Rethinking Bretton Woods | Sun, Jul 19, 2015
RBW Project Director Aldo Caliari offers his assessment of the Addis Ababa Action Agenda adopted by governments at the Third International Conference on Financing for Development, July 13-16, 2015.
On July 16th, governments adopted the Outcome of the Third Conference on Financing for Development, held in Addis Ababa (Ethiopia), called the “Action Ababa Action Agenda” (AAAA or the “Outcome”). In a collective and sharp statement in response, civil society said that the conference “lost the opportunity to tackle the structural injustices in the current global economic system and ensure that development finance is people-centered and protects the environment.”
The lack of ambition of the adopted text, though not a surprise to observers of the negotiations leading up to it, is very striking for it contradicts hyped-up rhetoric from different sources in the UN and governments about the link between this conference and the upcoming ones this year. Ambitious outcomes in the conferences on the post-2015 development agenda (New York, September) and the Conference of Parties (COP) 21 on Climate (Paris, December) were expected to depend on success of FFD 3. But in its final form, the AAAA does not offer the hoped-for strong financial means of implementation for such other commitments. The reality is that negotiations saw a systematic action by Northern countries to deprive the outcome of any ambition.
The limited ambition of the AAAA
The CSO Forum that met the two days prior to the start of the conference noted, in its Declaration, myriad of concerns with the document that had been sent to the conference and ended up being approved with only a minor amendment. The forum gathered the approximately 600 civil society organizations (CSOs) attending the conference and its declaration was the result of months of consultations and consensus-building by the near 1000 CSOs that followed the process of negotiations in the lead up to Addis Ababa.
The strong reactions are justified in the face of an outcome that represents, in the balance, retrogression over the achievements of Monterrey and Doha. There are two areas on which the document represents a step forward. One is the establishment of a Technology Facilitation Mechanism, longstanding demand for a forum to discuss technology issues of relevance for development. This is a deliverable somehow “parachuted” from other processes – technology as such is conceptually different from the financing items that comprise the development agenda – and in that regard one that helps hide the lack of progress on the “traditional” FFD items. But CSOs agreed on its importance, regardless of whether FFD was the adequate forum. The second is the strengthening of the existing follow up process that will now include an annual meeting of “up to five days” yielding a negotiated outcome. Although this strengthening comes at the price of including in the same follow up space FFD and Means of Implementation for the post-2015 agenda – thereby risking dilution of the FFD agenda -- and falls short of CSOs demand for setting up an intergovernmental commission, CSOs welcome this step nonetheless.
But on more than 20 areas, the AAAA represent a step backwards or, at best, maintenance of the status quo in relation to the pre-existing Monterrey / Doha body of commitments. Civil society expressed concerns can be generally summarized as follows:
First, the AAAA places a strong optimism on the role of the private sector, without evidence to back it up and without parallel recognition of the developmental role of the State and commitments to safeguards States’ ability to regulate in the public interest or to protect human rights and the environment.
Second, while not a pledging conference, it is deplorable that a conference on financing failed to scale up existing sources and commit new financial resources. This is not just a statement on Official Development Assistance. Emerging consensus in civil society is that mobilizing domestic resources is a preferred source of financing for development, one that is more stable and fosters democratic ownership and accountability of the development process. But the lack of pledges on ODA should have, at least, been compensated with greater openness to revisit the rules of international tax cooperation that currently prevent developing countries from adequately mobilizing their own domestic resources. Yet, the conference did not offer anything in terms of reform to democratize the international space for norm-setting on tax cooperation, currently captured by a club of rich countries, the OECD.
Third, the AAAA could have reinforced the role of the UN on addressing systemic issues. The Financing for Development process, underpinned by the normative function and ethos of the United Nations, is the right forum for consensus-building on political matters that underpin international finance. In spite of the availability of consensus pronouncements confirming the mandate of the UN to address systemic issues such as financial regulation, the international monetary system and reform of the Bretton Woods Institutions, the negotiations saw a re-edition of these old disputes that had been settled time and again.
Fourth, as put by the Women’s Working Group on Financing for Development “The AAAA might leave the impression to some that it is strong on gender equality, women’s empowerment and women’s rights. However, while the AAAA, importantly notes in the first paragraph a commitment to respect all human rights, including the right to development, and that member states will ensure gender equality and women’s and girls’ empowerment, it lacks an integrated, consistent and explicit human rights based approach.” Indeed, the lip service paid to the rights of women and girls does not mean much without tackling the structural barriers to gender equality. Moreover, the AAAA takes at times the unhelpful position of instrumentalizing women’s rights, by speaking of them as a means to economic growth, rather than an end in themselves as recognized in UN norms and principles.
Fifth, the AAAA represents no progress on the beginning of the century’s promise to find a “lasting solution to the debt problem of developing countries.” The Outcome refrains from providing full support to the substantial amount of work going on in the UN on debt crises prevention and resolution–work to which the text even denies meaningful recognition. Furthermore, the Addis Ababa conference would have been the perfect opportunity to adopt the UNCTAD Principles on Responsible Sovereign Lending and Borrowing. These represent a mere restatement of already existing best practices and international law on the matter whose adoption has no cost but could have led to saving billions in unwarranted debt contracts and payments.
Sixth, the outcome fails to explicitly reaffirm the applicability of the principle of Common but Differentiated Responsibilities on the Financing for Development field. Since one of the mandates –if not the only one-- of this iteration of the FFD conference is supporting the post-2015 Sustainable Development Goals, this would have been a crucial principle to uphold.
The negotiations methodology
Observers found the methodology for negotiations a matter of concern, with civil society calling to make sure this methodology was never again repeated in a UN process because of its negative transparency and due process implications.
Instead of the normal negotiations in which countries discuss and amend text being projected on a screen that everybody can see, the methodology consisted of the Co-facilitators carrying out informal bilateral consultations and countries submitting edits to them. Co-facilitators would issue a clean new text that would attempt to represent the different views – near the end of the process they would issue sets of clean paragraphs – and the process would start again.
The Group of 77 (the bloc of the 134 developing countries, which includes China) found that their proposals were being taken comparatively less seriously into account in this process. This resulted in an uphill negotiating process in which they needed to constantly reintroduce proposals– something that other parties did not need to do since their proposals were already largely reflected in the proposed text. The lack of on-screen negotiations made it unclear why certain proposals were less reflected than others or absent altogether. In some cases this meant having to submit entire new paragraphs as amendments to the text (the G77 is the grouping that most entire new paragraphs submitted as edits into the drafting process), with the risk of being portrayed as “the difficult party” that was unwilling to compromise in the negotiations. It is important to note that the methodology of on-screen text was the subject of repeated calls by G77, which were ignored by the Co-facilitators. The one thing the G77 failed to do was walk out of the negotiations, thus tacitly validating the Co-facilitators decided course of action.
At a plenary convened on July 7th after several plenary attempts that did not materialize in last-ditch efforts to buy time for closing the text, the Co-facilitators announced that the remaining issues on which the parties had not been able to reach agreement at the time were:
1. The intergovernmental tax body: Developing countries demanded upgrading the UN Committee of Experts on International Cooperation in Tax Matters to an intergovernmental committee with universal membership or at least proportional regional representation. Developed countries wanted to maintain the existing committee with at the most, perhaps making some minimal changes.
2. Common but Differentiated Responsibilities: The principle that establishes that developed countries have a greater responsibility to address environmental public bads than developing countries, due to their historical contribution to creating them and their greater capacity to contribute to the solution. Developed countries asserted that this was a principle that only applied to climate finance, a fact the draft outcome document already mentioned. Developing countries demanded that, given the expansion of the agenda to finance of Sustainable Development Goals, the principle should apply across the board in Financing for Development.
3. The relationship between the post-2015 development agenda and the Financing for Development Conference: Developing countries argued that the FFD 3 conference had its own separate life and purpose and should not be seen as merely the supporting Means of Implementation for the post-2015 development agenda. The developed countries maintained that FFD was purely for supporting the post-2015 agenda.
But the European Union, United States and Japan hinted that if in Addis Ababa these issues were opened for discussion, they might want to reopen some of their choice.
This led to the unusual scenario of a text being transmitted to the conference in clean form –that is, no brackets -- but open, so anything was potentially up for discussion. Although this would have foreshadowed a time of febrile negotiations on everything in Addis Ababa, the situation proved to be quite different. The Chair of the conference did not call a meeting of the Main Committee (the body of the conference that is tasked with carrying out negotiations) until the end of the second day.
In the meantime, developing countries received extreme pressure to close the document as it was. For one, the fact that Ethiopia was the conference host gave the Northern countries an additional leverage. G77 members were in the difficult position that if they wanted to confront the inflexibility of the Northern countries, they risked failure of the conference and an embarrassment to their member and host, Ethiopia.
The UN Secretary General added to such leverage by asking developing countries to drop their demands for an intergovernmental tax body in order to secure an agreed Outcome Document. This pressure had been also evident in a memo released by the UN Secretary General’s Special Advisor on Post-2015 Development Planning on July 7th. The document chose to emphasize purported “achievements” of the then-current text rather than the many concessions that the G77 had made up to that point and remained unmatched by concessions from the other negotiating Parties. The odd choice was clearly intended to convey the message that “enough had been achieved” in the deliberations and discourage a push for more ambition.
If only the memo’s assertions had been accurate. Several of its purported achievements can only be considered so without the benefit of history. As mentioned above, on more than 20 areas the text represents a retrogression compared to commitments in Monterrey and Doha, including issues of inequality, progressive taxation and important systemic issues. While the memo simply ignored most of these backwards steps, some of the memo’s claims enter in direct contradiction with them.
For instance, the memo stated that in the AAAA “We commit to a new social compact to end poverty in all its forms everywhere, delivering social protection and essential public services for all.” But a commitment to universal access to social infrastructure and inclusive social services was already part of the Doha FFD Review. The AAAA weakens such pre-existing commitment by qualifying it as applicable when “nationally appropriate” and “fiscally sustainable” –this latter an expression typically associated to the calls to impose user fees on services or just cut them. Moreover, there were no new resources committed for this purpose as attempts to have a global fund for such priorities were resisted and ultimately defeated by Northern countries’ opposition.
The memo claims that in the AAAA countries “will redouble efforts to substantially reduce illicit financial flows (IFF) by 2030.” But the AAAA’s pledge is just slightly stronger than similar ones present in Doha and Monterrey. However, a key instrument to make that happen which was a commitment in the Monterrey Consensus to take measures in source and destination countries to increase transparency of capital flows, was dropped from the text this time around after a number of Northern countries and the IMF objected to the feasibility of gathering such data.
In Addis Ababa, after the first meeting of the Main Committee it was very clear that the only issue that would be up for discussion would be some improvements on the existing UN Committee of Experts. But ultimately even this watered down version of the G77’s demand did not gather sufficient support from developed countries, with the US and, within the European Union, France and the UK, being the main blockers. On the third day of the conference, the chairman announced the amendment to the respective paragraph that essentially maintains the status quo. With only this amendment, the text was adopted.
In spite of ceding to the pressure to endorse the outcome, the G77’s discontent with the outcome was evident in a statement the Group filed at the closing plenary listing a number of issues “important to, and fully endorsed by, the Group that have not been adequately accommodated in the current text.” These issues included but were not limited to: the reaffirmation of the key Principle of Common but Differentiated Responsibilities; the need to maintain the integrity of the FfD3 and post-2015 development agenda processes as separate negotiation tracks; the need for development partners to meet current commitments and to upscale ODA; the specific needs of Middle Income Countries, the need to make an explicit reference to countries and people living under foreign occupation; the need for an upgrade of the UN Committee of Experts on Tax Cooperation and the need to explicitly address the fact that climate financing is additional to and cannot be counted as ODA.
That in spite of its diversity, a group that represents more than 134 countries found common ground in expressing discontent with the Outcome cannot be overemphasized. This joint statement, added to the several individual countries that filed interpretative statements and reservations, make the AAAA a shaky start to the three conferences of this year.
Fishing for the crumbs of hope
Not all is lost, however. While in the balance the agenda emerging from Addis Ababa is weaker than the pre-existing commitments on financing for development, it is important to recall paragraphs 1 and 132 in the AAAA as perhaps the strongest elements in terms of advocacy going forward.
Pursuant to paragraph 1 Member States “reaffirm and build on the 2002 Monterrey Consensus and the 2008 Doha Declaration.” Pursuant to paragraph 132 the forum on FFD will be “dedicated to discuss the follow-up and review of the Financing for Development outcomes” (emphasis added). This means, the AAAA does not replace the commitments in Monterrey and Doha outcomes, but the outcomes of Monterrey, Doha and Addis Ababa should be seen as a whole compact that will be followed up in the established follow up process.
Hopefully, the process failures should strengthen resolve to make sure the practices that prevailed in the lead to Addis Ababa will not ever be repeated in a UN negotiation in the future. For an emerging school of thought at the UN, on-screen negotiation is an inconvenience of the past, one that should be dispensed with for the sake of obtaining outcomes. But the lesson to learn from Addis is that those who ignore due process and “fast-track consensus” do so at their own peril. Outcomes that are grudgingly accepted or end up emblazoned with qualms voiced by large blocs of countries are not a sound basis on which to build any agenda, let alone one that should last 15 years and rely on voluntary ownership by the same countries. The lessons will have to be learned fast as negotiations leading to the post-2015 Summit continue already in the week immediately after the Addis Ababa Conference.
Another encouraging sign is the growing role played by civil society in the process. Key issues that became central to the negotiations can be traced back to civil society action and advocacy: the impact of a change of structure in the Outcome Document compared to Monterrey/ Doha, the importance of strengthening the follow up process, the need to establish an intergovernmental tax body, the history of the FFD process as different from the post-2015 development agenda, and the relevance of reaffirming the CBDR principle in the FFD field.
Civil society action was also a significant actor in providing technical knowledge on the issues under negotiation, raising awareness and swinging public opinion on them. Had there been a process conducive to a more balanced outcome, there is no doubt civil society would have had much more impact on the final outcome, too.
The strengthening of this extremely active, insightful, resourceful and well-organized community, and its stated willingness to not go away is, perhaps, the biggest crumb of hope one can rescue from the Addis Ababa episode of the FFD saga. Surely enough of a good reason to stay tuned.