Wednesday, 29 October 2014

EU’s pivotal role in tackling poverty and inequality worldwide

Photo by takasuii.
by Andrew Shepherd, ODI and Alisa Herrero, ECDPM

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 Millennium Development Goals, 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.

If the new EU leadership wants to make a difference in the eradication of poverty, it will need to frame its own poverty eradication policies as well as the goals and targets in the post-2015 development agenda in terms of the key measures which address chronic poverty, prevent impoverishment and sustain escapes from extreme poverty. It could also promote the inclusion of an income inequality target in the post 2015 framework (with details to be defined at national level).

To be effective, EU interventions should also be grounded on a solid analysis of the dynamics of political change and resistance to pro-poor reforms in partner countries. A new report from a group of leading think tanks ( explains the EU should adopt a poverty dynamics approach in identifying suitable sectors and programmes in partner countries.

The EU should ensure that the programming and implementation of the Partnership Instrument targets outcomes that contribute to poverty eradication in terms of, for instance, standard setting for decent work.

Sharing the positive elements and lessons from the European social model is key when exploring new and existing strategic partnerships with emerging countries, and when conducting political dialogue with countries phasing out from development assistance.

It should further extend joint programming with EU member states and work with them to maximise the focus on the reduction of poverty and inequality of all EU international cooperation.
Ensuring that those countries in which aid is being phased out have a clear ‘destination’ of graduation, including making sure that not all instruments are withdrawn (particularly aid and aid-for-trade) simultaneously, is also important.

As part of the implementation of the Agenda for Change, the EU should keep the list of countries to which it provides aid under review and use opportunities such as the Mid-Term Review in 2017 to make further adjustments to the list.

Friday, 24 October 2014

A global economy that works for the good of all: responsible trade and financial policy coordination

Photo by Danumurthi Mahendra
by Mark Furness and Jodie Keane (ODI)

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.

The EU could win friends and influence people, and lead by example, including by taking the following steps:

Articulate a sustainable development vision with regard to trade, financial coordination and taxation issues
  • Adapt to the realities of Global Value Chains (GVCs): existing trade and investment mechanisms need better alignment. There are examples of poor understanding of how the EU trades within GVCs, including recent anti-dumping actions over imported solar panels. 
  • Upgrade existing trade and development mechanisms to incentivise sustainable development: social and environmental standards should not be lower or less enforceable in Free Trade Agreements (FTAs) than the EU’s General System of Preferences (GSP+). The EU-US Transatlantic Trade and Investment Partnership (TTIP) presents a unique opportunity to better align trade and development mechanisms. Areas of harmonisation between the US and EU include standards, but also rules of origin. 
  • Develop impact assessments and promote dialogue: when seeking to upgrade developing country trading partners to new FTAs it is important to update existing business dialogue and mechanisms for monitoring progress. This is not only important for trading partners, but also within and amongst EU member states, so that appropriate flanking and sensitising measures required by new trade liberalisation can be designed. Current reliance on Sustainability Impact Assessments (SIAs) to assess the pros and cons of ‘hypothetical’ trade and investment agreements is weak. 
  • The Bali package agreed at the recent WTO Ministerial needs to be implemented. Resources for trade facilitation (aid for trade) should be additional to ODA. The EU could lead by example by responding effectively to calls from the LDC group on rules of origin and implementation of the services waiver, including through broadening and deepening its GSP. 

Work with partners on coordinating the governance of global financial markets and the reform of international financial institutions
  • There is a need for transparent, widely accepted triggers for economic policy coordination. Existing EU shock facilities need updating to new realities and an ex-ante rather than ex-post approach. Using triggers to guide policy interventions before they arise would avoid the need for bailouts later. 
  • Address illicit financial flows out of and into developing countries, including measures to improve the exchange of tax information and transparency. Recent changes to the Savings Tax Directive and the Administrative Cooperation Directive can extend automatic exchange. By reaching internal agreement with EU member states and associated countries, the new leadership would lend the EU the credibility necessary to push for a global standard. 
  • The 2012 Financial Action Task Force (FATF) recommendations are the most progressive worldwide standard on increasing financial transparency. The new EU leadership should continue to push member states and associated countries to meet FATF standards, particularly requiring companies to disclose ownership information, making this accessible in public registers and making tax crimes a predicate offence. Steps towards this are already being taken under the fourth revision of the Anti-Money Laundering Directive. 
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.

Thursday, 23 October 2014

Ensure a EU climate agreement and support a transition towards a green economy

United Nations Photo

by Imme Scholz, Niels Keijzer, Neil Bird, Alejandro Guarín

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 for securing its own future.

Climate change is a major threat to future well-being, 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.

Until now the EU has been a recognised global leader of climate change policy, both at the international negotiations table and at the cutting edge of implementation at home. But now there are signs of diminishing ambition: the 2014 Commission’s proposal on climate and energy policy eliminates the goal on renewable energy shares at member states’ level and is less demanding with regard to energy efficiency. It proposes a greenhouse gas emission reduction target of 40 percent by 2030 based on 1990 levels. Are 40 percent enough if the Commission calculates that it will reach a reduction of 32 percent already by 2020? And it makes the next stretch of the road much steeper: by 2050, the EU wants to achieve a target of 80 percent reduction.

Therefore, we believe that a higher target for 2030 would a) make the road towards 80 percent decarbonisation by 2050 more realistic by making it more gradual and b) offer space for European demand for emission reduction certificates from developing countries, such that the EU could provide further support for developing countries in their efforts to reduce emissions.

The reduction in the EU’s level of ambition can be attributed largely to the nature of the economic recovery of most EU economies after the financial crisis, which has been slow and painful. The governments of several member states are nervous that a commitment to cleaner energy and lower carbon emissions will result in higher energy and transportation costs—both of which are anything but politically palatable. But this perspective ignores ongoing changes outside the EU’s borders: 138 countries are already implementing renewable energy targets. China, the US and many other countries are increasing their investment in renewable energy technologies. In 2012, 40 percent of new photovoltaic modules and 70 percent of new wind power were installed outside Europe. Efforts in energy efficiency are also increasing worldwide, with China and India leading in energy-efficient cement production. Emission trading systems are under preparation in 16 countries and at provincial or state level in the US, Canada and China.

Securing the EU’s position within the leading group of climate and energy policies is thus a matter of maintaining both its clout in multilateral diplomacy and safeguarding its economic competitiveness.

What’s at stake and what the EU should do

A failure to negotiate a climate agreement and an ambitious post-2015 agenda will not only weaken global cooperation but also reduce the EU’s ability of protecting its own citizens from the worst effects of climate change. Neighbouring regions, especially North Africa, the Mediterranean and Southeast Europe, will also be heavily affected by global warming and spillovers to the EU are very likely. At the same time, a proactive climate and energy policy would contribute to maintaining European economic competitive advantages, its significant export trade in the areas of low carbon technology development and implementation, and to reducing its dependence on fossil fuel energy imports.

So far, climate policy commitments fall short of the objectives that scientists claim are necessary to stay within safe planetary limits.

Therefore, the next High Representative for Foreign Affairs and Security Policy should build up a much stronger profile in the area of climate change, in close cooperation with the Climate and the Energy Commissioners, and strengthen linkages between climate policy measures in the EU and abroad. This is needed given the importance of reversing climate change as a long-term EU foreign policy interest. The new Development Commissioner, Neven Mimica, should continue on the path started by his predecessor in pursuing the further integration between development and environment policy, including through a post-2015 sustainable development agenda.

The EU has to back its international discourse with far-reaching actions inside its own borders and globally to maintain credibility as a champion of progressive climate and environmental policy. The EU can make a difference: its main contribution will not be to reduce its GHG emissions as already in 2011 they accounted for barely 11 percent of global emissions. What the EU is expected to do is, first, to demonstrate that it is possible to decarbonise an economy, by investing in R&D, changing incentives, policies, and institutional setting, and thus behavioural patterns while maintaining satisfying levels of prosperity. Second, the EU is expected to establish mitigation partnerships with all countries willing to engage in decarbonisation processes, and to cooperate in identifying and implementing solutions for this task.

Monday, 13 October 2014

VIDEO: European Think Tanks Event at the EU Commission

Introduction: Mr. Gaspar Frontini, Head of Unit, DEVCO A1, International Development Dialogue

Presentation: Mr. James Mackie, Senior Adviser EU Development Policy, ECDPM

Link to report: “Our Collective Interest: Why Europe’s Problems need Global Solutions and Global Problems need European Action”

The presentation can be found below:

Monday, 6 October 2014

LIVESTREAM from EU Commission - Our Collective Interest: Europe’s Problems need Global Solutions

Watch the livestream of our EU Commission event on Our Collective Interest: Europe’s Problems need Global Solutions.

Friday, 10 October, 1pm (GMT+1) until 2pm.

The European Think Tanks Group published a major report 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”. The report puts forward recommendations for the EU’s engagement in 5 areas – trade and international finance; environmental sustainability; peace and security; democracy and human rights; and, poverty and inequality – and proposes organisational and structural changes to enhance the EU’s performance.

Introduction: Mr. Gaspar Frontini, Head of Unit, DEVCO A1, International Development Dialogue

Presentation: Mr. James Mackie, Senior Adviser EU Development Policy, ECDPM