The international monetary, financial and trading systems in support of development

1. The international monetary, financial and trading systems in support of development Presentation at the ESCWA Member Countries Regional Consultation in Preparation for 2008 FFD Review Conference By Aldo Caliari, Center of Concern Doha - Qatar April 30, 2008

2. Outline • Follow up process • A holistic approach to trade, financial and monetary policy • Participation of developing countries in international economic decision-making and norm-setting

3. Follow up process [I] • The most crucial systemic issue, because of the nature of the Monterrey Consensus: more process than content. Process characteristics of Monterrey and its follow up: >All stakeholders, beyond UN >Coherence >Convening and coordination role of the UN: political considerations underpin development policy >Holistic consideration of all mechanisms for development financing

4. Follow up process [II] Evaluation of follow-up since Monterrey: Agenda-setting power of the Monterrey Consensus, beyond the UN. Main tools, ECOSOC High Level Dialogue and General Assembly High Level Dialogue, have proved weak. • Participation level • Outcomes :Non-negotiating format

5. Follow up process [III] Need for strong follow up process: A variety of formats (FFD Commission, FFD Council, upgrade of existing process) But essential features should be: 1) Periodic and frequent 2) Negotiating power (thus, some instances of existing process would become pre-negotiating) 3) All stakeholders, and at the highest level (“spirit of Monterrey”)

6. Follow up process [IV] It should be accompanied by (though not consist only of): • Intergovernmental Committee on FFD at General Assembly level (counterpart for Secretariat) • Call for a new conference at Heads of State level, in a few years • Strengthened Secretariat machinery (including FFD Trust Fund)

7. A holistic approach to trade, financial and monetary policy [I] By definition, it cuts across all chapters. Importance: • Unique advantage of the UN-based process compared to other economic forums (e.g. World Bank, IMF, WTO). • Useful way to raise the profile and value of the UN as a leader, rather than follower, with regards to such other processes. • Strategic way to reframe the agenda and deliberations on a number of economic policy issues, bringing to forefront developing country concerns (asymmetries otherwise not revealed when separately looking at trade, finance or monetary aspects)

8. A holistic approach to trade, financial and monetary policy [II] • Exchange rate volatility and trade performance Issues: 1) Foreign investment, 2) Domestic investment, 3) Access to international financial markets, 4) erosion and uncertainty of market access concessions, 5) impact on absolute size of market access Lack of adequate institutional structure to provide exchange rate stability in a credible way (implement para. 54 of MC). IMF proved a failure at this task (multilateral surveillance). Role of regional financial and monetary cooperation Need for domestic policy space to manage the exchange rate (IMF bilateral surveillance) What protecting tools in trade and investment agreements? (Exchange rate safeguards, opt-out clauses)

9. A holistic approach to trade, financial and monetary policy [III] • Financial policy issues in Free Trade and Investment Agreements, and their Dispute Settlement Processes Issue: Do they take into consideration lessons learned on financial crises prevention and resolution? (East Asia, Argentina, now US) Treaty provisions that discipline management of: Financial sector Capital account Sovereign debt

10. A holistic approach to trade, financial and monetary policy [IV] • Capital accumulation as a framework for trade and investment Issue: shaping trade and investment rules not to increase exports/ attract foreign investment, but to raise levels of domestic capital: Relative value of market access Revenue from natural resource extraction The addition of value (know-how, technology) The export –investment nexus and debt service

11. A holistic approach to trade, financial and monetary policy[V] • Others A strategic approach to “Aid for Trade” Financial instability and trade Foreign Direct Investment and the BOP The role of multilateral institutions/aid on governance of the trading system Export-led strategies in the context of rising domestic currency-denominated debt

12. Participation of developing countries in Int’l Ec Policy[I] • The Bretton Woods Institutions Net result after Singapore + 2008 Spring meetings decisions: 2.7 % voting power changed hands Variables in quota formula: GDP, openness, variability, reserves Basic votes Double majorities Effective voting power not addressed The broader picture: Less lending + More surveillance & regulation=can a governance structure so reliant on funding capacity of members be any longer justified?

13. Participation of developing countries in Int’l Ec Policy [II] • Financial standard-setting bodies Standards and codes in the light of current crisis (e.g. Basel II) Implementation (MC para. 57): 12 G7-endorsed Standard and Codes continue to be part of IMF/World Bank incentives and sanctions Design (MC paras. 63 and 57): No progress registered.

14. Participation of developing countries in Int’l Ec Policy [III] Credit rating agencies Regulation of international finance The emergence of “new” actors: Sovereign Wealth Funds, Hedge Funds, Private Equity Funds

15. Participation of developing countries in Int’l Ec Policy[IV] • Emerging Aid Architecture Design and monitoring of conceptual and operational aspects. Definition of aid, review of delivery performance, coordination issues. FFD Review should: . assess the operationalization of Aid effectiveness mandate from Monterrey Consensus (an assessment of Paris Declaration on Aid Effectiveness and follow up). . Strengthen the ECOSOC Development Cooperation Forum as a far more adequate venue to hold this discussion

16. Participation of developing countries in Int’l Ec Policy[V] • International Cooperation on Tax Matters ECOSOC Committee of Experts, since 2004 Difference in outputs with OECD similar body: e.g., Model Convention on Bilateral Taxation Conclusion: Voice matters

17. Thank you Contact information: aldo@coc.org or acaliari@coc.org