Theme on the Environment, Macroeconomics, Trade and Investment (TEMTI) of the Commission on Environmental, Economic and Social Policy (CEESP), IUCN - International Union for the Conservation of Nature
- Date submitted: 31 Oct 2011
- Stakeholder type: United Nations & Other IGOs
- Submission Document: Download
- Additional Document:
General Contenta) What are the expectations for the outcome of Rio+20, and what are the concrete proposals in this regard, including views on a possible structure of the Outcome document? SEE UPLOADED DOCUMENT.
b) What are the comments, if any, on existing proposals: e.g., a green economy roadmap, framework for action, sustainable development goals, a revitalized global partnership for sustainable development, or others? SEE UPLOADED DOCUMENT.
c) What are the views on implementation and on how to close the implementation gap, which relevant actors are envisaged as being involved (Governments, specific Major Groups, UN system, IFIs, etc.); N/A
d) What specific cooperation mechanisms, partnership arrangements or other implementation tools are envisaged and what is the relevant time frame for the proposed decisions to be reached and actions to be implemented? N/A
Specific Elementsa) Objective of the Conference: To secure renewed political commitment for sustainable development, assessing the progress to date and remaining gaps in the implementation of the outcomes of the major summits on sustainable development and addressing new and emerging challenges. Contributions could include possible sectoral priorities (e.g., (e.g., energy, food security and sustainable agriculture, technology transfer, water, oceans, sustainable urbanization, sustainable consumption and production, natural disaster preparedness and climate change adaptation, biodiversity, etc.) and sectoral initiatives that contribute to integrate the three pillars of sustainable development could be launched and endorsed at Rio+20. N/A
b) Green economy in the context of sustainable development and poverty eradication: views regarding how green economy can be a means to achieve sustainable development in its three dimensions, and poverty eradication; what is its potential added value; experience to date, including what has worked and how to build upon success, what are the challenges and opportunities and how to address the challenges and seize opportunities, and possible elements of an agreement in outcome document on a green economy in the context of sustainable development and poverty eradication N/A
c) Institutional framework for sustainable development: Priorities and proposals for strengthening individual pillars of sustainable development, as well as those for strengthening integration of the three pillars, at multiple levels; local, national, regional and international. N/A
d) Any proposals for refinement of the two themes. Recall that Resolution 64/236 describes the focus of the Conference: "The focus of the Conference will include the following themes to be discussed and refined during the preparatory process: a green economy in the context of sustainable development and poverty eradication and the institutional framework for sustainable development". N/A
THEME ON THE ENVIRONMENT, MACROECONOMICS, TRADE AND INVESTMENT (TEMTI) Commission on Environmental, Economic and Social Policy (CEESP) IUCN, International Union for the Conservation of Nature CONTRIBUTION FOR INCLUSION IN THE COMPILATION DOCUMENT
Alejandro Nadal, Co-Chair, TEMTI
This Contribution is an input for the first Theme of the United Nations Conference on Sustainable Development (UNCSD, Rio+20) on the Green Economy in the context of sustainable development and the eradication of poverty. We find the objectives of this part of the Conference highly important. At the same time, we think there are five crucial problems that are essential for a meaningful discussion on the ?transition to a green economy? that are not included in the agenda. It is essential to incorporate them in the deliberations of the UNCSD and the negotiations therein. The five themes that need to be addressed are the following:
A) Role of Macroeconomic Policies
First, the role of macroeconomic policies needs to be fully incorporated in any discussion concerning sustainable development or the newer concept of green economy. Macroeconomic policies (fiscal, monetary, financial and exchange rate policies, as well as other economy wide policies like prices for food stuffs and incomes? policies) shape the economic forces that can lead to sustainability and shift us away from a wasteful and unjust society. These policies affect every economic agent, from the largest corporation to the smallest subsistence farmers. And their effects have serious implications for their resource management practices and, this, for the environmental stewardship. In spite of this, it remains a fact that in previous conferences on sustainability, as well as in the conferences that led to the Millennium Development Goals (MDGs), these policies were absent from the discussions.
The UNCSD needs to take macroeconomic policies into account. It must open the discussion on the priorities of macroeconomic policy-making. The priorities of fiscal policy and of monetary policy have typically focused on the need to maintain a balanced budget and price stability. There is a critical debate over these priorities as opposed to full employment and sustainable development. The redefinition of macroeconomic policy priorities is essential for a transition to a green economy or sustainable development or the transition to a green economy. No discussion on poverty eradication is intelligible without covering in a meaningful manner macroeconomic polices, their priorities and instruments. No debate on the allocation of resources for environmental conservation at the macro level will be meaningful if the priorities of fiscal policies are not taken into account (and especially the notion that a primary surplus must be generated year after year). The United Nations Conference on Sustainable Development owes it to the peoples of the world to engage this discussion.
B) Financial Re-Regulation and Capital Controls
The expansion of the financial sector during the past four decades is one of the most important features of the world economy. In many ways the main priorities of economic policy are defined in accordance to the needs of the financial sector. Capital account deregulation during the past decades responded closely to the requirements of financial flows. This aspect of financial liberalization has significant implications for the role of interest and exchange rates in an open economy. Over the past decades, capital flows have shown they can have highly destabilizing effects on host economies.
Likewise, the deregulation of financial activities in securities, stocks and bonds markets led to the excesses that distributed toxic assets all over the world and led to the financial crisis that began in 207. Finally, deregulation in commodities markets led to financial speculation where basic commodities were used as assets in risk management. All of this has had very serious implications in the real economy. As a result of the financial crisis, already millions of people have lost their jobs, are being removed from their homes and their livelihoods have been destroyed. Ways and means to re-regulate the financial sector?s activities must be discussed as part of an agenda for a green economy. Because these financial flows have critical repercussions on the real economy (and therefore on the environment), it is important to re-examine the role of capital controls as a way to prevent balance of payments crises. Finally, in so far as climate change policies are concerned, it is important to understand the relation between carbon trading schemes and financial regulations. Carbon trading leads to the creation of assets (emissions rights) that are traded like financial instruments. They can lead to derivatives, securitization and speculative transactions. Also, emissions rights? prices can be volatile and this will not only lead to greater speculation, but can also delay investments that incorporate a low carbon footprint. A discussion on the transition to a green economy must incorporate a debate on the relation between financial regulations and carbon trading schemes.
C) Inequality (domestic and international)
Inequality is one of the greatest enemies of sustainability. In other terms, sustainability is antithetical with a world in which 50% of the population lives with less than 2.5 US dollars a day. For one thing, inequality involves asymmetric vulnerability as poorer groups in society are exposed to greater environmental risk.
During the past three decades inequality has increased in the advanced capitalist economies, as well as in most developing countries. During the same period, international inequality has also increased. This means that over the past four decades there have been economic and political forces at play that have increased inequality. Clearly, the notion that growth and trickle down effects would eliminate inequality has been proven wrong by recent economic history. Fiscal policies dominated by the need to generate a primary surplus, as well as an international economy driven by export-promotion policies which have led to a race to the bottom in wages are two of the key factors explaining this growing inequality.
An international conference dealing with the question of sustainability will need to address the causes of inequality, its effects and the ways to redress this problem. The notion that fine-tuning of safety nets will be enough to prevent the worst damages of inequality is not a good stance for macroeconomic policies. The redistributive role of fiscal policies must be recovered and taken into account in Rio+20.
In addition, UNCSD must take into account that incomes? policies with explicit redistributive priorities need to be reintroduced into the panoply of macroeconomic policies. One of the reasons behind the levels of unsustainable indebtedness in the US economy after 1980 and that led to the financial crisis of 2007-08 is the stagnation of real wages. Aggregate demand cannot be driven by unsustainable debt. This is a theme that needs to be put squarely on UNCSD?s agenda.
D) The Debt Predicament
The debt of developing countries is a critical obstacle for sustainability. Total public external debt of developing countries increased between 1970 and 2000 from US $70 billion to US $3,360. Total debt service payments by developing countries during the period 1980 ? 2007 amounted to a staggering US $7,150 billion. Furthermore, in 1970 the world?s poorest countries had a total debt of approximately US $25 billion. By 2002 these countries? debt had risen to US $523 billion. In the case of African nations, in 1970 their debt was US 11 billion and thirty years later it had ballooned to more than US $30 billion. By 2008 developing countries had reimbursed the equivalent of 102 times the amount of their debt in 1970. Today sub-Sahara Africa is a net creditor to the rest of the world: its external assets are greater than its external debts. The big difference is that while the assets are private, the debts are public. During the past ten years, sub-Saharan Africa shows a net transfer to the rest of the world of over US $11 billion. This means that Africa has transferred more money to its creditors than it received as loans. In spite of this, the debt burden has continued to grow.
This transfer of resources constitutes one of the most important obstacles to sustainable development. Clearly, initiatives such as the Paris Club and the HIPC and the new Multilateral Debt Relief have not been enough to redress this situation. The UNCSD must take into account this serious problem. The poorest nations need immediate debt relief and concessional funds in order to engage in counter-cyclical policies and invest in long-term sustainability. A new framework for negotiations must be defined, one that puts ethical and sustainability considerations as the paramount priorities.
E) Transnational Corporations and Concentration of Market Power
Another feature of the world economy is that giant corporations with considerable market power have become key actors in international economic affairs. These mega corporations play a very important role in international trade and investment: more than 66% of world trade takes place through transnational corporations, and 40% of this takes place within companies (UNIDO 2003). They concentrate enormous market power in sectors that are close to the natural resource base (the crises in energy and food prices in 2007-2008 can be traced to the actions of these corporations). These mega-corporations are doing what they want to the environment far away from adequate supervision and monitoring. There are many examples in the extractive industries, commercial logging, fisheries, agricultural trade, etc.
There is a big difference between the agents that sign the agreements within the WTO system (i.e., governments) and the agents that actually perform trading operations (i.e., firms and large multinational corporations). Today there is a serious disconnect between the overarching WTO objective of reducing or eliminating market distortions and the presence of intense market power in most branches.
Market distortions are not always related to government subsidies but to market concentration. Perhaps the single most important lacuna of all WTO agreements is this lack of reference to market concentration, oligopolies and anti-trust enforcement measures. Free trade has become the equivalent of a world in which international market prices are affected by collusion, unfair business practices and market concentration. But the WTO has left this reality untouched. Leaving these problems to the obscure workings of international commerce arbitration boards is not the solution; their scope of competence does not include mandatory anti-trust measures applicable to general cases. Although this problem is screaming for attention, it has not been addressed by the WTO. The UNCSD cannot ignore this.
Vertical and horizontal integration in global commodity markets is another important cause of market distortion. Possible policy responses include an international review mechanism on mergers and acquisitions (M&A) that involve transboundary transactions. At a minimum, transparency requirements should be imposed on transactions between agents that have more than 20% of a regional or global market. Similarly, M&A?s and joint ventures involving cross-licensing and capitalization of patent rights should receive better scrutiny. These operations can be used to engage in serious business malpractices and unfair competition that distort market operations.
Not only has the WTO failed to regulate and look into the unfair business practices of large MNCs in the world?s markets, it has established rules that protect these firms. The Trade-related Investment Measures (TRIMs) agreement of the WTO forbids host governments from imposing any type of performance requirements on these firms. This eliminates one very important tool from the arsenal of industrial and technology policies that were critical in achieving the economic success that is now attributed to free and unregulated markets (Chang 2003). Although the lobbies of MNCs failed to get a multilateral investment agreement by the OECD and WTO in the nineties, they are still protected by an array of bilateral investment agreements that shield them from government intervention. In some notorious cases (for example, NAFTA?s Chapter 11) MNCs are protected from the effects of environmental rules and legislation.