Bulletin Apr 15

To: Organizations addressing Trade-Finance Linkages

1) Stiglitz Commission finds lack of trade -finance coherence 2) Modalities agreed for UN Conference on World Financial and Economic Crisis 3) London G20 Summit does little for developing country trade problems 4) Trade Finance Facility launched by World Bank 5) Global Economic Crisis and Development: UNCTAD Public Symposium invitation 6) Invitation- Gender and the Economic Crisis: Opportunities and Equitable Responses

1) Stiglitz Commission finds lack of trade-finance coherence The Commission of Experts on Monetary and Financial Reform, appointed by the President of the General Assembly last year and chaired by Nobel Prizewinner economist Joseph Stiglitz, released its preliminary report. Coming on the eve of the Interactive Dialogue on Monetary and Financial Reform that took place at the UN (March 25-27), the report is expected to provide substantive input into the UN Conference on the World Financial and Economic Crisis and its Impact on Development. (See separate item in this same bulletin) Faithful to its terms of reference, which called on the Commission to bear in mind that "in an interdependent world, multilateral rules and regulations in trade, debt and finance will have to be mutually reinforcing," the report places on the agenda crucial and usually overlooked issues that lie at the intersection between trade, debt and finance. Most visibly, the report calls for the lack of coherence between policies governing trade and finance to be rectified. In paragraph 37, the report says: "Many bilateral and multilateral trade agreements contain commitments that circumscribe the ability of countries to respond to the current crisis with appropriate regulatory, structural, and macro-economic reforms and rescue packages, and may have exposed them unnecessarily to the contagion from the failures elsewhere in the global economic system. Developing countries especially need policy frameworks that can help protect them from regulatory and macro-economic failures in systemically significant countries. Developing countries have had imposed on them not only deregulation policies akin to

those that are now recognized as having played a role in the onset of the crisis, but also have faced restrictions on their ability to manage their capital account and financial systems (e.g. as a result of financial and capital market liberalization policies); these policies are now exacting a heavy toll on many developing countries." The Commission vindicates, thus, a long held demand of civil society coalitions. Notably, a statement in the context of the Doha FFD Review Conference last year had stated that many provisions in trade and investment agreements "are not consistent with the flexibility needed to successfully implement pro development fiscal, monetary and banking policies, such as employment or exchange rate targeting, where governments may deem them necessary. " [i] In its paragraph 37, the report contains a call for more policy space for developing countries: "Conditionality attached to official lending and support for international financial institutions has often required developing countries to adopt the kinds of monetary and regulatory policies which contributed to the current crisis. In addition, these conditionalities contribute to global asymmetries, disadvantage developing countries relative to the developed, and undermine incentives for developing countries to seek support funding, contributing to global economic weakness." The asymmetry recognized in this language is also one that civil society groups had long denounced, adding last year that "Trade and investment agreements should urgently operationalize effective mechanisms to redress the asymmetric impact that development finance institutions and agencies have had on the negotiating space of recipient countries." The Commission's report says that a successful completion of the Doha trade round "would be welcome," but is doubtful on its impact on the crisis and its development dimension. (para. 39) This is an important departure from the line held by the Group of 20 Summit, which continues to insist on emphasizing conclusion of the Doha Trade Round as a key element of the crisis response. The Group of 20's position on this matter has been found troubling by civil society groups. This is especially so because it may involve deepening of financial liberalization measures whose wisdom the crisis is calling into question, in exchange for gains for developing countries that are poised to be negligible at best. On the other hand, the report refers to a number of measures that have been already agreed in multilateral trade negotiations and could, if rapidly implemented, support developing countries in the crisis: duty free, quota free market access for products from LDCs, elimination of all forms of developed country export subsidies which, though envisioned to happen by 2013, could be implemented immediately, abolition of domestic cotton subsidies and the preservation of the "long recognized principle of special and differential treatment of developing countries." (para. 39)

Among its recommendations the document says "There is a need for a true development round, to create an international trade regime which truly promotes growth in the developing countries. It is essential, that in all trade negotiations, the long recognized principle of special and differential treatment of developing countries be preserved." (para. 74) In an implicit recognition that special and differential treatment may call for reversals in market access, the report calls only on "advanced industrial countries" to observe their pledges not to undertake protectionist actions. It adds to this the need to ensure that stimulus packages and recovery programs do not further distort the economic playing field. (para. 16) An example, mentioned in the following paragraph, are "developed country subsidies to financial institutions" that have been accompanied by a sharp reduction in flows of capital to developing countries. "Financial subsidies" states the Commission, "can be just as detrimental to the efficiency of a free and fair trading system as tariffs." (para 17) The excesses not only in deregulation of financial markets but also "in international trade" are held as responsible for the crisis. (para. 18) An important issue that the experts also highlighted is the connection between trade and the world monetary system. "The global imbalances which played an important role in this crisis can only be addressed if there is a better way of dealing with international economic risks than the current system of accumulating international reserves." A single-country reserve system presents dangers, but two- or three-country reserve systems are unstable, they warn, calling, instead, for a new Global Reserve System. (para. 47) As a remedy to this situation, civil society groups had proposed a greater role for regional and sub-regional monetary arrangements. This path could constitute, also, the building blocks to a more balanced currency basket on which to base the Global Currency. Indeed, in a reference worth developing, the Commission does say "regional cooperation arrangements can be particularly effective because of greater recognition of cross -border externalities and greater sensitivities to the distinctive conditions of neighbouring countries." (para. 28) A less obvious, but not less important, connection between trade and finance is addressed by the report. According to an analyst, financial investors rushing in and out of commodities made price risk management instruments in commodity exchanges too expensive for commodity processors and traders, particularly in developing countries.[2] In this regard, he says, "Price volatility, and resulting food and energy insecurity associated with riots in at least 60 countries, was caused in part by the OTC "weight of money" that overwhelmed the supply/demand price signals of regulated exchanges."[3] The Commission tackles the "large scale use of unregulated, unsupervised OTC derivatives." (para 63) and, among other measures, call for the use of these contracts to be discouraged and ensure that these instruments are held on balance sheets,

valued at independently audited real transaction prices, with appropriate capital provisioning and clarity of purpose. (para .64) Full report by the Commission is posted at http://www0.un.org/ga/president/63/letters/recommendationExperts200309.pdf [i] CSO Statement at the Informal Review Session on Chapter III of the Monterrey Consensus, available at http://www.coc.org/system/files/NGO+Trade+statement.pdf [2] Steve Suppan, "The G20's Opportunity on Commodities Exchanges Regulation", available at http://www.iatp.org/iatp/commentaries.cfm?refID=105625 [3] Ib.

2) Modalities agreed for UN Conference on World Financial and Economic Crisis The UN Conference on the world financial and economic crisis and its impact on development is now scheduled to take place from June 1 -3, 2009. The agreement on the date is part of a number of agreements on modalities contained in a modalities resolution of the UN General Assembly. The agreements were finally reached after protracted negotiations that revealed a continued conflict of views, mostly along developed and developing country lines, regarding the role that the UN is called to play on issues of financial reform. The call for the conference was the most contentious point in the outcome of the Doha Review Conference on Financing for Development held last year. The resolution on modalities was supposed to be agreed by end of March but the difficulties to reach agreement account for the delay of about a week. The demand came at a pivotal time when the global financial crisis, while started in the US, was reaching systemic proportions. Developing countries insisted on a paragraph of the Doha Outcome Document that would call for a major conference to "review the international financial and monetary architecture and global economic governance structures." As those negotiations were underway, a proactive new president of the General Assembly, just arrived into his office, decided to form a Commission of experts that included current and former government officials with recognized economic expertise, chaired by Joseph Stiglitz, to provide a substantive input and ensure the conference would not be confined to diplomatic platitudes, but rather engage on deeply technical issues. Almost in parallel, then-US President George W. Bush convened Heads of State of the Group of 20 in Washington with the purported goal of coordinating

their response to the financial crisis. Some member states argued decisions on reform of global finance should be left to that forum. But deliberations in Doha emphasized that the G20 could certainly not be considered to override the "G192"-that is, the meeting of all nations in the only forum where they could be convened: the United Nations. Indeed, the fact that some matters were undergoing debate in the G20, while this is an important forum for coordinating positions among its members, cannot be a legitimate reason to preempt such discussions in an intergovernmental body like the UN. Doing otherwise would be tantamount to placing on agreements by the G20-a selfselected group of countries with not even legally-agreed and permanent operating procedures- equal status as those by the UN. The conference is being called "at the highest level", which reveals continued divisions about the need to hold the conference at the Summit level. However, as announced in a press release, the Group of 77 countries and China have already pledged full participation and the President of the General Assembly, Mr. d'Escoto, has visited and plans to visit a number of countries to build support for participation at the Head-of-State level. According to the resolution the conference, to be held at the UN Headquarters in New York, will consist of a short opening session; plenary meetings and four interactive round tables, and will result in a "concise outcome to be agreed by Member States." The resolution requests the President of the General Assembly, through an open, transparent and inclusive process led by the Member States, to present in a timely manner a draft text based upon all preparatory inputs to serve as the basis for an outcome document, to be agreed by the Member States. It also entrusts the Secretary-General to prepare a report on the origins and causes of the present crisis, the mechanisms of its transmission to the developing countries, the potential impact of the crisis on development, the response of the United Nations to the crisis through its development activities and national and international policy responses to date. Importantly, the conference will bring together not only all 192 member states but also, in a multi-stakeholder manner, United Nations funds, programmes and specialized agencies, the Bretton Woods institutions, the World Trade Organization, the regional development, banks, the regional commissions of the United Nations, as well as non-governmental organizations and civil society and business sector entities. The first chance to begin deliberations towards the conference will take place at the special high-level meeting of ECOSOC, the Bretton Woods Institutions and the WTO. Usually focused on the follow up to the Financing for Development Process, this year the dialogue will address the main topic of the conference and provide a summary of discussion to be used as an input to the preparatory process for the draft outcome document of the Conference. (A

second topic in the dialogue, though not referred in this resolution, will be initial discussion to strengthen the follow up process to Financing for Development). The full resolution on modalities is available here http://www.coc.org/system/files/Resolution04-09-Final.pdf Press Release by the President of the General Assembly 's office is posted at http://www0.un.org/ga/president/63/news/pressrelease70409.pdf

3) London G20 Summit does little for developing country trade problems Leaders of Group of 20 member countries met in London on April 2 to give follow up to the "process" started in Washington DC last November. Among the issues that the Summit was expected to address was the steep fall in world trade flows. Trade has become the major channel by which the crisis is now projecting its impacts onto developing countries that until late last year seemed would be able to weather it. But, just like at the preceding Summit gathering in Washington, trade matters in the Summit's agenda were squarely focused on market access issues. They failed to engage in a reform of the financial regulations and structures that need to be in place to ensure developing countries can benefit from trade, both as a source of finance for development and as a pillar of financial stability. The commitments to keep markets open seems all the more futile coming in the wake of a World Bank report that showed 17 out of its 20 members had engaged in protectionist measures since the Washington Summit when they agreed not to do so. The declaration did, however, call on the WTO and other international organizations to monitor and report publicly on measures that raise barriers to trade. The declaration calls for "a successful and balanced outcome of the Doha WTO Round." However, it greatly oversells such outcome by adding that this would boost the global economy in $ 150 billion per year, a figure not consistent with the latest assessments by the World Bank, not to mention those by academic and civil society experts. Leaders also committed to "ensure availability" of $ 250 billion for trade finance. But, like other figures in the Summit declaration, close scrutiny revealed there is much bang but little buck to this one. The ambiguous reference is rather an estimate of all that would be spent -by countries and private sector -- in trade finance in the next two years, than a new and additional pledge attributable to this meeting. This includes a new trade finance facility launched by the World Bank the day before the Summit and presented with much fanfare as a "$ 50 billion trade finance facility." The fine print of that announcement revealed that pledges amount to scarcely $5 billion, with $ 50 billion being the amount of total trade that is expected to be

financed by it. In a similar spirit, one of the G20 annexes puts actual voluntary bilateral contributions made at the Summit at $ 3-4 billion, to be contributed to that same World Bank pool. For the G20 Leaders' Statement visit http://www.londonsummit.gov.uk/en/summit-aims/summit-communique/ For the G20 Declaration on Delivering Resources through the International Financial Institutions visit http://www.londonsummit.gov.uk/resources/en/PDF/annex-ifi For the G20 Declaration on Strengthening the Financial System visit http://www.londonsummit.gov.uk/resources/en/PDF/annex-strengthening-finsysm For an assessment of the G20 Summit covering issues other than trade, visit http://www.coc.org/node/6370 4) Trade Finance Facility launched by World Bank Below is the press release by the World Bank on the trade finance facility launched on the eve of the G20 meeting in London. New Trade Finance Program to Provide up to $50 Billion Boost to Trade in Developing Countries World Bank Group Contact: Lotte Pang Tel: +1202-758-4290 E-mail: [email protected],

April 2, 2009-The World Bank Group today announced the launch of a coordinated global initiative that brings together governments, development finance institutions (DFIs), and private sector banks to support trade in developing markets and address the shortage of trade finance resulting from the global financial crisis. The Global Trade Liquidity Program will begin operations in May, channeling much-needed funds to back trade in developing countries. With targeted initial commitments of $5 billion from public sector sources, the program should be able to support up to $50 billion of trade. It raises funds from international finance and development institutions, governments, and banks, and it works through global and regional banks to extend trade finance to importers and exporters in developing countries. Robert B. Zoellick, President of the World Bank Group, said, "We welcome the tremendous degree of cooperation between public and private sector

institutions that allows us to come together to launch the Global Trade Liquidity Program for developing countries. I welcome G-20 support for this timely and targeted solution that will provide trade finance to support businesses across developing markets." The program has received commitments of $1 billion from IFC, a member of the World Bank Group. The U.K. government, through its development finance institution CDC, intends to make a contribution of up to £300 million. The Canadian government announced it will commit $200 million. The Dutch government will commit $50 million. Douglas Alexander, U.K. Secretary of State for International Development, said: "Private sector businesses are an essential engine of growth and play a vital role in stimulating global trade, which provides a lifeline to millions of people across the globe. People in developing countries have been disproportionately hard-hit by the economic crisis. This money will help firms keep going during the difficult climate and help to protect and create jobs". Bert Koenders, Dutch Minister for Development Cooperation, said: "The dramatic drop in trade flows, combined with the credit crunch, severely impacts the poorest countries. The Netherlands therefore welcomes this joint effort and focuses its contribution of $50 million to low-income countries that have less policy space to deal with this crisis. Our contribution will enable IFC to arrange financing of $300 million to $750 million for new trade transactions, which directly benefit the poor." Donald Kaberuka, President of the African Development Bank, expressed his strong support for the Global Trade Liquidity Program, saying: "The drying up of trade financing lines is already having a major impact on the African continent. This needs to be addressed urgently. The African Development Bank has a leading role to play on the continent and our Board has already approved a Trade Finance Facility to that effect. We are very pleased with this cooperation to ensure a speedy and coordinated response to the crisis". Zoellick signed agreements with Peter Sands, Group Chief Executive of Standard Chartered Bank, and David Munro, Chairman, Standard Bank, South Africa. These two banks are the first that plan to work with the Global Trade Liquidity Program. The banks will receive lines of credit through the program that will enable them to significantly scale up the flow of trade finance to emerging markets banks. Standard Chartered will receive an initial line of $500 million and Standard Bank a line of $400 million.

5) Global Economic Crisis and Development: UNCTAD Public Symposium invitation UNCTAD and NGLS are organizing a public symposium on "The global economic crisis and development - the way forward," 18-19 May 2008 in

Geneva. The symposium is an effort to mobilize civil society, governments, agencies and other actors around the key issues on the crisis and global economic reform that have not received enough attention if at all. Key topics which will be debated at 3 plenary sessions of the symposium are: The global economic crisis - its causes and its multiple impacts The debate will consider, in particular, the effects on developing countries in the areas of trade, investment, food security and jobs; Assessing existing responses to the crisis at the international, regional and national levels - limitations and best practices In addition to examining the effectiveness of stimulus packages implemented in some countries, the debate will address multilateral efforts to find solutions to the crisis, including the G-20 Summit outcome and regional initiatives; Proposals for the way forward - obstacles and opportunities The debate will include opportunities arising from the upcoming United Nations conference on the world financial crisis and its impact on development, and longer-term issues such as the reform of the international financial architecture and global economic governance. Participants are encouraged to submit written contributions on the symposium's key topics. For guidelines on how to contribute please visit: www.unctad.org/publicsymposium Substantive contributions will be posted on the symposium website, and papers of publishable quality will be included in a compendium of the symposium report. - Length: 5 pages max - Languages: English, French or Spanish - Deadline: 4 May 2009 (see more information on www.unctad.org/publicsymposium) Flyer http://www.unctad.info/upload/docs/sections/publicsymposium/publicsymposiu mflyer09_en.pdf

6) Invitation- Gender and the Economic Crisis: Opportunities and Equitable Responses If you are in DC next week, please consider attending the event below.

Center of Concern, Heinrich Böll Foundation, and the Institute for Women's Policy Research

invite you to a discussion forum on Gender and the Economic Crisis: Opportunities for Equitable Responses Wednesday, April 22, 2009 1:00-3:00 PM Carnegie Endowment for International Peace, Choate Room 1779 Massachusetts Avenue, NW (close to Dupont Circle Metro Station) Welcome: Kristin Sampson,Center of Concern Featured Speakers: Rania Antonopoulos, Research Scholar at Levy Institute of Economics at Bard College Lanyan Chen, Professor and Foreign Expert at the Institute of Gender and Social Development at Tianjin Normal University in China, currently in the US as a Fulbright Scholar Heidi Hartmann, President, Institute for Women's Policy Research Marie Shaba, Human Rights Activist, Tanzania Mayra Buvinic, Sector Director of the Gender and Development Group, PREM at the World Bank

Moderator: Liane Schalatek, Heinrich Böll Foundation Recent years have seen a convergence in global crises: commodity and energy prices on global markets, breakdown in global financial markets, deep recession in the real economy, and an increase in climate-related disasters. As of March 2009, all developed economies were in recession with increasing numbers of developing countries feeling the effects of the financial crisis and spillover into the real economy. This time of global hardship and insecurity, however, may also offer the opportunity for leadership and bold policy action to reduce inequalities among nations and across poverty and gender lines. Without bold leadership and new thinking progress made in poverty reduction and women's equality, two key developmental goals, may come to a halt and reversals may be on the horizon. The panel seeks to provide responses to the following questions: How is the crisis impacting men and women differently across developed and developing economies? How can governments develop recovery packages that address the immediate economic needs while advancing gender equality? Given the recent systemic failure, what does gender analysis offer in terms of

redefining the macroeconomic structures and governance frameworks? For any questions or comments please contact Kristin Sampson at (202) 6352757, x128 or [email protected]. Please RSVP by email addressed to [email protected]

Aldo Caliari Director Rethinking Bretton Woods Project Center of Concern