Third ECONOMICSThird World ECONOMICS No. 705, 16-31 August 2020 World Trends and Analysis

No. 705 16-31 August 2020 e-ISSN : 2716-5388 UNCTAD stresses need for global economic recovery plan A global recovery plan is required to kickstart a world economy that has been laid low by the coronavirus outbreak. In making this call, the United Nations Conference on (UNCTAD) underlines the leading role governments must assume, not only to raise effective demand but also to address the fragilities that had been besetting the global economy even before the pandemic struck.

l Global recovery plan needed to avert a “lost decade” – p2

...... Also in this issue ......

UNCTAD’s blueprint on “structurally transforming” economies

South calls for “developmental and inclusive” WTO reform agenda

Reinventing multilateral solidarity – rhetoric, or realignment of power?

Regressive taxation must be reversed

1 Current Reports l EconomicThird policy World ECONOMICS No. 705, 16-31 August 2020 Economics Tren d s & A n a l y s i s Global recovery plan needed to avert 131 Jalan Macalister a “lost decade” 10400 Penang, Malaysia Tel: (60-4) 2266728/2266159 Reviving a world economy battered by the COVID-19 pandemic will Fax: (60-4) 2264505 require that governments spend to boost global demand as well as Email: [email protected] redress pre-existing vulnerabilities, asserts a UN development body. Website: https://twn.my

C O N T E N T S by Kanaga Raja countries, to stick to deficits for several years ahead,” it added. CURRENT REPORTS GENEVA: In the face of a deep recession “Hope of a rapid economic bounce- in the world economy amid a still- back from a scientific breakthrough unchecked COVID-19 pandemic, the – in the form of an effective and widely Global recovery plan needed to avert time has come to hammer out a plan for available vaccine – cannot blind us to other — p2 a “lost decade” global recovery that can credibly return man-made dangers ahead. If governments even the most vulnerable countries to a opt for premature fiscal tightening in an UNCTAD’s blueprint on “structurally stronger position than they were in before attempt to bring down public debt and transforming” economies — p7 the onset of the coronavirus crisis. businesses adopt an aggressive cost- This is one of the main conclusions cutting strategy in an attempt to boost South calls for “developmental and highlighted by the United Nations exports, the recovery will likely fizzle inclusive” WTO reform agenda — p9 Conference on Trade and Development out, with a double-dip recession a real (UNCTAD) in its flagship Trade and possibility in many countries in 2022,” South calls for addressing scope Development Report 2020 (TDR), which UNCTAD cautioned. and sequencing issues in fisheries was released on 22 September. At a hybrid media briefing (both text— p11 According to UNCTAD, “an aborted in-person and online), Richard Kozul- economic recovery, or worse, another lost Wright, Director of the UNCTAD Division calls for “special reform” after decade, is not preordained. It is a matter on and Development first round of DG race —p13 of policy choice.” An inclusive recovery Strategies and the main author of the will require a willingness on the part of TDR, said, “Clearly, we are not at the end OPINION government not only to keep spending of this crisis. I don’t think we are at the for as long as it takes the private sector end of the beginning of this crisis. And Reinventing multilateral solidarity – to regain its confidence to spend, but that generates a lot of uncertainty and rhetoric, or realignment of power? also to tackle the underlying stresses and unfamiliarity.” He said the numbers that — p14 fractures that were already exposed by the UNCTAD has projected have to take that global financial crisis, papered over, and degree of uncertainty and unfamiliarity in Regressive taxation must be left to fester for a decade, it said. mind. “It means addressing a series of pre- “That said, we continue to worry a reversed — p15 existing conditions that were threatening lot about the disconnect between some the health of the global economy before of the language particularly of national the pandemic hit, including high and policymakers about doing whatever it entrenched inequality, sluggish growth, takes to address this crisis and a lot of weak investment, endemic wage repression global confusion and weaknesses in the in the developed world and precarious response of the international community THIRD WORLD ECONOMICS working conditions in the developing from which the developing countries are is published fortnightly by the Third world.” sure to be the biggest victims,” said Kozul- World Network (TWN), an independent The first thing to get right, said Wright. non-profit international research and UNCTAD, is avoiding the mistakes of “I think it is worth asking the question advocacy organization involved in the last crisis. That means maintaining – will this crisis take us closer to the brink bringing about a greater articulation of an expansionary macroeconomic policy or will it open up a new era of cooperation, the needs, aspirations and rights of the stance, appropriately balanced between stability and prosperity?” he said. “I think peoples in the South and in promoting its monetary and fiscal components, for it is important to recognize that it will be just, equitable and ecological as long as it takes the private sector to policy choices and political leadership, not development. regain its confidence to spend, including, epidemiological destiny, that determines Editor: Chakravarthi Raghavan in particular, a strong investment drive. the course of the global economy over the Editorial Assistants: Lean Ka-Min, “Avoiding a lost decade will require coming years.” T. Rajamoorthy, Chee Yoke Heong governments, particularly in the advanced

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2 Current Reports l Economic policy Third World ECONOMICS No. 705, 16-31 August 2020

Impact of COVID-19 on global be 6.4% below its pre-COVID-19 trend in response to the pandemic also increased economy 2021. Measured in terms of world gross albeit, in many cases, not sufficiently to product (WGP), the COVID-19 recession deal with the magnitude of the problem. According to the TDR, before the will likely amount by end of 2021 to a “This shortcoming created bottlenecks pandemic, most analysts had expected $12 trillion loss in global income, relative and rationing in health systems, in both world output to accelerate in 2020, pulled to a simple projection of the 2017-2019 developed and developing countries,” said by faster growth in some of the larger trend, far larger than the TDR update UNCTAD. developing economies, even as advanced expected in early March 2020. Moreover, What has made this crisis an economies continued their sluggish the growth recovery in 2021 will coincide unprecedented event, however, was the growth performance. The pandemic has with rising unemployment, which is likely decision by governments to shut down forced a reappraisal. As of mid-2020, to reach double digits in some advanced economic activity in an effort to contain the expectation of most private-sector, economies. the pandemic, protect overstretched government and multilateral institutions is According to UNCTAD, this baseline healthcare systems and save lives. This a sharp contraction of the world economy scenario anticipates a wide fluctuation of sudden stop triggered automatic spending this year, concentrated in the first half of the growth rate of global output in 2020-21, stabilizers, particularly in the more 2020, followed by an incomplete recovery, but a full recovery to the pre-COVID-19 advanced economies with robust social starting in the second half of 2020. As trend by 2021 is unlikely for four reasons: security systems, but many governments measured by annual growth rates, the (1) the world economy had a positive trend adopted additional discretionary recession in 2020 will be much deeper growth rate before COVID-19, so even monetary, financial and fiscal initiatives than after the global financial crisis with an expansion of 4.1% in 2021, global to soften the blow to income, employment (GFC). Assuming that a second lockdown income will not recover, in that single year, and private balance sheets. The scale of is avoided, the recovery is expected to to the level expected before the pandemic; these discretionary actions amounts to continue through 2021, although world (2) the massive income losses of firms and massive disaster-relief packages to support income is still unlikely to reach its pre- families from COVID-19 have, and will firms and families through the lockdown, COVID-19 level by the year’s end. continue to have, a negative impact on as well as to aid local administrations UNCTAD said that it sees a similar savings and income, raising private debt in large federations whose revenues fell pattern of a deep global recession followed levels; (3) evidence from the GFC shows precipitously. by a technical bounce (as lockdown eases) that monetary policy alone cannot bring It is clear, said UNCTAD, that and an initial recovery for this year, but the economy quickly back to its pre-shock monetary responses, in the forms of a full V-shaped recovery depends on situation. Fiscal stimulus is needed; the loans and guarantees and/or quantitative policymakers doing everything right, scale and composition of that stimulus will easing, have been the preferred response a far-from-certain prospect. And there have a significant bearing on the trajectory to the COVID-19 shock in advanced are reasons to be worried about the pace of recovery; (4) based on what happened economies but that fiscal packages have of recovery next year, not only because after the GFC, the necessary increase in been significant in a number of cases. of the non-negligible risk of new waves government deficits and debt to fight the Both responses are significantly smaller in of the disease, but also because of the crisis may be prematurely aborted by fiscal developing economies, where fiscal space high uncertainty about the direction consolidation; this could happen as soon is constrained and many central banks try of economic policy and the absence of as mid-2021 in many countries, which in to maintain a minimum precautionary timely multilateral support on a scale turn would slow down the return to full level of international reserves to manage a commensurate with the challenging economic recovery or even reverse it. stringent balance-of-payments constraint; circumstances, particularly in developing According to the TDR, the fragile state however, fiscal packages have been countries, leading to deeper and more of the world economy going into 2021 significant in some cases. lasting damage from the COVID-19 should be a wake-up call for policymakers It is still too soon to gauge the effective shock. everywhere. If it is not, there is a high economic response of each country or UNCTAD’s baseline scenario, simulated likelihood that world output will not region to COVID-19, or to separate what through the United Nations Global Policy follow the V-shaped pattern that many are is a result of discretionary government Model (GPM), and assuming the policy hoping for or even the stunted V that is seen decisions and what comes from exogenous response this year is properly targeted as the more likely outcome. A prolonged support and endogenous mechanisms and continues into 2021, indicates a 4.3% recession or U-shaped recovery, a double- built into macroeconomic policy rules, reduction in world output in 2020 and a dip recession (W-shaped) or a permanent said UNCTAD. 4.1% expansion next year. “Compared to loss of potential output (L-shaped) are all However, as of mid-2020, two things the average expectations of public and possible trajectories. seem certain for coming economic policy private institutions as of mid-2020, our discussions: this year there will be a deep scenario suggests a less severe downturn Policy responses to COVID-19 global recession and a massive global this year, but a weaker recovery next year,” increase in public debt. it said. According to the TDR, the first Most policy responses to COVID- In quantitative terms, considering economic response of many countries 19 have been concentrated on relief or that the average growth rate of the world to COVID-19 was to liquify financial compensatory aid to firms and families, as economy – the pre-COVID-19 trend – markets to stop a credit crunch and well as preparation to deal with new waves was 3.0% in 2017-19, UNCTAD’s baseline deflationary debt spiral. Government of the disease. These measures have surely scenario means that world income will still emergency funds to support the health been necessary to save human lives and

3 Current Reports l Economic policy Third World ECONOMICS No. 705, 16-31 August 2020 avoid an economic recession turning into is indisputable. The experience since the Recent discussions dub such a strategy a more prolonged depression, but the post- GFC has shown that reducing the real a “Green New Deal”, recalling the efforts pandemic world will require more than interest rate to zero or negative values of the Roosevelt administration in the disaster relief and prophylactic measures helps but it is not sufficient to spur market to tackle unemployment to recover from the current shock. forces to stimulate investment and bring and low wages, the predatory nature of The state of the world economy was the economy back to full employment, let finance, infrastructure gaps and regional far from satisfactory before COVID-19 alone to transform current carbon-heavy inequalities, in the context of recovering appeared, and the current health shock has patterns of consumption and production. from the Great Depression. exposed many of the stresses and fragilities Significant government incentives for “Given the nature of the climate that need to be addressed for the global targeted investments and innovation crisis, and now the health crisis, such economy to become more resilient and combined with strategic planning will a programme would, at this moment move on to a sustainable economic, social be required to accelerate green inclusive in history, require a global effort,” said and environmental growth trajectory. growth, including penalties or outright UNCTAD. Indeed, there seems little doubt that prohibitions on activities with clear Enhanced international cooperation once the bottom of this crisis is reached, negative externalities for social stability and coordination will be essential if the world will not only be trillions of and environment preservation. genuinely taboo-breaking measures dollars worse off, it will be more unequal, are to deliver on scale and on time and more insecure and more indebted than without themselves generating daunting it was before. Governments will be more challenges for future generations. The beholden to the vagaries of financial The current health leading countries and regions of the world, markets, large corporations will be more which have more material resources and dominant, and the will have shock has exposed policy autonomy to implement change widened further. in their own economies, will also have Calls for a rethinking of the basic social many of the stresses to support change in the rest of the contract (a “new deal,” or other monikers) world. “Coordinating these packages have, not surprisingly, grown louder, said and fragilities that and extending financial support beyond UNCTAD. the core will require effective and active Economic reconstruction after multilateral institutions,” said the TDR. COVID-19 will, above all, require need to be addressed The existing multilateral architecture active government policies to reduce has, however, struggled to keep up with income inequality while lowering carbon for the global the challenges of a hyper-globalized world, emissions, large public investment according to the TDR. Recovery strategies projects to generate jobs and accelerate economy to become in some advanced and developing the transition to a low-carbon energy- countries have included measures to help efficient economy, and structural reforms more resilient. build resilience on both the health and to transition to new patterns of production environmental fronts, but international and consumption, said the TDR. cooperation and coordination has been “Developing nations will require access “All of this implies a mixture of woefully short of what is needed or absent to sufficient and affordable financing and more active fiscal, labour and industrial altogether. technology, along with more policy space, policies in the post-COVID-19 world. The policy space for autonomous to make their contribution to a sustainable Policy must aim to recover employment recovery and reconstruction policies is planet, as they also seek to close the and boost national income, and to shift much more limited outside the United economic and social gaps with advanced its distribution, while also changing the States, China, Europe and Japan, which nations.” underlying production structures,” said only heightens the responsibility these Market forces alone are neither able UNCTAD. countries and regions should assume in nor suited to guide economic and social It noted that last year’s TDR (2019) coordinating their economic initiatives transformations on the scale required, showed that a large-scale coordinated and encouraging more progressive change including meeting the Sustainable investment push – upwards of 2% of WGP in the rest of the world. Development Goals (SDGs) by 2030. and spearheaded by the public sector – to The COVID-19 shock has demonstrated Indeed, the hyper-globalization era, reinvent energy and other carbon-emitting the need for active economic policy in despite establishing a business-friendly sectors of the economy and radically alter the face of an emergency. To save lives environment, has, in many countries, production and consumption patterns and preserve income and employment, failed to deliver a fast pace of capital was not only necessary but feasible. An governments of different political formation, in large part because of the investment push on this scale will also orientations have followed a mixture of spread to corporate boardrooms of an need to tackle high levels of income Keynesian and monetarist measures, as investment calculus drawn from financial inequality and, at the same time, adopt they did in 2009, as well as more targeted markets. more progressive fiscal arrangements, policies on the supply side. That the recovery to the COVID- and directly target social outcomes Whether this was the best response 19 shock will require increased public through employment creation, decent to a self-induced economic coma will tax investment, along with novel ways to work programmes and expanded social policymakers and commentators for some manage fiscal constraints and imbalances, insurance. time to come. However, the post-COVID-

4 Current Reports l Economic policy Third World ECONOMICS No. 705, 16-31 August 2020

19 economic recovery will demand that, year, the restarting of the global economy and an exclusive focus on measures to unlike after the GFC, policymakers will result in a pick-up in many countries, boost growth from the supply side. But do not abandon a pragmatic approach but the path ahead is uncertain. especially since the GFC, there has been a prematurely under the political pressure Part of the uncertainty comes from the greater awareness that inadequate growth of vested economic interests and the fact that the global pandemic may have of demand can cause a constant downward intellectual influence of some defunct altered aggregate supply in significant pressure on productive capacity and economists, said UNCTAD. ways, including the reorganization of supply. Conversely, productivity growth supply chains and lasting effects on the – the main variable supporting capacity Averting another “lost decade” labour force and technology. But it mostly and incomes over the longer run – comes from the demand side, since can be triggered by a robust growth of According to the TDR, despite its households, businesses and governments demand and economies of scale that drive tragic human cost, the global capacity must take stock of their balance sheets in specialization. of production did not fall substantially the face of lost income and accumulated However, there are constraints on a because of COVID-19 since the virus did debts before they start spending again. demand-driven growth path. One, and not destroy productive capacity to the Critical to determining the shape of of growing importance, is the natural extent that cyclical downturns usually do. any possible recovery over the medium environment, and the present pandemic is Nor is it the case that skills have suddenly term is the underlying structure of a painful reminder that interdependency been made redundant by a profound and global demand. The world economy was has many, sometimes tragic, dimensions. permanent technological shift. This may unprepared for any serious shock, let alone Other pressing constraints of particular change if the pace of bankruptcies picks one of the nature and scale of COVID-19. relevance to developing countries include up dramatically over the second half of This structural uncertainty is an outcome lack of access to foreign currency and 2020 and if working practices undergo a of the GFC – albeit with longer roots in limited industrial capacity in a world longer-term transformation, but to date the rules of a hyper-globalized economy economy that has become more and there is idle capacity in many sectors – that is not as widely appreciated as it more dominated by big players. Another and tens of millions of unemployed and should be. During the last decade, the possible restraint on the growth of underemployed workers across the world. imbalances exposed by the GFC were aggregate demand that weighs heavily The risk of excessive inflation, were not repaired. The debt overhang – private on the minds of policymakers, in both governments to supply the demand so more than public – that brought the world developed and developing countries, is dearly lacking in today’s global economy, economy to its knees in 2008 is more debt accumulation. is as low as it has ever been in a lifetime. severe now than it was then. The low The TDR summarized that In short, there is a window of employment rates and precarious nature contractionary fiscal stances represent opportunity to recover better. But the of much work are affecting ever-larger a dead-end for both developed and window will not remain open for long and segments of the world’s labour force. developing economies. For the former, there is massive uncertainty as to whether Income and wealth inequalities that have for as long as fiscal spending multipliers governments can muster the political will hampered economic growth and distorted are greater than one – which is the case to make the required choices, ones that distributional outcomes everywhere have except in the extraordinary circumstances should be clear after the failed response to worsened further, with governments vying of binding supply constraints – there the GFC, said the TDR. with each other to extend tax breaks for are no macro-financial constraints to Either way, policy choices taken today corporations and high-wealth individuals an expansionary stance, especially with matter for the direction of the economy and loosen regulations that favour those low or negative interest rates. For the over the longer term. As soon as the at the top. latter, contractionary stances are not a choices are made, one way or another, The shrinking of the public sector as valid option but resolving the financial the dynamics of world economic and well as the tendency to fiscal austerity have bottlenecks requires support from global financial interactions will drive the continued. The weakness of investment in macroeconomic conditions and some outcomes that determine the quality of fixed capital and infrastructure – which degree of financial insurance, either life for workers and their families, the further constrains capacity, productivity regional or global. The binding constraint investment opportunities available for growth and income generation – has is thus the level of global support to businesses and the environmental health persisted. All these trends tend to growth and stability, a question of political of the entire planet. These dynamics are encourage short-termism and speculative economy. well understood and show absolutely no activities that lead to financial fragility. The TDR also said that export-driven sign of changing absent decisive action. “Mainstream economic analysis has growth is not a feasible growth strategy for The onus is on the world’s leaders to contributed to the lack of preparedness the world as a whole, and seldom even for avoid a lost decade (or worse) and make of policymakers by promoting the wrong individual countries in a world economy the choice to revive equitable, sustainable notion of resilience – one focused on with deepening financial integration. It is growth. doing business and foreign investors, a recipe for financial fragility, crises and The COVID-19 shock caused a sudden rather than good jobs and income security rising inequalities. It also depresses global stop in global supply and demand, with a – with an attendant narrowing of the aims demand in the mid-term and displaces negative impact on, and feedback from, and objectives of economic policy.” development strategies as relatively less financial markets, as debt ratios and The world largely abandoned the successful economies must earmark financial leverage shot up. Given the huge imperative of demand management with increasing portions of their income to decline in WGP in the first half of this the turn to neoliberal policies in the 1980s service external liabilities while keeping

5 Current Reports l Economic policy Third World ECONOMICS No. 705, 16-31 August 2020 up demand for exporting countries. inadequate,” said the TDR. revival scenario, consistent with the Once the immediate COVID-19 Similar results have followed other SDGs, requires simultaneous attention to supply shock is over, the main threats to crises, particularly in the developing three global public goods: environmental a full recovery of the world economy stem world. The most paradigmatic examples protection, economic development of from two sources. One is the extent of are the debt crises that hit Latin American all nations, and financial stability. Like business bankruptcies. While a number and African economies in the 1980s. environmental protection, economic of high-profile bankruptcies have already Similar cases include the crises in the development in a globally integrated been reported in the second half of 2020, 1990s, in East Asia, the Russian Federation economy brings common benefits. these have not yet amounted to a cascade and again in Latin America. In all cases, According to the TDR, strong of cases that would adversely affect the the period after was marked by severe domestic demand support in countries financial sector through defaults and adjustment to the public sector, leading with a current-account surplus is collapsing balance sheets. It is however to “lost decades” in terms of growth and necessary to put the world economy on a nearly impossible to make a precise development. sustainable and robust growth path, while prediction of what might follow, especially “The main difference this time also promoting industrialization in the where the corporate debt overhang in around is of a perverse kind. The size South. Combinations of financial support, developed and developing economies is of the acquired public sector debts is technology transfers and especially by unprecedentedly high, said UNCTAD. unprecedented and across all countries. increasing market access and injections of The second cause for concern lies with If austerity emerges as the winning policy aggregate demand can achieve this goal. the structure of global demand and income option, the consequences are most surely This will help to raise the share of exports generation. If the forces required to launch going to be of comparatively gigantic of manufacturing products produced in a global recovery, one that would drive proportions.” the South. up incomes and restore stability, are not A lost decade for the global economy In the growth revival scenario, strong enough, or worse still if they run – or rather another lost decade – is a advanced surplus economies will reduce counter to a global demand reflation, the plausible outcome. But a lost decade is their imbalances by relying more heavily principal victims may not necessarily be not inevitable. Any sustainable global on faster growth of domestic demand. large corporations operating worldwide. macroeconomic strategy must achieve a The complementary effort to back Instead, small and medium-scale firms, combination of mid-term objectives: robust industrialization of emerging economies those operating in the informal sectors economic growth, industrialization and will work in the same direction. across developing and, increasingly, development, inclusiveness, employment, Meanwhile, advanced economies running developed economies, the self-employed, financial stability and, importantly, current-account deficits improve their and ultimately ordinary workers will climate change mitigation. Together these external positions without completely suffer. Ultimately, the prospects for can determine the macroeconomics of a eliminating the deficits. Finally, the growth inclusive economic development will be well-functioning global economy. revival scenario assumes an international severely undermined. “The priority for economic policy must financial architecture that functions for The review of the structure of global be ensuring a real recovery of economic global stability and development. demand offers a framework to make an expansion that puts people back to work More generally, moving in the direction informed projection of what lies ahead and restores income growth, while also of the proposed growth revival scenario based on current conditions and similar ensuring that the financial imbalances calls for policy focus and bold measures. past events. The starting hypothesis is left by the COVID-19 shock are repaired,” Domestically, economic planning and a potential reluctance by policymakers said the TDR. industrial policies will be essential; to reinstate a vigorous role for the It is not too late yet for an effective internationally, policy coordination will public sector in sustaining a strong pace stimulus to global demand. As long as be needed. Though both approaches have of demand growth, said UNCTAD. productive capacity remains in place, been part of the policy discourse in the Especially in the developed world, the workers have not lost skills or left the past, implemented by both advanced and existing economic structure remains labour force and creditworthiness emerging economies to some degree, they geared to promoting either a debt- remains robust, a globally coordinated imply a change of course with respect to dependent, private borrowing-led or an effort to spur demand has a real chance of the current policy mindset. export-led path to growth. Public sector restoring growth. With the private sector There should be no denying the fact demand injections are seen as a problem, everywhere in “wait and see” mode, the that changing course is becoming harder not a solution. Moreover, calls for fiscal initiative simply must come from the over time. Self-restraint by policymakers, austerity have already resurfaced. This public sector. sometimes to even discuss the possibility of is reminiscent of the fiscal response to Injections of public-sector demand stimulus, has become habitual, effectively the GFC, which was initially strongly into the economic system can boost reducing the institutional space to operate. expansionary but was quickly followed incomes across the economy thanks to Governments have downsized in the name by attempts to withdraw and effectively high multipliers. Only a strong fiscal of austerity, outsourcing and privatization, reverse the direction of fiscal policy. expansion can bring unemployment down but the size of their financial obligations “But the policy of austerity left scars quickly enough to avoid permanently has expanded disproportionally by as measured by a permanent loss of damaging workers, and it can only wind absorbing debts contracted elsewhere. In good jobs, decaying infrastructure, and down carefully once the private sector is honouring debts, promoting the creation weaker social safety nets. Ten years after, able to pick up demand. of liquidity to rescue bank balance the growth of global demand remained The vision underlying the growth sheets, and relaxing the rules, they have

6 Current Reports l Economic policy Third World ECONOMICS No. 705, 16-31 August 2020 contributed to the creation of financial conditions where states and wage earners speculation have to be reinvented; and giants that are “too big to fail”. Thus, states are relatively weak, they still represent employment and fair remuneration have become not only smaller but also the sole possibilities of raising effective ensured. weaker in comparison. Meanwhile, the demand to avert a continuing global The argument, after a crippling enlargement of rights, protections and economic decline that will leave all parties financial meltdown that led to a decade favourable tax treatment to corporations, worse off. To realize such possibilities, the of insipid growth and increasing financial and other forms of abidance to corporate role of fiscal policy has to be reinstated; fragility, should be obvious in light of the power and international investors have corporate power has to be regulated in COVID-19 crisis. What remains to be seen pari passu reduced the ability of workers exchange for a continuing and stable is whether there is the political willingness to raise their wages. source of prosperity; credit instruments to coordinate a global recovery plan, the Nevertheless, under the present to sustain production while averting TDR concluded. (SUNS9196)

bare Beijing’s well-designed “targeted UNCTAD’s blueprint on policies and strategies” that brought about “structural transformation.” “structurally transforming” China, says Banga, “built its digital economy from scratch with a economies comprehensive policy that targeted both the supply and demand sides.” The big push In seeking to structurally transform their economies, developing by China in the digital arena “included countries can draw on China’s experience in crafting policies to network, broadband and cloud computing shift from “being a manufacturing hub of the world to an economic infrastructure and data centres”, and this powerhouse”, says UNCTAD. was accompanied by “a strategy to build an industrial internet ecosystem that was compatible with national economic and social development”. by D. Ravi Kanth bottom-up growth experiences,” she adds. China took specific actions as part of Significantly, China has withstood the its policy to bring about “targeted deep GENEVA: A senior economist at worst shocks arising from COVID-19 due integration of the internet with the real UNCTAD has offered a blueprint on how to its calibrated industrial policies that economy along with building consumers’ to “structurally transform” economies resulted in remarkable advances in the digital skills.” in the developing and least developed digital sector, particularly in the arena Among the developing countries, China countries, amid the raging COVID-19 of advanced telecommunications and is first to recognize the importance of data pandemic. artificial intelligence (AI). and the need to have an appropriate policy Against the backdrop of the worsening Further, China’s multi-billion-dollar framework to ensure that data is stored economic crisis and enveloping global infrastructure and investment venture within China. Based on this recognition, recession, Rashmi Banga has outlined called the Belt and Road Initiative (BRI) it formulated its “cybersecurity law” which the crucial elements of structural has provided vital infrastructure linkages is a crucial scaffolding for storing the transformation policies that the developing between the partner countries. personal information and important data and least developed countries need to Banga says that UNCTAD’s BRI collected and generated within Chinese pursue in the wake of the pandemic. Platform has published six papers territory. The Chinese law clarifies that Banga says that China is one of the few “outlining the policy experiences that where such data is transferred across countries in the world to have moved away facilitated the structural transformation borders for business needs, security from “being a manufacturing hub of the of the Chinese economy.” These papers assessments shall be conducted. Cross- world to an economic powerhouse”, using cover China’s experience in the areas of border e-commerce is closely regulated by its huge market to embark on a range of macroeconomic management and finance; the government, which has successfully transformative policies. the digital economy; trade, industry and implemented an array of associated tax In her briefing note, titled “How investment; and debt sustainability and policies, says Banga. nations can structurally transform their debt management. Unsurprisingly, the United States, economies” and circulated by UNCTAD which is the leader in global digital trade on its website on 27 August, Banga says How did China do it? – where its giant tech corporations such that “there are significant lessons from the as Google, Amazon, Facebook, Apple and China experience which other countries According to Banga, who is an expert Microsoft have monetized the data from can draw on.” on global digital trade, targeted actions other countries to generate hundreds of “There are benefits to emulating propelled the digital revolution in China. billions of dollars of profits annually – advanced economies, but most developing UNCTAD’s two papers on China’s digital has opposed China’s cybersecurity law. In countries are better placed to learn from policy and e-commerce policies have laid fact, this is the major area of contention

7 Current Reports l Economic policy Third World ECONOMICS No. 705, 16-31 August 2020 between China and the US in the ongoing the resulting investments contributed and debt sustainability” during the past 40 plurilateral Joint Statement Initiative (JSI) to its overall economic development. Its years of rapid structural transformation talks on e-commerce. strategic approach to participation in with double-digit economic growth. global and regional value chains has been “Well-targeted project selection – Macroeconomic policy framework particularly successful, Banga says, while aimed at market expansion and foreign its investment policy has played a pivotal exchange revenue generation – and the In addition to a comprehensive digital role in attracting and regulating foreign assignment of responsibility for raising policy, Banga says, China’s macroeconomic investment and guiding it to positively debt and investment decision-making to policy framework played a central role in contribute. local government authorities contributed bringing about structural transformation. In his book Kicking Away the Ladder, to debt sustainability,” Banga says. “This Through a combination of “proactive the Cambridge economist Ha-Joon move also encouraged innovation and macroeconomic management, financial Chang succinctly argued that all major flexibility, as central authorities remained reforms, and carefully managed capital industrialized countries deployed in control of aggregate debt risks and account liberalization,” China made “interventionist economic policies” in economic stability.” significant progress. The financial sector their early phases of industrialization, In the coming months, UNCTAD is reforms launched by China have catalyzed including protective tariffs, for planning to publish policy papers on the “capital accumulation and economic transforming their economies. In many experiences of other developing countries, diversification,” according to Banga. ways, China has chosen to adopt such such as Ethiopia, Indonesia and Sri Lanka, During the past 40 years of economic interventionist policies. in implementing policies to structurally reforms and opening up the market for According to Banga, China also adopted transform their economies. (SUNS9181) foreign investors, China ensured that a “strategic approach to debt management

TWN Intellectual Property Rights Series No. 16

Supplementary Protection Certificates and Their Impact on Access to Medicines in Europe: Case Studies of Sofosbuvir, Trastuzumab and Imatinib by Yuanqiong Hu, Dimitri Eynikel, Pascale Boulet and Gaelle Krikorian

In recent years, there has been increasing as to the negative impact of SPCs on pressure on systems in timely access to affordable medicines. high-income countries due to high medicines prices, one of the underlying On the basis of an analysis of three causes of which are the market medicines for hepatitis C and cancer monopolies granted to pharmaceutical treatment, this paper critically engages undertakings. These monopolies have with the policy justifications underlying been facilitated by expanded forms SPCs. It then analyses access challenges of intellectual property protections, to a hepatitis C medicine and an HIV Yuanqiong Hu is Senior Legal and Policy including the extension of the exclusivity treatment in Europe, highlighting the Adviser, MSF Access Campaign, Médecins period after the expiration of the patent social cost of the introduction of SPCs. Sans Frontières; and Postdoctoral term concerning medicinal products. Both the normative and empirical Research Associate at the School of Law, analyses have demonstrated that the School of Oriental and African Studies In the , such an common justifications supporting the (SOAS), University of London. Dimitri approach lies in the Supplementary SPC regime are deeply questionable. Eynikel is Advocacy Adviser at MSF Access Protection Certificate, a mechanism The addition of SPC exclusivity has Campaign, Médecins Sans Frontières. formally introduced under Regulation also heavily delayed competition and Pascale Boulet is a Consultant with 1768/92/EEC (now: Regulation maintained high medicines prices in Medicines Law & Policy. Gaelle Krikorian 469/2009/EC, amended). After more European countries. Ultimately, the is Head of Policy, MSF Access Campaign, than 20 years of implementation, the granting of such extended exclusive Médecins Sans Frontières. common justifications for SPCs are being private rights on medicines may result challenged by recent findings as to in unnecessary suffering and be a factor Email [email protected] for further their functioning and impact. Similarly, in the erosion of access to medicines for information, or visit https://twn.my/title2/ legitimate questions have been voiced all. IPR/ipr16.htm

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South calls for “developmental and Disregarding negotiating history During his intervention at the meeting, inclusive” WTO reform agenda China’s Ambassador to the WTO Zhang Xiangchen inveighed against the reform Developing-country trade diplomats speaking at a recent forum proposals advanced by the current USTR advocated development-friendly reforms in the WTO in place of Robert Lighthizer, saying they would erode developed-country proposals they say would deepen existing the results of the painstaking negotiations imbalances in the trading system. over the past many years. In an op-ed in the Wall Street Journal on 20 August, the USTR had proposed five major reforms at the WTO: (1) by D. Ravi Kanth campaign for comprehensive reforms. baseline tariff rates that apply to all, with The proposed reforms were spelt out at minimal exceptions; (2) end the free GENEVA: Trade envoys from developing the WTO in 2018-19 and were in such trade agreement land grab; (3) large or countries delivered their nuanced areas as: special and differential treatment advanced economies (such as China, India, perspectives for pursuing “developmental (S&DT)/categorization of developing Indonesia, and Argentina) and inclusive” reforms at the World Trade countries; rule making – substantive should not have access to S&DT; (4) new Organization (WTO) during a recent and procedural; regular work and rules to stop economic distortions that virtual discussion, as a counter to what transparency; and dispute settlement. flow from China’s state capitalism; and (5) they called imbalanced, skewed and anti- In total, Ismail identified seven replacing the WTO’s two-stage dispute developmental reforms proposed by the “pathways” proposed by the US to reform settlement process with commercial US, the European Union and Canada the WTO: arbitration, “in which ad hoc tribunals are among others. (1) S&DT – recategorization of developing impanelled and resolve particular disputes The virtual brainstorming session on countries; in an expeditious manner.” 3 September was hosted by Prof. Abhijit (2) global value chain (GVC) narrative on Zhang said the proposal to have Das, the head of the Centre for WTO trade; baseline tariffs for all countries “not Studies in New Delhi, the Geneva-based (3) abandonment of the consensus ap- only disregards the negotiating history South Centre and the Penang-based Third proach in favour of variable geometry of the previous negotiations but also is a World Network and plurilaterals; contradiction with the principle of less (4) abandonment of the single undertak- than full reciprocity as embodied in the US-proposed “pathways” ing in favour of issue-by-issue nego- WTO agreements.” tiations; He said Lighthizer’s proposal to force In his key address to the trade envoys (5) targeting China in the WTO; countries to bring their tariffs down at the meeting on “Strengthening the (6) notifications and counter-notifica- to the level being levied by developed Multilateral Trading System to Foster tions; countries is fundamentally flawed as Development: Prospects and Challenges,” (7) reforming the dispute settlement it fails to take into consideration the former South African Ambassador system. levels of development among countries, to the WTO Faizel Ismail said the US According to Ismail, the underlying particularly the developing and least reform proposals are not something new objectives of the US-mooted reforms are developed countries. but started during the Barack Obama to deepen asymmetry of the rule-based He said not every country is presidency between 2008 and 2016. system, erode the gains of developing liberalized and that WTO members This began with the then US Trade countries on S&DT, and change the open their markets through give-and- Representative (USTR) Susan Schwab strategic course of the WTO in favour of take negotiations. He added that tariffs declaring that “Doha is dead” while developed countries. are an important policy instrument for demanding that the “emerging countries” The developing countries, he said, developing and least developed countries must take on additional responsibilities. must respond to these “negative” reforms in their pursuit of industrialization. Subsequently, another former USTR proposed by the US and other developed As regards the USTR’s proposal Ron Kirk and former US Ambassador countries by: for differentiation among developing to the WTO Michael Punke argued that (a) building developing-country coalitions countries for availing of S&DT, Zhang “fundamental differences exist on the in the proud tradition of the , said there are no internationally accepted nature of emerging markets and their G33, NAMA 11, LDCs, SVEs, African criteria of classifying developing countries, responsibilities”, noted Ismail. Group, Cotton 4 and G110; and that it will be difficult to have such At the WTO’s eighth Ministerial (b) building an alternative vision of criteria in the foreseeable future. Conference in Geneva in 2011, the US multilateralism based on principles of He said the US proposal on proposed “new pathways” in WTO talks development and inclusivity; and differentiation is not only an issue for the by suggesting plurilateral and issue-by- (c) uniting behind the UNCTAD Geneva likes of China, India and South Africa but issue negotiations and bringing up the Principles for a Global Green New also a “systemic” issue which developing issue of global value chains. Deal, broadening the context for a countries have to address in a united At the eleventh Ministerial Conference WTO deal. manner. Developing countries must in Buenos Aires in 2017, it launched a ensure that S&DT is made “precise” and

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“effective” so as to operationalize it, he in a preventive manner. further tilt the playing field in their favour. added. Navnit said that issues concerning She said the eight elements of the “market- Commenting on the proposal for non-tariff barriers as well as the balance oriented policies” advanced by the US will commercial arbitration, Zhang said it of payments that may arise in the post- have serious repercussions for developing would take WTO members back to the COVID-19 scenario must be included countries. These eight elements are: GATT panels and would lead to the by developing countries in the list of l Decisions of enterprises on prices, fragmentation of the state-to-state dispute reforms. costs, inputs, purchases and sales settlement process. Moreover, it would Jamaica called for pursuing an inclusive are freely determined and made in lead to the controversial investor-state and developmental agenda, including the response to market signals; dispute settlement system, he suggested. need to safeguard S&DT. l Decisions of enterprises on On proposals for disciplining Its Ambassador to the WTO Cheryl investments are freely determined and industrial subsidies as tabled by the US, K. Spencer cautioned against growing made in response to market signals; the European Union and Japan among plurilateralism, saying that it would lead to l Prices of capital, labour and technology others, the Chinese envoy said the further fragmentation of multilateralism. are market-determined – minimum proposals are targeted against developing Spencer also called for the restoration wage laws to address exploitation of countries to deny them “policy space”. of the two-stage dispute settlement workers; The developed countries, which had mechanism and raised several concerns l Capital allocation decisions are themselves used industrial subsidies about the proposed reforms to strengthen determined and made in response to during their industrialization, are now the WTO secretariat. She highlighted the market signals; trying to re-shore the supply chains, he developmental component in the Doha l Enterprises are subject to said, calling on the developing countries agenda, suggesting that its linkage with internationally recognized accounting to defend their “legitimate policy space.” development-oriented proposals must be standards, including independent Zhang said the developing countries at the centrestage of reforms. accounting; must press ahead with their own reform l Enterprises are subject to market- proposals, suggesting that the one-sided Close scrutiny oriented and effective corporation law, and imbalanced reforms proposed by the bankruptcy law, competition law and US and other developed countries must In a detailed critique of the reform private property law, and may enforce be opposed. package advanced by the US, the EU and their rights through impartial legal He said S&DT must be safeguarded in Canada, South Africa’s Ambassador to the processes, such as an independent the WTO fisheries subsidies negotiations WTO Xolelwa Mlumbi-Peter scrutinized judicial system; and that there should be a “green box” for each proposal by the developed countries l Enterprises freely access relevant fisheries subsidies. He also emphasized with regard to the WTO’s three functions: information on which to base their the need to address the continued the negotiating function, monitoring and business decisions; and “asymmetries” in agriculture, particularly dispute settlement. l There is no significant government the need to eliminate the so-called Amber On the negotiating function, interference in enterprise business Box subsidies. China, India and several concerning the proposed differentiation decisions described above. other countries have been calling for among developing countries in availing Mlumbi-Peter argued that markets are the elimination of these trade-distorting of S&DT and “levelling the playing not perfect, noting that there are adverse subsidies for almost two years. field,” Mlumbi-Peter said the arbitrary outcomes arising from over-pricing, market Zhang further said that there should criteria adopted by the US entail serious concentration, rising unemployment and be an outcome on cotton. He also implications for developing countries inequality, among others. With the growing supported the Joint Statement Initiative as well as least developed countries. She need for governmental intervention as on plurilateral outcomes in investment said developing countries must insist demonstrated by the current COVID-19 facilitation. on the continuation of S&DT in current pandemic, as well as the presence of mixed and future trade negotiations as it is economies in WTO member countries, “Proactive” and “curative” agenda their “legitimate” right as well as the core she said “we need a multilateral trading element of trade relations. Moreover, system that supports inclusive growth, In his intervention, Indian Ambassador S&DT is clearly laid out in the Marrakesh and enables national authorities to pursue to the WTO Brajendra Navnit spoke Agreement and is the “scaffolding” for the steps to achieve national developmental about how the preamble of the WTO’s successive WTO agreements. At a time objectives and outcomes based on their foundational set when the development divide is being peculiar circumstances.” out the need for S&DT. further widened, developing countries The South African trade envoy Navnit also said the Southeast Asian need S&DT for addressing “structural criticized the recent disciplines proposed countries which made significant strides challenges”, including inequality, poverty by the US, the EU and Japan on industrial in their industrialization must assist other and other disparities shown by the subsidies and state-owned enterprises, developing countries. COVID-19 pandemic. saying they will “limit policy tools to The Indian envoy suggested that Mlumbi-Peter also cautioned that advance industrial development.” She developing countries must pursue a the developing countries must remain added that while the US, the EU and “proactive” and “curative” agenda of trade concerned over the “market-oriented” Japan clamour for industrial-subsidy reforms and not merely “react” to the reforms proposed by the US and other disciplines, there is total silence on how to reforms advanced by developed countries industrialized countries as they would reform farm subsidies.

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Commenting on the US proposal for said these “disregard the genuine capacity agreement-specific proposals on S&DT resetting bound tariff rates and agreeing constraints facing many developing put forward by the G90 developing- on baseline tariff rates that apply to all countries.” “We therefore propose a country grouping – promote public with minimal exceptions, Mlumbi-Peter ‘developmental and cooperative approach’ health, accelerate industrialization, said this is harmful as it implies that to notifications and that transparency is balance of payments, upgrade and WTO members would have the same not limited to notification requirements modernize manufacturing, promote commitments regardless of their level of but permeates all the processes of the technology transfer and close the development, even as developed countries WTO to ensure inclusive participation in digital divide to promote an inclusive are refusing to facilitate intellectual all WTO processes and decision-making,” digital economy; property and technology transfer. she added. l Advancing a development-oriented Resetting bound tariff rates would be “the Referring to the WTO’s enforcement and cooperative approach to biggest trade injustice of treating unequal function and the dispute settlement system, transparency rather than a punitive members the same,” she emphasized. Mlumbi-Peter said that while developing approach; Mlumbi-Peter also criticized countries recognize the importance of the l Rebalancing global rules and national the plurilateral Joint Statement dispute settlement system, “preserving the economic development imperatives to Initiatives, saying they will result in system does not mean accepting either provide for policy flexibility in order the “fragmentation” of the multilateral inherited inequities or proposals that for countries to address their peculiar trading system as the JSI discussions are would worsen imbalances.” challenges – promote economic about multilateralizing the plurilateral “Any reform [of the WTO] must resilience and recovery; initiatives. She said the JSIs are all about address the longstanding concerns, l Resisting rules on e-commerce that bringing “new rules” into the WTO to the especially those that constrain policy space would confine developing countries complete disregard of the provisions of the to nurture our industries, including rules to being consumers of digital Marrakesh Agreement, and are a brazen [that] have contributed to an unbalanced products rather than foster digital attempt to “undermine the fundamental globalization where benefits increasingly industrialization; and reviewing principles of the WTO such as consensus- accrue to a few and generate growing the WTO moratorium on customs decision making” and establish parallel concentrations of wealth, inequality, job duties on electronic transmissions, structures in negotiations. losses and insecurity,” Mlumbi-Peter given its implications for digital Regarding proposals by the US and emphasized. industrialization, revenue and broader other industrialized countries for punitive She called for reforms based on socio-economic effects.(SUNS9186) measures for non-compliance with WTO “inclusivity and development”, including: notification requirements, Mlumbi-Peter l Preserving S&DT and advancing the 10

chair emphasized the need for good- faith implementation of the outcomes, South calls for addressing scope and suggesting that “some delegations are approaching the negotiations on how to sequencing issues in fisheries text defend themselves in litigation and how WTO member states remain far apart on how to regulate fisheries to challenge some others’ commitments even before allowing them to comply.” subsidies after the latest round of talks at the trade body made scant Wills said he was alarmed that headway towards a final agreement. members stuck to their original positions and were concerned with “how to exempt themselves from a particular discipline and at the same time to include others in by D. Ravi Kanth provisions before addressing the faultlines the application of that discipline.” in the draft text, trade envoys told the “This won’t work,” he said, arguing that WASHINGTON DC: Many developing South-North Development Monitor “instead of challenging current measures, countries have called for addressing the (SUNS). we need to ensure that members will scope and sequencing issues, including the At a meeting of heads of delegation comply with what is being negotiated, special and differential treatment (S&DT) (HoD) on 18 September, sharp differences as we are dealing with the underlining provisions, in the draft fisheries subsidies came into the open on various provisions problem of sustainability.” text issued by the chair of the Doha rules of the draft consolidated text due to the “Litigation should be [the] last resort, negotiations in the WTO, Ambassador chair’s selective prioritization of issues and not a mindset to negotiate; if this is Santiago Wills from Colombia. such as overcapacity and overfishing and not addressed, we will have a substantial The developing countries pushed transparency and notification provisions. problem very soon,” he added, expressing back against suggestions for overseeing In his comments, Wills expressed sharp concern over the failure to make fisheries management at the WTO and for his unhappiness at the way members progress during the meetings over the negotiating transparency and notification approached the negotiations. The week.

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US support manner” in line with the United Nations prejudge outcomes of core disciplines at Sustainable Development Goal (SDG) this time.” Responding to the chair’s apparent 14.6. Mlumbi-Peter argued that exasperation, the US Ambassador to the Under SDG 14.6, world leaders had “transparency and notification obligations WTO Dennis Shea supported the draft agreed to “prohibit certain forms of should not be more burdensome than consolidated text and the overall conduct fisheries subsidies which contribute to necessary, and must take into account of the week’s negotiations. overcapacity and overfishing, eliminate the peculiar practicalities of the fisheries Shea said the US was not convinced that subsidies that contribute to illegal, sector and the capacities of especially the continued discussions on Article 5.1 on unreported and unregulated fishing developing countries.” the prohibition of subsidies contributing and refrain from introducing new such She also said members “must deliver on to overfishing and overcapacity could subsidies, recognizing that appropriate the mandate” based on SDG 14.6 and not make much progress. and effective special and differential SDG 14.4, which emphasizes on regulating “Briefly put, several members from treatment for developing and least harvesting, ending overfishing, and different continents have put a proposal developed countries should be an integral implementing science-based management for capping,” he said. He lamented that part” of the WTO fisheries subsidies plans. She said that “the WTO does not “time and again we have seen proposals negotiations. have expertise nor the mandate to deal for prohibiting other members’ subsidies Without naming the countries that with fisheries management.” and exempting their own through have depleted global fish stocks through innumerable exemptions and exclusion.” their industrial-scale fishing, India He also said that “despite the mandate’s suggested the “polluter pays” principle, ban on some harmful subsidies, some saying that those who created the problem delegations have categorical objections to should bear the responsibility. "S&DT is a any environmental and other criteria.” India also spoke about moving the He said the US was concerned by deadline for the negotiations to next fundamental pillar “objections to strong transparency year, while emphasizing that S&DT must provisions in distant water fishing.” remain at the centre of all the provisions. and principle that In the face of growing pressure for Several developing-country coalitions a credible process and “sequencing” of such as the African, Caribbean and underpins all WTO issues, the US envoy said the key was to Pacific (ACP) Group, the African Group avoid any stalled discussion on process and the least developed countries, and negotiations." and sequencing issues – for the good of South Africa among others raised sharp fish and for the good of the organization. concerns about the draft text, cautioning The US strongly supported the chair in that it needed to be amended to include the conduct of the negotiations. their proposals. Moreover, the “parameters of the On capping subsidies as proposed by negotiations have been clearly defined the US, the European Union said that Linkages among provisions and agreed by our leaders,” the South certain harmful subsidies needed to be African envoy said. “Any expansion of the eliminated, and capping of subsidies was In her intervention, South African mandate is not going to assist our cause.” outside the mandate. Ambassador to the WTO Xolelwa Mlumbi-Peter stressed that S&DT had The EU said several members remained Mlumbi-Peter said while it was the to be “an integral part of the agreement as opposed to fisheries management but such chair’s prerogative to “identify issues per the mandate.” “We reject any notion management played an important role in that are critical to be discussed in each that limits S&DT to transition periods constraining fisheries subsidies. cluster, it is important to understand the and capacity building,” she added, arguing The CARICOM (Caribbean Commu- linkages between various provisions of the that “S&DT is a fundamental pillar nity) countries and Vanuatu said their agreement and the difficulty of selective and principle that underpins all WTO populations depended on fishing for their prioritization of certain issues without negotiations and it must at its core include food security, suggesting that there must a broader understanding of how they flexibilities for developing countries.” be balanced disciplines. interact.” She drew attention to the Marrakesh Indonesia’s Ambassador to the WTO “It seems clear to us that there is a Agreement Establishing the WTO, which Syamsul Bahri Siregar called for making need to reflect on the sequencing of the “states clearly that we conduct our trade the draft consolidated text simpler and negotiations,” said Mlumbi-Peter. She relations in a manner consistent with our clearer, arguing that there were “significant added that “a discussion on the scope is of respective needs and concerns at different gaps.” paramount importance if we are to make levels of economic development.” He suggested reformulating the draft any progress in these negotiations. This will Members “also need to bear in mind text on overcapacity and overfishing, result in clarity on the type of disciplines that in negotiations on sustainability there and also emphasized that special and relating to fisheries subsidies. In addition, is an important principle of common but differential treatment was very important we cannot start with negotiation of differentiated responsibilities (CBDR), a for Indonesia and other developing transparency obligations when we have not principle of international environmental countries. finalized the core disciplines themselves.” law establishing that all states are Indonesia called for negotiations in While transparency and notification issues responsible for addressing global ills, yet an “inclusive, transparent and objective were important to members, they “cannot

12 Current Reports l WTO Third World ECONOMICS No. 705, 16-31 August 2020 not equally responsible,” Mlumbi-Peter “These negotiations are extremely On the process, said “the emphasized. important to us as we have an offensive questions about how the text will be Further, “those who are the major interest,” the South African envoy said, amended or changed have been a subject of subsidizers and are responsible for the arguing that members “must work discussions [and] it is important to clarify state of fisheries must shoulder the greatest towards a balance that leads to effective the rules of engagement so that members responsibility,” she maintained. disciplines on fisheries subsidies, that can prepare themselves appropriately.” Responding to the chair’s call for respect the mandate under SDG 14.6 and On behalf of the ACP Group, Jamaica negotiating in good faith, Mlumbi-Peter the mandate of the WTO.” said the Group “does not support linkages said “it is important to ensure that the Speaking on behalf of the African to tests or expose fish management agreement is fair and does not limit our Group, Botswana called on members to decisions to scrutiny in the WTO.” It ability to develop our fisheries resources “demonstrate flexibility and pragmatism said “the WTO is not a fish management for the benefit of our people.” in the approach of a prohibition of the organization and that what you have will She also said that “the pace of the most harmful subsidies in line with the not invoke panel scrutiny.” It cautioned negotiations must take into account the spirit and letter of the mandate and the that the proposed tests “appear to provide COVID-19 challenges and importantly ambit of the WTO competences.” an opportunity to exempt the major allow for political oversight in these Members “should be focusing on subsidizers that can find creative ways negotiations and for time for us to consult subsidies and not fisheries management,” around the tests.” (SUNS9194) our capitals.” Botswana argued.

Citing the GC decision of December Egypt calls for “special reform” after 2002 on the procedures for the appointment of Directors-General, first round of DG race Walker said that “as regards the breadth of support, we considered the distribution Egypt has urged reform of the process to select the WTO Director- of preferences across geographic regions General after its candidate in the current contest fell out of and among the categories of Members contention. generally recognized in WTO provisions: that is, LDCs [least developed countries], developing countries and developed countries”. by D. Ravi Kanth from the United Kingdom – will proceed During the interventions by the trade to the second round of the selection envoys of the countries sponsoring the WASHINGTON DC: Egypt has called process. three losing first-round candidates, Egypt’s for “special reform” of the procedures for The GC chair is assisted in conducting Ambassador Youssef Alaa said while its appointing the WTO Director-General, the selection process by the chair of the candidate Mamdouh possessed the best after its candidate was eliminated from , Ambassador qualifications to serve the organization the first round of the DG race along with Dacio Castillo from Honduras, and the in these critical times, he could not cross two others. chair of the Trade Policy Review Body, the first round, according to a trade envoy At a heads of delegation (HoD) Ambassador Harald Aspelund from who asked not to be quoted. meeting on 18 September, the WTO Iceland. Alaa said that a “special reform” General Council (GC) chair, Ambassador Walker said that the second round was needed in the procedures for the David Walker from New Zealand, would commerce on 24 September and DG selection process to ensure that the announced the results of the first round of conclude on 6 October, with another three candidate selected for the job was the best the DG selection process, in which three candidates to be eliminated after that candidate. He hinted that things were not of the eight candidates have been asked round. In the second round, members will good with the way the selection process to withdraw from the field as they were each be asked to provide two preferences; was being conducted, the above trade “least likely to attract consensus.” negative preferences will not be accepted. envoy said. The three candidates who lost out in The GC chair said preferences expressed Mexico’s Ambassador Angel the first round are Egypt’s Abdulhameed in the first round will not count in the Villalobos Rodriguez expressed regret Mamdouh, Tudor Ulianovschi from second round, and members will have to that its candidate Seade Kuri could not Moldova and Jesus Seade Kuri from give their preferences all over again. cross the first round, suggesting that the Mexico. He said that “the objective is to identify, organization was facing an existential The five remaining candidates – Ngozi among the different preferences expressed crisis. Okonjo-Iweala from , Yoo Myung- by delegations, those least likely to attract Moldovan Ambassador Tatiana hee from South Korea, Amina Mohamed consensus, so that the General Council Molcean congratulated the five candidates from , Mohammad Maziad Al- can narrow the field of candidates, as who made it to the second round. Tuwaijri from Saudi Arabia, and Liam Fox foreseen in the Procedures.” (SUNS9193)

13 OPINION l Global governance Third World ECONOMICS No. 705, 16-31 August 2020

Reinventing multilateral solidarity – Stepping up to govern The 2030 Agenda for Sustainable rhetoric, or realignment of power? Development made a valiant effort to connect the dots and the COVID-19 Genuine multilateral solidarity demands that public institutions take tragedy has forced governments back the leading role in tackling the global challenges of our times, writes into the driver’s seat, a role many had Barbara Adams. relinquished willingly or under pressure. Climate change and COVID-19 are not the only crises that have exposed the abdication of achieving substantive democratic multilateralism but have been of such dimensions that member states have to step up and govern. Multilateral solidarity is gaining traction political, business, cultural and other Has the preference of many to partner as the slogan for mobilizing support for leaders of society to shape global, regional rather than govern met a dead end? international cooperation and for the and industry agendas.” Reinventing multilateral solidarity United Nations. In June 2019, the UN Secretary- must start with bending the arc of Is it replacing or merely renaming General signed a framework agreement governance back again – from viewing cross-border obligations, many of which with the WEF, promising multiple people as shareholders, to stakeholders, have been enshrined over decades in UN areas of cooperation on activities the to rights holders. There are many global treaties, conventions and agreements, and WEF describes as “shaped by a unique standards and benchmarks that could be the principle of common but differentiated institutional culture founded on the developed to measure this progression. responsibilities in their implementation? stakeholder theory, which asserts that an These should be at the forefront of Why do we seek another name at this organization is accountable to all parts of pursuing substantive, rights-based time? society. The institution carefully blends multilateralism and distinguishing it from It seems that reaffirmation is less and balances the best of many kinds of multilateralism for rhetoric’s sake. Just a attractive than invention in this time organizations, from both the public and few to get started: of innovation, short-term thinking and private sectors, international organizations l Vaccines recognized as global public results measurement and messaging via and academic institutions.” goods. social media and 280 characters. How Is this agreement a recognition that l Moratorium on intellectual property should it be reinvented? stakeholders are replacing public sector rights for health, climate change and representatives and rights holders as the indigenous peoples’ rights while going Stakeholder trend primary “subjects” of multilateralism and through a review and possible recall the UN? process. In the 1980s, Chase Manhattan CEO One of the victims of this (stakeholder) l Ratification and adherence to human David Rockefeller said that the economics trend is the UN. The pragmatism of rights treaties and conventions. of international relations drives the Secretaries-General Annan and Ban l Ratification and adherence to politics. Certainly, the politics of Ki-moon launched a succession of environmental and sustainability international relations has failed to keep public-private partnerships and multi- treaties. pace with globalized economics and has stakeholder initiatives to keep the UN in l Abdication of nuclear weapons and resulted in unfettered hyper-globalization the multilateral game. export of small arms as a commitment and multidimensional inequality and Are these what is meant by multilateral to peaceful and just societies. violence. solidarity? l Global priority positioning of the 2030 Decades of structural adjustment, If so, how can it be expected to tackle Agenda for Sustainable Development market liberalization and austerity the most serious global challenges that to support sustainable livelihoods and policies, together with financialization include climate degradation, ballooning strategies for conflict prevention, as and digitalization, have propelled the inequalities and systemic discrimination, well as to evaluate debt sustainability rush to neoliberal governance. This is the COVID-19 pandemic and an and the quality of financial flows. characterized by the unwillingness and/ unsustainable debt burden for many l National oversight and implementation or loss of capacity of UN member states developing countries? of agreements on business and human to govern at the national level and, by The record of the international financial rights. implication and logic, also at the global institutions (IFIs) is not encouraging. l New and meaningful commitments level. The vacuum has been nurtured The looming debt crisis, exacerbated by to reducing inequalities within and and “filled” by power centres, public and COVID-19 and economic lockdowns, is between countries, including policies private. not a unique phenomenon. The failure addressing and measuring the One prominent forum is the World of IFIs to assess debt sustainability and concentration of wealth. Economic Forum (WEF), which defines related fiscal policy according to rights l Cross-border solidarity that is not itself as “the International Organization and social, economic and environmental an excuse for interference or market for Public-Private Cooperation” and justice obligations is a longstanding access. asserts: “The Forum engages the foremost practice, one that treats symptoms at best. l Demotion of gross domestic product

14 OPINION l Global governance l Taxation Third World ECONOMICS No. 705, 16-31 August 2020

(GDP) as the primary measure of And this requires predictable and International Affairs from 1977-79 in Canada. economic progress and prosperity. sustainable public resources, currently She also served as Associate Director of the Multilateral solidarity relies on trust undermined by tax evasion and illicit Quaker United Nations Office in New York and requires addressing the trust deficit in financial flows and detoured to servicing (1981-88), and as Deputy Coordinator of the public and private spheres. Solidarity undeserved debt burdens. the UN Non-Governmental Liaison Service is demonstrated by a commitment to all The necessary but not sufficient (NGLS) through the period of the UN global rights for all and this cannot be achieved or condition for multilateral solidarity, the conferences and until 2003. From 2003-08, aspired to without an effective duty bearer fuel to change direction, is a new funding she worked as Chief of Strategic Partnerships – government and the public sector. compact at national level and to finance and Communications for the United Nations The UN should be the standard bearer an impartial, value-based and effective Development Fund for Women (UNIFEM). at the global level, not a neutral convenor of UN system. (IPS) public and private engagements. Credible The above op-ed is a short chapter in the public institutions with commitment and Barbara Adams, chair of the board of the 2030 Spotlight Report launched on 18 capacity for long-term programming and Global Policy Forum, was trained as an September 2020. non-market solutions and responses are economist in the UK and served as Executive essential at all levels. Director of the Manitoba Council for

Regressive taxation must be reversed Evasion and avoidance Successive US governments have also A recent book by two noted economists presses the case for a enabled tax evasion and avoidance by not progressive tax system to curb economic inequality. investing enough to effectively enforce what remains of the US tax code. These have been portrayed by beneficiaries and their propagandists as “unavoidable”. They then claim that the best option to ensure greater compliance by Jomo Kwame Sundaram long been part of US history and tradition is to lower “headline” tax rates. Thus, has become far more influential. instead of greater efforts to reduce tax With many in the world experiencing Another, more progressive tax evasion and avoidance, they urge further declining living standards, there has ideology can be traced to more egalitarian reduction of tax rates. been growing frustration. Many hope traditions, including some involving Saez and Zucman insist that that progressive taxation will improve wealth taxation. The US has actually had governments, especially the world’s most things. While some economies once had some of the highest tax rates on the rich powerful one in Washington DC, must progressive tax systems, recent decades in world history, as taxation became more come down hard on tax dodgers, pointing have seen regression. progressive from the 1930s, especially out that not doing so is due to political Triumph of Injustice, the recent book after the War. choices made. They propose a Federal by Emmanuel Saez and Gabriel Zucman, Those most responsible for the U-turn Protection Bureau to enhance capacity both associates of “rock-star” economist from the 1980s have been US Presidents against tax evasion and avoidance. Thomas Piketty, calls for a US return Ronald Reagan and Donald Trump. to progressive taxation. The duo show The authors attribute the great recent Corporate taxation that the US had one of the world’s most increase in US economic inequality to progressive tax systems, but now, the the “negative spiral” involving regressive The duo show that corporate taxes were richest pay a lower tax rate than the tax reforms over the last four decades. crucial in narrowing the gap between rich poorest. However, empirical support for their and poor during the Keynesian Golden The two French economists at Berkeley claim is suspect as the “primary” Age for a quarter-century or so in the consider the two major competing US distribution of income before taxation is mid-20th century after World War II. ideologies on taxation based on rival hardly egalitarian. Besides the traditional While very high top personal income claims with contemporary echoes. division between capital and labour, tax rates and much more inheritance The socially regressive, ostensibly rentier incomes and much higher and property taxes can help, they show libertarian tradition has its roots in executive remuneration have become far that corporate taxation was crucial. The property, including slaves, who once more significant in recent decades. corporate income tax rate then was 50%, accounted for 40% of the population of While regressive tax incidence has un- taking half of firm profits. the US South. Plantation owners and doubtedly made things worse, exaggerat- The high tax rate also encouraged slaveholders opposed property taxes in the ing the fiscal system’s redistributive impact reinvesting profits, rather than paying name of freedom and liberty. Meanwhile, detracts from a more comprehensive un- dividends and bonuses, encouraging firm the myth of the wealthy that low taxes have derstanding of contemporary inequality. growth with higher capital accumulation

15 OPINION l Taxation Third World ECONOMICS No. 705, 16-31 August 2020 in the long term. Saez and Zucman also show that the place from 1982, most of the 400 richest Meanwhile, progressive government rich can afford to pay 4% of national Americans would still be billionaires, expenditure complemented progressive income, or US$750 billion more in tax. but worth much less. Their wealth shares taxation, including more direct taxes, for a Four sets of taxes would double their would be closer to what they were in 1982, comprehensively progressive fiscal system, current average tax rate from 30% to before the rapid rise of wealth inequality. reducing overall economic inequality. 60%. They propose a steeply progressive Mark Zuckerberg would have $21 billion income tax, arguing that a top rate of 75% instead of $61 billion, while Bill Gates Proposals to reduce inequalities is most viable. The duo also recommend would be worth $4 billion instead of $97 strongly enforced corporate tax, doubling billion. Saez and Zucman persuasively offer a inheritance tax revenues, and introducing Under President Franklin Delano comprehensive set of proposals to reverse a wealth tax. Roosevelt in the 1930s, an income tax top the downward spiral to rebuild a much They insist that it will be impossible rate of 94% was introduced, apparently not more progressive US tax system, with to reduce inequality in the contemporary to raise revenue but rather to limit high many lessons very relevant elsewhere as world only by raising corporate, incomes and wealth concentration. This well. inheritance and income taxes, as important effectively limited income differentials They acknowledge that the US has as these are to the overall effort. At the between the highest and lowest paid to far already shown the way with its Foreign rates recommended, a wealth tax would more reasonable levels. Account Tax Compliance Act (FATCA). raise significant sums, but still would not As top tax rates have drastically fallen FATCA compels all US citizens, both at radically reduce inequality or extreme since, executives now get several hundred home and abroad, to file annual reports wealth concentration. times more than their lowest-paid on all their foreign holdings, ensuring Hence, the authors argue for higher employees. greater financial transparency in the age rates, not only to raise more government In a recent interview, Gates commented, of globalization. revenue, but also to reduce extreme wealth “I’m all for super-progressive tax systems Nevertheless, they insist it is not inequality and concentration. ... I’ve paid over $10 billion in taxes. I’ve enough, arguing that “when it comes to Saez and Zucman argue that extreme paid more than anyone in taxes. If I had regulating the tax industry, the Internal wealth concentration has led to growth to pay $20 billion, it’s fine. But when you Revenue Service (IRS) brings a knife to benefits being captured by a few. For say I should pay $100 billion, then I’m a gunfight”, instead of enhancing US tax them, “a radical wealth tax would lead starting to do a little math about what I capacities and capabilities. to a reduction in the number of multi- have left over.”(IPS) The first principle of taxation for billionaires. More than collecting revenue, them is that all income should be taxed it would de-concentrate wealth”. They Jomo Kwame Sundaram, a former equally, whether from work or assets. suggest a 10% rate on fortunes over $1 economics professor, was United Nations Today, capital income is taxed much less billion. This would not only make it harder Assistant Secretary-General for Economic than labour income, increasing inequality to be a billionaire, but also much harder to Development, and received the Wassily contrary to the popular presumption that become and remain a multi-billionaire. Leontief Prize for Advancing the Frontiers of taxation is progressively redistributive. If their proposed wealth tax was in Economic Thought in 2007.

TWN Climate Change Series no.5 Understanding the Enhanced Transparency Framework and Its Modalities under the UNFCCC’s Paris Agreement

To assess progress towards curbing global warming, Parties to the United Nations Framework Con- vention on Climate Change are required to provide information on actions taken to reduce emis- sions of greenhouse gases, deal with the impacts of climate change, and support implementation of the UNFCCC commitments. Such reporting has now been significantly scaled up under the En- hanced Transparency Framework (ETF) established by the UNFCCC’s Paris Agreement. Complying with these more rigorous reporting rules under the Paris Agreement may pose a challenge for de- veloping countries given their capacity constraints.

VICENTE PAOLO YU is a Senior Legal Adviser of the Third World Network, Visiting Research Fellow at the United Nations Research In- stitute for Social Development (UNRISD), and Associate Fellow at the Geneva Center for Security Policy. AMR ABDEL-AZIZ, president of Integral Consult, has more than 25 years of consulting experience in environment and energy sectors, including climate change. WANG TIAN is an assistant professor at the National Center for Climate Change Strategy and International Cooperation (NCSC) in China. GAO XIANG is a professor and Director of the Division of International Policy Research at the NCSC.

Email [email protected] for further information, or visit https://www.twn.my/title/climate/climate05.htm 16