CADOD | Christian Aid

A Human Development Approach to Globalisation

Duncan Green & Claire Melamed
June 2000

Note: Christian Aid is the official relief and development agency of 40 British and Irish Churches. CAFOD is the official aid and development agency of the Catholic Church in England and Wales. The two organisations work closely together in a number of areas, and decided in May 2000 to make a joint submission to the government White Paper on globalisation and development. This paper is based on that submission.

Acknowledgements: The authors would like to thank the following for their help in producing this report:- Seble Abera, Kevan Bundell, Jenny Davidson, Julian Filochowski, George Gelber, Sally Golding, Karen Joyner, Sharon McLenaghan, Henry Northover, Jennie Richmond, Roger Riddell, and Malcolm Rodgers.

Executive Summary

Introduction

Globalisation is a process of increasing interconnectedness of individuals, groups, companies and countries. The technological, economic and political changes which have brought people closer together have also generated serious concerns over the terms of that integration. These concerns have been generated by the realisation that while globalisation has led to benefits for some, it has not led to benefits for all. The benefits appear to have gone to those who already have the most, while many of the poorest have failed to benefit fully and some have even been made poorer.

In Christian Aid/CAFOD's view, the debate should not be about whether we are pro or anti-globalisation. Some form of globalisation is a given. But globalisation is not the same as the weather - it can be managed. As the Secretary of State for International Development has repeatedly pointed out, globalisation has been designed by people, and can be reformed by people. The important question is how can it be made to work most effectively for poor people? CAFOD/Christian Aid believe that new answers are emerging - if policy-makers have the will to listen.

Equity and redistribution are increasingly recognised as the 'missing link' between globalisation and poverty reduction. Recent evidence from the World Bank shows that improved equity not only leads to faster poverty reduction for a given amount of growth, but also leads to faster growth. What is good for poor people is good for the economy as a whole. Yet up to now, globalisation has frequently been linked to increasing inequality.

Christian Aid/CAFOD believe that existing responses to globalisation, consisting of market liberalisation accompanied by increased attention to human capital formation, largely through improved health and education provision, are insufficiently redistributive to reverse the pattern of rising inequity and achieve the International Development Target (IDT) of halving world poverty by the year 2015. What is needed is a much more vigorous approach to redistribution, which takes up the lessons of previous successes and failures. Clearly, growth matters. What needs to be the focus of attention is the way that growth is achieved and who benefits.

New research also points to the importance of national differences. The same policy reforms have different outcomes in different countries, depending on the structure of the economy, the initial distribution of assets, and the nature of economic and political institutions. Policy responses to globalisation should be appropriate to particular cases in terms of the instruments used, the sequencing of reforms, and the combination of policies employed.

However, even though the evidence points to the importance of diversity, developing country governments are pushed by international rule-making, whether under the auspices of the WTO, through the pressures exerted by structural adjustment packages, or by the need to reassure the markets, towards greater homogeneity of policy response. The challenge for policy makers is to find ways to make national and international rule-making accommodate appropriate diversity of policy rather than to reduce diversity to a minimum.

In CAFOD/Christian Aid's view, recent developments on structural adjustment could provide the model for a new and innovative human development approach to globalisation, addressing both the importance of growth and equity and the need to recognise national differences. National poverty reduction strategies, drawn up by developing country governments through inclusive public debate, should become the basis for proposals for pro-poor trade and investment reform. The central challenge of such an idea is how to combine the benefits of multilateral rules with those of national specificity and the overall aim of meeting the 2015 targets.

Recommendations

• Economic reforms are a means to an end. Trade and investment reform should be seen as a means to the end of human development and the elimination of global poverty, reflected in the International Development Target of halving global poverty by 2015.
• Policy reforms should be based on experience, evidence and data, and be guided by national poverty reduction strategies.
• Far greater attention should be given in policy formulation to issues of equity and redistribution, as well as to the nature of growth.

Finance and capital flows

One of the lessons of recent years is that liberalisation and deregulation have very different costs and benefits when applied to the three areas of financial flows, direct investment and trade. Arguments and evidence for one should not be applied to the others. The increasing frequency and severity of financial crises in recent years demonstrate the need for serious reforms of the global financial architecture. Financial crises and instability are particularly damaging to the realisation of the IDTs, the UK Department for International Development (DFID)'s overarching goal. Crises hurt the poor disproportionately, and increase inequality, making the achievement of pro-poor growth harder thereafter. For the least developed economies, debt cancellation remains one of the most efficient ways of freeing the resources needed to achieve the IDTs.

Recommendations

• Broaden the debate on reform of the global financial system to allow greater participation by developing countries and civil society organisations, and ensure that technical assistance enables appropriate diversity in policy making.
• Review the process of deregulation. A balanced approach, based on empirical research and experience, is preferable to an ideologically driven push for deregulation at any price.
• Improve regulation of capital markets in industrialised countries in order to curb volatility and reduce global poverty and inequality.
• Establish an International Debt Standstill and Work-out Procedure for dealing with financial crises. The mechanism should be administered by a new, independent body such as an International Debt Tribunal.
• The International Monetary Fund (IMF) and World Bank should make it apparent to governments and civil society organisations that sound policies will be acceptable to their boards, even when they depart from the economic policy prescriptions of traditional structural adjustment programmes.
• Technical assistance and capacity building should be provided to both governments and civil society organisations to enable them to engage constructively in the new approach to debt relief based on national poverty reduction strategies.

Investment, competition and the private sector

The private sector is a crucial source of jobs, investment and innovation - all essential for achieving the IDTs. Experience shows that in order to maximise impact on poverty reduction and development, a strong public-private partnership is required at both national and international levels. If this does not happen, the danger is that competition between countries wishing to attract foreign investment and technology could lead to a 'race to the bottom' in terms of tax incentives and labour market suppression, thereby minimising the potential social benefits offered by the private sector. To maximise the benefits of Foreign Direct Investment (FDI), governments must be able to establish performance requirements for investors, as part of national poverty reduction strategies. The impact of FDI on employment, on export performance and on domestic industry is not guaranteed, and governments must be able to provide a regulatory framework to maximise the benefits and minimise the costs. Competition policy is also a vital part of strengthening developing country governments' ability to maximise the benefits of FDI, and should be part of any discussion of global investment rules.

Recommendations

• Existing international guidelines on corporate social responsibility should be strengthened, and an international monitoring body should be established, which has the power, in extremis, to impose sanctions on individual companies.
• Complementary moves to support self-regulation by responsible companies should be encouraged.
• All governments regulate investment to meet national objectives, and governments in developing countries should be allowed to regulate investment to meet nationally-agreed poverty reduction strategies.
• The UK Government should encourage the EU and other parties to support the development of an international agreement on competition.

Trade

Christian Aid/CAFOD believe strongly that it is essential to have rules governing international trade. A body like the World Trade Organisation (WTO) is necessary to ensure that weaker nations are not discriminated against by the strong in both North-South and South-South relations. However, rule-making must proceed at a pace that is appropriate for the weakest members of the system, and the rules made in the WTO must be the right rules for poverty reduction. Current rules open Northern governments to well-founded accusations of double standards on issues such as protection for domestic industries and support for domestic farmers.

During the 1980s and 1990s, trade policy became almost synonymous with trade liberalisation. However, evidence is emerging that the costs of liberalisation may be higher, and the increases in growth and the impact on overall poverty lower, than was first assumed. Increasingly, sectoral level studies show that the long-term impact of trade liberalisation on the incomes of the poorest groups may also be less than is hoped, and less than is needed to meet the IDTs.

Two areas of trade and investment rules give particular cause for concern: the erosion of developing country governments' ability to make and implement industrial policy as part of their national poverty reduction strategies, and the promotion of export sectors that do not benefit, and may even harm, the poor.

Recommendations

• The agenda for any genuine 'development round' of global trade talks should be based on the concerns of developing countries, such as implementation and anti-dumping issues. Future trade and investment agreements should take proper account of the differences between countries, and of the requirements of national poverty reduction strategies.
• The UK Government should lead efforts in the WTO to conduct a thorough assessment of the gains and losses of recent trade agreements such as the Uruguay Round, the North American Free Trade Agreement (NAFTA) and Mercosur. It should also support the introduction of a system of prior social and environmental impact assessment in future trade negotiations and agreements.
• The EU should grant duty-free access to all (not 'essentially all') goods from least developed countries.
• The Export Credit Guarantee Department should include a commitment to poverty reduction and sustainable development, including respect for the environment and human rights, in its business mandate.
• The World Bank, Regional Development Banks and IMF should ensure that their advice on export promotion and structural adjustment strengthens, rather than undermines, national efforts to achieve the IDTs.

Information, communication and knowledge

One of the defining characteristics of globalisation is the increase in the speed with which knowledge can be transmitted, and the rapid development of new technologies. CAFOD/Christian Aid believe that the distribution and control of new technologies and the knowledge they generate is of vital importance in ensuring that globalisation contributes to poverty reduction.

While new technology has enormous potential to benefit the poor, it is definitely not a panacea. Experience shows that new technologies tend to flow towards the 'haves' in the global economy, and widen the gaps between them and the 'have nots'. Concerted international action is essential to ensure that poor countries and communities reap the benefits of the 'new economy' and that some of the existing rules, which actually prevent technology transfer to the poor, are reformed.

CAFOD/Christian Aid accept that intellectual property rights (IPRs) are necessary to encourage commercial innovation, while allowing the knowledge behind them to be shared. However, existing IPR regimes have signally failed to meet the needs of developing country populations, and proposed reforms to the regimes could make matters worse. Christian Aid/CAFOD share the concern of many developing country governments and civil society organisations that the application of Trade Related Intellectual Property rights (TRIPs) to genetically modified crops will reduce biodiversity, lead to further concentration of the agribusiness sector and increase the vulnerability of small farmers.

Recommendations

• The TRIPs agreement should be redrafted so that its overarching aim is to contribute to achieving the IDTs.
• The principles of special and differential treatment of unequal parties contained in the WTO articles should be introduced into the TRIPs agreement.
• The period of patent protection, now set at a uniform 20 years, should be made more flexible according to the technologies involved.
• Article 27.3(b) of TRIPs should exclude all life forms from patenting and remove the requirement for plant variety protection, with a moratorium on implementation in the interim.
• Consideration should be given to removing IPRs from the WTO.

Institutions

Co-ordinated and coherent action at the international level is needed to ensure that the global economy is managed in the interests of all, and that the 2015 targets are achieved. International institutions, like national governments, should be judged according to their success in contributing to poverty reduction. Some, like the World Bank and IMF, have publicly committed themselves to working towards poverty reduction. Others, like the WTO, have more instrumental goals - in the WTO's case, to provide a forum for governments to negotiate trade agreements. A first step in ensuring coherence would be for all international institutions to be working toward the same goals. In CAFOD/Christian Aid's view, all institutions should work within internationally agreed targets on poverty reduction.

In order to be able to translate national poverty reduction strategies into effective action on the global stage, developing countries need to participate more effectively in the existing institutions. Reform of the WTO, the IMF and the World Bank is needed to allow developing country interests to be adequately represented.

Recommendations

• All international agreements should be judged against their contribution to poverty reduction.
• The WTO should state publicly that the achievement of the international development target of halving world poverty by 2015 is an explicit objective of its work.
• Developing countries need to increase their capacity to negotiate in the WTO. All WTO members should make binding commitments to contribute to a common fund to support the representation of developing countries in Geneva. In addition, developing countries' obligation to implement agreements should be made conditional on their receiving adequate prior technical assistance.
• At the national and EU level, parliamentary oversight of the WTO should be stepped up. An annual reporting procedure to both European and British parliaments on the WTO would contribute towards this aim.
• Governments should disclose all written advice they have received relating to trade negotiations.
• The Government should explore which recommendations of the Nolan Committee on Standards in Public Life could usefully be introduced at the WTO.

Measuring Progress

Christian Aid/CAFOD welcome the Secretary of State's commitment to the need for improved data in the effort to design policies to achieve the IDTs. In CAFOD/Christian Aid's view, too much of the debate on globalisation is based on ideology and simulation, and too little attention is paid to experience in developing countries, from which valuable lessons are being learned about how to combine growth with equity. The Government's emphasis on sound data should form part of a wider movement to give greater importance to experience and empirical evidence in the evaluation and formulation of policy.

As well as measuring the impact of past policies, policy design could be strengthened by a greater attention to assessing the likely impact of future policies. Impact assessment should become an essential part of trade and investment policy design and reform.

Recommendations

• DFID should implement and maintain systematic monitoring of the impact of trade liberalisation in a representative group of developing and least developed countries, in order to build up time-series data on the impact of trade policy reform on poverty reduction.
• The UK Government should clearly state the empirical basis for its policy proposals on bilateral and multilateral trade and investment arrangements.
• The Government should continue to press for the introduction of an international code on social data collection and dissemination.

1. A Human Development Approach to Globalisation

Public disquiet over globalisation has grown in recent years, demonstrated at an international level in Seattle and the earlier dispute over the proposed Multilateral Agreement on Investment (MAI). Nearer to home, events in Longbridge and Dagenham have also raised concerns at some of the negative social impacts of globalisation.

By globalisation, Christian Aid/CAFOD mean a process of increasing interconnectedness of individuals, groups, companies and countries. The technological, economic and political changes which seem to have brought people closer together have also generated huge debates about the degree, and more importantly the terms, of that integration.

In CAFOD/Christian Aid's view, the debate should not be about whether we are pro or anti-globalisation. Some form of globalisation is a given. But globalisation is not the same as the weather - it can be influenced. As the Secretary of State has repeatedly pointed out, globalisation has been designed by people, and can be reformed by people. For development agencies, including DFID, CAFOD and Christian Aid, the important question is, how can it be made to work most effectively for poor people?

The Starting Point: Key Policy Issues

In discussing the connection between globalisation and development, it is important to step back and examine underlying assumptions. Minor reforms to the existing processes of globalisation, even if undertaken to make them more development-friendly, are likely to miss some important opportunities for more effective reform. Christian Aid/CAFOD's starting point is as follows:

• The International Development Targets (IDTs) should underlie all discussions of trade and investment reform.
• Trade and investment are means to an end, not ends in themselves.
• Policy reforms should be based on experience, evidence and data, which need to inform theory.
• Because countries are different, any attempt at a 'one size fits all' policy prescription is likely to hinder the achievement of the IDTs.

The International Development Targets (IDTs) should underlie all discussions of trade and investment reform

The Secretary of State and DFID have shown exemplary leadership in pushing for the world-wide adoption of the 2015 targets. These provide a means of ensuring coherence between governments, donors and international institutions in the international push to end the scandal of global poverty. The World Bank and the IMF (but so far not the WTO) have publicly committed themselves to the 2015 poverty target. In CAFOD/Christian Aid's view, the IDTs provide an internationally agreed benchmark, and a means of introducing a human development agenda into fora (such as the WTO), where it has been largely lacking.

Trade and investment are means to an end, not ends in themselves

There is no a priori merit to either open or restrictive trade or investment regimes. Both are merely economic approaches which, in practice, benefit some and harm others. The critical factor in judging the relative merits of different policies is by assessing their impact on human development. This point may seem obvious, but it is often lost in the debates. Governments are judged not by their success in promoting the welfare of their people, but by how far or how fast they have cut this or that tariff, or liberalised this or that sector of the economy.

Policy reforms should be based on experience, evidence and data which need to inform theory

Too little attention is given in the debate on globalisation and development to the real-life experiences generated by nearly two decades of structural adjustment and liberalisation. Moreover, the last 50 years have seen a number of success stories in East Asia, Europe and elsewhere, where developing countries have managed to achieve impressive levels of poverty reduction through a combination of growth and equity. Christian Aid/CAFOD hope that policy makers, in devising responses to globalisation, will explore the concrete lessons from these different experiences and go beyond a level of generalisation of the 'is trade liberalisation a good thing or a bad thing?' variety.

CAFOD/Christian Aid welcome the Secretary of State for International Development's remarks in a recent speech, arguing that solid empirical data has been a crucial precondition for pro-poor reform since the 19^th century, when members of the Fabian Society provided practical evidence as a foundation for public education and welfare reform. Statistics are needed to achieve the IDTs, she went on, to 'provide the basis for rational evidence-based decision making' ... 'They have a fundamental role in macro-economic and sector management, in designing policies to reduce poverty'. She added that 'too little attention is paid to using statistics in policy and decision-making ... those who want progress want better statistics. Those who don't, don't.'¹

Because countries are different, any attempt at a 'one size fits all' policy prescription is likely to hinder the achievement of the IDTs

In terms of its link to poverty reduction, the debate on globalisation and trade reform lags behind the debate on structural adjustment programmes. There is much to be gained from a greater degree of cross-fertilisation between the two. Ever since the publication of 'Adjustment with a Human Face',² there has been increasing recognition that a 'one size fits all' approach to structural adjustment programmes (SAPs) is mistaken. To achieve a sense of policy 'ownership' and policies that work, reforms should be adapted to fit the specific circumstances of the country or sector in question and should be drawn up with the maximum possible level of public involvement and consultation. CAFOD/Christian Aid believe, however, that the debate on trade and investment liberalisation has lagged behind in this regard, with a tendency to stick to sweeping statements on the virtues or iniquities of liberalisation, rather than enter into the detail necessary to ensure that outcomes are consistent with the IDTs.

Equity: the Missing Link between Globalisation and the IDTs

In recent years, a consensus has been growing that equity should be given much more attention in the efforts to devise policy to achieve the IDTs. Projections indicate that if equity issues are not addressed, current rates of growth will not be sufficient to achieve the IDTs. For example, the World Bank's recent projections (in Global Economic Prospects 2000) indicate that over the next ten years, if growth rates and levels of inequality continue unchanged, the headcount index of $1 per day poverty will fall from 24 per cent to 22 per cent - far short of halving world poverty by 2015.

The world needs to become more equal if the IDTs are to be achieved. However, far from becoming more equal, there is compelling evidence that inequality is rising both between and within countries.³ The UN Development Programme (UNDP)'s 1999 Human Development Report finds a worsening situation in both the transition economies of Eastern Europe and in China, Indonesia and Thailand - erstwhile models of growth with equity.⁴ The UN Economic Commission for Latin America and the Caribbean (ECLAC)'s Social Panorama of Latin America 1998 found that during the 1990s, income distribution had improved in the urban areas of four of the 12 countries analysed (Bolivia, Honduras, Mexico and Uruguay), remained steady in one (Chile) and deteriorated in the other seven (Argentina, Brazil, Costa Rica, Ecuador, Panama, Paraguay and Venezuela).⁵ That situation was likely to have worsened with the onset of recession in 1999.

Faith-based agencies such as Christian Aid/CAFOD promote equity on the grounds of social justice and values rooted in Christian ethics, but evidence is mounting that there are also more pragmatic reasons for pushing equity issues much higher up the social agenda. Summarising recent research, the World Bank's draft World Development Report 2000/1 found:⁶

Whether growth translates into significant reductions in poverty depends on a number of factors. The degree of inequality in society matters. Studies find that the responsiveness of income poverty to growth increases significantly as inequality is lower. Initial levels of inequality in assets (land and education) also determine the poverty impact of growth, as do gender and ethnic inequalities. Addressing these structural inequalities thus becomes a crucial component of a poverty reduction strategy.

For a long time there was a concern that greater equality in different dimensions would come at the expense of lower growth. More recently, however, empirical studies have tended to show that more equal societies can actually grow faster. This is true of assets inequality and gender inequality, for example. Thus greater equity in these dimensions has a double impact on poverty reduction--because the impact of any given growth rate on poverty reduction is greater, and because the growth rate will be higher as well.⁷

Finding a means of combining reasonable levels of economic growth with greater equity is thus emerging as the best, perhaps the only, way to achieve the 2015 targets. Since the liberalisation policies of the last 20 years have coincided with (and some evidence suggests, partially caused) growing inequity (see section 2.3 on trade), this will require a fundamental rethink of the way globalisation and liberalisation are managed.

Existing responses to globalisation, consisting of market liberalisation accompanied by increased attention to human capital formation, largely through improved health and education provision, is insufficiently redistributive to reverse the pattern of rising inequity and make the IDTs an attainable goal. What is needed is a much more vigorous approach to redistribution, which takes up the lessons of previous successes and failures. Such lessons include:

Liberalisation of different sectors has different equity outcomes

In a paper for the tenth conference of The United Nations Conference on Trade and Development (UNCTAD), Frances Stewart notes:

Trade liberalization may increase labour-intensive exports in countries with abundant labour, but only if infrastructure is adequate and the labour has at least minimal education (Wood, 1994). In economies, where the dominant export is minerals or plantation agricultural crops, trade liberalization can worsen income distribution.⁸

In Brazil, for example, CAFOD/Christian Aid partners report that trade liberalisation and export promotion have benefited commercial soybean interests in the South, but only at the expense of thousands of small farmers who have been pushed off their land. Many of them have migrated in search of new land in the Amazon rainforest, adding to the deforestation in that region.

Initial redistribution can set a lasting pattern

Stewart also argues that initial asset redistribution is important, since

it influences the rest of the development strategy in a variety of ways; for example, more equality leads to more widely spread education, and it may lead to mass markets for labour-intensive consumer goods rather than �lite goods. The consequent political economy tends to favour more pro-poor economic decisions.⁹

A key issue, and one of great concern to many Christian Aid/CAFOD partners, is land reform. Initial land reform laid the foundations for the subsequent economic 'miracles' in Taiwan and South Korea, and is central to any attempt to develop a growth model which will contribute to poverty reduction within developing countries. As World Bank economists Binswanger and Lutz point out:¹⁰

More than two thirds of the poor in the developing world live in rural areas. The poverty there is not only wider spread, but also deeper, as measured by income and by nutritional status. Ironically, hunger prevails in areas that grow food. Rural growth is necessary for rural poverty reduction, but it is not enough, as Brazil dramatically shows. Growth must generate employment on farms and in the rural non-farm sector. This outcome is more likely to occur where family farms dominate, rather than large, capital-intensive commercial farms.

The capacity of the state to manage globalisation in the interests of poverty reduction should be strengthened

The impact of the first wave of structural adjustment programmes in the 1980s and early 1990s has been to undermine the capacity of state institutions, through reductions in public spending and in the state's role in both macro and microeconomic management. This has damaging consequences for states' ability to redistribute wealth through processes such as agrarian reform, progressive tax reform or raising the minimum wage. Asian countries such as South Korea, Taiwan and Malaysia which have achieved growth with equity have done so through strong and capable state intervention in the economy to ensure more equitable outcomes.

CAFOD/Christian Aid believe that closer and more impartial study of the successful Asian economies could provide valuable lessons for how best to combine the strengths of market and state in achieving pro-poor growth. States in East Asia provide lessons in achieving high domestic savings and investment rates, effective co-operation between state and private sector over investment and Research and Development (R&D), and the effective timebound nurturing of infant industries, as well as how to combine import substitution and export-led growth at different stages of national development.¹¹

Progressive tax reform should be central to any attempt to shift to a more pro-poor growth trajectory. According to the draft World Development Report, 'Studies have found that measures of redistribution, such as marginal and average tax rates and different types of social spending, have, if anything, a positive effect on growth rates.'¹² Furthermore, as Frances Stewart points out:¹³

Most government expenditure is progressive compared with pre-tax incomes. Higher taxation and expenditure can generally be expected to improve the distribution of welfare. This is an important conclusion and counters the widespread image that elites monopolize government expenditures, and that, therefore, less government taxation and expenditure is more progressive than more. It follows that downward pressure on government taxation and expenditure - associated with globalization and the liberalizing agenda - is likely to worsen post-tax, post-benefit income distribution.

Gender equity matters

The gender impacts of globalisation are ambiguous and often contradictory. For example, more jobs have been created for women due to the rise in export-oriented manufacturing. However, women have also suffered disproportionately from the huge rationalisation of public sector jobs resulting from SAPs, particularly in African countries. It is the complexity of the gender impacts of these processes that make it all the more vital for policy makers to seek to disaggregate them in their analysis. Making gender issues a priority in this way reinforces the message that tackling inequality, discrimination and injustice, whether it be based on race, sex, class, disability, gender, or age, is essential to achieving poverty eradication.

Placing equity at the centre of the globalisation process would require a shift of perspective in the thinking of policy makers around the world, but is essential if the IDTs are to be anything more than a pious, and ultimately unfulfilled, aspiration. A comprehensive recent study by the UN's Economic Commission for Latin America and the Caribbean ¹⁴ concluded 'The main challenge facing the region as we start a new century is that of building more egalitarian societies.' This is just as true for other developing regions, and CAFOD/Christian Aid hope that policy responses to globalisation will take equity as a central concern.

A Human Development Approach to Globalisation: Lessons from the Structural Adjustment debate

In Christian Aid/CAFOD's view, recent developments on structural adjustment could provide the model for a new and innovative human development approach to globalisation. At their 1999 annual meetings the IMF and World Bank announced the introduction of a new 'Poverty Reduction Strategy Paper' (PRSP) as the basis for the IMF's new Poverty Reduction and Growth Facility (PRGF), which replaced the Enhanced Structural Adjustment Facility (ESAF). The intention was that an inclusive national debate should enable governments to draw up a genuinely 'owned' national poverty reduction plan, which serves as a structural adjustment package.

Discussing such reforms, the draft World Development Report 2000/1 concludes:

How well states take on the interests of the poor depends on the participation of the poor in political processes and on the quality and orientation of organizations in political and civil society, especially the extent to which they mediate the voice of the poor to the state. Empowerment of the poor with respect to institutions of the state is thus both a good in itself and instrumentally, as a way of ensuring that state institutions do indeed become pro-poor.¹⁵

CAFOD/Christian Aid believe that this new approach could be an important part of focussing policy-making on poverty reduction and the 2015 targets, and should be applied more generally to trade and investment reform. National poverty reduction strategies, arrived at through inclusive public debate, would necessarily throw up proposals for pro-poor trade and investment reform. This should be encouraged. Henceforward, the IDTs should become the external benchmark against which economic reform proposals and the setting and enforcement of global trade and investment rules are judged.

The central challenge is how to combine the benefits of multilateral rules with those of national specificity and the overall aim of meeting the 2015 targets. One potential vehicle is via a redefinition of the Special and Differential Treatment (SDT) provisions of the WTO. How might this work?

1. Developing countries should draw up a national poverty reduction strategy in consultation with their civil society organisations and with advice from multilateral institutions such as the WTO, World Bank and UNCTAD. The PRSP process currently applies to 80 World Bank International Development Association (IDA) low income countries, but more could be included for an IDT-based approach to trade and investment reform.

2. A range of proposals for poverty-reducing trade and investment reform would emerge from this process. It is likely that no single prescription would be followed, but that it would be appropriate to liberalise in some sectors while temporarily protecting others, and to use a range of other instruments to enable poor people to gain from reforms. This method of policy formulation may well prove a slower process, but that is in accordance with the lessons of recent years, as the draft World Development Report 2000/1 points out:

During the height of the 'reform rush' the prevailing view was that reforms should be introduced as quickly as possible in order to take advantage of the 'window of opportunity' provided by reform-friendly governments. This view is now changing. The financial crashes of the late 1990s in particular revealed the importance of creating adequate institutions (rules and organizations) and codes of behavior, or 'social capital' (voluntary compliance with established laws, trust, cooperative behavior, and basic codes of conduct), before market-oriented reforms are adopted.¹⁶

3. These reforms should then be permitted under WTO rules by an extension of SDT. In recent years, SDT has come to mean little more than delaying the deadlines for the poorer countries to implement reforms. It is important that SDT be redesigned in order to give poor countries the best possible toolkit with which to achieve the 2015 targets.¹⁷ The definition of SDT should be transformed away from negative issues such as delayed implementation schedules and exemptions towards a broader, more positive definition based not on some arbitrary choice of GDP per capita or what the powerful nations are prepared to 'allow' developing countries in terms of room for manoeuvre, but on the economic policies required to achieve the IDTs. In addition, as Zhen Kun Wang and Alan Winters suggest, technical assistance could be made a binding part of each WTO agreement, with the least developed countries not obliged to implement agreements if technical assistance is not forthcoming.¹⁸ Such changes could provide precisely the kind of grand confidence-building measure needed to get the stalled WTO process moving again.

A first step in ensuring greater coherence between trade reform and poverty reduction could be to reform the WTO's Trade Policy Review Mechanism (TPRM). These reviews, which take place every six years for developing countries, are currently very narrowly drawn around specific areas of trade policy, with no attempt to discuss how such reforms contribute to (or undermine) a country's poverty reduction strategy. A reformed TPRM could assess the level of civil society involvement in trade policy design, and the evidence of the impact of trade reform on poverty reduction.

Conclusion

Christian Aid/CAFOD hope that, in devising policy responses to globalisation, governments will pay attention to the importance of equity - both for economic growth and for poverty reduction. They also hope that governments will recognise the importance of diversity in policy responses to globalisation, and that policy must be rooted in national poverty reduction strategies. New thinking on structural adjustment provides a model for a new, human-development centred approach to globalisation.

CAFOD/Christian Aid believe that cross-fertilisation between the UK Government's role in the debate on debt relief and its work on globalisation could greatly strengthen the global effort to halve world poverty by 2015. It would also help Britain fulfil its obligations as a signatory of the Plan of Action agreed at UNCTAD X which states:

Trade policies and trade liberalization should be made more consistent with overall development objectives. In developing countries, ways and means need to be sought to ensure that trade makes a more decisive contribution to alleviating poverty. The role of trade for stimulating economic growth, the distribution of growth effects, and sectoral policies for agricultural and tourism development, and in the longer term for diversification into industry and advanced services, require further attention, including monitoring of the developmental impact of multilateral trade agreements.¹⁹

2. Globalisation and the UK Government's development strategy

The UK's Department for International Development increasingly recognises that globalisation is an important part of the context in which development policy is made. Both Christian Aid and CAFOD have welcomed this approach in the past - but with reservations. In its submission to the International Development Committee inquiry into the Government's last White Paper on International Development in 1997, Christian Aid highlighted globalisation as one area where the Government's thinking was welcomed - but where more work was needed:

Christian Aid welcomes the White Paper's recognition of the growing integration of global markets and the power of transnational corporations, and the potential impacts of these trends on social and environmental conditions in developing countries. The section outlining the need for standards - for labour rights, the environment, health and business conduct - is particularly welcome.

Christian Aid has seen, however, how the rewards of globalisation and the opening of markets are very unequally distributed. There should be more recognition in the White Paper that globalisation produces winners and losers.

Similarly, CAFOD's initial reaction to the White Paper said:

This new emphasis on coherence is the most innovative and exciting part of the Paper, but the Paper itself suffers from a degree of incoherence. The sections on trade and investment largely ignore the overall focus on poverty elimination. There is no challenge to the current model of structural adjustment and its negative impact on the poor through cuts in social spending and food subsidies, the introduction of user fees in health and education and anti-trade union legislation.²⁰

Since 1997, the Government's development strategy has progressed with the publication of the draft International Development Target Strategy Papers (TSPs), outlining how the International Development Targets might be achieved by the year 2015. Christian Aid/CAFOD fully support DFID's commitment to the IDTs and its recent efforts to outline its own strategies to support the achievement of each target. In the context of the forces of globalisation which increase opportunities for some and intensify competition to the detriment of others, it is essential that strategies to reach these targets address the rapidly changing environment. In its comments on the TSP on Economic Well-Being in December 1999, Christian Aid welcomed the development of thinking on globalisation:

Christian Aid also welcomes the recognition that globalisation processes have costs as well as benefits. ... In particular, we welcome the focus on equity and security, and the recognition that there are no guarantees that globalisation alone will deliver either.

However, serious gaps remain in DFID's analysis of globalisation which are of concern to both agencies. CAFOD raised its concerns at a number of substantial gaps in the draft document's analysis, including its lack of attention to issues of redistribution, taxation, issues of global economic management, the negative impact of recent episodes of capital account liberalisation and its one-sided representation of the East Asian Newly Industrialised Countries (NICs). CAFOD/Christian Aid are also of the view that, in the monitoring of progress towards these targets, it is not sufficient for development agencies to use purely economic indicators of poverty or growth as indicators of development. Christian Aid/CAFOD would emphasise the need to recognise multi-dimensional aspects of exclusion and injustice.

A number of the remaining concerns about DFID's overly sanguine view of globalisation and liberalisation have been taken up in other forums, reflecting the development of thinking on these issues in the main multilateral institutions. In particular, CAFOD/Christian Aid have been encouraged by some aspects of the draft for the 2000/1 edition of the World Development Report (WDR), which significantly advances World Bank thinking in a number of areas. In its submission on the draft,CAFOD identified several areas of weakness but added:

CAFOD was genuinely impressed by many aspects of the draft WDR. It represents a real achievement in terms of its nuanced and evidence-based approach, and will provide food for thought and challenges to policy makers and development analysts on all sides of the political spectrum. We believe it will be a major contribution to the literature on development and poverty reduction.

Christian Aid/CAFOD hope that some of the new thinking within DFID, as well as in the World Bank and other agencies will be reflected in the evolution of the UK Government's development strategies. This is particularly important in view of the disappointing progress so far in realising the IDTs. As described above, all recent data from the World Bank, the UNDP and others indicate that, unless substantial changes are made to the rate and the distribution of growth, the goal of halving world poverty will be missed by a very considerable margin.

CAFOD/Christian Aid therefore hope that, in considering progress in its development policies since the last White Paper on International Development in 1997, the Government will be open about the changes needed to the approach taken so far, to ensure that the IDTs are met. Some areas where changes to the UK Government's approach are needed are discussed below.

While applauding DFID's increased attention to the impact of globalisation on poor people, it is important not to undermine the case for development assistance. Foreign investment in the developing world is massively concentrated in a handful of emerging markets, many of them middle income countries, and has far less to offer to the poorest countries and communities. Development assistance to those groups still has a vital role to play in achieving the IDTs. Christian Aid/CAFOD welcome the government's reversal of the long-term decline in UK aid spending and its move away from tying aid to commercial self interest, and hope that this is the start of a long-term upward trend.

Recommendations

• The International Development Targets (IDTs) should underlie all discussions of trade and investment reform.
• Policy reforms should be based on experience, evidence and data, which need to inform theory.
• Far greater attention should be given in policy formulation to issues of equity and redistribution, as well as to the nature of growth.
• National poverty reduction strategies, arrived at through inclusive public debate, should provide the basis for trade and investment reforms.

3. Finance and Capital Flows

One of the lessons of recent years is that liberalisation and deregulation have very different costs and benefits when applied to the three areas of financial flows, direct investment and trade. Arguments and evidence for one should not be applied to the others. CAFOD/Christian Aid believe that a nuanced, and evidence-based analysis should result in differing conclusions and policy recommendations in the three areas.

The Global Financial Architecture (GFA)

Since the onset of the Asian financial crisis, reform of the GFA has become a key aspect of current debates on globalisation. The increasing frequency and severity of financial crises in recent years demonstrates the need for serious reforms of the GFA. CAFOD's analysis of the development issues raised, and proposals for reform, are contained in Capital Punishment: Making International Finance Work for the World's Poor (CAFOD September 1999).

GFA reform is vital in the interests of equitable development. Financial crises and instability are particularly damaging to DFID's overarching goal, the IDTs. Crises hurt poor people disproportionately, and increase inequity,²¹ making the achievement of pro-poor growth harder thereafter. In 1999, the richest decile of Koreans earned 10 times as much as the poorest decile, compared to seven times as much before the crisis. At a macro level Korea is rebounding, but almost 70 per cent of those who entered the shelters for the new homeless in spring 1998 are still there. Unemployment is still double pre-crisis levels.²² Even low income countries have been hurt, due to the impact of the Asia crisis on commodity prices.

Unfortunately, GFA reform is being undermined by opposition from the financial sector and a lack of political will. Over the last year, Christian Aid/CAFOD have watched with growing disappointment as the initial momentum for reform in the wake of the Asian and Russian financial crises has rapidly dissipated, leaving only minor improvements in the international financial architecture. CAFOD/Christian Aid agree with the conclusions of a recent paper by Yilmaz Aky�z, chief economist at UNCTAD and one of the keenest observers of the GFA debate:

Many of the proposals and actions considered in these fora have concentrated on marginal reform and incremental change rather than on the big ideas that emerged in the wake of the East Asian financial crisis. More specifically, attention has focused on standards and transparency, and, to a lesser extent, financial regulation and supervision, while efforts have been piecemeal or absent in the more important areas addressing systemic instability and its consequences. With stronger-than-expected recovery in East Asia, the containment of the damage in Russia and Brazil, and rebound of Western stock markets, emphasis has increasingly shifted towards costly self-defence mechanisms and greater financial discipline in debtor countries. ... Big ideas for appropriate institutional arrangements at the international level for global regulation of capital flows, timely provision of adequate international liquidity with appropriate conditions, and internationally sanctioned arrangements for orderly debt workouts have not found favour among the powerful.²³

This lack of political will was aggravated, in Christian Aid/CAFOD's view, by a misrepresentation of the causes of the crisis. Blame was placed almost solely on domestic financial weaknesses in the crash countries, while the workings of the international system and the recent introduction of capital account liberalisation were absolved from blame.

By contrast, new thinking has looked at the links between capital account liberalisation, instability and trade deficits. As Joseph Stiglitz recently explained in the New Republic:²⁴

In the early '90s, East Asian countries had liberalised their financial and capital markets--not because they needed to attract more funds (savings rates were already 30 percent or more) but because of international pressure, including some from the U.S. Treasury Department. These changes provoked a flood of short-term capital--that is, the kind of capital that looks for the highest return in the next day, week, or month, as opposed to long-term investment in things like factories. In Thailand, this short-term capital helped fuel an unsustainable real estate boom. And, as people around the world (including Americans) have painfully learned, every real estate bubble eventually bursts, often with disastrous consequences.

A recent UN study of Latin American reforms from 1980-2000 concluded that capital account liberalisation had undermined the region's efforts at exports promotion by prompting a sudden inflow of capital, leading to overvalued currencies and a loss of competitiveness.²⁵ UNCTAD further argues that the negative impact of capital account liberalisation in leading to overvalued currencies has been compounded by the level of trade protectionism exerted by rich Northern governments. This combination lies behind many of the recent financial crises:

With liberal trading regimes now in place throughout much of the developing world, growth sucks in a greater volume of imports than in the past. Attempts to close the payments gap through increased exports to developed countries run up against sluggish markets, adverse movements in the terms of trade and protectionism. As a result, maintaining growth momentum increasingly relies on attracting foreign capital, of any kind. Dependence on hot money has thus become the unstable pillar of economic growth and development in many countries. This situation contrasts with the post-war experience of liberalization in industrial countries, where the process was a gradual one and was underpinned by exceptionally strong growth.²⁶

CAFOD's view, laid out more fully in Capital Punishment, is that much more far-reaching reform of the GFA is required in order to damp down growing global financial instability, which in turn leads to worsening inequality and hinders the international community's efforts to achieve the 2015 targets. Many of their views are echoed in a recent paper by Charles Soludo of the University of Nigeria, and Musunuru Sam Rao.²⁷

One of the positive results of the debate over the Asia crisis has been the greater readiness at international level to countenance actions by individual governments to manage capital flows into and out of their economies. Chile's controls on inflows have made it something of an international teacher's pet, while Malaysia's temporary controls on outflows have also won increasing acceptance as a potentially useful response to a financial crisis, not least because Malaysia has weathered the crash with far less social disruption than its neighbours, who responded in a more orthodox fashion. Chile's use of a commodity stabilization fund to protect itself from the vagaries of the international copper market has also been praised.²⁸

More broadly, Christian Aid/CAFOD sees this as part of a move away from the days of 'one size fits all' policy-making to a greater acknowledgement of the importance of national specificity, and with it the need for a greater room for manoeuvre for national governments seeking to regulate the market in the interests of national development and poverty reduction.

Debt

Debt cancellation is one of the most efficient ways of making additional resources available for development and poverty reduction. There is no dispute that the poorest countries are chronically short of resources for development, whether these come in the form of development assistance, export income or foreign direct investment.

Despite the high profile of international debt and the time devoted to this issue by the Finance Ministers of the G7, the World Bank and the IMF, the cut-off dates used to determine debt eligible for cancellation under the enhanced Heavily Indebted Poor Countries (HIPC) initiative mean that most HIPCs will still be saddled with over 50 per cent of their debt stock. This is a long way from the headline figures - 80 or 90 per cent reductions in debt - with which the HIPC initiative has been promoted. This in turn means that there will be only modest gains in terms of reduced debt service. For most of the HIPC countries current debt service represents only a fraction of what they should be paying if they were servicing their entire debt. In other words, overall, the HIPC initiative does only a little more than cancel that part of the total debt which was in any event not being serviced. This situation enables the Bank and the Fund to say that for Uganda, Bolivia and Mozambique debt service relief will amount to $8.4 billion in total,²⁹ whereas the actual annual difference between their pre and post-HIPC debt service is the more modest difference between $596 and $335 million a year.³⁰

Cut-off dates need to be revised so that more debt is available for cancellation. This could be done without departing from current conditions simply by determining that cut-off dates would be set at a certain number of years from the date when the HIPC country first approached the Paris Club. Quite apart from the calculations on which the HIPC initiative is based, there are clearly problems with resourcing the HIPC initiative and the most significant of these - such as the US Congress's refusal to approve President Clinton's request for $210 million for HIPC - are not the responsibility of DFID or the UK Government.

Debt reduction does not automatically lead to poverty reduction. It has long been recognised that there needs to be a robust link between the two, for poverty reduction as such, and to secure the credibility of debt cancellation as a means of resourcing it. The World Bank, the IMF and donor governments have chosen the Poverty Reduction and Growth Facility (PRGF) and the Poverty Reduction Strategy Paper (PRSP) process as this link.

While CAFOD/Christian Aid recognise the potential offered by the shift from ESAFs to the PRGF, they do not believe that this move goes far enough in integrating debt relief with the IDTs. The arguments are set out in the papers A Human Development Approach To Debt Relief For The World's Poor, (CAFOD March 1999) and Forever in Your Debt? (Christian Aid May 1998). This paper goes one step further and argues that true international coherence can only come by making the IDTs the centrepiece for both debt relief and trade and investment reform.

Moreover, it is not clear to what extent the PRGF process, relying on the participation of civil society and dialogue with government, is genuinely open-ended. In particular, it is not clear what will happen if the recommendations of a nationally agreed PRSP conflict with what the IMF regards as sound macroeconomic policy. Publicly, the Fund stresses the need for national 'ownership' of reform proposals if they are to flourish, but privately, after the failure of externally imposed conditionality, Fund staff seem to see the PRGF and the PRSP process as a way of winning wider ownership of policies determined by the Fund's traditional views. Under the new system, the boards of the IMF and World Bank must still endorse the reform programme before debt relief is granted. No-one yet knows what will happen if governments say one thing, and the IMF and World Bank another, when it comes to devising policies to reduce poverty.

Nevertheless, the new system at least obliges governments and the International Financial Institutions (IFIs) to listen to the people of the country concerned, and should open the way to a more productive long-term debate on its economic recipes. Much depends on the extent and quality of civil society participation in the exercise, and CAFOD and Christian Aid are both actively involved in encouraging and strengthening those of its partners who wish to take part.

Worryingly, CAFOD partners in Bolivia and Honduras report that some civil society organisations' contributions have been effectively blocked by the Bretton Woods institutions, raising concerns at the real level of inclusiveness of the process. Christian Aid partners have noted the same and have also complained that they do not have access to all the information available to governments and the IFIs. Access to information is the minimum required for true consultation.

Conclusion

In recent years, the impact and regulation of private financial flows has become a major development issue. The impact of financial crises on poverty, inequality and sustainable development has grown as such crises have become both deeper and more frequent. Financial volatility and instability is becoming an endemic part of the global economic system. For the least developed economies, public debt remains a crippling burden, and debt cancellation is one of the most efficient means of freeing up resources needed to reduce poverty. While the UK Government should be commended for its determination in pushing for faster, deeper and broader debt relief for poor countries, much more remains to be done.

Recommendations:

• Broaden the debate on reform of the global financial system to allow greater participation by developing countries and civil society organisations.
• A balanced approach, based on empirical research, is preferable to an ideologically-driven push for deregulation at any price. Governments should reject any calls to transfer the financial deregulation agenda to new fora such as the WTO.
• Northern industrialised countries should improve regulation of capital markets in order to curb volatility and reduce global poverty and inequality.
• Developing countries should be offered impartial advice and technical assistance on a range of capital account regimes, and permitted to decide for themselves which most suits their needs.
• An International Debt Standstill and Work-out Procedure should be established to deal with financial crises. This should be administered by a new, independent body such as an International Debt Tribunal.

On debt

• The IMF and World Bank should make it apparent to governments and civil society organisations that sound policies will be acceptable to their boards, even when they depart from the economic policy prescriptions of orthodox structural adjustment programmes.
• The IMF, World Bank and governments should ensure timely and thorough public access to all documentation related to development policy in developing countries.
• Technical assistance and capacity building should be provided to both governments and civil society organisations to enable them to engage constructively in the PRSP process.

4. Investment, competition and the private sector

In achieving the IDTs, the private sector is a crucial source of jobs, investment and innovation. Experience shows that in order to maximise impact on poverty reduction and development, a strong public-private partnership is required at both national and international levels. If this does not happen, the danger is that competition between countries wishing to attract foreign investment and technology could lead to a 'race to the bottom' in terms of tax incentives and labour market suppression, thereby minimising the potential benefits offered by the private sector. Several aspects of this partnership are important:

The partnership should be guided by national development policy

As with other aspects of reform, reform of the investment regime is a means to an end, not an end in itself, and the end should be sustainable pro-poor growth. To maximise the benefits of Foreign Direct Investment (FDI), governments should be able to establish performance requirements for investors.

FDI is not necessarily the same as domestic investment

Despite claims to the contrary, there are important ways in which foreign investment is different from domestic investment, and may require different treatment as part of a country's development strategy. Foreign investment is less 'sticky' than domestic, and tends to have fewer linkages to the local economy. While it may introduce more modern technology, a lack of linkages may result in a failure to spread this technology through the host economy, or to develop the industrial clusters that are increasingly seen as an essential aspect of successful industrialisation.

Furthermore, recent research suggests a complex relationship between FDI and levels of overall investment. In a paper for UNCTAD X, Agosin and Mayer argue that the relationship between FDI and domestic investment varies - crowding in (FDI leads to increase in domestic investment) occurred in some parts of Asia and Africa, while crowding out (FDI squeezes out domestic investment) occurred in Latin America. In other parts of Asia and Africa the impact was neutral. The paper concluded that crowding out occurs where the investment regime is most liberal, and where domestic sectors are less developed. This in turn suggests that liberal regimes for FDI may not necessarily be good for the development of domestic industry and commercial agriculture, especially in the least developed countries.

The main conclusion that emerges from the analysis is that the positive impacts of FDI on domestic investment are not assured. In some cases, total investment may increase much less than FDI, or may even fail to rise when a country experiences an increase in FDI. Therefore, the assumption that underpins policy toward FDI in most developing countries - that FDI is always good for development and that a liberal policy toward multinational enterprises is sufficient to ensure positive effects - fails to be upheld by the data. ... The most far-reaching liberalisations of FDI regimes in the 1990s took place in Latin America and FDI regimes in Asia have remained the least liberal in the developing world. Several Asian countries still practice screening of investment applications and grant differential incentives to different firms. As already noted, some types of investment have remained prohibited for most of the period under review. Nonetheless, it is in these countries that there is strongest evidence of (crowding in). In Latin America, on the other hand, these practices have been eliminated in most countries. Nonetheless, liberalisation does not appear to have led to (crowding in).³¹

In the light of these concerns, CAFOD/Christian Aid view with great scepticism any uses of phrases like 'level playing field', 'national treatment' or 'non-discrimination' when discussing the treatment of large foreign investors in developing countries.

FDI is not portfolio investment is not financial flows

This may seem an obvious point, but a surprising number of policy documents and speeches gloss over the fundamental differences between different forms of investment and use the lessons from one form to argue for liberalisation in the others. The Asia crisis has graphically shown the differing levels of volatility between FDI and financial flows, and there are also clear differences in terms of job creation and technology transfer. It is important that they are dealt with separately in trade and investment reform. For example any future discussions on an International Investment Agreement would benefit from a definition of investment that is much more sharply drawn than the broad version used in the ill-fated MAI negotiations.

Large investors are not the best generators of jobs

Job creation is at the heart of achieving the IDTs, and research clearly shows that large firms are not the best means of generating jobs. A recent study of the impact of market reforms in nine Latin American countries concluded:

The reforms did not solve, and quite probably increased, two problems: investment continued to be concentrated among large enterprises [principally transnational corporations (TNCs)] that have not shown the capacity to develop backward and forward linkages with smaller firms, and supplier chains were destroyed by the quest for competitiveness through increasing imported inputs. Moreover, the reforms did not deliver the expected employment growth.³²

The link between FDI and export earnings is weakening

Recent research questions one of the traditional arguments in favour of FDI, namely that it is an important generator of export earnings. UNCTAD's 1999 Trade and Development Report cites studies of Malaysia, which has been one of the most successful developing countries in attracting TNCs and using FDI for capital accumulation and technological progress. The total impact of the trade balance of foreign firms and their income flows on Malaysia's current account has been negative in every year during 1980-1992. UNCTAD puts this down to the high import-intensity of the investment, and the rising level of royalty and licence fees and profit remittances. As foreign investment increasingly takes place in services rather than tradeables, the link with export earnings can only get weaker. According to UNCTAD this is a world-wide trend.³³

For a fuller discussion of the development impact of FDI, see David Woodward, Drowning by Numbers: the IMF, The World Bank, and North-South Financial Flows, (Bretton Woods Project, 1999)

Making International Investment Agreements (IIAs) consistent with the IDTs

The above considerations are important in guiding attitudes to international investment agreements. The failure of the MAI drew attention to the dangers of concluding investment agreements for their own sake, rather than making a clear development case for their introduction, accompanied by a transparent and inclusive process of negotiation. In its 1999 Human Development Report, UNDP considered these issues:

What does it take for foreign direct investment and growth to contribute to human development? First, investments in infrastructure and services should have a direct impact on human development. Second, foreign direct investment must be tailored to national priorities, in activities that have spillovers - in creating more employment, bringing in high technology, building future human capital. Third, countries need to minimise the adverse impacts of foreign direct investment (such as creating inequalities), provide domestic enterprises with necessary incentives and protect their interests.

The MAI debacle also showed that it is not politically (or developmentally) acceptable to conclude an IIA which merely imposes responsibilities on governments, while granting new rights to corporations. A balance of rights and responsibilities for businesses operating in developing countries is essential.

Any new attempt at an international investment agreement should have the achievement of the IDTs as its starting point and underlying rationale. For good suggestions on an overall framework, see Making Investment Work for People: An International Framework for Regulating Corporations, (World Development Movement Consultation Paper, February 1999). This argues for a twin track approach, covering only FDI, enabling governments to attract high quality investment as part of their development strategy, while protecting basic rights by setting global minimum standards (through both self and legally binding regulation). The role and responsibility of the private sector is of key importance in ensuring that investment contributes to poverty reduction.

The role of the private sector

The world's 100 largest non-financial TNCs held $1.8 trillion in assets in 1998, and sold products worth $2.1 trillion, but included only two TNCs based in developing countries (Korea's Daewoo, and Venezuela's Petroleos de Venezuela).³⁴ Globalisation has led to a massive concentration of trade and investment in the hands of TNCs, raising issues of their impact in host developing countries, and the degree of regulation and oversight to which they are subject in their countries of origin. Private investment in the developing world has increased dramatically, from $44 billion in 1990 to $164 billion in 1998 ³⁵ and consequently the role of the private sector in directing and supporting international development has become increasingly important.

Clearly, investment does not benefit all equally, as the increased gap between rich and poor countries, and rich and poor people, demonstrates. Furthermore, although often somewhat less damaging than domestic investment, the negative effects of some TNCs on the environment and in the sustained abuse of human rights are well documented. Greater emphasis should be given to the control and regulation of foreign investment to ensure that maximum benefits are enjoyed by all stakeholders in the South, especially poor communities. Increased corporate responsibility for social and environmental standards is also essential for sustainability and to improve the livelihoods of the world's poorest people.

Host country issues

While acknowledging that FDI can provide much needed jobs and technology, Christian Aid/CAFOD partners have raised serious concerns about the social and environmental impact of some forms of inward investment. Across Asia, wages and working conditions in the garment and shoe industries in countries such as the Philippines and Thailand have been undermined as buyers use the entry of lower-cost producers in China and Cambodia to bargain down prices. Local NGOs in Southern Sudan are concerned at the impact of oil investment in terms of the forced displacement of local people in the middle of a conflict zone, while in the Philippines, CAFOD partners have criticised the impact of transnational control of high yield rice varieties, which they see as undermining attempts to develop appropriate rice technology and defend genetic diversity. Transnational control of Genetically Modified Organisms (GMOs) is also a widespread cause for concern.

A number of Christian Aid partner organisations from Africa, Asia and Latin America, have expressed strong concerns about the activities of multinational companies in their countries. They argue that companies are depriving poor communities of resources such as land which are essential for their livelihoods, that employment often involves very low health and safety standards, and that linkages with the local economy are weak or non-existent. They argue that enforceable regulation of multinational companies is an essential element in any future trade reforms.

Given the depth of these concerns, it is vital that host countries be given the necessary policy space to regulate and channel direct investment in the interests of national development and poverty reduction. This should be a starting point for any future discussions on international investment agreements.

Source country issues

In the homes and major markets of large transnationals, there is enormous scope for developing corporate social responsibility in the pursuit of the IDTs. CAFOD/Christian Aid welcome the recent appointment of Kim Howells M.P. as Minister for Corporate Social Responsibility, and hope his remit will be international as much as domestic. While some leadership companies have made great strides on this issue, much remains to be done.

One example of a productive combination of legislation and voluntary action is the government's recent decision to require pension funds to include in their annual reports the social and environmental criteria they use for their investments. An apparently minor technical change, the new reporting requirement opens up the previously hermetic world of pension fund investment, which accounts for a large slice of the stock market, to scrutiny by policy holders who want to see their savings used ethically. In May 2000, Friends Provident announced it would exert social and environmental scrutiny across its entire �15 billion portfolio of shares. Other funds such as the BT and the Universities' Superannuation Scheme have also announced they will include social and environmental issues in their discussions with companies.

Ethical Trading

As the Secretary of State notes, there is a need for ethical trading standards to counteract a downward spiral to the bottom where the governments of developing countries are being pressurised to reduce labour and social standards to compete for foreign investment. There is increasing interest worldwide in developing a partnership approach between business, trade unions and NGOs in order to develop best practice over labour standards. One such partnership is the Ethical Trading Initiative (ETI), a unique British initiative which is at the forefront of developing such a tripartite partnership. Christian Aid/CAFOD are proud to be founding members of the ETI, and staff from both organisations are currently serving as directors on its board.

The increased participation and involvement of southern civil society will be key to the ETI's success in ensuring that the benefits of ethical trade reach all stakeholders of the project. In the case of women and marginalised workers, whose rights are most insecure and needs most often forgotten, their representation is crucial. Such participation can also ensure local ownership of the initiative countering fears that this is a British protectionist venture. To this end CAFOD/Christian Aid support work to strengthen Southern civil society groups' ability to engage with local suppliers on ethical trade issues. In addition, the needs of small producers should also be emphasised and their ability to participate in ethical trade should be ensured.

Competition Policy

Investment agreements govern the relationship between individual governments and investors. However, complementary regulation applying to all companies is needed to ensure that markets function in a way that does not give any individual company an unfair advantage. Christian Aid/CAFOD believe that there is reason for concern in some sectors that the spread of investment may be leading to excessive global market concentration, as single companies penetrate a number of national markets. In some of the most dynamic new industries, competition is being eroded by a series of mergers and acquisitions - for example, the top ten companies in the global telecommunications sector now control 86 per cent of the world market.³⁶ Until now, competition policy has been an issue for national, rather than international, economic governance. However, if the imbalances of power between small states and large companies are to be addressed, global regulation of companies - including the private sector - will be essential. Therefore, in any discussion or negotiation, investment should always be accompanied by competition policy.

A number of major multilateral institutions have begun to express concern over market concentration in particular sectors. The UNDP, for example, argues that

The mandate of the WTO needs to be expanded to give it anti-monopoly functions over the activities of multinational corporations, including production, working in close collaboration with national competition and antitrust agencies.

However, as with any international rule-making process, competition law should take into account the particular circumstances of the developing countries if it is to contribute to the achievement of the IDTs. UNCTAD's Trade and Development Report 1999 adds that

any multilateral agreement on competition policy would have to take fully into account the special and differential treatment of developing countries that was unanimously agreed upon in the Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices adopted by the United Nations. Such treatment could encompass the right to exempt sectors from national competition rules for development reasons. Exceptions and exemptions still exist in most developed countries.³⁷

Conclusion

CAFOD/Christian Aid believe that the private sector has an important role to play in development, and that investment is an essential source of resources and new technologies for developing countries. However, in order for these benefits to be realised, attention needs to be paid to the quality, as well as the quantity, of investment, and to the impact of the actions of investors on poor communities. Agreements on investment and competition should be designed with these impacts in mind, to allow governments scope to regulate companies where required to meet national poverty reduction strategies while providing stability for investors. Source governments, host governments and companies themselves all have a role to play in ensuring that the activities of the private sector contribute to, rather than undermine, the achievement of the IDTs by 2015.

Recommendations

• Regulation of investment, competition and the private sector need to be complementary to ensure that both the quantity and the quality of FDI to developing countries are improved.
• Existing international guidelines on corporate social responsibility should be strengthened, to cover areas such as human rights, core labour standards, the environment, corporate governance and restrictive business practices.
• An international monitoring body should be established, which has the power, in extremis, to impose sanctions on individual companies, to give such guidelines teeth.
• Complementary moves should be encouraged to support self-regulation by responsible companies such as those involved in the codes of conduct movement.
• All governments regulate investment to meet national objectives, and governments in developing countries should be allowed to regulate investment to meet nationally agreed poverty reduction strategies e.g. via performance and local content requirements.
• Within the WTO, rules on Trade Related Investment Measures (TRIMs) may need to be revised. A new approach to other agreements may also be needed. For example, the government should support the approach contained in the GATS agreement, allowing governments to impose conditions on firms which benefit from market access agreements, and investigate how this approach could be transferred to agreements in other sectors, or to any future investment agreement.
• The UK Government should encourage the EU and other parties to support the development of an international agreement on competition policy.

5. Trade

Multilateral trade regulation

The furore surrounding the WTO's Ministerial meeting in Seattle in November illustrates the political importance of trade policy to industrialised country governments, and the seriousness of the issues for developing countries. Christian Aid/CAFOD believe strongly that it is essential to have rules governing international trade. A body like the WTO is necessary to ensure that weaker powers are not discriminated against by the strong in both North-South and South-South relations. However, rule-making should proceed at a pace that is appropriate for the weakest members of the system, and the rules made in the WTO should be the right rules for poverty reduction.

During most of 1999, the debate on multilateral trade regulation was dominated by the possibility of a new comprehensive round of trade negotiations in the WTO. Christian Aid/CAFOD believe that events in Seattle demonstrated the difficulties in the EU's stated position that any 'development round' should include a range of new issues such as competition policy and investment (known as a 'comprehensive round'). It was clear, both in Seattle and beforehand, that many developing country governments did not share this view, arguing instead that their interests and limited capacity would be best served by addressing a limited number of issues, beginning with the negative impacts of the Uruguay Round agreements. The EU, and particularly the British government, was therefore placed in the uncomfortable position of claiming to know what the South needed better than developing countries themselves.

The EU's insistence on a broad agenda was one of the reasons why the South, especially the smaller nations, came to feel so alienated by the Seattle process. What is now needed is a change of approach. Rather than undermine an already weakened multilateral trading system by continuing to insist on a new comprehensive round of talks, Christian Aid/CAFOD urge the UK Government to make the so-called 'development round' a reality, and take a lead in developing new, poverty-reducing structures of multilateral trade regulation. Trade regulation should start with an assessment of how poor communities interact with national and international trading regimes. National governments then need support in designing trade policy regimes that meet the needs of poverty reduction, and multilateral agreements should be made which allow them to do so.

What kind of trade rules?

Following the experiences of the 1930s with protectionism, and subsequent experiments with import-substituting industrialisation, many policy-makers drew the conclusion that liberal trade regimes were the best policy environment for development, and that developing countries should move toward an open trade regime as quickly as possible. Twenty years of structural adjustment and the Uruguay Round agreement on wide-ranging trade liberalisation were the result.

The assumption that generalised liberalisation of international trade is the best trade policy stance is enshrined in the text of the Final Act of the Uruguay Round, establishing the World Trade Organisation as a body in which countries will negotiate

reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations.³⁸

However, the manner and the speed at which liberalisation has happened so far do not indicate that this faith in liberalisation and non-discrimination is necessarily well-placed. It is not clear at either a theoretical or an empirical level that the rules made in the WTO so far have been the right rules for poverty reduction. Development agencies have been reporting the very mixed experiences of trade liberalisation at the micro level for many years. The experience of the communities with whom agencies such as CAFOD and Christian Aid work has not been that trade liberalisation and increased trade have led unambiguously to benefits for poor people.

The transitional costs of trade liberalisation are often high, and fall on some of the most vulnerable communities. In the Philippines, Christian Aid's partner organisation, the Ibon Foundation, has documented how trade liberalisation under structural adjustment has led to huge dislocation in the sugar sector. Following increases in sugar imports after trade liberalisation, domestic producers are suffering a fall in demand for their crop. Ibon says the costs will fall hardest on the poorest:

The 413,000 farmworkers who could be dislocated are already food insecure and lack the capital and education to shift very easily to other forms of work. For them the future looks bleak.³⁹

The experience of structural adjustment programmes during the 1980s and 1990s, which included trade liberalisation among the policy changes required, led to acknowledgement among both donors and governments that economic reforms have costs as well as benefits, losers as well as gainers. The World Bank quickly incorporated the concept of 'social safety nets' into the design of structural adjustment programmes, to compensate the losers for temporary falls in income during reforms.

However, new literature indicates that trade liberalisation might not increase economic growth sufficiently to compensate the losers in the process. Evidence is emerging that the costs may be higher and the increases in growth and the impact on overall poverty lower than was first assumed. The 'transitional' costs may be much longer-term than was thought, and the benefits not sufficient to offset them. In addition, the World Bank itself now acknowledges that social safety nets themselves are likely to be among the first areas of state expenditures to be cut when the costs of reform start to bite.⁴⁰ The strong indication is that poverty reduction should be integrated into trade policy-making from the start, rather than growth being pursued through liberalisation, while poverty reduction is addressed separately through social safety nets.

Trade liberalisation and growth

Despite a huge volume of literature on the subject, the claim that trade liberalisation has a positive effect on both growth and on poverty reduction has less empirical foundation than is often asserted. According to two leading trade economists, 'there is a significant gap between the message that the consumers of this literature have derived and the "facts" that the literature has actually demonstrated'.⁴¹ Following a review of several influential papers investigating the relationship between trade liberalisation and economic growth, the authors conclude, 'we believe that there has been a tendency in academic and policy discussion to greatly overstate the systematic evidence in favour of trade openness'⁴²

In part, the problem with existing literature lies in the difficulty of measuring openness to trade. A study of one influential index (the Sachs-Warner index of openness to trade), found that, when examining the importance of each of the separate variables that make up the composite index:

Both tariffs and quotas are insignificant. A joint F-test of their significance ... indicates that the two variables are jointly statistically insignificant. Surprisingly, the two measures in the Sachs and Warner index which are most likely to capture trade policy are not correlated with growth. ... Out of all the five factors, only one is significant: whether or not the country had a socialist economic system. The results ... seem to suggest that the factor driving statistical significance behind the composite measure is the market structure of the economy, not its trade policy orientation.⁴³

Increasingly, researchers are concluding that there may be no single, identifiable relationship between particular trade policies and economic growth. A recent paper, commissioned by DFID, concluded, 'overall, the fairest assessment of the evidence is that trade liberalisation alone has not been shown unambiguously to foster growth, but it has not been identified as a hindrance'.⁴⁴ In part, this may be because researchers have been asking the wrong questions. According to Rodriguez and Rodrik:

Our bottom line is that the nature of the relationship between trade policy and economic growth remains very much an open question. The issue is far from having been settled on empirical grounds. We are in fact sceptical that there is a general, unambiguous relationship between trade openness and growth waiting to be discovered. We suspect that the relationship is a contingent one, dependent on a host of country and external characteristics. Research aimed at ascertaining the circumstances under which open trade policies are conducive to growth (as well as those under which they might not be) and at scrutinising the channels through which trade policies influence economic performance is likely to prove more productive.⁴⁵

CAFOD/Christian Aid endorse this more nuanced approach to trade policy-making. In order to get beyond the simplistic, often ideologically driven, analysis of trade policy and poverty reduction, Christian Aid and CAFOD propose that the UK Government adopt an approach to trade policy based on empirical evidence on the links between particular policies and their impact on particular groups, and the impact of different environments in making these links appear stronger or weaker.

Trade liberalisation and poverty - the short term impact

On an aggregate level, as well as at the micro-level documented by development agencies, research shows that the costs of trade reform might be higher than has previously been assumed. According to a recent World Bank study on the impact of trade policy on poverty and inequality:

openness is correlated negatively with growth [in incomes] among the poorest 40 per cent (of the population), but strongly and positively with growth among the middle 60 per cent and wealthiest 40 per cent. While greater openness benefits the majority, it harms the poorest. These results show, in fact, that the costs of adjusting to greater openness are borne exclusively by the poor, regardless of how long the adjustment takes. In addition, the consequences of terms of trade changes are far greater for the poor than for the middle or wealthy classes. The poor are far more vulnerable to shifts in relative international prices, and this vulnerability is magnified by the country's openness to trade. Considering that terms of trade have been falling on average for the countries in this sample, this bodes ill for the poor, and suggests that much more needs to be done to compensate those who lose from liberalisation.⁴⁶

The authors go on to argue that a different kind of trade policy might be needed, to minimise the costs to poor people and increase growth in the long term:

At least in the short run, globalisation appears to increase poverty and inequality, and the economic costs of exogenous shocks are magnified by distributional conflicts. Terms-of-trade shocks exacerbate social divisions, which in turn lead to greater volatility, which can further reinforce and widen distributional differences and so on. Policies to minimise the adverse consequences of shocks to the poor are essential not only to enhance welfare but also to boost growth in an increasingly interdependent world economy.⁴⁷

In Zambia, one CAFOD partner reports

Zambia has always been a relatively open economy. However, as a result of the liberalisation policies of the nineties, she is now the most open economy in the Southern African region. This excessive openness relative to that of the neighbouring economies has not redounded to the benefit of Zambia. Zambia has become a virtual dumping ground for goods from countries like South Africa and Zimbabwe. This is what has in the main been responsible for killing the local manufacturing industry.⁴⁸

The partner went on to record the adverse impact of trade liberalisation on the incomes of small maize farmers:

While the aim of liberalisation is to ensure remunerative prices for the producers not guaranteed by fixed pan-territorial prices, it is mainly the large farmers who seem to have experienced this anticipated benefit. For the small farmer in the remote rural areas, the experience has been the reverse. His income as a result has been lowered and given that poverty in Zambia has already been concentrated in the remote rural areas, this situation is bound to worsen poverty and income inequality.⁵⁰

The doubts expressed by development agencies about the poverty impact of trade liberalisation are increasingly borne out by aggregate level studies. However, it has always been argued that trade liberalisation can deliver poverty reduction in the long, if not in the short term, through its positive impact on economic growth. New evidence increasingly suggests that, as well as the costs of trade liberalisation being higher than previously thought, the benefits are also less than predicted. Trade liberalisation may not always deliver poverty reduction in the long term.

Trade liberalisation and poverty - the long term impact

What evidence there is shows that we cannot afford to be complacent about the impact of trade liberalisation on poverty. This is a highly contentious area, and is far from being conclusively proved either way. Two recent papers from within the World Bank ⁵¹ say almost entirely contradictory things about the relationship between openness, growth and poverty, illustrating the lack of consensus even within the same institution. Given the disagreements, after many years of research into these questions, it may be that future research would be more appropriately directed toward the type of questions suggested by Rodriguez and Rodrik,⁵² addressing the circumstances under which particular policies can lead to reductions in poverty. The evidence presented below sheds some light on this issue.

As well as the increasing doubts described above about the overall impact of trade liberalisation on growth, and the mounting evidence of the extent of the short-term costs of liberalisation, sectoral level studies show that the long-term impact of trade liberalisation on the incomes of the poorest groups may also be less than is hoped, and less than is needed to meet the IDTs.

Evidence from countries that have implemented trade liberalisation shows that this did not necessarily lead to significant poverty reduction - in India, though the economy grew at over 7.5 per cent a year in the mid-1990s, the percentage of Indians living in poverty fell by only one per cent between 1993 and 1997.⁵³ More dramatically, since liberalisation began in Russia in 1989, inequality has doubled, wages fell by almost half, and male life expectancy has declined by more than four years to 60 years.⁵⁴ While precise causality is hard to determine, the kind of growth resulting from trade liberalisation in these countries is clearly not sufficient on its own to lead to significant increases in the incomes of poor people.

The assumed relationship between trade liberalisation and poverty is that as trade is liberalised, use of capital and labour will become more efficient, foreign investment will lead to the introduction of new technologies, and productivity will increase. This will then increase the rate of growth, which will lead to benefits for all, including the poorest. As described above, the link between trade liberalisation and growth is increasingly being questioned. The link between trade liberalisation and poverty reduction has been shown to be even less robust.

In part, this is because of the type of growth that is associated with liberalisation. Aggregate rates of growth are always composed of different growth rates in different sectors. For growth to have the maximum impact on poverty, it has to occur in the sectors where poor people earn their livelihoods. However, the type of growth resulting from trade liberalisation seems to occur in sectors of the economy which are of least importance to the poorest communities. The main sectors on which poor people depend for their livelihoods include the urban informal sector, agriculture, and low-skilled wage work in the formal sector. These are the sectors which seem to have benefited least from trade liberalisation.

The urban informal sector may be being left behind by growth occurring elsewhere in the economy. Economic theory predicts that, through competitive pressures and technology transfer, openness to trade increases the productivity of domestic industry. However, when looked at more closely from the perspective of poverty reduction, it is found that the productivity effect of trade liberalisation varies considerably across different sectors, and may be weakest in sectors of most interest to poor people.

A recent study for the IMF,⁵⁵ finds that 'in low-growth (traditional) manufacturing sectors, increased international trade has little or no effect on productivity growth.'⁵⁶ The author's conclusion is that, because liberalisation in these sectors is unlikely to secure pro-poor growth, 'for developing countries specialised in low-growth sectors, a case could be made for stimulating production in sectors with higher growth as a means to increasing overall productivity growth'.⁵⁷ If government policy in this area is not effective, Rodriguez and Rodrik argue that trade can have a negative effect on growth in developing countries, 'a country that is behind in technological development can be driven by trade to specialise in traditional goods and experience a reduction in its long-run rate of growth'.⁵⁸

More than two thirds of the world's poor people live in rural areas. Though agricultural producers were predicted to be among the main beneficiaries of both domestic liberalisation and increased openness to international trade, the benefits have been less than expected. Even where trade liberalisation has led to growth, this has not necessarily led to growth in the incomes of poor people.

Reforms in Madagascar seem to have hurt the rural poor despite the increase in their output. Following reform, agriculture grew the fastest it had in 20 years (albeit still at a modest rate), with growth concentrated among the smallest farmers. But the evidence also shows deepening poverty during and following liberalization, particularly in rural areas. Nutritional, educational, and spending data all suggest significant deterioration in living standards among the country's primarily rural poor. An important cause appears to be the significant liberalization-induced rise in the mean and variance of all major food crop prices, particularly rice. Rice price changes associated with liberalization are estimated to have led to welfare losses of more than 20 percent for more than a third of the country's rice farmers, who comprise most of the country's poor. Because most small farmers in Madagascar are net rice buyers, liberalization seems to have induced significant welfare losses among the country's primarily rural poor, including a large proportion of rice producers. A natural response for immiserized smallholders is to increase their labor effort, which increases output. Hence the apparent paradoxical result of higher agricultural output and higher rural poverty.⁵⁹

Theory also predicts that trade liberalisation should lead to an increase in the incomes of unskilled labour, where labour is the dominant factor of production. However, a recent literature review, funded by DFID, concludes that empirical studies of this issue have 'produced mixed results'.⁶⁰ In much of Latin America and parts of Asia, the incomes of the unskilled, often the poorest group in society, have been falling relative to the skilled. In China and Mexico, import liberalisation has been shown to increase the wage gap between skilled and unskilled labour.⁶¹ This is borne out by a nine-country study of Latin America, comparing the pre-liberalisation period (1950-80), with the adjustment period (1980-2000). The authors conclude that liberalisation of the economy, including trade reform 'hindered the growth of employment', and in addition led to 'a widening gap in wages based on skill level, which is the opposite of what the proponents of the reforms expected.'⁶²

Considering a range of available evidence on openness and employment, the draft of the World Bank's 2000/1 World Development Report concludes:

The evidence does not confirm that greater openness has led to low-skilled labor--intensive growth--if anything, it suggests the opposite. Only time will tell whether the decline in the relative returns to low-skilled labor reflects a one-time adjustment effect or a bias toward higher skills. It may be that unilateral openness may not suffice to bring about pro-poor economic modernization.⁶³

There is clearly a need for policy makers to pay more attention to the development of the theory on which policy is based. The divergence of the actual outcomes of trade liberalisation from the predictions of economic theory indicates the need to develop the theoretical basis of policy-making until it better fits the available evidence, and that there is a need for greater attention to the political realities which affect how trade policy works out in practice.

In developing the theory, available evidence strongly suggests the need to look more closely at the sectoral impact of liberalisation, and to develop policies that differentiate more strongly between sectors, in order to ensure that the benefits of policy change reach poor communities, and that the costs are not borne by those who can least afford them. This will involve a closer analysis of the economic activities of poor people, and the ways that trade policy change is transmitted to them.

The EU's external trade arrangements

A primary concern of many developing countries is the policies of the EU itself. The economic context for poverty reduction is created partly by international institutions such as the WTO and by the governments of developing countries, but also by the actions of donor countries such as the EU and the UK. In trade policy particularly, the behaviour of the big powers impacts on smaller economies through trading relationships, as well as through direct political pressure. The governments of the big trading powers have special responsibility to ensure that their own trading arrangements do not undermine the achievement of the IDTs. This responsibility is enshrined in Article 130 of the Maastricht Treaty, which commits the EU to 'foster sustainable economic and social development'.

Northern protectionism

Despite their public allegiance to the IDTs, in almost every sector, the largest trading powers have failed to turn their commitment to poverty reduction into action when it comes to their own trade policies. This is most evident in the highly protectionist trade stance of most industrialised countries, particularly in the sectors of most interest to developing countries, such as agriculture. The OECD estimate that agricultural policies of OECD countries - after the limited reforms following the Uruguay Round - cost developing countries $19.8 billion per year. In manufacturing, average tariffs on manufactured imports from poor countries are four times higher than those on imports from rich countries.⁶⁴ UNCTAD estimates that the opportunity cost to developing countries of lost markets in other sectors protected by industrialised countries is $700 billion. The total cost of protectionism to developing countries is nearly $720 billion per year - a figure which compares with annual official development assistance from OECD countries of $51.9 million in 1998.⁶⁵

Unfortunately, the EU has not been conspicuous in its success in ensuring that its own trading policies contribute, or at the least do not undermine, poverty reduction in developing countries.⁶⁶ Despite its free trade rhetoric, the EU is responsible for one of the major distortions in global markets. The Common Agricultural Policy (CAP) is responsible for the dumping of subsidised exports on developing country markets, undermining domestic agricultural production. For example in South Africa, CAFOD partners have charted how the dumping of subsidised milk imports from the EU is undermining large parts of the domestic dairy industry.

In Seattle, there was widespread scepticism over the EU's position among developing countries, who interpreted its insistence on a broad agenda as a way to maximise the trade-offs it could demand in return for any action on the CAP. In the aftermath of Seattle, EU negotiators confirmed this interpretation of its position. Many developing countries, along with the US, see the CAP as one of the greatest obstacles to ensuring developing nations benefit fully from globalised trade, since it both limits access to European markets, and dumps artificially cheap food on other countries.

The protectionist policies of the EU and other industrialised countries are partly responsible for the suspicion among some developing countries and NGOs that the call for a comprehensive new round of trade talks was simply a means to avoid making concessions on agricultural protection. Since Seattle, the EU has done little to allay these fears, but rather has exacerbated them through its failure to agree to the very modest proposal to allow duty-free imports to all products from the least developed countries. As well as being of benefit to the poorest countries in the world, this action would send out an important signal that the EU is genuinely concerned to ensure that the gains from trade are shared world-wide.

UK trade policy levers

The UK's trade with developing countries is worth around �300 billion per year - over 100 times the value of UK Government aid. UK trade policy is clearly an important lever the government can use to promote the achievement of the IDTs.

Unfortunately, there are a multitude of examples where the UK has supported questionable, and often damaging business in the South. Officially-supported exports and investment from the UK overseas - supported by the UK's export credit agency, the Export Credits Guarantee Department (ECGD) - could be harnessed to work for poor countries and poor people, but not without some fundamental changes in the way the ECGD operates. CAFOD/Christian Aid recommendations are discussed fully in both agencies' submissions to the ECGD review. Officially-supported export credits and investment from the UK should not compromise the development efforts of poor countries. As a first step, the ECGD should be far more transparent about what business it supports, allowing the opportunity for more timely public debate and avoiding later confrontations over human rights and environmental issues. Secondly, the ECGD should include a commitment to sustainable development, including the environment and human rights, in its business mandate. Finally, the recipient country often lacks the capacity or institutional structures to analyse fully the impact of Northern export credit activity on its own development. Northern governments and institutions should support capacity building initiatives to enhance Southern government and institutional capacity to conduct such analyses when considering business supported by Northern export credit agencies.

Trade policy reform in developing countries

While the practices of the EU and the UK also impact strongly on the trading relationships of developing countries, national level policy-making remains of enormous importance.

This paper has argued that unfettered trade liberalisation in our unequal world is not the best trade policy from the perspective of poverty reduction. CAFOD/Christian Aid approach trade policy with the assumption that different countries need to design different policies to fit their specific circumstances. For this reason, policy-making capacity in developing countries is of central importance.

Reliable governance capacity at the national level is the keystone for effective markets and economic growth. A capacity-building approach focuses attention on the importance of reconciling the tasks of institution-building at the national level and the challenge of constructing governance institutions at the global level, in a manner that will produce a positive-sum relation rather than a zero-sum relation.⁶⁷

States also need to develop the capacity to achieve the redistribution that is needed if the IDTs are to be achieved by the 2015 target (see above section on equity).

Many developing countries have now had over twenty years experience of trade policy reform, starting with structural adjustment in the 1970s and 1980s. As described above, the results of this reform have been mixed. Though in many cases reforms were needed, the particular reforms that were followed have not always led to gains for the poorest people. Christian Aid/CAFOD argue that trade policy reform in developing countries needs to be rooted in national poverty reduction strategies and priorities. Rather than being driven by an a priori commitment to indiscriminate liberalisation, developing countries need to establish what works, given their own particular economic and social structure. It is very clear that, even with effective states, there is more to trade policy reform in developing countries than simply adopting the 'right' policies. CAFOD/Christian Aid would agree with Deepak Nayyar that:

The object of any sensible strategy of development in a world of globalization should be to create economic space for the pursuit of national interests and development objectives. In this task, there is a strategic role for the State - not only in the national context, to adopt policies that maximize the benefits and minimize the costs of economic integration with the outside world, but also in the international context, to shape the rules of the game through regional arrangements or strategic alliances.⁶⁸

There are a number of areas where national level policy-making in developing countries needs to be reconsidered, in the light of the post-war experiences of the East Asian economies, and the lessons of the structural adjustment process. Two areas are of particular importance - industrial policy and export promotion in agriculture.

Industrial policy and the East Asian enigma

In recent years, industrial policy has frequently been denigrated as inefficient and an obstacle to market-led development in the Third World. However, there is increasing recognition that this view was based more on ideology than on an objective interpretation of historical events. Christian Aid/CAFOD believe that renewed attention to effective industrial policy is a vital piece in the poverty reduction jigsaw. Rather than advocating its abandonment, donors and multilateral institutions should be seeking to encourage and strengthen industrial policies in developing countries as part of the global drive to achieve the IDTs.

Can industrial policy lead to growth with equity?

Most of the Asian examples of growth with equity have been built on a strong industrial policy. Stewart shows that in Malaysia, industrial policy and a 'structured market' (via the New Economic Policy) allowed the government to meet its own objectives (narrowing gaps between Malays and others) without undermining growth, while income distribution improved. Malaysia's growth rate over the period was one of the fastest in the world, at 6.3 per cent per annum during the period 1960-1989, while there was a marked improvement in income distribution, with the share of income of the bottom 40 per cent rising from 11 per cent in 1970 to 14 per cent in 1987, and the share of the top 10 per cent falling from 41 per cent to 35 per cent over the same period.⁶⁹

Theory and practice in industrial policy

There is compelling evidence that these examples of growth with equity were based on an interventionist, rather than a minimal, state. In some cases, governments have deliberately fostered growth in certain parts of the economy ('picking winners'), and in others have protected local industry from competition for limited periods. In a paper for UNCTAD X,⁷⁰ Carlota P�rez, currently at the Institute for Development Studies, concludes that 'actually existing industrialisation' occurs only through decisive government intervention - usually a combination of absorbing 'mature technologies' and picking winners in new technologies. She makes a clear argument for strong state and industrial policy, but suggests that the key is local not national government, for example in developing sectoral clusters.

Cambridge economist Ha Joon Chang concurs, making a convincing case that the portrayal of the Asian Newly Industrialised Countries (NICs) as free market success stories is seriously misleading. Chang shows the centrality of industrial policy in East Asian development, pointing out that it was those with the weakest level of industrial intervention (South East Asia) or which had abandoned industrial policy in the 1990s (South Korea) which proved most vulnerable to the financial crises of 1997/8.⁷¹ In a case study of Thailand's Board of Investment (BOI), Alice Amsden shows how the Thai government successfully 'picked winners' and industrialised the economy, and concludes 'The BOI's pervasive influence thus went hand in hand with sustained manufacturing expansion.'⁷²

Summarising the arguments on protection of domestic industry, UNCTAD's Trade and Development Report 1999 concludes:⁷³

A sophisticated infant-industry programme designed to reduce the import content of growth also needs to be part of the policy arsenal available to developing countries. The current aversion to such programmes reflects a misreading of the reasons for the failure of an earlier generation of import substitution policies. A careful review of past experience shows that design and implementation problems, and not misguided logic, were the main source of failure. Moreover, the success of the East Asian and other fast-growing developing economies shows that an export push often followed the build-up of domestic production capacity for the replacement of imports. In view of the evidence that the import content of growth in developing countries is now an even greater constraint on sustained economic growth than in the past, a rethinking of this issue is an urgent necessity in many developing countries.

Industrialised countries have a particular responsibility to assist in the development of industries in developing countries, in view of their past involvement in policy formulation through structural adjustment, and their own industrial and agricultural policies. According to UNCTAD:⁷⁴

In view of the growing pressure on countries to push domestic producers into world markets, the concept of infant industries needs to be extended beyond the earliest stages of manufacturing and include nourishing more advanced competitive industries through appropriate protection and support. Developed countries cannot, on the one hand, justify protecting and helping mature producers in their agricultural and high-technology sectors and, on the other, deny such possibilities to developing countries facing their own particular problems.

Industrial policy has achieved a new level of visibility in the UK in recent months, with the threatened closure of the Longbridge plant, and the closure at Dagenham. In a debate in the House of Commons on the Longbridge plant, the Secretary of State for Trade and Industry, Stephen Byers, commented:

We look at three broad matters when considering assistance. First, we need to support investment - either inward investment to attract a mobile project that could go anywhere in the world or projects such as the airbus initiative, where investment is made in the form of launch aid, which is repaid to the Government. Secondly, we need to ensure that competition is not unfair. For example, we must ensure that our shipbuilding industry is not at a disadvantage, given that the industry in other parts of Europe receives Government support. Thirdly, we need to assist industry through the process of change. That was one reason why we provided �100 million to the coal industry, where the process of change occurred because of the lifting of the stricter gas consents policy.⁷⁵

These three criteria - supporting investment, ensuring that domestic producers can compete, and actively assisting transformations of industry, are equally pertinent when considering industrial policy in developing countries. CAFOD/Christian Aid are concerned that free trade agreements, whether bilateral, regional or at the WTO, are placing increasing constraints on developing country governments' ability to make industrial policy. This could undermine developing countries' efforts to industrialise. Christian Aid/CAFOD urge the UK Government, both at bilateral level and via the EU, to ensure that existing and future trade and investment agreements maintain developing countries' ability to design and implement industrial policy. The UK should do this both to further its stated objective of meeting the IDTs, and to avoid any appearance of double standards over governments' right to intervene on industrial issues, which could undermine its credibility in fora such as the WTO.

What level of industrial policy is still possible?

Given that industrial policy can be an important part of achieving growth with equity, what are the implications for the IDTs of recent and proposed WTO and International Investment Agreements? Observers differ over the degree to which the new international architecture of trade and investment agreements rules out the kind of industrial policy regimes which have in the past underpinned many successful experiences of growth with equity. UNCTAD is pessimistic, arguing that 'the post-Uruguay Round trading regime has circumscribed the scope in most developing countries for replicating some of the policy measures which contributed to East Asian success.'⁷⁶

This pessimism would seem to be justified by the recent announcement by the US trade department of cases that have been listed for the WTO's dispute settlement mechanism. Two of the six cases cited related to local content requirements on foreign investors, an established tool of industrial policy with the aim of promoting linkages between foreign and domestic industry, which is now being disputed by the US government through the WTO.

Other authors see the danger not so much in the new rules and institutions, but in the 'tendency of developing country political leadership towards overconformity with global rules rather than towards challenging them.'⁷⁷ Alice Amsden ⁷⁸ believes the restrictions on developing country economic sovereignty are overstated, concluding that 'All in all, the liberal bark of the WTO appears to be worse than its bite, and 'neo-developmental States' in 'the rest' have taken advantage of this, where necessary.' She finds that the WTO leaves sufficient elbow room for developmental states to use performance requirements to industrialize, and holds out examples such as Taiwan's provision of science parks for chosen companies, or Korean promotion of science and technology through large national research projects, a model later followed by China. This question will ultimately be settled by the dispute resolution process. However, CAFOD/Christian Aid believe that where doubt exists, developing countries should be given the benefit of that doubt in being enabled and permitted to develop industrial policy regimes which foster growth and poverty reduction. Whether current WTO rules allow states to develop a coherent industrial policy or not, there is a need to ensure that future rounds of trade talks do not restrict further the use of policy instruments which have shown themselves to have a positive role to play in achieving growth and poverty reduction.

Export promotion

Trade policy reform advice offered by the World Bank in the 1980s and 1990s was partly based on the assumption that the aim of trade policy was export promotion, in particular in agriculture. Farmers were encouraged, through pricing and marketing policy, to switch production from food to export crops, in order to boost export revenues and reduce budget deficits. However, evidence on the success of such policies in boosting export revenues is mixed - though export volumes have sometimes risen in response to price and marketing reforms, earnings from exports have tended to rise less than volumes, and in some cases have declined.⁷⁹ A trade policy which leads to continued dependence on primary commodities is problematic given the long-term decline in the terms of trade for these commodities.

Christian Aid/CAFOD partners report a lack of coherence between different elements of structural adjustment programmes, which hindered trade liberalisation's potential to benefit poor people. In Nicaragua, the government shut down BANADESA, the bank which provided credit to small farmers. In Burkina Faso, the SAP of 1990/91 encouraged small and other producers to invest in cotton production, but small food producers suffered when cotton producers were given priority for loans from the National Credit Fund for Agricultural Projects.

In addition, switching production from food to export crops has implications for household food security, and for distribution within households. A series of case studies on the impact of trade liberalisation on food security, produced by Aprodev,⁸⁰ found that in many cases structural adjustment, and the promotion of export crops, had worsened food security. In Benin, for example, 'in many agricultural zones, farmers are not producing enough for their own consumption, but concentrating instead on export crops, mainly cotton.' This has led to a shortage of food for purchase on local markets, as well as shortages in production for their own use by rural households. Both rural and urban households experienced food insecurity.⁸¹ In addition, shifts between crops led to changes in the distribution of resources within the household, often worsening gender equality. The Aprodev case studies find that in East and West Africa, women have lost out as food production has been squeezed out by the promotion of export crops.

Bangladesh provides further evidence of how the promotion of different exports can have very different impacts on poor people. Over the last 15 years, garments and prawns have become the country's two main exports but NGOs in the country report that the two products have had very different impacts on poor communities. While the garments sector has employed over a million poor women, prawn aquaculture has generated few jobs, and damaged the lives of thousands of small farmers by polluting water supplies, reducing soil fertility through salination, and through the forced displacement of small farmers by large prawn-farming interests.

Reliance on the expansion of export crops is not necessarily beneficial either for growth in the aggregate, or for micro-level distribution. Trade policy in developing countries needs to go beyond the promotion of exports on the basis of existing comparative advantages, and towards a more dynamic view of competitiveness, where government has a role in facilitating the development of competitive and profitable industry.

Capacity building for trade policy

In order to have the capacity to develop and implement effective poverty-reducing trade reform, states in developing countries need to have the appropriate technical capacity, and the political space in which to develop new ideas. CAFOD/Christian Aid applaud DFID's work in the area of capacity building in developing countries, and urge the UK Government to take the lead in international efforts to increase the amount of technical assistance available through a variety of institutions. Technical assistance should aim to increase the capacity of states in terms of the resources available, the quality of intervention, and the extent of interventions. Evidence shows that where states have been strong in the capacity, extent and quality of intervention in areas such as industrial policy, (e.g. East Asia), and agrarian development, (e.g. Taiwan), poverty reduction has been more successful than where states have been weak, (e.g. Russia, parts of Africa).

Conclusion

During the 1980s and 1990s, trade policy became almost synonymous with trade liberalisation. However, evidence is emerging that the costs of liberalisation may be higher, and the increases in growth and the impact on overall poverty lower, than was first assumed. Increasingly, sectoral level studies show that the long-term impact of trade liberalisation on the incomes of the poorest groups may also be less than is hoped, and less than is needed to meet the IDTs.

Despite this evidence, the trend in international rule-making is toward blanket liberalisation rather than a more nuanced approach to trade policy. Though CAFOD/Christian Aid believe strongly that a body like the WTO is necessary to ensure that weaker powers are not discriminated against by the strong, rule-making must proceed at a pace that is appropriate for the weakest members of the system, and the rules made in the WTO must be the right rules for poverty reduction. Current rules, as well as not necessarily being appropriate for development, open Northern governments to accusations of double standards on issues such as protection for domestic industries and support for domestic farmers. Christian Aid/CAFOD urge policy makers to move beyond simplistic pro or anti-liberalisation debates to look at ways of designing and implementing trade policies that will help national governments to pursue their poverty reduction strategies.

Recommendations

• The World Bank, Regional Development Banks and IMF should ensure that their advice on export promotion and structural adjustment strengthens national efforts to achieve the IDTs.

6. Information, Communication and Knowledge

One of the defining characteristics of globalisation is the increase in the speed with which knowledge can be transmitted, and the rapid development of new technologies. According to the UNDP, 'the recent great strides in technology present tremendous opportunities for human development, but achieving the potential depends on how technology is used'. CAFOD/Christian Aid believe that the distribution and control of new technologies and the knowledge they generate is of vital importance in ensuring that globalisation contributes to poverty reduction.

While new technology has enormous potential to benefit poor people, it is definitely not a panacea. Experience shows that new technologies tend to flow towards the 'haves' in the global economy, and exacerbate the gaps between them and the 'have nots'. Concerted international action is essential to ensure that poor countries and communities reap the benefits of the 'new economy' and that some of the existing rules which actually prevent technology transfer to poor countries and people are reformed.

Two areas are of particular importance - access to new technology, and the emerging international regime for regulating intellectual property rights.

Poverty and the Internet

At the recent UNCTAD X conference in Bangkok, the potential role of the Internet in poverty reduction was highlighted by Michel Camdessus of the IMF and James Wolfensohn of the World Bank. Both argued that the internet, by making knowledge and communications cheaper and faster, has an important role to play in enabling poor and excluded people to benefit from globalisation.

The expansion of new technologies needs to be managed in ways which include poor people. Though there is undoubted potential in the internet, there are still serious constraints on the use of technology in most developing countries - constraints which exclude large parts of the world's population from one of the main drivers of globalisation, and which currently seem to increase inequalities. One of CAFOD's Peruvian partners has spoken of his fears for what he calls 'los desenchufados', the unplugged ones, in the new global economy.

One of the internet's most important roles has been facilitating the spread of information to individuals and groups, and communication between them. However, large groups of people are excluded, by poverty, from participation in this embryonic global community. Forty per cent of people in developing countries have never made a phone call. Uganda has only 1 telephone per 500 people. There are also sharp differences between developing countries - Thailand has more mobile telephones than the whole of Africa.⁸²

Use of new technologies can never be a substitute for investment in social and physical infrastructure. In least developed countries, the average adult illiteracy rate is 52 percent.⁸³ If individuals and groups in developing countries are to participate in the spread of information and communications technologies, they must first be able to read.

The internet is expected to become a major commercial tool, facilitating trade between companies and individuals. It enables transactions to happen irrespective of physical distance, and so increases competition and facilitates market entry. However, the internet cannot facilitate the physical movement of goods from one place to another. Unless services are advertised, paid for and delivered electronically, infrastructure will remain a serious constraint for businesses in developing countries.

The global market in information technology alone will not solve these problems. As discussed above, liberalisation and privatisation have led to increasing concentration of ownership in the communications industries. It is essential that governments retain the capacity to regulate the communications industry, in order to ensure that the constraints on information use are gradually overcome. There are encouraging examples of governments successfully regulating investors to achieve benefits for their populations. In Senegal, investors in the newly privatised telephone system were required to install public telephones in half of Senegal's largest rural villages by 2000. In the Philippines, investors in mobile phones were required to install 400,000 land lines in the first five years of their operations.⁸⁴

The UK Government must ensure that developing countries retain the rights, and develop the capacity, to regulate the telecommunication and information sectors to ensure that technology is transferred and reaches poor communities.

Trade Related Intellectual Property Rights (TRIPs)

Christian Aid/CAFOD accept that intellectual property rights (IPRs) are necessary to encourage commercial innovation, while allowing the knowledge behind them to be shared. Patents give inventors a temporary monopoly over new inventions, which they can commercially exploit, in return for publishing information about the invention. However, existing IPR regimes have signally failed to meet the needs of developing country populations, and proposed reforms to the regimes could make matters worse.

The nature and duration of the monopoly are issues that need to be negotiated. Article 31 of the WTO TRIPs agreement makes clear that even when patents are protected there can be over-riding humanitarian concerns which permit compulsory licensing, that is, local manufacture or parallel importing without the permission of the patent-holder.

Those who argue for a worldwide system of IPRs, with the possibility of sanctions against countries where these rights are violated, should examine carefully the developmental consequences of such a system. The level of concentration amongst owners of proprietary technology is already very high: industrialised countries hold just over 97 per cent of all patents in existence.⁸⁵ Within the industrialised countries, private research and development expenditure is heavily concentrated in TNCs.

It is not surprising that there is vocal support for IPRs from companies with heavy Research and Development (R&D) expenditures, but it is far from clear that their large R&D budgets are the result of IPRs. Cohen and Levin, for example, have found that patents are significant to innovation only in certain industries, most notably chemicals and pharmaceuticals, where only an estimated 60 per cent and 30 per cent respectively of innovation occurs because of the presence of IPRs.⁸⁶ Moreover, state intervention and investment play an enormously important role in the development of technology, both through the government's own R&D activities, and through its support for private sector research. In 1992 the United States' government's percentage share of total R&D expenditure and its direct share of R&D performed by the private sector was 47.0 per cent and 28.3 per cent respectively. Comparable figures for the United Kingdom were 34.2 per cent and 14.6 per cent.^87,88

There are both welfare and developmental aspects to IPRs as they affect developing countries and their ability to achieve the IDTs. Welfare is affected if the existence of strong IDTs promotes rent-seeking behaviour by companies holding IPRs. This has already been amply documented in the case of international pharmaceutical companies which charge more for drugs in some developing country markets than in industrialised countries. Where pharmaceutical TNCs take advantage of a monopolistic situation, as in many African countries, the prices they charge for branded drugs are frequently higher than in the OECD countries where they are based, and much higher than in Asia where they face competition from Indian companies which manufacture similar or comparable drugs as the result of reverse engineering.⁸⁹

It should be noted that the availability of cheap and effective treatments for life-threatening conditions plays only a small part in reducing infant mortality. They can work effectively only where children are not weakened by malnutrition or threatened by unsafe drinking water, bad sanitation and so on.

The developmental implications of a 'strong' international IPR system are less clear but potentially more significant. If such a system succeeds in increasing the intellectual property protection already enjoyed by TNCs, then there is a danger that it will hinder the transfer of technology and increase its cost to developing countries. At the same time the impact of IPRs is complex and will vary according to other developmental factors, such as human capital, the efficiency of IPR administration, competition rules and linkages between researchers and business.

Article 7 of the TRIPs agreement states, 'The protection and enforcement of IPRs should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.'

According to a leading US lobbyist for TRIPs, however, the groundwork for the present TRIPs agreement was laid by US, European and Japanese business organisations and the primary purpose of their involvement was to protect and promote their own interests.⁹⁰ While it should not be automatically assumed that this means that the operation of the TRIPs agreement will be bad for development, it does mean that there is a prima facie case that there should be an independent examination of the impact of TRIPs on development and that public concerns over the issue should be taken seriously.

Trips and food security

One area where the developmental impact of TRIPs, and current trends in technology development and transfer which the agreement reinforces, are of particular importance is in the area of agricultural development and food security.

Despite the recent troubles of the Monsanto corporation, it remains the case that through a series of mergers, joint ventures and acquisitions, a handful of large biotechnology corporations are gaining increasing control not only over GM technology and seeds but also more widely over agricultural production technology and agricultural commodity trading. CAFOD/Christian Aid believe that this has great risks for developing country agriculture and food security, especially for resource-poor farmers whose livelihoods could be destroyed by an increasing dependence on expensive external inputs controlled by purely commercial interests.

It needs to be recognised that, for resource-poor farmers and their communities, local food security will be best ensured by enabling them to grow their own food and/or grow for local markets. This does not mean being opposed to science, as a CAFOD partner in the Philippines reports:

One major step was the development of the MASIPAG Rice Technology. MASIPAG is the Filipino term for 'industrious' but it is also the acronym for Magsasaka at Siyentipiko para sa Ikauunlad ng Pang-agrikulturang Agham sa Pilipinas (Farmers and Scientist for the Advancement of Agricultural Science in the Philippines.)

MASIPAG was a group of various farmer leaders and scientists committed to developing alternatives to unsustainable agriculture in the country. The fusion of the knowledge of the two pillars of agriculture - farmers and scientists - gave birth to a popular alternative technology: the MASIPAG technology. The technology teaches farmers how to breed rice and do away with petrochemical-based agriculture. This alternative technology spread like wildfire. With this any farmer can perform his own experiment and be able to produce his/her own rice variety suitable to his/her land. This amazing achievement is worthy of international recognition and support.⁹¹

It also needs to be recognised how many people in developing countries are still largely or wholly dependent on growing their own food. Support for these farmers and communities has been relatively lacking and this needs to be rectified. What is needed is a sustainable way forward based on local control and local inputs. It is not clear at this stage what contribution GM crops might make to this, but they are less likely to help if the technology is dominated and owned by the biotechnology corporations.

Conclusion

It is too early to point to any clear empirical evidence of the developmental consequences of the introduction of TRIPs. It has been pointed out, however, that all the innovations of the 'Green Revolution' were introduced without the benefit of IPRs on plant genetic material, unlike those produced by recent investment in biotechnology. Significant innovations of considerable developmental importance were not, in this case, dependent on the existence of a stringent international IPR regime. Commenting on the dangers of TRIPs, the Nuffield Foundation has expressed concern that market dominance of a few multinational companies in the field of biotechnology will work against the interests of poor farmers in developing countries.⁹² The UK should aim to strengthen research and support to agricultural techniques and inputs appropriate to the circumstances of poor farmers. There is an urgent need for regulation and reform at the international level to maintain the necessary balance between private and public interest.

Recommendations

• Article 27.3(b) of TRIPs should be amended to exclude all life forms from patenting and remove the requirement for plant variety protection, with a moratorium on implementation in the interim.
• The TRIPs agreement should be redrafted so that its overarching aim is to contribute to achieving the IDTs.
• The principles of special and differential treatment of unequal parties contained in the WTO articles should be introduced into the TRIPs agreement.
• The period of patent protection, now set at a uniform 20 years, should be made more flexible, according to the different technologies involved.
• Consideration should be given to removing IPRs from the WTO, thereby removing the threat of cross-retaliation in trade measures for infringements of IPRs.

7. International institutions

The confusion, ill-feeling and lack of progress demonstrated by the MAI debate and the collapse of the WTO meeting in Seattle demonstrated the need for a new and inclusive approach to global economic management. The workings of the global economy can no longer be decided purely by professional civil servants and trade negotiators, hidden away from public gaze. Furthermore, Seattle showed that southern governments are no longer willing to be treated like children in international fora, kept in the dark until the last minute, and then arm-twisted into signing whatever agreements the rich nations have drawn up.

Restoring the legitimacy of the system of global economic governance is no easy task. It will require a new, more inclusive style of debate and negotiation, which includes Northern and Southern governments and their civil societies. Christian Aid/CAFOD found the UK Government's openness to dialogue with NGOs during the Seattle negotiations exemplary in that regard, as was the inclusion of an NGO representative as part of the official delegation. CAFOD/Christian Aid trust that this is a precedent for the future (the government delegation to UNCTAD X also included an NGO representative).

In Christian Aid/CAFOD's view, restoring legitimacy also means restoring the United Nations to its proper place at the head of the multilateral system, and reforming and strengthening UN structures accordingly. It is not acceptable that whenever an 'important' economic issue is discussed (trade, investment, capital markets), power is spirited away from the relevant UN body to other fora. In practice, as well as in theory, the WTO, IMF and World Bank should be part of the wider UN system, deferring to its specialist bodies on issues such as labour standards or the environment. The UN system, much attacked in recent years, should be reformed and strengthened to ensure its effectiveness and legitimacy.

It is crucial that development agencies seek to raise the concerns of poor communities who are affected by the forces of globalisation, and to enable these communities to speak for themselves. CAFOD/Christian Aid would urge DFID to facilitate where possible the participation of civil society groups in global processes and institutions and to ensure that these processes are as participatory and empowering as possible. In particular, consultations must be organised in such a way as to ensure the widest possible grassroots participation in policy-making. This might require more consultations within developing countries, and, within countries, outside capital cities and in different local languages.⁹³

Co-ordination and coherence

Co-ordinated and coherent action at the international level is needed to ensure that the global economy is managed in the interests of all, and that the 2015 targets are achieved. International institutions, like national governments, should be judged according to their success in achieving poverty reduction. Some, like the World Bank and IMF, have publicly committed themselves to working towards poverty reduction. Others, like the WTO, have more instrumental goals - in the WTO's case, to provide a forum for governments to negotiate trade agreements. A first step in ensuring coherence would be for all international institutions to be working toward the same goals.

In Christian Aid/CAFOD's view, the WTO should state publicly that poverty reduction and the achievement of the IDTs are an explicit objective of its work. In working towards the IDTs, institutions will need to look beyond existing models of economic management, based on the assumption that liberalisation will necessarily lead to poverty reduction. Above all, far higher priority will have to be given to issues of equity and redistribution. The evidence presented above supports the view of Peter Evans that 'the biggest challenge facing global governance institutions is to find ways to reverse the trend towards growing inequality (within and between countries) that has characterized the current process of globalization. The simple pursuit of openness now seems very unlikely to meet this challenge'.⁹⁴

If all international institutions and agreements were working toward the same goals, the difficulty of resolving any conflicts between the plethora of international agreements that now exist would be reduced. The IDTs would provide criteria for comparison and discussion of different agreements and processes, but only if much greater attention is given to social and environmental impact assessment, and to empirical analysis of the impact of existing agreements and processes.

Coherence between national and international action is needed to ensure that developing countries benefit fully from integration into the global economy. Increased attention to genuinely-owned national reform processes should be accompanied by complementary international action to deal with problems that cannot be solved at a national level. For example, regional coordination of tax incentives, competition policy or minimum wage legislation would help avoid undermining a country's competitiveness, whereas unilateral measures could drive away investment. Action at an international level could also be required to tax short-term capital flows or deter transfer-pricing and other tax avoidance methods used by some TNCs.⁹⁵

Greater attention must also be paid to the hierarchy of agreements - in particular to the relationship between agreements made in the WTO and other international bodies, where lack of coherence is becoming an increasing problem. Besides the IDTs, Agenda 21 and many other international social and environmental agreements have led to a change in the way governance of the international economic system is viewed. Yet the central focus of the WTO remains the achievement of trade liberalisation and, because of the WTO's stronger enforcement mechanism, WTO rules de facto take precedence over almost all other international agreements.

For example, just the threat of WTO action (reportedly issued by an infant formula company) persuaded the Guatemalan government to backtrack on its compliance with the World Health Organisation ruling on breast milk substitutes in 1995. More recently the US attempted to promote biotechnology companies' interests by trying to ensure that the Biosafety Protocol is subordinate to WTO rules. If the US had been successful, it would have rendered the Protocol virtually meaningless and government action to restrict GMO imports could have been successfully challenged in the WTO. The compromise reached in Montreal still leaves a great deal of uncertainty surrounding the potential for a successful challenge to the Biosafety Protocol. This is neither good for the Protocol, nor the WTO. The relationship between the WTO and other international agreements should therefore be addressed.

The following are examples of international agreements that find little or no reflection in WTO rules and need to be given equal weight in international law:

• Universal Declaration of Human Rights
• Rio Declaration of Environment and Development
• UN Guidelines for Consumer Protection
• Multilateral Environmental Agreements such as the Convention on Biological Diversity
• Agenda 21
• Core Labour Standards (ILO)
• World Health Organisation Provisions on Essential Drugs

Developing country participation

To be able to translate national poverty reduction strategies into effective action on the global stage, developing countries need to participate more effectively in existing institutions. Reform of the WTO, the IMF and the World Bank is needed to allow developing country interests to be adequately represented. NGO proposals for reform of the Bretton Woods Institutions are well-known, and will not be rehearsed in this paper,⁹⁶ which will instead concentrate on the WTO.

WTO ⁹⁷

Although, in theory, all countries are equal at the WTO, the reality is quite different. This was acknowledged by all the major trading powers after the Seattle ministerial meeting last year. The EU's Trade Commissioner, Pascal Lamy, characterised the organisation as 'medieval', while the chief US negotiator, Charlene Barshefsky, said its practices had 'outgrown the processes appropriate to an earlier time'. Stephen Byers, among the most vocal in his calls for change, said that 'the status quo is not an option', and promised to 'lead the campaign for reform of the WTO'.

The problems are serious. There is huge discrepancy in the capacity of countries to maintain representatives in Geneva. It is expensive to maintain a permanent representative - the UK Government estimates that it costs around $900,000 per year to keep its mission in Geneva (not including the costs of office buildings).⁹⁸

Over half of the least-developed country members of the WTO have no representation in Geneva. These countries have a total population of 81 million people who, despite being members, have very limited, if any, voice at the WTO. Those developing countries that do have some representation in Geneva often have only one person responsible for all negotiations in the WTO, where there can be more than 40 meetings a week on subjects ranging from air transport to competition policy, environmental agreements to industrial tariffs.⁹⁹ This means that the majority of the world's population are not represented at most of the negotiations that go on in the WTO. By contrast, the US has over 250 negotiators in Geneva,¹⁰⁰ and richer countries routinely fly in additional technical experts to deal with complex issues.

In the short term, the priority for reform should be to ensure more effective participation in the WTO by developing countries. There is a real danger that what happened in Seattle will undermine the WTO to the extent that it ceases to function. If this happens, the possibility of increased protectionism in the US and other developed countries, and of developing countries being forced into bilateral trade deals that work against their interests, will be greatly increased. This should not be allowed to happen.

The WTO and the Private Sector

There is a growing perception that within the countries that dominate the agenda in the WTO, trade policy-making is heavily influenced by the interests of large corporations. During the Uruguay Round, large companies were influential in both drafting and negotiating deals. In agriculture, companies were involved in negotiations from the very beginning of the process. Cargill, a US firm which controls half of global trade in grains, was heavily involved in the preparations for the US negotiating position on agriculture before the last round of trade talks - with some commentators claiming that the company wrote the first draft of the US negotiating position.¹⁰¹

TNCs were also involved in the drafting and negotiation of agreements on intellectual property rights and services. According to the Corporate European Observer, intellectual property rights were put on the agenda for trade talks by a committee of 13 major companies, including General Motors and Monsanto, which lobbied governments to include their proposals in the Uruguay round of trade talks.¹⁰² In the talks that followed, 96 out of the 111 members of the US delegation negotiating on intellectual property rights were from the private sector.¹⁰³ In the preparations for the Seattle meeting, businesses were offered special opportunities to meet with key negotiators in return for donations to cover the costs of the summit.¹⁰⁴

As trade policy-making becomes more international, the same standards that apply to domestic policy-making need to be applied to international negotiations. Christian Aid/CAFOD believe that, in order to ensure that WTO rules really are in the interests of the whole of the world's population, delegations should be more equal in size and more open about the contacts they have with different lobby groups. The principles of transparency and avoiding conflicts of interest are well established in the national governments of industrialised countries, and they need to take the lead in ensuring that the same standards are maintained in a body which is, according to its former Director General, 'writing the constitution of the single global economy'.¹⁰⁵ As an example of 'best practice', the recommendations of the Nolan committee's report on Standards in Public Life ¹⁰⁶ seem worth considering by WTO members, as the basis for regulating the conduct of delegations.

Conclusion

Co-ordinated and coherent action at the international level is needed to ensure that the global economy is managed in the interests of all, and that the 2015 targets are achieved. International institutions, like national governments, should be judged according to their success in achieving poverty reduction. Some, like the World Bank and IMF, have publicly committed themselves to working towards poverty reduction. Others, like the WTO, have more instrumental goals - in the WTO's case, to provide a forum for governments to negotiate trade agreements. A first step in ensuring coherence would be for all international institutions to be working toward the same goals. In CAFOD/Christian Aid's view, all institutions should work towards internationally agreed targets on poverty reduction. Coherence between agreements, and the hierarchy of agreements, should be determined by how far each contributes to this goal.

In order to be able to translate national poverty reduction strategies into effective action on the global stage, developing countries need to participate more effectively in the existing institutions. Reform of the WTO, the IMF and the World Bank is needed to allow developing country interests to be adequately represented. WTO reform should be the Government's overriding priority in Geneva. Any attempt to embark on a new round of trade talks before the WTO is reformed will simply worsen the atmosphere of suspicion and accusation that emerged in Seattle.

Recommendations

• Developing countries need to increase their capacity to negotiate and to participate in reform of the WTO. They have already been assisted in this by the UK and others, but such assistance needs to be institutionalised. All WTO members should be invited to make binding commitments to contribute to a common fund to support the activities of developing countries in Geneva.
• WTO members should consider the desirability of agreeing an upper limit to the size of delegations.
• At the national and EU level, parliamentary oversight of the WTO should be stepped up, in particular to ensure that non-trade concerns are adequately taken into account. This should include the introduction of an annual reporting procedure on the WTO to both European and British parliaments.
• Governments should disclose all written advice they receive relating to trade negotiations.
• Delegation members should disclose all agreements with and payments from private sector bodies, trade unions, NGOs and other groups.
• For an agreed period after participating in a delegation, or holding a post within the WTO secretariat, individuals should have to seek clearance from a specially constituted body before entering employment with private companies that might entail a significant conflict of interest.
• The Government should examine which other recommendations of the Nolan Committee's report on Standards in Public Life could usefully be introduced at the WTO.

8. Measuring Progress

CAFOD/Christian Aid welcome the Secretary of State's commitment to the need for improved data in the effort to design policies to achieve the IDTs.¹⁰⁷ In Christian Aid/CAFOD's view, much of the debate on globalisation is based too exclusively on ideology, theory and simulation, and too little attention is paid to the real world, in which valuable lessons are being learned over how to combine growth with equity. The government's emphasis on sound data should form part of a wider movement to give greater importance to experience and empirical evidence.

CAFOD has raised this issue in the context of the Asian financial crisis, when it discovered that the IMF and other institutions were devising policies with serious impacts on poverty, in the total absence of up-to-date social data. CAFOD therefore proposed a 'Social Data Collection and Dissemination Code', which was subsequently advocated by the Chancellor of the Exchequer in his speech to the Interim Committee of the IMF in September 1999.¹⁰⁸ In this the Chancellor argued:

HIPC countries also need the capacity to collect reliable statistics on their social sectors to complement the traditional emphasis on economic and financial statistics. Without good quality information they are ill placed to plan and monitor effective policies to reduce poverty in their countries and play their part in achieving the global International Development Targets. They need help to do this. A coordinated and strategic approach towards building sustainable national statistical capacity is required. We strongly support the work OECD-DAC is doing with the World Bank, IMF and UN to map out the way forward.

Donors also have an interest in good quality social statistics. To minimise the demands we place on developing countries we should standardise our requirements wherever this can be done. The work the World Bank and Fund are doing together on strengthening the social statistics module of the General Data Dissemination System (GDDS) is a useful start. But this needs to be developed and could form the basis of a Social Data Code to enable the IFIs and other donors to assess the impact of their programmes of support. We call upon the Bank and Fund to increase their efforts on this and to involve other bilateral and multilateral donors as well as developing countries so as to meet the needs of all.

Unfortunately, little has been heard of the proposal since then. Christian Aid/CAFOD urges the government to press on with this issue, as a social data code, accompanying other financial codes and standards in the international arena, could be a vital tool in the effort to design poverty-reducing policies and achieve the IDTs.

As well as measuring the impact of past policies, policy design could be strengthened by a greater attention to estimating the impact of future policies. Impact assessment should become an essential part of trade and investment policy design and reform, as the Draft World Development Report 2000/1 points out:

Acknowledging the fact that reforms may hurt the poor (or even create new poor) has several implications. First, before introducing reforms, policymakers should assess how the reforms will affect the poor, both in aggregate terms and by subgroups. Second, on the basis of such an assessment, policymakers should determine whether the reforms (or the way in which they are implemented) can be modified to reduce the costs to the poor without sacrificing much efficiency. Trade liberalization for low-skilled labor-intensive goods could be phased in more slowly, for example, or certain consumer goods, such as food staples and medicine, exempted from the value-added tax. Third, policymakers should put in place safety nets, such as employment programs, to help poor people cope with reforms.¹⁰⁹

In the context of the debate around the WTO and proposed new round of negotiations, CAFOD/Christian Aid were alarmed to find that the case for further trade liberalisation was in many cases being made on the basis of simulations carried out in 1994/5. Simulations and modeling may be better than nothing, but they are certainly inferior to empirical study. Arguments that the Uruguay Round has not yet had sufficient impact to be measurable, and therefore simulations remain the best guide, raise two important questions: first, given the serious concerns over the social impact of trade liberalisation, if we do not yet have sufficient information to judge whether the Uruguay Round had an adverse or positive impact on poverty, how can policy makers justify pressing for further liberalisation? Second, what systems have been put in place to collect and analyse empirical evidence of the impact of the Uruguay Round as it 'starts to bite'? To Christian Aid/CAFOD's knowledge, the answer to the second question is 'very little' - far more needs to be done in this area.

Conclusion

Christian Aid/CAFOD welcome the Secretary of State's commitment to the need for improved data in the effort to design policies to achieve the IDTs. In CAFOD/Christian Aid's view, too much of the debate on globalisation is based on ideology and simulation, and too little attention is paid to the real world, in which valuable lessons are being learned about how to combine growth with equity. The government's emphasis on sound data should form part of a wider movement to give greater importance to experience and empirical evidence in the evaluation and formulation of policy.

As well as measuring the impact of past policies, policy design could be strengthened by a greater attention to assessing the likely impact of future policies. Impact assessment should become an essential part of trade and investment policy design and reform.

Recommendations

• DFID should work with developing country governments and statistical services to implement and maintain systematic monitoring of the impact of trade liberalisation in a representative group of developing and least developed countries, in order to build up time-series data on the impact of trade policy reform on poverty reduction.
• The UK Government should clearly state the empirical basis for its policy proposals on bilateral and multilateral trade and investment arrangements.
• The Government should continue to press for the introduction of an international code on social data collection and dissemination.

Conclusions

Globalisation - the increasing interconnectedness of individuals, companies and countries - is the defining characteristic of our time. It has the potential to unleash the vast forces of human ingenuity and cooperation in the interests of humanity, making advances in science, technology and governance work in the interests of all.

These benefits are neither automatic nor fairly distributed. This is hardly surprising. Globalisation is not a given, like the weather. It functions according to a set of rules designed and negotiated by economic actors such as governments and businesses. The outcome of such negotiations inevitably reflects the relative economic and political power of the actors involved. Many of the most worrisome aspects of globalisation reflect and exacerbate such inequalities - the growing control of intellectual property by powerful business interests; the North's double standards on protectionism in agriculture and textiles.

New research and economic thinking have improved our understanding of the nature and outcomes of globalisation rapidly in recent years. We have learned that the impact of globalisation on countries is complex and highly differentiated. The outcome depends on the existence, strengths and weaknesses of a dense web of economic actors, capacities and relationships: levels of skills, education, citizenship, credit and tax regimes, infrastructure, good state management of economic policy, and many other factors determine how well or badly a country, or a sector of the population, fares through greater integration with the global economy.

Yet even as research has pointed to a more complex and heterogeneous world, policy-making, especially at international level, has become ever more intolerant of national difference, insisting that the same policy prescriptions should apply to governments, communities or sectors at very different stages of development. Developing country governments are pushed by international rule-making, whether under the auspices of the WTO, through the pressures exerted by structural adjustment packages, or by the need to reassure the markets, towards greater homogeneity of policy response. The challenge for policy makers is to find ways to make national and international rule-making accommodate appropriate diversity of policy rather than to reduce diversity to a minimum.

It is vital that our understanding of globalisation abandon uniform recipes based on the simplistic maxims of the 1980s. Statements such as 'trade liberalisation is good for growth and growth is good for poverty reduction' are both empirically questionable and of little practical use in improving policy design and outcomes in a complex world.

A clear lesson from the structural adjustment programmes of the past twenty years is that

policy design should not only be geared to national or local circumstances, but should be 'owned' by the people who must implement it and experience its effects. The principle of subsidiarity - that decisions should be taken by bodies as near as possible to the people involved and affected - should become central in designing effective and just economic policy.

Another lesson from recent research, and an issue that has always been of central importance to faith-based organisations such as CAFOD/Christian Aid, is that equity is rapidly being recognised as the 'missing link' between growth and poverty reduction. The world needs to become more equal if poverty is to be ended, but in recent years the traffic has mostly been in the opposite direction - inequality between and within countries has been growing. This poses a huge challenge for government and multilateral policy-making, which will have to move far beyond its current concentration on supply-side issues such as health and education even to stem the rising tide of inequality, let alone reverse the process. Achieving the necessary degree of redistribution to poor people will require attention to issues which development agencies have been raising for decades, such as land reform, gender inequalities, microfinance and progressive tax reform.

At the centre of debates on inequality, or on how to develop the dense web of institutions and relationships that triggers economic take-off, is the role of the state. In the 1980s, the state was seen largely as a problem, to be replaced as far as possible by market forces. In the 1990s, that view increasingly fell into disrepute, and attention began to be paid to how to encourage states to be efficient and enabling, working with the grain of market forces, but not subordinate to them. In Christian Aid/CAFOD's view, that process has not gone far enough, and many of the reforms to the state encouraged through multilateral and bilateral pressure, and often reflected in debates at the WTO and other fora, are still too concerned with reducing its role, rather than improving its capacity for pro-poor economic management and redistribution.

New thinking does not automatically lead to new policies. The debate on globalisation is confused and heated. Policy makers in the North are buffeted by the conflicting tides of academic research, the onward march of new technology, business demands for greater levels of integration, increasing anger in the South at its exclusion from global decision-making, and growing public anxiety in the North over everything from GMOs to factory closures. In such choppy waters, it is tempting to cling to the illusory certainties of yesteryear. As Keynes acidly observed:¹¹⁰

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

It is important that 'practical men' catch up with the latest academic scribblings, which hold out a number of lessons on how to harness globalisation in the interests of development. Otherwise, intelligent debate on complicated issues can become polarised into unhelpful name-calling, in which those with differing views become capitalist lackeys, utopian luddites, or closet protectionists. All participants in the debate should acknowledge that no-one has all the answers, and that discussion should be based not merely on ideology, theory or assumption, but on the real lived experience of poor people. Much remains to be done to capture that experience and use it to guide policy-making.

Politics is about reconciling different identities, experiences, needs and aims. In the case of globalisation, this is especially true. The debate is marked by differences between North and South, between governments and civil society organisations such as trade unions or NGOs, and between different government departments. Reconciling difference requires a shared, unifying vision which serves to establish common ground and build a basis for action. An ethic of development and social solidarity, already in evidence in the increased attention to issues of corporate social responsibility, must become central to any sustainable and just approach to global economic management.

One such vision is that of ending global poverty. CAFOD/Christian Aid believe that the Secretary of State and DFID can take a good deal of credit for establishing the International Development Targets as one of the key unifying themes of UK and European Union economic policy-making. In Christian Aid/CAFOD's view, however, the IDTs are not yet high enough up the political agenda, and could provide the key to unlock some of the doors slammed shut in Seattle, dividing North from South, Europe from America. The IDTs have helped reshape the debate on structural adjustment and debt relief; they should now do the same for the discussion on international rules for trade and investment. The adoption in trade and investment policy-making of the new approach to structural adjustment, based on nationally designed and owned poverty reduction strategies, could be the practical means of achieving this.

The current climate of division and confusion over globalisation cries out for intellectual and political leadership. CAFOD/Christian Aid urge the UK and other governments to open up the kind of full and genuine debate which is essential if the forces of globalisation are to be harnessed in the service of the greatest crusade of our times, the drive to end the scandal of global poverty.

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Endnotes

1 Rt Hon Claire Short, MP, 18 Novermber 1999

2 Cornia et al., 1987

3 See for example Cornia, 1999; Lundberg & Milanovic, 2000

4 UNDP, 1999, p.36

5 ECLAC, 1998, p.22

6 See also Hanmer, L. et al, 1999

7 World Bank, 2000, Summary, paragraph 13

8 Stewart, 2000, p.10

9 Stewart, 2000, p.8

10 Binswanger & Lutz, 2000

11 See for example, Gereffi & Wyman, 1990

12 World Bank, 2000, sec. 2.17

13 Stewart, 2000, p.20

14 ECLAC, 2000

15 World Bank, 2000, Summary, paragraph 31

16 World Bank, 2000, sec. 8.13

17 For a discussion of the revision of SDT to strengthen developing countries' ability to make industrial policy, see UNCTAD, 1999, p.132

18 Wang & Winters, 2000

19 UNCTAD, 2000, paragraph 52

20 CAFOD Briefing on the White Paper on International Development, November 1997

21 World Bank, 2000, chapter 6

22 Far Eastern Economic Review 20.4.00

23 Aky�z, 2000, p.2

24 See also Chang et al, 1998

25 Stallings and Peres, 2000

26 UNCTAD, 1999, p.VIII.

27 Soludo & Rao, 2000

28 Stallings and Peres, 2000

29 World Bank/IMF, 2000, p.2

30 Jubilee 2000 estimate, 19 April 2000

31 Agosin & Mayer, 2000, p.14

32 Stallings & Peres, 2000, p.40

33 UNCTAD, 1999, p.121

34 UNCTAD, 1999b

35 UNCTAD, 1999b

36 UNDP, 1999, p.3

37 UNCTAD, 1999, p.42

38 Uruguay Round, final act, Marrakech, 15 April 1994, p.9

39 Madeley, 2000

40 World Bank, 2000, sec. 8.26

41 Rodriguez & Rodrik, 1999, p.3

42 ibid., p.39

43 Harrison & Hanson, 1999, p.8

44 Winters, 1999, p.7

45 Rodriguez &Rodrik, 1999, p.4

46 Lundberg & Squire, 1999, p.27

47 ibid., p.31

48 Seshamani, 1999

49 Small scale farmers constitute 56% of the total population and 90% of them are poor. This 90% incidence of poverty marks a rise from the 1991 figure of 81% as per the government's Priority Survey Report of 1993 (Republic of Zambia, 1993). The small scale farmers are thus the single largest poverty group in the country in both absolute and percentage terms. And it is this group that has borne the brunt of the agricultural liberalisation together with other areas of policy reform.

50 Seshamani, 1999

51 Lundberg & Squire, 1999; Dollar & Kraay, 2000

52 Rodriguez & Rodrik, 1999

53 Economist, 29/4/00

54 UNDP, 1999, p.85

55 Choudri & Hakura, 2000

56 ibid., p.14

57 ibid., p.14

58 Rodriguez & Rodrik, 1999, p.4

59 WDR, 2000, sec.8.14

60 McKay et al, 1999, p.15

61 Stewart, 2000

62 Stallings & Peres, 2000, p.30

63 WDR, 2000, sec. 8.20

64 Economist, 25/9/99

65 DAC tables, 2000

66 for more details, see Aprodev, 1999, Brussels' Blind Spot, Brussels: Aprodev

67 Evans, 2000, p.7

68 Nayyar, 2000

69 Stewart, 2000, p.13

70 P�rez, 2000

71 Chang, 1999

72 Amsden, 2000

73 UNCTAD, 1999, p.131

74 ibid

75 Hansard, 11 May 2000, column 999-1000

76 UNCTAD, 1999, p.131

77 Evans, 2000, p.9

78 Amsden, 2000, p.6

79 Singer, 1989, World Bank/UNDP, African Development Indicators, 2000

80 The Association of World Council of Churches-related development organisations in Europe, of which Christian Aid is a member.

81 Aprodev, 1999

82 UNDP, 1999, p.62

83 UNDP, 1999, p.148

84 UNDP, 1999

85 World Intellectual Property Organisation, 1996

86 Cohen & Levin, n.d

87 Kumar & Siddharthan, 1997

88 Christian Aid/CAFOD are indebted to GRAIN (Genetic Resources Action International) for the examples contained in the preceding two paragraphs. See Global Trade and Biodiversity in Conflict, Issue No 3 - October 1998.

89 Bala & Sagoo 1999

90 Pratt, 1996. According to Pratt, former Chairman and CEO of Pfizer, it was the combined strength of the Intellectual Property Committee in the United States (of which Pfizer and IBM were co-founders), UNICE in Europe and the Keidanren in Japan, which '... enabled us to establish a global private sector network which lay (sic) the groundwork for what became TRIPS.'

91 Tri-people Partnership for Peace and Development, Mindanao, private communication

92 Nuffield Council on Bioethics, 1999, p.78. '... there is a danger, especially if uncorrected by an adequately financed, open-access public research structure and supervisory systems such as in the NARS and the CGIAR, of exposing the feeding and farming of the world's poorest people to the R&D (and pricing) consequences of the business decisions of a few market-dominant multinational companies.'

93 See Richmond and McGee 1999, 'Who's Round the Table?', Christian Aid, London

94 Evans, 2000, p.13

95 Stewart, 2000, p.23

96 See for example, the publications of the Bretton Woods Project

97 CAFOD/Christian Aid's views on the WTO are set out in more detail in: CAFOD submission to the House of Lords EU subcommittee, February 2000 and Christian Aid submission to the International Development Select Committee, January 2000

98 Department of Trade and Industry, written answers to questions from UK Trade Network, September 1999

99 Independent on Sunday, 18/7/99

100 World Development Movement, 1999

101 John Madeley, 1999, p.38

102 Corporate Europe Observer, Issue 4, July 1999

103 ibid.

104 'Gates offers Ministers for Sale at World Trade Conference', Independent on Sunday, London, 22/8/99

105 Renato Ruggiero, speech to UNCTAD Trade and Development Board, 8/10/96

106 HMSO, 1996

107 Rt. Hon Clare Short M.P. Speech, Paris, 18.11.99

108 Joint Statement with the UK Secretary of State for International Development, 25 September 1999

109 World Bank, 2000, sec. 8.26

110 Keynes, 1936, p383

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