Addressing systemic issues: enhancing the coherence and consistency of the international monetary, financial and trading systems in support of development

FfD-Agenda

United Nations, A/ AC. 257/ L. 2, June 2000

"Addressing systemic issues: enhancing the coherence and consistency of the international monetary, financial and trading systems in support of development

9. Improving global governance: broader participation in decision-making and norm-setting; accountability; transparency; regional arrangements; policy coordination for increased and more equitable world economic growth.

10. Strengthening the international financial architecture to support development: enhancing financial stability; improving early warning, prevention and response capabilities vis-à-vis financial crises; through, inter alia, the enhancement of social safety nets; liquidity issues and lender of last resort.

11. Strengthening the role of the United Nations in assisting and complementing the work undertaken in the appropriate international monetary, financial and trade institutions in accordance with their respective mandates, with a view to enhancing coherence and consistency in support of development. "

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First Working Paper of the Facilitator

United Nations, A/AC.254/24, March 2001

" Heading VI: Addressing systemic issues: enhancing the coherence and consistency of the international monetary, financial and trading systems in support of development

A central challenge is to ensure the inclusive, adequate governance of economic globalization in support of development in the context of increasing interdependence. International institutions and policy coordination need to be strengthened in relation to the objective of increased and more equitable world economic growth. Broadening the participation of developing countries in norm-setting and decision-making processes is key to ensure the soundness and legitimacy of agreements and to effective and efficient follow-up. Increased cooperation with civil society and the private sector is also an important component of these efforts.

How to encourage all relevant national, regional and international policy-making forums to further pursue efforts to become more accountable, responsive and transparent to public concerns, as well as to review their composition and consultation mechanisms so as to ensure fuller and deeper participation of developing countries and adequate consultation with all concerned actor and stakeholder groups?

How to continue to benefit from the technical and logistical advantages of ad-hoc groupings and limited-representation forums while ensuring that decisions with global repercussions are taken in fora that are more inclusive and that have clearly-defined and broad-based intergovernmental mandates, such as the International Monetary and Financial Committee, the Development Committee and the United Nations General Assembly and Economic and Social Council?

What would be the most appropriate form for an enhanced institutional relationship between the WTO and the UN? Should the Ministerial Council of the WTO be asked to consider again this matter at one of its forthcoming meetings?

How can the objectives of democracy (reflecting the weight of population), economic pragmatism (reflecting economic size) and diversity (reflecting the perspective of countries that are small in population and economic terms—or both) be balanced to enhance the voice and participation of developing countries in global economic governance? How to catalyze efforts to achieve this purpose in an incremental way?

What would be a do-able formula for more systematic consultation between the UN, BWIs, WTO, regional development banks, civil society organizations and business representatives at the international level?

How to promote further global tax cooperation to enhance efficient and equitable national tax systems and avoid tax evasion, double taxation and the risk of "races to the bottom"? Could a forum for cooperation on tax matters play a role as a first step in that direction?

What kind of awareness raising and specific policy coordination effort could major industrialized countries undertake to fulfil their special responsibility in ensuring that their macroeconomic policies, including exchange rate policies, take into account their effects in creating an international economic environment favourable to equitable growth and development, international financial stability and enhanced financial flows for development? How could multilateral surveillance be strengthened for this purpose?

Though progress on reform of the international financial architecture had moved in the right direction, it has been insufficient, given the magnitude of the changes required to ensure its support of development, and has been asymmetrical, with slower progress in the area of international reform, as opposed to reforms at the national level in many developing countries.

It is necessary to deepen national, regional and international efforts to improve surveillance, early warning, prevention and response capabilities for dealing with the emergence and spread of financial crises in a timely manner, taking a comprehensive and long-term perspective while remaining responsive to the challenges of development and the protection of the most vulnerable countries and social groups.

What kind of measures are required to ensure that the resources at the disposal of the international institutions, in particular the International Monetary Fund and similar regional bodies, are sufficient to allow them to provide emergency financing in a timely and accessible manner to countries affected by financial crisis?

Beyond the liquidity requirements to prevent and respond to financial crises, what kind of measures are required to increase the long-term resources at the disposal of the international financial system, strengthened by regional and subregional efforts, to allow them to adequately support economic and social development, including support for infrastructure, poverty eradication and social safety nets?

How best to ensure that the international financial institutions and other development agencies, in providing policy advice, supporting adjustment programmes and requiring implementation of codes and standards, more fully take into account the special needs and implementing capacities of developing countries, in accordance to nationally owned development policies and strategies?

How to support the development of appropriate frameworks for the involvement of the private sector in the prevention and resolution of financial crisis, including clearer rules for an equitable distribution of the cost of crisis resolution adjustments between the public and private sectors and among debtors, creditors and investors?

What measures could be put in place in both destination and source countries to avoid costly crises and their contagion, and allow a country to harness the potential benefits of portfolio and credit flows while containing excessive volatility and other risks they entail, particularly in the case of short-term capital flows and highly leveraged transactions?

How to ensure that sovereign risk assessments of developing countries by rating agencies be based on objective and transparent criteria?

How regional and subregional financial institutions and arrangements can be harnessed and strengthened to support the reform of the international financial system, enhance financing for development and provide or leverage emergency financing in time of crises?

The International Conference of Financing for Development and its follow up should contribute to the realization of the United Nations potential as a central pillar of international coordination and cooperation, acting in collaboration with the Bretton Woods institutions, regional development banks and the World Trade Organization, to ensure that globalization works for development and that its benefits reach all people.

How can we maximize the UN General Assembly capacity to provide a forum to further consolidate a broader global agenda for a strengthened and stable international financial and trading system that is responsive to the priorities of growth and equitable development? How best to ensure its collaboration with other multilateral institutions, in particular the BWIs and the WTO, in addressing priorities for action, emerging issues and policy gaps in the follow up of the International Conference on Financing for Development?

What would be required for the Economic and Social Council to become a more effective forum for identifying coherence gaps and discussing general policy coordination issues on international economic, social and related matters? Would enhanced participation from Finance, Trade and other relevant ministries in key meetings and high-level consultations and a more comprehensive regular reviews of trends in financing for development policies and performance contribute to strengthen efforts to achieve more coherence and consistency?

Which should be the features of the follow-up mechanism of the International Conference on Financing for Development? How best to continue building bridges between development and finance and trade deliberations and initiatives? How best to continue and nurture the high-level political dialogue to assess the global economy and progress of implementation of the outcome of the Conference among the United Nations, the Bretton Woods Institution and the World Trade Organization, with the participation of Member and observer States of the United Nations, as well as other relevant stakeholders?"

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Report of the Secretary-General
to the Preparatory Committee for the
High-Level International Intergovernmental Event
On Financing For Development

United Nations, A/AC.257/12, January 2001

"The ongoing reform efforts by the governing bodies of the international financial institutions should be welcomed and pursued vigorously and on a priority basis with a view, inter alia, to helping make those institutions more responsive to evolving globalization and development challenges, improve overall representation and participation, especially of developing countries, and enhance accountability and transparency.(...)

Multilateral financial organizations should maintain independent monitoring bodies for external evaluation of their performance on a regular basis - in accordance with the terms of reference established by the respective governing bodies - which could as a general rule be empowered to respond to certain types of requests for evaluation from member Governments, civil society, the private sector and labour, as well as to initiatives of the evaluators themselves.(...)

Ad hoc groupings and forums that lack adequate global representation but that, in effect, make policy recommendations with global repercussions should be used mainly as a complement and as an input to discussions in forums that are more representative and that have clearly defined and broad-based intergovernmental mandates, such as the International Monetary and Financial Committee, the Development Committee, the General Assembly and the Economic and Social Council.(...)

Restricted membership bodies undertaking any functions with implications for global governance should implement ways and means to establish clear procedures to increasingly reach out to and regularly engage all relevant non-member stakeholders and secure their views. The Financial Stability Forum and other international bodies set up to consider universal standards, codes and guidelines in the financial sector should pursue such procedures - and develop modalities for operating - through fully inclusive, participatory, accountable and open processes. Recommendations of such bodies should be taken up in discussions taking place in relevant bodies of the United Nations system.(...)

The United Nations and the World Trade Organization should continue to work innovatively and constructively with each other in pursuing overall coherence and consistency issues related to the international monetary, financial and trading systems, especially as they relate to the support of development. In this context, the UNCTAD Trade and Development Board should further deepen regular interactions with the Committee on Trade and Development of the WTO General Council. Other interactions and cross-participation of senior officials, committee chairs and interested government representatives in United Nations and WTO intergovernmental meetings should be similarly facilitated.(...)

The high-level event should mandate that a careful in-depth study be undertaken, in cooperation with IMF and other relevant international financial institutions, of potential means for enhancing tax-related international cooperation, including mandating a specific negotiating process on international agreements on this subject and the possibility of establishing an international organization or forum for cooperation on tax matters.(...)

International support for regional and subregional cooperation in financial as well as trade matters, which should complement and be consistent with global accords, should be strengthened. In this context, the United Nations regional commissions should enhance collaboration with other subregional and regional bodies on these issues, such as by facilitating the exchange of relevant information on experiences and practices.(...)

The international community should recognize that the implementation of international prudential standards and regulations for national financial systems should take account of different stages of economic development and administrative capacities, as well as different cultural and legal traditions, across countries. In the developed economies, all relevant financial markets and institutions, including highly leveraged institutions, should be the subject of prudential standards and regulations. In economies with less developed financial sectors, not all standards may be fully relevant due to the absence or limited development of some sectors. In order to enhance the implementation of standards, capacity-building in financial-sector supervision in developing and transition economy countries should receive increased international support. Special provisions should be formulated to allow these countries to overcome their structural or systemic impediments to their overall participation in the international financial and trading system.(...)

National authorities in all countries and relevant international institutions should strengthen the collection and reporting of economic and financial data by government offices, central banks and financial authorities at domestic and international levels, taking into account norms established in international forums. This is an additional need that has to be met as a result of the new global economic environment, and the international community should respond favourably to requests from developing and transition economy countries for assistance in this area. (...)

In order to provide policy makers with a variety of perspectives, global economic monitoring and assessment should continue to be carried out in the international financial institutions, in the United Nations, in the World Trade Organization and in other representative global and regional forums.(...)

The high-level event should underline the importance of full and symmetrical surveillance of all national and regional economies by IMF on behalf of the international community. Such surveillance should continue to emphasize the systemic consequences of national economic developments and policies, taking into account the differences in circumstances among countries. The content and nature of multilateral surveillance should continue to be kept under review, adapted and strengthened as the world economic and financial environment evolves.(...)

The high-level event should endorse the principle that arrangements among groups of countries for mutual surveillance are a useful supplement to multilateral surveillance, and should encourage developing and transition economy countries to engage in such exercises. The international financial institutions and such other entities should work closely together to mutually reinforce their respective surveillance and policy coordination endeavours.(...)

The high-level event should reiterate that internationally supported adjustment programmes should be employment and growth-oriented and should minimize the social costs of adjustment, especially their impact on poverty and on access to basic social services. Programmes should be fully funded, including provision for sufficient restructuring of external debt-servicing obligations. For this purpose, the international community should continue to explore mechanisms that might be added to existing funding and policy instruments.(...)

The high-level event should suggest that, in view of the possibility of multiple and simultaneous financial crises, IMF, in cooperation with other relevant international institutions, undertake an assessment of the global capacity to respond to emergency needs for international liquidity, including the feasibility of temporary allocations of special drawing rights.(...)

The high-level event should request that the United Nations system have and use the professional and operational capacity to assist all interested developing and transition economy countries in developing and operating appropriate mechanisms for national and international dialogues on development and its financing with all relevant stakeholders.(...)

The high-level event should call for a strengthened United Nations to play a key role as a central pillar of the international system, acting in collaboration with the Bretton Woods institutions and the World Trade Organization, in the management of global economic integration and in helping to develop adequate policy responses to the imperatives of growth, equity and stability, and of coherence and consistency. It should urge Member States to strengthen the capacity of the United Nations to promote broad-based and participatory dialogue and to use this capacity more fully and effectively in the international efforts to ensure that globalization contributes to development and that its benefits reach all people, and to develop an open, equitable, rule-based, predictable and non-discriminatory multilateral trading and financial system.(...)

Member States should consider convening, in the context of the General Assembly sessions, periodic round-table meetings at the highest level to address broad, cross-cutting policy questions relating to global economic growth, stability, equity and integration. Such round tables should have an open and participatory preparatory process, with the full involvement of the relevant multilateral institutions, civil society and the private sector.(...)

The President of the General Assembly should be invited to explore, with the chairs of relevant regional associations of Governments, the international financial and trade organizations, and United Nations system bodies with economic responsibilities, appropriate modalities for consultations with each other and with all relevant actors that will help identify and deal with institutional policy gaps and focus attention on development-related policy issues of global concern.(...)

The high-level event should agree that efforts should be strengthened to make more effective use of the United Nations Economic and Social Council as a forum for identifying coherence gaps and discussing general policy coordination issues on international economic, social and related matters, as well as concerns related to the objective of enhancing the coherence and consistency of the international monetary, financial and trading systems in support of development.(...)

Member States should further pursue and enrich initiatives, such as those introduced in recent years to facilitate the interaction of the Economic and Social Council with representatives of the international monetary, financial and trade institutions. The annual "policy dialogue" and the Council’s meeting with representatives attending the semi-annual meetings of the Bretton Woods institutions should be seen as a continuum of opportunities for promoting policy coordination and coherence and their agendas should accordingly be developed and preparations undertaken with a view to achieving more clearly defined outcomes.(...)

The Economic and Social Council should undertake, as part of its follow-up to global conferences and of the financing for development high-level event, a periodic and systematic review and assessment of:

(a) Progress in the attainment of internationally agreed development goals and targets;

(b) Trends in development cooperation policies and performance;

(c) Overall development impact of development cooperation, finance and trade policies.

(...)

The Economic and Social Council should be requested to consider devoting part of its sessions, on a periodic basis, to a broad-based discussion on issues related to the follow-up and implementation of the financing for development event, which should include, through further innovative and flexible mechanisms, the active involvement and participation of all relevant institutional and non-institutional stakeholders."

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Joint Statement of the Co-Chairmen
at the Conclusion of the First Part of the
Third Session of the Preparatory Committee

United Nations, 8 May 2001

" VI. Systemic issues

There was a broad consensus among speakers that progress on systemic issues is absolutely essential.11/ Like at the February Session of the Prep Com, major attention was devoted to two broad themes: participation in the international decision-making and norm-setting process and better coordination and coherence in activities of different international bodies.

Most participants stressed the need for broader and more effective participation of all countries in the process of setting norms, standards and rules of universal application and that global governance arrangements should adequately reflect interests and concerns of all. There was a convergence of views that increased coherence between development, trade and finance should be a priority and one of the major outcomes of the FfD process. There was also a broad agreement that the United Nations can and should provide an important forum for convening and facilitating policy dialogue on global economic, financial and development issues. Speakers welcomed the efforts of international financial institutions to become more accountable, as well as more transparent and responsive to international public concerns.

Towards policy priorities

How the on-going reform efforts of the existing financial structures could make these structures more transparent and responsive to the challenges of globalization and development.

Developing appropriate arrangements for capacity building of developing countries in making international finance and trade policy.

Examining the conditions for a more enabling international environment in support of domestic resource mobilization, including market access for developing country exports, the stability of international commodity prices and the global financial system governing international financial flows.

Improving consistency, coherence, coordination and cooperation in financial, trade and development spheres. Some improvements have already been made. Nevertheless, according to speakers, much more is needed to further extend and strengthen coherence and consistency among international financial institutions, WTO, United Nations and various forums and committees. It was pointed out that better coordination is required both at the international and national levels. It was also recognized that increased coherence in policy making should be matched at the operational level when policies are translated into concrete actions.

Ways by which regional cooperation can effectively complement actions at the global level. Participants stressed that strengthening regional cooperation and coordination arrangements between global and regional institutions in monetary and financial matters as well as in crisis prevention and management should be further explored.

Further exploring possible modalities for increased international cooperation on tax matters.

Strengthening multilateral surveillance in a symmetrical manner for all countries.

Encouraging coherence of major industrial country policies with global objectives.

Better monitoring and surveillance of world financial markets, to improve transparency of all actors including those in the private sector, to increase cooperation in information and data collection.

Differentiated approach to implementation of standards and codes, taking into account the development needs and capacities of developing countries

Supporting IMF efforts to streamline conditionality.

Continue to respect the domestic, social and political policies of individual countries in structural adjustment programmes.

Respecting autonomy in capital account management, such as regarding use of fiscal disincentives and regulations, and the choice of exchange rate regimes.

The contribution of the private sector to domestic and international financial stability is important. According to many speakers, the development of rules and procedures for private sector involvement in crisis management and resolution is very important and needs to be further elaborated. In addition, enhanced dialogue, active and regular two-way contact on policy issues may help prevent crises.

Strengthening systems of social protection in developing countries and better integration of social and financial issues. Exploring ways to strengthen multilateral support so that countries may better withstand economic and financial crises and adjust in a more growth and employment-oriented manner." 

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High-Level Panel on
Financing for Development -
Recommendations & Technical Report

United Nations, A/55/1000, 26 June 2001

Recommendations:

" Systemic issues

Many of the issues at the heart of development financing have to do with global economic governance. Economic and social policies are subjects not only of national but also of global governance. The dramatic events of the first half of the twentieth century taught nation states that global interdependence without global rules and institutions is in nobody’s long-term interest. The painfully acquired awareness of the need for a global rules-based framework is what led to the building of the existing multilateral system. Despite its shortcomings, this system has made powerful contributions to the unprecedented progress and stability that much of humankind has enjoyed since the end of the second world war.

It is clear, however, that the challenges of globalization today cannot be adequately handled by a system that was largely designed for the world of 50 years ago. Changes in international economic governance have not kept pace with the growth of international interdependence:

§ As economic interdependence increases, its potential benefits increase, but so do the speed and strength of the effects that a disturbance anywhere can have on the rest of the global economy. Despite recent worthy efforts, the world has no fully satisfactory mechanism to anticipate and counter global economic shocks.

§ The integration of markets—either through explicit decisions of nation states or simply by virtue of technological progress and economic specialization—is not occurring as harmoniously as it could and should. This leads to mounting frictions and, in several actual and potential market participants, to a sense of unfairness and frustration.

§ Sovereign states have proliferated and a good number of fast-moving developing countries have increased their shares in world production and trade. Yet global economic decision making has become increasingly concentrated in a few countries. Tensions have worsened as a result. For a range of common problems, the world has no formal institutional mechanism to insure that voices representing all relevant parts are heard in the discussion.

§ The international community has no commonly agreed instrument or procedure for deciding who does what. The result is several vacuums in global governance. For some global public goods, practically no agency has effective authority and existing agencies struggle to respond to problems for which they are ill-equipped or lack a precise mandate—as for example when the WTO is asked to enact and enforce labor standards.

§ Some forums that attempt to address systematically a variety of global economic issues are too restrictive in their membership—like the Group of Seven plus Russia. Others—like the Group of Twenty or the committees of finance ministers and central bankers convened periodically by the IMF and the World Bank—lack the adequate political level to make authoritative decisions.

These gaps in global governance have a host of adverse consequences for the resolution of many of the issues that this Panel was asked to address. The Commission on Global Governance[2] warned lucidly about the “global governance deficit” six years ago—and since then the trends that make it urgent to confront the deficit have continued to assert themselves very strongly.

Global Council and Globalization Summit

We thus endorse the Commission’s proposal to create a global council at the highest political level to provide leadership on issues of global governance. The proposed council would be more broadly based than the G7 or the Bretton Woods institutions. It would not have legal binding authority but through its political leadership it would provide a long-term strategic policy framework to promote development, to secure consistency in the policy goals of the major international organizations, and to promote consensus building among governments on possible solutions for issues of global economic and social governance.

As much as we perceive the need for the proposed council, we acknowledge the enormous political difficulty of launching it. To pave the way, we support a Globalization Summit.[3] The Summit would convene a group of heads of state, large enough to be representative but small enough to be efficient, to address the key governance challenges of globalization through a structured but informal discussion. Very importantly, through the influence of its political leadership, the Summit could speed up some ongoing processes of reform and launch new ones that are urgently needed to help give effect to the promises of globalization.

The Globalization Summit should take as a very important input the conclusions of the Financing for Development Conference. We recommend that first the Conference and then the Summit should consider the following systemic issues that affect financing for development:

Support for multilateralism

The Conference and the Summit should endorse the multilateral approach to handling the common problems of humanity. Without the United Nations System ours would be a much worse world and, as has been wisely said, its main institutions would have to be invented anew. First and foremost, the United Nations Organization must receive the appreciation and support it deserves for its many accomplishments and its still enormous untapped potential. The UN must be reinvigorated politically and economically. And so must the Bretton Woods and some other institutions of the UN system.

Faster reform of the international financial architecture

Financial crises in several countries in recent years have given rise to a number of initiatives aimed at reforming the international financial system. Some useful initial progress has been made, but now that the sense of urgency has subsided, the implementation of the main points of the agenda has proceeded too slowly. Much remains to be done to strengthen financial systems, to promote adherence to international standards of good practice, and to promote fair burden sharing by inducing better involvement of the private sector in preventing and resolving crises.

In the International Monetary Fund, the shift to crisis prevention, including the timely detection of external vulnerability, is yet to be completed. Another important pending issue is the streamlining of the Fund’s conditionality. The Fund frequently imposes too many conditions and unrealistic demands on borrowing countries, exceeding its core mandate and taking insufficient account of domestic authorities’ willingness and capacity to execute its demands. Without impairing the Fund’s ability to comply with its core mandate, borrowing countries should be given the opportunity to choose their own path to reform.

The World Bank should also accelerate its refocusing, to support client countries’ longer- and medium-term structural and social reforms, particularly those useful for preventing crises and fostering economic and social recovery from financial crisis, including the construction of social safety nets.

Efforts to correct anomalies in the governance of both institutions should continue.

Reinforcement of the WTO

The World Trade Organization, the first new global institution of the post cold-war era, is the centerpiece of the multilateral trading system. It is a unique institution, to the extent that it not only works through the acceptance and observance of its rules by all its members, but also provides a multilateral dispute settlement system and procedures to enforce the commonly agreed rules. The WTO system based on rules and disciplines is of critical importance to developing countries, which have much less capacity than the industrial countries to influence trading conditions, unilaterally or bilaterally. The WTO provides developing countries with an enforceable framework to ensure their rights are respected.

Yet the WTO is under enormous stress. Both developing and industrial countries claim to have quarrels with the institution—not to mention activists of all persuasions who would like to see the WTO serve their specific social and political agendas.

Despite its youth, the WTO is in urgent need of reform and support in certain critical aspects. The necessary changes are unlikely to be achieved from within. What may be needed is a bigger political impulse, stemming from the construction of global economic governance. In that endeavor, at least the following aspects of the WTO should be addressed:

§ its decision-making system, which many developing countries perceive, with reason, as selective and exclusionary;

§ its capacity to provide technical assistance to developing countries, so they can participate more effectively in multilateral trade negotiations, trade opportunities, and the dispute settlement mechanism;

§ attached to the latter, the WTO’s evident underfunding and understaffing.

Institutional response to environmental and labor issues

Various international organizations have been under huge, and frequently conflicting, pressures to address legitimate environmental and labor issues that are raised by civil society interests. With its capacity to impose sanctions, the WTO has been the most attractive target for such pressures. To a large extent, this situation reflects the lack of global instruments capable of responding adequately to the labor and environmental concerns that are raised.

To deflect pressures from the WTO and provide a more adequate forum for the development and enforcement of labor and environmental standards, serious consideration should be given to:

§ strengthening the International Labor Organization by providing it with instruments to enforce its standards; and

§ consolidating the sundry organizations with responsibility for environmental issues into a single Global Environment Organization.

Innovative sources of finance

Modern globalization calls for global governance, respectful of individual sovereign states, but properly equipped to address global problems such as poverty, security, and pollution. Sovereign states must empower the multilateral system to overcome its many challenges. For official development assistance, humanitarian aid, and for global public goods, the system needs more resources than are being provided by traditional sources of funding. There is a genuine need to establish, by international consensus, stable and contractual new sources of multilateral finance.

The international community must recognize that it is in the common interest to provide stable and contractual resources for these purposes. Politically, taxing for the solution of global problems will be much more difficult than taxing for purely domestic purposes. But like all political decisions that are taken for the next generation and not just the next election, this one should be assessed carefully against the alternative scenarios, including the very dangerous one of continuing polarization, exclusion, confrontation, and insecurity in the world. If only out of self interest, new sources of finance must be considered without prejudice by all parties involved.

The Panel has considered many suggestions for innovative sources of finance. We believe the Financing for Development Conference and the Globalization Summit should first discuss whether or not the world should have global, and not only sovereign, imposition of taxes. Next, if global taxation is considered desirable, they should proceed to discuss seriously the pros and cons of two such sources: a currency transactions tax and a carbon tax. We advise that before any political discussion, these possible new sources of international finance be examined purely on their economic and development merits and shortcomings.

A currency transactions tax, or Tobin Tax, is a tax on all spot conversions of one currency into another, proportional to the size of the transactions. Proponents of the Tobin tax believe that it would dampen speculative operations in international financial markets and would raise large revenues. Skeptics argue that it would be too complex to implement, and that its economic effects would be somewhat ambiguous. They observe that given the ease with which financial transactions can shift location, the tax would need to be implemented worldwide at a uniform rate, and that in practice it would be enormously difficult to get the necessary international agreement for this purpose. They also stress a second practical difficulty: given the possibility of bypassing spot foreign exchange markets by using derivative instruments, the tax net would need to be extended to encompass all derivatives that traders might use to undertake equivalent transactions, notably to the futures and options markets. Third, the skeptics question whether such a tax would have any systematic effect on speculation. Finally, they point out that what might look like very low rates of tax are actually very high in relation to buy-sell spreads, and thus that a Tobin tax might greatly reduce the volume of foreign exchange transactions, with unpredictable effects on the revenue that such a tax might yield.

The Panel believes that further rigorous technical study is needed before any definitive conclusion is reached on the convenience and feasibility of the Tobin tax.

If global taxation is considered desirable, the Conference and the Summit are likely to find more promise in a carbon tax—a tax on the consumption of fossil fuels, at rates that reflect the contribution of these fuels to CO2 emissions. This tax could serve two important goals: limiting the rise in global temperatures associated with burning these fuels, and raising revenue. Adhering to the sound and fair principle of “make polluters pay”, it would create price incentives to economize on the consumption of fossil fuels. It would guide production to less damaging sources of supply and create a further stimulus to bring science to bear in saving energy. The appropriate forum would need to agree on what proportion of the revenue thus raised would be retained by each country and what would be directed to finance global public goods and ODA.

Revive special drawing rights. Consideration should also be given to reviving the Special Drawing Rights (SDR) created by the IMF in 1970. The original intent of the SDR system was to allow international reserves to be increased, in line with need, without imposing real costs on the average country. In effect, no allocation has been made since 1981. Developing countries have had a strong need in recent years to build up reserves to reduce their vulnerability to crises, and have financed this buildup either by running current account surpluses or by borrowing on terms much more onerous than those associated with SDRs. The result is a large flow of what is sometimes called “reverse aid”. To prevent it or at least reduce it, the IMF ought to resume SDR allocations.

The role of an international tax organization

Most countries’ tax systems evolved at a time when trade and capital movements were heavily restricted, so that enterprises operated largely within the borders of their home country and most individuals earned their incomes from activities in their home country.

Matters are much more complex in today’s global village. We thus propose that the Financing for Development Conference and the Globalization Summit consider the potential benefits of an International Tax Organization (ITO)[4], to:

§ At the least, compile statistics, identify trends and problems, present reports, provide technical assistance, and develop international norms for tax policy and administration.

§ Maintain surveillance of tax developments in the same way that the IMF maintains surveillance of macroeconomic policies.

§ Take a lead role in restraining tax competition designed to attract multinationals with excessive and unwise incentives.

§ Slightly more ambitiously, develop procedures for arbitration when frictions develop between countries on tax questions.

§ Sponsor a mechanism for multilateral sharing of tax information, like that already in place within the OECD, so as to curb the scope for evasion of taxes on investment income earned abroad.

§ Perhaps most ambitious of all, an international tax organization might in due course seek to develop and secure international agreement on a formula for the unitary taxation of multinationals.

If an ITO succeeded in curbing tax evasion and tax competition, there would be two beneficial consequences. One would be an increase in the proportion of a given volume of taxes paid by (a) dishonest taxpayers and (b) mobile factors of production (such as capital). Most people would consider this an unambiguous gain. The second consequence would be an increase in tax revenue at given tax rates.

An ITO would also be of great importance to develop and implement innovative sources of finance if they were agreed upon by the international community.

Migration policies

Immigration policies must protect individual nations’ economic and social interests. But it is time for governments, without risking the national interests they must promote, to start working together to develop forms of international cooperation to optimize collectively the benefits of the movement of labor across national borders. The time may be ripe to start seeking an international agreement on “the movement of natural persons."

Technical Report:

" 5- Systemic Issues

Although the structure of international economic governance has evolved in recent years, with the emergence of new bodies like the WTO, the Financial Stability Forum, and the Group of 20, these changes have hardly kept pace with the globalisation of the world economy. This may be one reason for the widespread perception that globalisation is responsible for the tragic and dangerous disparities between rich countries and poor. Many proposals aimed at modernising international economic governance have been advanced. This section seeks to identify those proposals whose adoption is critical either to improve the governance of existing institutions or to fill such gaps as remain.

Changes in Existing Institutions

Some of the biggest problems are to be found, perhaps unsurprisingly, in the latest recruit to the ranks of the major international economic organisations, the WTO. Part of the problem is simply the inadequacy of its budget, which, at less than $80 million in 2000, was a fraction of the $583 million at the disposal of the IMF that year. Cost-effectiveness is essential, but it should not become a threat to simple effectiveness. One service that the WTO ought to provide to its members, but presently does not, is legal aid to the smaller and poorer member countries. Such aid is needed when a country must mount a legal defence against, say, an unwarranted anti-dumping action by a much larger country[25] . To extend the range of such services it offers to its members, the WTO needs more money.

Like the General Agreement on Tariffs and Trade before it, the WTO works by consensus. The informal negotiations in the ‘Green Room’ that normally precede achievement of a consensus are conducted among a limited group of essentially self-selected countries. This process is now close to collapse, partly as a result of the increased numbers of countries involved, but mainly because the developing-country members have a far greater stake in the world trading system than they used to. Under the Uruguay Round accords, members can no longer pick and choose which of the negotiated agreements they will subscribe to—they are obliged to abide by all of them. Hence they cannot stand aside from the process of negotiation in any important area without endangering their interests. Many countries found after the Uruguay Round that they had accepted a series of obligations that had been developed without their participation, and which they would have great difficulty in implementing.

There is a case for establishing a small steering group that can be delegated responsibility for negotiating consensus on future trade accords among WTO member countries. Such a group should not undercut countries’ rights and obligations in the WTO, nor should it supersede the rule of decisionmaking by consensus. It need not involve proportional or weighted voting. Each member should retain the ultimate decision to accept or decline participation in trade pacts. Ideally, the composition of the steering group should be representative of the total WTO membership, and participation should be based on clear, simple, and objective criteria[26] .

It was argued above that the issues of both labour and environmental standards need a stronger focus in the international arena than they presently have. In the case of labour standards, the most natural solution would be to strengthen the International Labour Organisation (ILO). The ILO should be quicker than it has been to condemn governments that violate its conventions, and it should be able to impose economic sanctions, perhaps in the form of fines, on persistent offenders. Reform of the ILO needs more careful thought than the Panel has been able to address to the issue; there is a case for convening another Panel charged specifically with developing concrete proposals for its reform. In the environmental domain, the sundry organisations that now share policy responsibility should be consolidated into a single Global Environment Organisation with standing equivalent to that of the WTO, the IMF, and the World Bank.

The IMF and the World Bank–the Bretton Woods institutions—play a key role in the world economy. The IMF has responsibility for monitoring and guiding countries’ macroeconomic policies and, when guidance fails, managing the ensuing crises. The World Bank is the premier international development bank and profoundly influences the strategies that countries adopt to promote development. Yet in practice the operation of both institutions is often criticised. The Fund, for example, does very little to influence the macroeconomic policies adopted by its major members with a view to bringing the interests of the smaller countries to bear.

Conditionality is another perennial source of complaint from borrowing countries. The basic principles of Fund conditionality and of directing Bank lending to countries with a good policy environment are widely endorsed. But concerns are frequently expressed about the breadth of Fund conditionality, the perceived arrogance of its staff, the application of a one-size-fits-all approach to policies, and insensitivity to political realities. The current effort by the Fund to prune back conditionality to its macroeconomic core is welcome. Both the Bretton Woods institutions face a particular challenge in reconciling the concept of country ownership of policies and strategies, on the one hand, with that of lending only where the policy environment is favourable, on the other. Dialogue with the United Nations might be helpful in keeping the process from degenerating into one of simply lending to only those countries that claim to ‘own’ policies the Bretton Woods institutions are known to favour. Another possibility would be to use panels of ‘wise men’ drawn from the borrowing country’s surrounding region; such groups played a useful role in the allocation of aid during the Alliance for Progress of the 1960s.

The importance of their mandates makes the governance of both Bretton Woods institutions a key issue. Both the IMF and the World Bank are governed under a very different voting structure from the one-country, one-vote arrangement that prevails in the United Nations. Both organisations instead have a system in which a country’s voting weight (in both the governing board and, more important, the executive board) depends upon its quota, which in turn is determined (and periodically renegotiated) against the background of a formula that reflects the country’s weight in the world economy. Some decisions require a supermajority vote, of either 70 or 85 per cent, in order to pass. This in effect gives the developing countries, acting collectively, a veto over such decisions. But the size of the United States’ quota allows it to veto unilaterally any decision that requires an 85 per cent majority. This includes decisions to amend the Articles of Agreement as well as, most important, changes in quotas and allocations of SDRs.

The practical impact of this voting structure is to place decisionmaking power firmly in the hands of the industrial countries (although the developing countries did use their collective veto once, in 1994). This has been a perennial source of criticism among those who regard the one-country, one-vote arrangement as more democratic. The question can, of course, be posed as to whether it is really democratic to give the same voting power to a country with a population of 100,000 as to one with a billion citizens. However, the standard objection to this proposal does not rest on a philosophical debate about what constitutes true democracy. Rather, it is that both organisations function because of the willingness of the industrial countries to commit substantial financial resources to them. It is a fact of life that creditors expect to control organisations in which they place money. Were the creditors reduced to minority voting status, the likelihood is that their support would be curtailed, which would emasculate the effectiveness of the Bretton Woods institutions. Acceptance of this reality should not, however, preclude the continuation of attempts to correct anomalies in their governance.

Creating New Institutions

The idea of creating new public institutions is strongly resisted in some quarters. It is certainly proper to question the need for new institutions, and to demand that a strong case be made before one is sanctioned. By the same token, it is proper to be sure that the case is convincing before any existing institution is closed. But to demand that the world work permanently with the set of institutions that it happens to have inherited from the past is to allow the forces of inertia a quite irrational weight in decisionmaking. In fact, there appears to be a prima facie case for creating at least two new international economic institutions.

The principal area of economic policy where international spillover effects are strong but no international organisation is yet charged with addressing them is taxation[27] . The tax systems of most countries evolved at a time when trade and capital movements were heavily restricted, so that enterprises operated largely within the borders of one country, and most individuals earned their incomes from activities in their home country. In this environment, the territoriality principle—governments have the right to tax all incomes and activities within their territory—provided an unambiguous rule as to which government was entitled to tax what. The tax policies of other countries were a matter of marginal concern to policymakers.

Matters are much less simple in today’s globalised world. For example, under the territoriality principle, income from an investment in a country that is not the investor’s country of residence could legitimately be taxed by either. The distribution of the right to tax the income of a multinational corporation with operations in many different countries depends today upon complex and in some respects arbitrary conventions. The taxes that one country can impose are often constrained by the tax rates of others: this is true of sales taxes on easily transportable goods, of income taxes on mobile factors (in practice, capital and highly qualified personnel), and corporate taxes on activities where the company has a choice of location. Countries are increasingly competing not by tariff policy or devaluing their currencies, but by offering low tax rates and other tax incentives, in a process sometimes called ‘tax degradation’. And tax evasion is greatly aided where capital earns income in a country other than that where the taxpayer resides—a fact that sometimes provides a major motivation for capital flight.

All these considerations suggest an important role for an International Tax Organisation (ITO)[28] . At the very least, such an organisation could compile statistics, identify trends and problems, present reports, offer technical assistance, and provide a forum for the exchange of ideas and the development of norms for tax policy and tax administration. It could engage in surveillance of tax developments in the same way that the IMF maintains surveillance of macroeconomic policies. Going further, it might engage in negotiations with tax havens to persuade them to desist from harmful tax competition. Similarly, it could take a lead role in restraining the tax competition designed to attract multinationals—competition that, as noted earlier, often results in the lion’s share of the benefits of FDI accruing to the foreign investor. Slightly more ambitiously, an ITO might develop procedures for arbitration when frictions develop between countries on tax questions. More ambitiously still, it could sponsor a mechanism for multilateral sharing of tax information, like that already in place within the OECD, so as to curb the scope for evasion of taxes on investment income earned abroad. Perhaps most ambitious of all, it might in due course seek to develop and secure international agreement on a formula for the unitary taxation of multinationals.

Another task that might fall to an ITO would be the development, negotiation, and operation of international arrangements for the taxation of emigrants. At present most emigrants pay taxes only to their host country, an arrangement that exposes source countries to the risk of economic loss when many of their most able citizens emigrate. The general introduction of arrangements analogous to those in the United States, which requires its nationals to pay U.S. taxes on their world-wide income regardless of where they reside, might be important in turning such a brain drain into a benefit to the source country. Without an ITO to help with enforcement, however, enactment of such legislation by most countries would be an empty gesture.

If an ITO were successful in curbing tax evasion and tax competition, there would be two consequences. One would be an increase in the proportion of a given volume of taxes paid by dishonest taxpayers and by mobile factors of production (like capital). Most people would consider this an unambiguous gain. The other would be an increase in tax revenue for a given tax rate. Governments could take advantage of the increased revenue by either increasing public expenditure, improving the fiscal balance, or cutting tax rates. The latitude to increase public spending would be welcomed by some but deplored by others, who may for that reason oppose the proposal.

The other major lacuna in existing international economic arrangements is the absence of any apex organisation with political legitimacy. This is a serious matter, given the need to confront the economic polarisation in the world noted at the beginning of this Report. The world needs an apex body with the ability to focus other international institutions on reducing economic insecurity as an essential condition for a politically more secure world. One of the key recommendations of the 1995 Commission on Global Governance was a new institution to address this need[29] . The commission argued (pp. 153-54) as follows:

The international community has no satisfactory way to consider global economic problems in the round and the linkages between economic, social, environment, and security issues in the widest sense. The boundaries between issues of trade, competition policy, environment, macroeconomic policy, and social policy are increasingly blurred …global interdependence is growing, and traditional institutional arrangements no longer suffice. Political structures that can articulate a sense of common interest and mediate differences are not keeping pace … at a global level.

The commission concluded that what was needed to fill this gap was an Economic Security Council (ESC) within the United Nations. This body would have the same standing on international economic matters that the Security Council has with regard to peace and security. Its tasks would be to monitor the state of the world economy, to supervise interactions among the major policy areas, to provide a strategic framework for policy made in the several international organisations and secure consistency across their policy goals, and to promote intergovernmental dialogue on the evolution of the global economic system. Its recommendations would carry weight by virtue of the authority of those who participate in its deliberations, rather than from the power to make legally binding decisions. The commission envisaged two meetings of the ESC per year, one at the level of heads of government and one at the level of finance ministers, with a supporting infrastructure of deputies and a small secretariat. The commission emphasised that they did not foresee the need for any major new bureaucratic apparatus.

The commission maintained that an effective ESC would need to be small, by which they meant no more than 23 members. (This would preclude adapting the Economic and Social Council as an ESC.) They suggested that the world’s largest economies, in terms of GDP measured on a purchasing power parity basis, should be represented as of right. Membership by these countries would be supplemented by a constituency system to provide balanced representation among regions and participation by some of the smaller states. One way of implementing this proposal would be for each of the five U.N. regional economic commissions to elect periodically one of their members to represent the smaller countries of the region. The commission also suggested, more tentatively, that regional organisations like the European Union, ASEAN, and Mercosur might participate on behalf of all their members.

The suggested model has its attractions, but it would be presumptuous and possibly counterproductive to set a particular design in stone before any meetings have occurred. A safer approach would be for the United Nations to convene a Global Economic Governance Summit on a one-off basis[30] , with the possibility of it deciding to perpetuate itself as an ESC if the first meeting proved worthwhile. Its agenda would be focused on the operation of the multilateral system, and on evaluating the need for new global institutions and rules of the sorts that have been discussed in this section.

For all of their shortcomings, the major international institutions have played a positive role in supporting development over the past half century—a period that, as noted at the start of this Report, has witnessed human and economic development without parallel in world history. But recognition of what has been accomplished already should not obscure the magnitude of the task that remains. If progress is indeed to accelerate, as it must if the International Development Goals are to be attained, the international institutions need to adapt to reflect the ongoing process of globalisation. This means giving the WTO enough money to function effectively and a governing structure that offers the smaller countries a voice in determining the rules. It means giving the ILO some teeth and a willingness to use them. It means consolidating the sundry institutions with responsibility for environmental questions into a Global Environment Organisation. It means creating an International Tax Organisation. And it means at least considering the case for creating an apex institution in the form of an Economic Security Council."

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Draft Outcome Prepared by the Facilitator

United Nations, A/AC.257/25,  09/17/01

" Addressing systemic issues

42. We recognize the urgent need to enhance the coherence and consistency of the international monetary, financial and trading systems in support of development. To this end, we underline the importance of reforming the international financial architecture, improving global governance and strengthening the UN leadership role.

Reforming the international financial architecture

43. Progress in the reform of the international financial architecture, though significant, falls short of the changes that are needed to ensure adequate support of development and the protection of the most vulnerable countries and social groups from the effects of crises.

44. To promote greater global macroeconomic stability and reduce volatility in the exchange rates of the major currencies, as essential elements of an environment for enhanced and predictable financial flows to developing countries, we call for a strengthened coordination of macroeconomic policies among the leading industrialized countries.

45. The multilateral financial institutions, in particular the IMF, should continue to give high priority to preventing crises and strengthening the underpinnings of international financial stability. In this regard, we call on the Fund and relevant regional bodies to deepen efforts to improve their surveillance of all economies, in particular those of the major industrialized countries that have a significant influence on world economic growth and financial stability, and to support the timely detection of external vulnerability by means of well-designed early warning systems. We also call on the IMF to continue its contribution to the assessment of the role that controls on speculative capital inflows and outflows may play in crisis prevention and crisis management.

46. We call on multilateral financial institutions, in providing policy advice, supporting adjustment programs, and requiring the implementation of multilaterally agreed codes and standards, to respect nationally owned paths of reform, and to pay due regard to the special needs and implementing capacities of developing countries, aiming at the best possible outcomes for the peoples in these countries in terms of growth and development, including employment and social protection.

47. We underline the need to ensure that the multilateral financial institutions have adequate resources to provide emergency financing in a timely and accessible manner to countries affected by financial crises, or in danger of contagion, including through temporary issues of SDRs and more proactive contingency credit lines. In this regard, we also underline the need to enhance the stabilizing role of regional and subregional reserve funds, swap arrangements and similar cooperation mechanisms.

48. To further promote fair burden-sharing and prevent moral hazard, we call on the multilateral international financial institutions to support the development of clearer ex ante rules for equitable distribution of the cost of crisis-resolution adjustments between the public and private sectors and among debtors, creditors, and investors. Mechanisms for such adjustment include universal bond-holders’ collective action clauses, debt standstills in critical circumstances, and voluntary mediation or arbitration.

Improving global governance

49. Many of the issues at the heart of development financing have to do with the global economic governance and its shortcomings. To better reflect the growth of interdependence and enhance legitimacy, global economic governance needs to change in two areas: more broadly based decision making on issues of global concern, and filling organizational gaps. To provide political leadership, as well as to complement and consolidate advances in these two areas, the role of the UN role must be strengthened.

50. More participatory decision making. We uphold the principle that all members of the international community have an important role to play in economic decision-making and norm-setting. In this regard, broadening and strengthening the representation and participation of developing countries in all global economic decision making and norm setting bodies is essential to ensuring the soundness and legitimacy of agreements and their effective and efficient implementation. Increased consultation with civil society and the business sector is also an important component of these efforts.

51. All ad-hoc groupings and forums that lack adequate global representation but, that in effect, make policy recommendations with global repercussions, should take decisive steps to strengthen the work and to support the decisions of multilateral institutions that are more representative and that have clearly defined and broad-based intergovernmental mandates, particularly regarding the global political guidance of the UN in development and international economic issues.

52. We encourage all relevant international policy-making institutions and forums to deepen their efforts to become more accountable, responsive, and transparent to public concerns, as well as to review their composition and consultation mechanisms so as to ensure fuller and broader participation of developing countries.

53. As first steps to more participatory decision making on global issues, we encourage the following actions, to be taken within the mandates and means of the respective institutions and forums:

International Monetary Fund and World Bank: To steadily continue exploring ways and means to enhance the role of developing countries in their decision-making and deliberative bodies, taking into account these countries’ real economic and demographic weight as well as the need to enhance the voice of low-income countries. World Trade Organization: To ensure that any steering group required to facilitate consensus complies with two conditions: 1) maintenance of the rule of decision-making by consensus and 2) representation of the full WTO membership, based on clear, simple, and objective criteria. Bank for International Settlements, Basel Committees, and Financial Stability Forum: To enhance their outreach and consultation efforts with developing countries at the regional level and to review their membership to allow for adequate participation of developing countries. Ad hoc groups such as G-20: To strengthen the work and to support the decisions of multilateral institutions, particularly the UN system, as well as to broaden its membership to allow for more adequate participation of developing countries. Ad hoc groups such as G-8 and G-15: To strengthen the work and to support the decisions of multilateral institutions, particularly the UN system.

54. Filling organizational gaps. In the interest of increased and more equitable world economic growth, social development, and environmental protection, several gaps in global governance need to be addressed. To this end, we shall:

Actively pursue a higher level of coordination of the multilateral financial and development institutions, which mobilize all relevant stakeholders, public and private, in support of an enhanced provision of global public goods. Strengthen the WTO, including by enhancing its focus on the priorities of development, and upgrading its institutional relationship with the UN to a similar level to the one already established among the IMF, the World Bank and the UN. Provide the International Labor Organization with instruments to enforce its agreed standards. Strengthen international cooperation to optimize collectively the benefits of the movement of labor across national borders, including exploring the benefits of an international agreement on the movement of natural persons. Give careful consideration at the World Summit on Sustainable Development, to improving the coordination of the multilateral environmental institutions in support of growth and equitable development. Strengthen the coordination of the multilateral financial and development institutions to more decisively mainstream gender into economic and development policies. Explore, including through a global network of tax authorities, the potential benefits and optimal design of an International Tax Organization or other tax cooperation forum, taking into account previous efforts in this regard as well as the special needs of developing countries and countries with economies in transition. Promote the role of the UN regional commissions and the regional development banks in supporting the reform of the international financial system, as well as in supporting policy dialogue arrangements among peers on macroeconomic and development issues.

Strengthening the UN role

55. As an indispensable complement and reinforcement to these steps, we attach the highest priority to the reinvigoration of the United Nations as the fundamental pillar for the promotion of international cooperation to make globalization work for all.

56. We reaffirm our commitment to enable the General Assembly to play effectively its central position as the chief deliberative, policy-making and representative organ of the United Nations and to strengthen further the Economic and Social Council to help it fulfil the role ascribed to it in the UN Charter.

57. We also commit ourselves to ensuring greater policy coherence and better cooperation among the United Nations, its agencies, the Bretton Woods Institutions and the World Trade Organization, as well as other multilateral bodies. The goal is to achieve a coordinated approach to the provision of global public goods and the consolidation of a stronger, stable international financial system fully responsive to the requirements of growth and equitable development worldwide.

58. To address decisively the global economic governance deficit, we decide to launch open-ended consultations of the General Assembly, with the support of all relevant stakeholders, to explore how to set up, under the aegis of the UN, a world economic body at the highest political level. The role of such a body would be to provide a long-term strategic policy framework to promote economic and social development, to secure consistency in the policy goals of the major international organizations, and to provide political leadership to enhance the coherence and consistency of the international monetary, financial, and trading systems in support of development. The body should be large enough to be representative but small enough to be efficient.

59. To support the General Assembly consultations on this proposal, we request the Secretary-General to encourage public discussions on the issue and to establish a Group of Eminent Persons with the mandate to propose options and recommendations. The results of such consultations should be submitted as soon as possible but not later than the end of the 58th UNGA.

III. STAYING ENGAGED

60. To build a global alliance for financing for development will require an unremitting effort. We thus commit to keep ourselves fully engaged, both to ensure proper follow-up and implementation of the agreements and commitments sealed at this Conference, and also to continue our collective search for mutually beneficial constructive steps.

61. To this end, we shall meet again in 2005, as an open-ended intergovernmental Forum at the level of the highest economic authorities, to fulfill the following mandates:

To take stock of progress on the implementation of the decisions reached in this Conference, and to take appropriate decisions on any corresponding actions in this regard. To continue building bridges between development and finance and trade deliberations and initiatives, within the framework of the holistic agenda of this Conference.

The 2005 Forum should be held under the auspices of the General Assembly, and actively involve all stakeholders associated with the 2002 Conference.

62. The Forum will continue to meet as deemed necessary, until its responsibilities can be transferred to the world economic body referred to in paragraph 58.

63. To carry on the preparatory work of the Forum and its successor body, we have also decided:

To establish a mechanism for substantive engagement among ECOSOC, the Bretton Woods institutions, and WTO, focused on supporting the implementation and follow-up of the results of this Conference. The arrangements would build on the experience of the ECOSOC-Bretton Woods annual dialogue and other complementary interactions. To request the Secretary-General to provide—with collaboration from the secretariats of the major institutional stakeholders concerned—all necessary support to the implementation of the agreements and commitments sealed at this Conference."

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Revised Draft Outcome Prepared by the Facilitator

United Nations,12/06/01

"Addressing systemic issues: enhancing the coherence and consistency of the international monetary, financial, and trading systems in support of development

46. To complement national development efforts, the international monetary, financial, and trading systems need to operate coherently and consistently. To contribute to this end, efforts should be strengthened at the national level to enhance coordination among all relevant ministries and other domestic institutions. Similarly, we must take full advantage of international institutions and policy coordination to meet the goals of sustained economic growth, poverty eradication, and sustainable development.

47. Reforming the international financial architecture. Important international efforts are underway to reform the international financial architecture. These need to be sustained. We also underscore our commitment to sound domestic financial sectors, embedded in our national development efforts, as an important component of an international financial architecture supportive of development.

48. Stronger coordination of macroeconomic policies among the leading industrial countries is conducive to greater global stability and reduced exchange rate volatility, which are important elements for enhanced and predictable financial flows to developing and transition countries. In this regard, we acknowledge the coordinated action that was taken by leading monetary institutions after the September 11th events.

49. The multilateral financial institutions, in particular the IMF, should continue to give high priority to preventing crises and to strengthening the underpinnings of international financial stability. In this regard, we call on the Fund to strengthen its surveillance of all economies and to support the timely detection of external vulnerability through well-designed early warning systems.

50. We call on multilateral financial institutions, in providing policy advice and supporting adjustment programs, to work on the basis of nationally owned paths of reform, and to pay due regard to the special needs and implementing capacities of developing and transition countries, aiming at the best possible outcomes for growth and development.

51. A basic priority is to ensure progressive, voluntary compliance with internationally accepted standards and codes of best practice covering macroeconomic policy and data transparency, institutional market infrastructure, and financial regulation and supervision. To ensure that the needs of developing countries are taken into account, it is essential to ensure their adequate participation in the formulation, as well as implementation, of these standards and codes, including through technical assistance for capacity building.

52. We underline the need to ensure that the multilateral financial institutions, particularly the IMF, continue to have enough resources to provide timely, accessible emergency financing, including through possible temporary issues of special drawing rights and readily available contingency credit lines, to countries affected by financial crises or in danger of contagion. In this regard, we also underline the need to enhance the stabilizing role of regional and sub-regional reserve funds, swap arrangements, and similar cooperation mechanisms.

53. To promote fair burden-sharing and prevent moral hazard, we welcome consideration of an international debt workout mechanism, modeled on domestic bankruptcy procedures, such as recently proposed by the IMF, that will engage debtors and creditors to come together to restructure unsustainable debts in a timely and efficient manner. An adequate balance must be struck between such mechanism and the provision of emergency financing in times of crises.

54. Combating money laundering and the finance of terrorism are urgent priorities that require a united front among all member countries. We commit ourselves to work together to eradicate these pernicious activities at all levels.

55. Improving global economic governance. Good governance at the international level is also essential for sustainable development worldwide. To better reflect the growth of interdependence and enhance legitimacy, global economic governance needs to improve in two areas: broadening the base for decision making on issues of global concern, and filling organizational gaps. To complement and consolidate advances in these two areas, we must strengthen the UN system, including the World Bank and the IMF.

56. Broadening and strengthening the representation and participation of developing countries in global economic decision-making and norm-setting bodies is essential to ensure the soundness and ownership of agreements, codes, and standards and their effective implementation. Increased consultation with civil society and the business sector is an important component in these efforts, which will also contribute to greater transparency, accountability and responsiveness. To these ends, we welcome further actions to help developing countries build their capacity to promote and defend their interests in multilateral forums.

57. A first priority is to find pragmatic and innovative ways to further enhance the effective participation of developing countries in international dialogues and decision-making processes. Within the mandates and means of the respective institutions and forums, we encourage the following actions:

§ International Monetary Fund and World Bank: To continue to enhance the role of developing countries in their decision-making and deliberative bodies, taking into account these countries’ real economic weight, as well as the need to strengthen the voice of low-income countries.

§ World Trade Organization: To ensure that any steering group is representative of the full WTO membership and participation is based on clear, simple, objective criteria.

§ Bank for International Settlements, Basel Committees, and Financial Stability Forum: To enhance their outreach and consultation efforts with developing countries at the regional level and to review their membership, as appropriate, to allow for the adequate participation of developing countries.

§ Ad-hoc groupings that make policy recommendations with global repercussions: To strengthen their outreach to developing countries and to enhance compatibility with the work of multilateral institutions with clearly defined and broad-based intergovernmental mandates.

58. To address several gaps in global economic governance, we encourage the following actions:

§ Strengthen the WTO, by enhancing its capacity to provide technical assistance to developing countries and by upgrading its institutional relationship with the UN to a similar level to that among the IMF, World Bank, and UN, in accordance to UN practices.

§ Strengthen the capacity of the International Labour Organization to implement its agreed standards.

§ Strengthen the coordination of the UN system and all other multilateral financial and development institutions, including environmental institutions, to more decisively mainstream gender issues into economic and development policies and support growth and sustainable development worldwide.

§ Strengthen international tax cooperation through enhanced dialogue among national tax authorities and greater coordination of the work of the concerned multilateral bodies and relevant regional organizations. In particular, we encourage them to engage in an all-inclusive global intergovernmental network of dialogue and interaction, giving special attention to the needs of developing and transition countries.

§ Promote the role of the UN regional commissions and the regional development banks in supporting policy dialogue among peers on macroeconomic, financial, and development issues.

59. We attach priority to reinvigorating the UN system as a fundamental pillar for the promotion of international cooperation to make the global economic system work for all. We reaffirm our commitment to enable the General Assembly to play effectively its central role as the chief deliberative, policy-making, and representative organ of the United Nations, and to strengthen further the Economic and Social Council to help it fulfill the role ascribed to it in the UN Charter, including through renewed efforts to reform it."

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