little, too slow

Sandino Asturias, head of the Centro de Estudios de Guatemala (CEG – Centre for Guatemalan Studies), told IPS that the consensus on the need to treat drug trafficking as a health problem, rather than a public security issue, reflects a change in tackling this scourge even by the United States, as it implicitly admits that the armed fight against drug trafficking has failed.

In Mexico, under conservative President Felipe Calderón (2006-2012), more than 83,000 people were killed in the context of the fight against organised crime, according to official figures. But the demand for drugs from consumer countries, especially the United States, has not declined. As a result, there is a growing consensus among governments in Latin America that it is time to consider new strategies.

“Some Latin American countries have been exerting pressure, and the idea that Washington only makes demands and the region must comply is beginning to change. I think there have been developments since the arrival of (U.S. President Barack) Obama, in the sense that there is more self-criticism,” Asturias said.

David Martínez-Amador, an expert with Proyecto Criminova in Mexico, which publishes academic papers on criminology, said that the health approach “has been put on the table.” But he criticised the fact that concrete policies, and sanctions against the use of armies in the war on drugs, have not been agreed.

“Like most of these forums, it ends with motivational speeches, hoping for discussions to continue while waiting for the extraordinary meeting; it’s a waste of time,” Martínez-Amador told IPS.

Several countries are taking steps to implement regulatory frameworks to legalise production of marijuana, including Argentina, Spain, Portugal, and in particular Uruguay, where parliament, at the behest of the leftwing Broad Front government, is debating a bill to legalise and regulate the sale of marijuana.

“This forum is just that, a forum, but when the doors close, each country has to blaze its own trail,” said the Mexican expert.

Turning the page

Guatemalan President Otto Pérez Molina, the host of this week’s OAS Assembly, proposed legalising drugs in early 2012, to shocked reactions.

During his election campaign he had said he was opposed to the idea, and days after he took office on Jan. 14, 2012, the government created a special agency to fight drug trafficking headed by its own drugs tsar, and confirmed that the Kaibil Commando, an elite army unit accused of the worst human rights violations during the 1960-1996 internal armed conflict, would lead the drug war.

No one, not even members of his own cabinet, could foresee that just one month later the retired general, who campaigned for the presidency on promises of coming down hard on crime, would declare that the time had come to consider decriminalisation as a possible solution to the rising tide of drug-related violence.

In April 2012, he tabled the issue again at the Summit of the Americas in Cartagena, Colombia, although the United States responded negatively.

Several hypotheses have been put forward as to why Pérez Molina is defending the legalisation of drugs.

The British weekly newspaper The Economist speculated that the Guatemalan president was trying to get more funds from the United States, while Natalie Kitroeff, a researcher for the New York-based Council on Foreign Relations think tank, said he was exerting pressure to lift the arms embargo imposed in 1978 on Guatemala due to human rights abuses committed during the civil war.

“The president is motivated by his image. (Pérez Molina) wants to be seen internationally as someone committed to democracy, not tainted by the past,” Asturias said.

The OAS summit is an opportunity for him to “turn the page” after the controversial trial of former dictator Efraín Ríos Montt, in which a witness directly implicated Pérez Molina of having participated in massacres in the highland department (province) of Quiché while commanding the Gumarcaj Task Force, Asturias said.

The New York Stock Exchange, as seen from the boot of George Washington’s statue at Federal Hall. Credit: Dan Nguyen/CC-BY-2.0

The global economy is awash with successive waves of liquidity generated over the past few years by the four most advanced economies, viz., the United States, the European Union, (EU), Japan and the United Kingdom, known as the G4. This liquidity has taken the form of “quantitative easing” (QE).

When zero rates of interest have failed to stimulate their economies, these countries have resorted to large-scale asset purchases by their central banks, such as corporate bonds or mortgage backed securities, to pump more money into the banking system.

The aim is to extend credit to business and industry and encourage consumption.

In the immediate aftermath of the global financial and economic crisis in 2008, when there was a danger of financial collapse, both advanced as well as emerging economies adopted stimulus packages, to revive demand, maintain trade flows and avoid large-scale unemployment. During the crisis phase of 2008/09, QE played an important role in crisis management, helping advanced and emerging economies alike.

However, while emerging economies have weathered the crisis and seen a revival of growth, the G4 continue to experience economic stagnation, depressed markets and large-scale unemployment.

Their response has been to persist with even larger doses of QE as a means of propping up demand,encouraging banks to expand and boosting stock valuations.

Before the crisis, the U.S. held 700 to 800 billion dollars of Treasury notes. The current level is 2.054 trillion dollars. In the latest round, QE-3, the U.S. Federal Bank is committed to the purchase of 40 billion dollars of mortgage-backed securities per month as long as unemployment remains above 6.5 percent.

The European Central Bank (ECB) has pumped 489 billion euros of liquidity into the eurozone since the crisis, while in the United Kingdom QE has reached the level of 375 billion pounds.

Most recently, the Bank of Japan has decided to pump 1.4 trillion dollars in the next two years into its economy, aiming at a two-percent inflation rate by doubling the money supply.

The assets of the G4 central banks have expanded from a figure of 11-12 percent of their gross domestic product (GDP) to the current unprecedented level of 23 percent. These assets were 3.5 trillion dollars in 2007 before the crisis. They are now nine trillion dollars and rising. This is the scale of liquidity expansion we are dealing with.

Since interest rates in the G4 remain at zero and their economies remain stagnant, it is inevitable that there will be significant capital outflows to emerging and other developing economies, in quest of higher risk-adjusted returns.

According to one estimate, about 40 percent of the increase in the U.S. monetary base in the QE-1 phase leaked out in the form of increased gross capital outflows, while in the QE-2 phase, it may have been about one-third.

This massive and continuing surge of capital outflows to emerging and other developing economies is having a major impact. Corporations, which have a sound credit rating, are taking on more debt, and increasing their foreign exchange exposure, attracted by low borrowing costs.

Their vulnerability to future interest rate changes in the developed world and exchange rate volatility will increase. Such inflows put upward pressure on exchange rates, stimulate credit expansion, and cause inflationary pressures, which pose a major challenge to policy-makers in the developing world.

Most of the capital inflows are in the nature of portfolio investments, which are prone to sudden and volatile movement and puts emerging economies at greater risk. The volatility one has witnessed in the Indian stock market is a case in point. In general, we may conclude that the overall impact of these capital flows is expansionary and distortionary.

There has been considerable criticism of the G4’s unconventional monetary policies from the emerging economies, including the BRICS (Brazil, Russia, India, China and South Africa).

The magnitude of QE has had unintended consequences beyond the borders of the G4, especially because their currencies are not only fully convertible but, together, constitute the pillars of the global financial system.

The U.S. dollar is the world’s leading reserve currency, and the euro, the British pound and the Japanese yen together constitute the basket of currencies the International Monetary Fund (IMF) uses to value its Special Drawing Rights. Thus, the nature of the G4 currencies and their significant role in the global financial market ensures that QE undertaken by them has a global impact on economies across our globalised and interconnected world.

It is necessary, therefore, for the G4 to act with great responsibility and to work together with the emerging economies, to minimise the adverse effects of their QE policies. It would be particularly important to forge a consensus on how to handle the potential financial turmoil and disruption that may afflict developing economies once the QE is sought to be retired and interest rates once again become positive in the G4. The sudden and large-scale reversal of capital flows is a likely scenario that would need to be anticipated and managed.

The Asian financial crisis of 1997/98 was, in part, triggered by an earlier version of QE pursued by Japan in the aftermath of the bursting of its property and asset bubble in the early 1990s. Then, too, the large inflow of low-cost yen loans led to the asset price bubbles, inflationary pressures and currency instability in the Asian economies. They paid a heavy price in the bargain.

A larger, more pervasive crisis may await the emerging and developing economies unless there is a much more coordinated and careful handling of the risks that are already building up. The G20 should have this issue at the top of its agenda.

(END/COPYRIGHT IPS)

The delegates selected to speak at the closing session in Darwin stressed the commitment to strengthening the global indigenous network, to get their collective voice heard around the world. Credit: Milagros Salazar/IPS

Some good-byes can actually mean the start of a long road working together. That was how it felt at the end of the World Indigenous Network (WIN) conference in this northern Australian city.

The big challenge is to consolidate “the indigenous network so its collective voice can be heard” and to get governments to implement its proposals, said one of the 10 speakers chosen by the delegations from more than 50 countries to sum up what was discussed in four days of sessions at the May 26-29 conference.

The gathering, supported by the Australian government, enabled face-to-face exchanges among indigenous people from around the world, who shared best practices in conservation of ecosystems and biodiversity and in the sustainable use of protected natural areas in Africa, Asia, Latin America, Canada and Australia.

The delegates to the conference of the “international network of indigenous and local community land and sea managers” stressed the importance of the world recognising that for ages, indigenous people have protected the land and sea thanks to their ancestral knowledge, and that their culture and way of life depends on their territories.

After these few days in Darwin, “I have the courage to continue my work with my community,” an enthusiastic Aei Satu Bouba, coordinator of the Cameroon Indigenous Women Forum, told IPS.

The new developments that came out of the WIN conference included the announcement of the creation of the Pacific Indigenous Network (PIN).

Rosiana Lagi, a doctoral student at the University of the South Pacific in Fiji, told IPS that through PIN, the Pacific island nations would seek “the support of our governments.”

The University of the South Pacific is supported by 12 island countries: Cook Islands, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Samoa, Solomon Islands, Tokelau, Tonga, Tuvalu and Vanuatu.

The importance of global efforts was highlighted on Wednesday, the last day of the conference. The conservation work of ICCA Consortium was presented as an example of such efforts.

Since 2010, the global association of indigenous organisations, local communities and supporting NGOs from around the world has promoted the national and international recognition of and support for ICCAs: Indigenous Peoples’ and Local Community Conserved Territories and Areas.

Taghi Farvar, president of the ICCA Consortium, told IPS that they work closely with the Secretariat of the Convention on Biological Diversity, which requires that countries include indigenous people and local communities in the conservation of fauna and flora.

Challenges and problems were also discussed alongside the successful practices presented at the four-day WIN conference. The representatives who spoke at the closing session stressed that not only the participation of indigenous and community leaders needed to be guaranteed, but local and grassroots involvement as well.

The majority agreed that more dialogue should have been allowed in the presentations.

In the full auditorium during the closing session, perhaps the most sensitive issue was brought up by the representatives of Latin America, whose spokespersons pointed out that the question of defending indigenous territories was glaringly absent during the conference.

They also complained about the shortage of interpreters.

However, the participants highlighted the efforts of the delegates to understand each other, despite the language barriers.

The Latin American delegation, mainly made up of people from Ecuador and Brazil, as well as activists from Bolivia, Colombia, Mexico and Peru, said they went “one step further” by demanding that governments recognise indigenous rights over their ancestral territories.

“It’s not just about indigenous people taking care of parks and protected natural areas, but about a question of legitimacy, of states recognising that we have been the owners of the territory for a very long time,” Paulina Ormaza, an indigenous woman who formed part of the group from Ecuador, told IPS.

Juan Chávez, a member of the Shipibo indigenous community from Peru, remarked to IPS that Latin America’s experience in that area would have helped to “expand the vision” of participants from other regions, especially in a context of promoting private investment on indigenous land.

How can conservation of the environment and of indigenous territories be advanced in the midst of the interests of the states? the Latin American delegates asked, pointing out that this thorny issue is actually faced by countries in every region.

Melissa George, a member of the Wulgurukaba aboriginal tribe of Australia and co-chair of the WIN National Advisory Group, told IPS that in her country, the extractive industries “are always the winners.”

Perhaps the only difference between indigenous people in Australia and Latin America is that Australia’s aborigines are not displaced from their territories by these investments, she said.

The defence of indigenous land is related to the implementation of the requirement that local and native communities be previously consulted about any investment project affecting their territory or culture, as stipulated by International Labour Organisation (ILO) Convention 169 Concerning Indigenous and Tribal Peoples.

The tension and activism surrounding the question of prior consultation in Latin America today was not discussed in Darwin. Peru was the first country in the region to pass a specific law to guarantee that right, in line with Convention 169, against a backdrop of conflicts and protests over mining, oil and infrastructure investment.

Ecuador recognises the right to prior consultation in its constitution, but the specific rules and regulations for implementation have not yet been approved, as demanded by the country’s indigenous organisations, their representatives told IPS.

The approval of the regulations for prior consultation is also under debate in Brazil. Cristina Cambiaghi, an adviser to the government’s National Indian Foundation (FUNAI), told IPS that “this process serves as an opportunity for dialogue to achieve recognition of the rights of the 305 indigenous peoples in Brazil.”

During her participation in the conference, Cambiaghi also pointed to pilot programmes for the application of a policy of indigenous territorial and environmental management.

“The aim is to guarantee and promote the protection of their territories, respecting their autonomy in line with the country’s laws,” she said.

But to face such challenges, it is necessary to strengthen the global indigenous network, participants in the conference agreed.

To that end, Eileen de Ravin, manager of the Equator Initiative, told IPS that they were waiting for a response from the different countries, under the premise that “governments are in power to serve, not just to say.”

The Equator Initiative is a partnership that brings together the United Nations, governments, civil society, businesses, and grassroots organisations to build the capacity and raise the profile of local efforts to reduce poverty through the conservation and sustainable use of biodiversity.