Monday, 25 August 2014

Blog Series: A global economy that works for the good of all

Responsible trade and financial policy coordination

By Mark Furness, German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE) & Jodie Keane, Overseas Development Institute (ODI)

In the run up to 1 September, we will be publishing a blog each Monday setting out the context of five global challenges. Today’s blog, the fourth in our series, examines trade and international finance. Originally published on DIE's Current Column

After a long period of economic prosperity in advanced and developing countries, the 2008 financial market meltdown and subsequent global and Euro crises came as a shock. The limitations of orthodox market governance approaches were starkly revealed, the global economy remains fragile, and few policy reforms to address the imbalances and loopholes that led to the crisis have been undertaken. The EU could drive a more holistic reform process, while articulating its vision of a sustainable 21st century growth trajectory. 

Despite the Euro crisis, the EU single market is still the world’s largest trader and investor. This is not expected to last past 2020, so the EU needs to use its leverage in the global economy while it still can. There are several levers that European policymakers can pull. Two stand out, both for their potential impact on the framework conditions for global economic exchange, and for the fact that if they are to be pulled successfully, collective action at the EU-level is needed: first, responsible trade; and, second, global financial policy coordination, particularly with regard to tax havens.

National regulators have not been able to match the speed of the transformation of global trade and financial flows, particularly as a large part of the process has been conducted using offshore financial centres out of reach of national tax authorities. Furthermore, as around one third of global trade is now conducted within multi-national enterprises (MNEs), there are big questions about how to track and tax these intra-firm transactions.

The EU–US TTIP, if agreed, could do much to reinvigorate and strengthen trade and investment relations between two of the world’s largest trading blocs. However, should this new ambitious partnership be agreed, greater attention needs to be paid to the effects that TTIP has on the global trade system, emerging economies and on developing countries.

A further priority is addressing illicit financial flows out of and into developing countries, including measures to improve the exchange of information and transparency. Estimates show that developing countries lost close to $6 trillion in illicit financial flows over the last decade, much of it linked to tax avoidance. Several of the world’s most notorious tax havens are under the sovereignty of EU member states, such as those located in British overseas territories, while the tax policies of some member states, including Austria, the Netherlands, Luxembourg, Cyprus, Ireland and the United Kingdom, do not go far enough in questioning the origin of funds invested by non-residents. The EU should be a role model in promoting the automatic exchange of tax information.

Domestic and global reform processes must go hand in hand. Europe needs to lead by example and assume a new, more positively influential role within a multi-polar global economy. In order to do this, it needs to get its own house in order and articulate a new vision of growth and development. Such prescriptions may seem pie-in-the-sky. But as the new Commission takes office, we need to ask ourselves what the alternatives are. We can muddle along, hoping that everything will be fine but fearing that it will not; we can give up on internationalism and retreat into our shells, a move that would foster inefficient isolationism and dangerous nationalism; or we can try again at the global level to strike a series of deals that make a difference.

Monday, 18 August 2014

Blog Series: Living up to democracy commitments

In the run up to 1 September, we will be publishing a blog each Monday setting out the context of five global challenges. Today’s blog, the fourth in our series, examines democracy commitments. It was originally published by FRIDE

A challenge for the new EU leadership

By Clare Castillejo

Democracy and human rights are central to the EU’s identity and a commitment to promoting these values is embedded across its policy framework for external action. However, recent events – notably the Arab uprisings, but also other trends including developments in the Eastern neighbourhood – have revealed some serious disconnects between the EU’s principles and its actions or impact on these issues.

In recognition of these problems, over the last few years the EU has developed a range of new policies aimed at strengthening its external democracy and human rights promotion. This new policy framework, despite being in some ways more a hasty response to events than a well considered reflection on the EU’s potential role in this area, nonetheless provides an opportunity for the EU to raise its game on democracy and human rights promotion. Seizing this opportunity and living up to the EU’s democracy commitments will be an important challenge for the incoming leadership in Brussels.

If the EU is indeed serious about doing better, it must move beyond its traditional approach to human rights and democracy promotion. This has been overly focused on rules, technical blueprints and elite actors; has been hampered by inflexible bureaucratic mechanisms; and has failed to provide effective incentives for reform. Instead it must use its enhanced policy framework as a starting point to develop an approach that is more politically and contextually nuanced, that recognizes that political change processes are complex and domestically driven, and that is based on a realistic vision of the EU’s role in influencing such processes.

Not only must the EU better understand local political contexts and dynamics, it must also tailor its approach to broader changes in the global context for democracy support. These include an increase in hybrid regimes, new forms of citizen activism and shrinking space for civil society, as well as the increased influence of emerging powers and reduced EU leverage in many contexts.

In the coming years the EU will be under pressure to live up to its promises to become a stronger and more effective democracy and rights champion, as well as respond to a wide range of democracy and human rights challenges in its neighbourhood and beyond. It is therefore high time for an enhanced approach that both builds on lessons from the EU’s past experience in this field and is able to respond more effectively to the complex local and international dynamics of political change. Sustained political commitment and high level support within the EU institutions will be critical to driving forward such an approach. It is therefore to be hoped that democracy and human rights will be a priority for the EU’s incoming leadership.

ETTG Presents to the Foreign Affairs Committee of the European Parliament

The ETTG will be presenting the report on EU global action, entitled Our Collective Interest: Why Europe’s problems need global solutions and global problems need European action to the Foreign Affairs Committee of the European Parliament on Monday 1st of SeptemberKevin Watkins, Executive Director at the Overseas Development Institute will make the presentation and it will be live streamed here from 15.00 – 18.30 CET.

Monday, 11 August 2014

Blog Series: EU’s pivotal role in tackling poverty and inequality worldwide

By Andrew Shepherd, Alisa Herrero

In the run up to 1 September, we will be publishing a blog each Monday setting out the context of five global challenges. Today’s blog, the third in our series, examines inequality.

Continued economic expansion and general human development have brought poverty down substantially in recent decades. However, progress has been geographically uneven, and economic growth has left large numbers of people in low and middle-income countries living only fractionally above the poverty line.

Discussions on progress towards the MDGs and a new global agenda and framework for development post-2015 have rekindled the debate on how best to tackle poverty and inequality. There is now substantial evidence to support the argument that growth reduces poverty faster and more sustainably where equality is greater, or if inequality is reduced at the same time. Redistribution does not need to hamper growth, and inequalities can indeed be tackled.

Tackling poverty and inequality is at the heart of Europe’s own integration project. It is the main driver of EU’s external action, which promotes a world vision based on the values of social justice and protection, solidarity, and economic, social and territorial cohesion, with an overall objective: the eradication of world poverty. Indeed, greater welfare and equality beyond Europe is in the EU’s own self-interest: besides contributing to economic growth, investment and improved governance in developing countries, it contributes to achieving EU security, migration and asylum policy objectives. Additionally, efforts in this area help the Union remain a key global player in the provision and protection of global public goods.

Unfortunately, the EU – like other donors - struggles to demonstrate impact on poverty and inequality. Developing a much closer connection between its global poverty eradication objective and its policies across different investments, sectors and actions remains a challenge. Two fundamentals are: the need to pay attention to its own evaluations, which suggest that much work does not contribute significantly to addressing chronic poverty, stopping impoverishment or sustaining escapes from poverty – the objectives which need to be achieved if extreme poverty is to be eradicated; and to base its work on the best understandings of how poverty can be eradicated.

Originally published on ODI's website

Monday, 4 August 2014

Blog Series: Ensure a climate agreement and support a transition towards a green economy

This is the second blog in our series in the run up to 1 September when the European Think Tanks Group will publish a major report. It will be addressed to the new leadership of the European Union entitled, Our Collective Interest: Why Europe’s problems need global solutions and global problems need European action. Some rights reserved by Twm™

The problem

In 2015, the EU needs to achieve both a substantive climate agreement and an ambitious global development agenda with transformative potential. This is necessary not only for increasing global prosperity in a sustainable way, but also for securing its own future.

Climate change is a major threat to future wellbeing, and it compounds other aspects of global environmental change such as biodiversity loss, desertification, and ocean acidification. The EU has been and continues to be a major driver of those changes. Despite the relatively high efficiency standards in energy use within its borders, Europe’s production and consumption relies heavily on external inputs. Imports of fossil fuels, raw materials, biofuels, virtual water (the water necessary to grow imported food), meat and livestock feed increase the size of Europe’s environmental footprint in an era of increasing resource scarcity (ERD, 2012)...