Perspective from the UN Conference Last Week

July 1st, 2009

Thoughts from United Nations Headquarters in New York on the UN Conference on the World Financial and Economic Crisis and Its Impact on Development:

United Nations HQ is an odd place. A huge somewhat dated building full of bureaucrats and security guards trying at every stage to stop you from getting things done. Some would say it is a metaphor for the UN itself.

But the UN is crucial. For the reality is that there is no other truly representative international organisation where developing countries have a fair say over how the world is governed. I have come to the UN conference on the financial crisis and it’s impact on development.

Negotiators from around the world meet months in advance to agree on a consensus document on how the UN will take the process forward. This is finalised at the conference.

Negotiations usually run to the 11th hour, and civil society representatives (like myself) run around frantically meeting officials and ministers, grabbing a moment in a lift or a coffee shop to try to persuade countries to push for stronger commitments.

Yet, following difficulties in the negotiation process and a postponement of the conference to give negotiators more time, there is a strange lull. The conference agreed to adopt a draft of the outcome document two hours after the conference started. The proposed document is both a great success and a great disappointment.

It is the first time the world’s governments have agreed on a response to the financial crisis and that is no small feat. Indeed the analysis of how the crisis occurred is spot on. Yet what is striking is the huge gap between the analysis of the problems and the commitment to do something about them. This is a once in a lifetime opportunity to reform the global financial architecture to prevent similar crises happening again. It has not been grabbed with both hands.

For the first time the G77 (the group of poorest countries) agreed a common position for the negotiations. They supported many of the progressive proposals put forward by a UN commission chaired by Nobel Laureate economist Joseph Stiglitz. These included an international court to deal with debt crises, a global economic coordination council to monitor systemic risk in the financial system, a new reserve system to minimise instability in global exchangerates and reforms to clamp down on tax dodging in developing countries.

Yet the rich countries, particularly the EU, have consistently blocked reforms going through the UN. They prefer the ad hoc group of G20 where their power over reforms is firmly cemented.

Christian Aid wanted to see firm proposals for clamping down on tax dodging from developing countries, started at the G20 London summit, taken into the UN system. Yet while the document recognises the importance of dealing with capital flight and tax dodging, the devil is, of course, in the detail.

Some countries lobbied hard to get the following language in to the document:

Inclusive and cooperative frameworks should ensure the involvement and equal treatment of all jurisdictions. We call for consistent and non-discriminatory implementation of transparency requirements and international standards for exchange of information.

This is diplomatic speak for slowing down the process and reaching the lowest common denominator in demanding transparency standards from tax havens. We have been lobbying hard for bringing developing countries into the process around tax transparency which is currently happening in the OECD (a rich countries club).

An ideal way to do this would be through an upgrade of the UN tax committee – a group of experts which is hugely under-resourced – to an intergovernmental body that would have the legitimacy to take the issues of tax cooperation forward in partnership with the OECD.

Yet treasury departments all over the world get nervous at the idea of the UN “interfering” in their tax affairs. This fear is somewhat misplaced. National sovereignty over tax policy is a sacred cow which every governmentwants to protect. But international tax cooperation is essential for this to occur. For in recent years, the globalisation of finance means that national tax policy is inadequate and the sovereign right of governments to tax economic activity occurring on their shores is routinely undermined by companies and individuals shifting money to jurisdictions where they can pay less tax or avoid it altogether.

That issues of tax cooperation and illicit capital flight are again firmly stated within a UN consensus document is something to build on. A failure to agree on strong commitments is a disappointment but this conference is another step towards ending tax secrecy and stemming the outflow of billions of dollars from the worlds poorest countries.

27th June 2009

Written by David McNair

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