Trade, sustainability and global governance

On 1 January 2016, the 17 Sustainable Development Goals (SDGs) in the 2030 Agenda for Sustainable Development, adopted in September 2015, came into force, replacing the Millennium Development Goals (MDGs) framework that that shaped the international development agenda from 2000 to 2015.

‘Over the next fifteen years, with these new Goals that universally apply to all, countries will mobilize efforts to end all forms of poverty, fight inequalities and tackle climate change, while ensuring that no one is left behind’.

So has the era of sustainability as a guiding norm for global governance arrived? As Jennifer Clapp explains, ‘governance frameworks are rarely guided by just a single normative idea, often it is the interaction of different norms that shapes policy outcomes’. Sustainability ‘shares the stage’ with another powerful norm - trade liberalisation. Increasingly, norms of trade liberalization and sustainability are presented ‘side by side’, as if mutually supportive. In the agri-food sector, for example, a liberalised trade regime is typically presented as not only compatible with but the means by which sustainability can be achieved.

The ‘trade supports sustainability’ argument relies heavily on the concept of comparative advantage, devised in 1817 by David Ricardo to explain aggregate efficiency gains realized when each country specialises in production of just those goods for which it enjoys comparative (if not absolute) advantage. What the theory assumes is that only goods, and not capital and labour, cross national borders. This is clearly not the case in a contemporary global trade regime, however, which is shaped by transnational corporations able to invest in ‘multiple locations around the world, and at numerous points along global supply chains’ undermining ‘that most basic assumption of comparative advantage, that is that capital is not mobile between countries’.

A Magna Carta for investors

While the ‘trade supports sustainability’ position broadly informed discussions at the Sustainable Development Summit, specific questions about how policies to achieve the SDGs might potentially conflict with commitments under preferential trade agreements and bilateral trade agreements (BITs) were sidelined. In particular, and unlike the SDGs, such agreements are enforceable though highly coercive ‘investor-state dispute settlement’ (ISDS) mechanisms. The inclusion of ISDS in a trade treaty or BIT enables overseas investors to sue national governments (but not the reverse) for profits lost, for example, as a result of appropriation of the company’s assets. The judgements (handed down by corporate lawyers, not judges) are binding and, it is said, irreversible.

A recent article in the Guardian revealed that the ISDS mechanism, which turned 50 last year, has a long and chequered history. The idea of ‘investor protection’ was originally conceived by European investors as a way to protect investments in former colonies. Herman Abs, then Chairman of Deutsche Bank Chairman described it, apparently without irony, as ‘a Magna Carta for private investors’.

ISDS was subsequently adopted by the World Bank, despite strong opposition from developing countries, in the belief it would ‘help the world’s poorest countries attract foreign capital.’ In 1964 the Bank set up its ‘International Centre for Settlement of Investment Disputes’ (ICSID), which remains the premier tribunal for hearing ISDS cases worldwide, and ISDS has since been a standard component in trade agreements with developing countries.

According to the authors of the Guardian article, a mechanism devised to protect against seizure of assets has suffered from rather an extreme case of mission creep. “The number of suits filed against countries at the ICSID is now around 500 – and that figure is growing at an average rate of one case a week.” These days multinational corporations routinely use ISDS, not only to recover money already invested, but for alleged “expected future profits”. Under this generous interpretation several governments have been sued for legislating to protect employment rights and social and environmental standards: In other words, the kind of measures that would be consistent with achieving the SDGs.

Treaty Alliance

The largest award made by an ISDS tribunal was by the Government of Ecuador, to the Occidental Petroleum Corporation in 2006, for $1.7 billion. Interestingly, while the tribunal found in the government’s favour (that the company had indeed violated Ecuadorian law) it nevertheless ruled damages be paid to the company on account of the government’s ‘disproportionate’ response of terminating the contract.

At a conference I recently attended, Maria Fernandez Espinosa, Government Minister and Ecuador ambassador to the UN outlined a series of events that have unfolded since that time. In 2007 Bolivia withdrew from the ICSID Convention, followed by Ecuador in 2009 and Venezuela in 2012. Between 2008 and 2010 Ecuador terminated nine BITS and have since declared several more to be ‘inconsistent with the country’s constitution’. The Government of Ecuador is now leading creation of an alternative, regional centre for dispute settlement under the rubric of the Union of South American Nations (UNASUR).

In her keynote speech, Espinoza reflected on ‘why are there not also treaties to force transnational companies to respect national laws, human rights and nature?’ Ecuador has, together with South Africa and several other countries in Latin America, along with hundreds of civil society organisations, formed the ‘Treaty Alliance’ in favour of a binding regulatory treaty with respect to human rights. Despite strong opposition from developed countries, in 2014 a UN resolution was passed to establish an intergovernmental working group: 

At its 26th session, on 26 June 2014, the UN Human Rights Council adopted resolution 26/9 by which it decided “to establish an open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, whose mandate shall be to elaborate an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises.”

Look South

Unlike the MDGs, which assumed that only developing countries were in need of ‘development’, the SDGs are indeed ‘Global Goals’ that apply to all countries. However, as Richard Jolly argues in a recent blog, ‘if the challenges are universal, so too are the lessons of experience, achievement and failures. A change of mindset will be needed – and some humility. No longer will the more developed countries be able to dispense wisdom and instructions to poorer countries about what they ought to be doing… breaking the cycle of poverty is far from easy. Which of the richer countries have done it? Not the UK, in spite of more than 200 years of growth and ‘development’. Nor the US, France, Germany or Russia’.

In a recent article in the Conversation, Ian Scoones argues that a question that is often asked; ‘what can Africa learn from Greece?’ is the wrong question. What we should be asking is: ‘What can Greece learn from Africa about effects of austerity after a debt crisis?’ Similarly, as civil society groups and citizens in the Global North grapple with implications of a raft of new trade and investment treaties (the alphabet soup that is TTIP/TAFTA, CETA, TPP and TISA) for sustainable development, surprisingly little is heard about developments in the Global South, particularly in Latin America, from where workable alternatives look most likely to emerge. So perhaps the most important lesson yet to be learned is the need to look South for lessons.

By Sally Brooks; follow her on Twitter

2015 - The Year 'International Development' Became 'Sustainable Development'

UN Member States adopted the 2030 Agenda for Sustainable Development in September 2015. The new agenda provides a framework for development cooperation over the next 15 years, and it recasts the scope of what we mean by ‘international development.’

Through my work with the conference reporting team of Earth Negotiations Bulletin, I’d been on the sidelines of the final negotiations and adoption of the agenda – through many long days and even longer nights of hallway huddles, gossip, rumours, and plenary adjournments while negotiators attempted to smooth over the last cracks in the wall of agreement.

On a warm Sunday evening at UN Headquarters in August, diplomats finally reached agreement on the final text to be forwarded for adoption. Applause broke out, long and loud. Negotiators wept and embraced. The 17 Sustainable Development Goals, 169 targets, and framing text that together made up the 2030 Agenda would become a reality when adopted as a package that September.

As I lugged my note-filled laptop back to the hotel to start work on the conference bulletin, I wondered if everything, or nothing, had changed. The answer, as ever, is probably somewhere in between.

It’s all too easy to dismiss the UN as a sideshow. The arcane procedures, the aspirational language, the endless speechifying…all of these make up the years and sometimes decades-long process toward a new multilateral agreement. Yet, it would be a mistake to assume that they mean nothing.

The negotiations take ages, because many concepts, ideas and proposals are hotly contested. Countries have different interests, and the intergovernmental process must somehow bridge these differences. The UN, or something very much like it, is needed because individual countries cannot adequately tackle problems that require joint solutions.

The task of implementing the 2030 Agenda has only just begun. While many have said that “history will judge” the value of this new agenda, some are already producing its first draft. Here are four thoughts on what is changing for practitioners of international development:

1. International development will integrate environmental concerns to a greater extent than before. It doesn’t mean that practitioners will take their eyes off the goal of poverty eradication – but it does mean that we will take a more consistently holistic approach. The 2030 Agenda recognizes the importance of the environment as the basis for shared prosperity and wellbeing, and each of the 17 Sustainable Development Goals has been carefully crafted to knit together the social, economic and environmental dimensions.  For example, SDG 1, to end poverty in all its forms everywhere, includes targets for equal rights to economic resources including land ownership and natural resources, and to build resilience to climate-related extreme events.
   
   We will probably see approaches similar to ‘One Health,’ which promotes interdisciplinary collaboration in all aspects of health care for humans, animals and the environment, and which is already supported by many agencies including the World Health Organization and the Centre for Disease Control, coming to the fore in the development sphere.
2. Whereas the Millennium Development Goals applied largely to poor countries, the new Sustainable Development Goals have recast development as a shared enterprise toward addressing common problems. The melding of poverty eradication and environmental sustainability aims in the 2030 Agenda implies new partnership approaches and the erosion of traditional donor-recipient relationships.
   
   Poor countries are recognized as stewards of planetary resources for all humanity, a point that has been increasingly highlighted in global forums such as the Third International Conference on Small Island Developing States (SIDS) that took place in Samoa in September 2014. The conference drew attention to SIDS as custodians of ocean biodiversity, for example, through Kiribati’s gazetting of the Phoenix Islands Protected Area, the largest marine conservation area in the Pacific.
   
   The stewardship role of countries that are poor in GDP but rich in natural resources provides a different kind of rationale for development assistance. Just as development aid moved from “needs-based” to “rights-based” approaches in the late 20^th century, in years to come we may look back and say the 2030 Agenda marked the point at which “planet-based” approaches began gaining traction.
3. Development agencies will become contributors to, and beneficiaries of, the current international effort to develop adequate indicators for monitoring progress under the 2030 Agenda. For example, the adoption of SDG 16 on peace, justice and effective institutions, has promoted interest in how we can measure achievements in the messy business of governance.
   
   The 2030 Agenda has brought with it higher expectations around monitoring of progress, greater demand for data and statistics to serve this purpose, and greater recognition that monitoring is not a purely technical role but has a political dimension to it. ‘Follow-up and review’ was one of the most hotly debated aspects of the 2030 Agenda, as countries grappled with the prospect of how governments can produce sufficient and credible data for measuring progress.
   
   The Interagency Expert Group on the SDGs (the IAEG-SDGs), a grouping of UN Member States, has been tasked with developing a global indicator framework for presentation to the UN Statistical Commission when it meets in March 2016.  So far, 225 indicators have been agreed to, and many more are still being discussed. Many development agencies have been involved in the online consultations to shape the final indicator package. At this point, it looks likely that the IAEG-SDGs will continue to meet as it grapples with many conceptual and technical issues; their efforts will be influential in development circles.
4. Crowdsourcing of development solutions will become a more frequent complement to technical, expert-led approaches. Between the UN Conference on Sustainable Development in Rio in June 2012 (Rio+20) and the adoption of the SDGs in 2015, online consultations through the UN and civil society ‘World We Want’ initiative made the shaping of the 2030 Agenda, arguably, the most participatory international process ever. While the full import of the broad and expansive scope of the 2030 Agenda is still sinking in, the Internet is making it possible to garner broad input to development questions. One example of this is the “knowledge co-production” exercise led by Sheffield Institute for International Development and the UN Research Institute for Social Development, that the University of Sheffield exercise last year, which sought to prioritize the top 100 research questions for international development in the SDG era.

Delia Paul

For a full account of negotiations leading up to adoption of the 2030 Agenda on Sustainable Development, see the Earth Negotiations Bulletin archive of reports on the post-2015 process. For ongoing news implementation of the 2030 Agenda for Sustainable Development, see the Sustainable Development Policy & Practice.

Financing the Sustainable Development Goals - reflections on FfD3

Last month the Third ‘Financing for development’ (FfD) conference in Addis Ababa agreed on a global action agenda – known as the “Addis Ababa Action Agenda” (AAAA or the “Outcome”) - for financing the Sustainable Development Goals (SDGs) between 2015 and 2030. Following endorsement of the AAAA by the UN General Assembly on 27 July, UN Secretary General Ban Ki Moon hailed it as “a foundation for success at the UN summit to adopt the UN post-2015 development agenda, in New York this September, and at the Conference of Parties of the UN Framework Convention on Climate Change (UNFCCC) (or COP 21) in Paris in December”.

“Historic”, “groundbreaking”, “a milestone” are some of the words the UN has used to describe a blueprint that it said would forge “an enhanced global partnership that aims to foster universal, inclusive economic prosperity and improve people’s wellbeing while protecting the environment”. Erik Solheim, Chair of the Development Assistance Committee (DAC) tweeted from the conference ‘I believe historians will see Addis #ffd3 as the turning point for development’. Similarly, in her speech Justine Greening, UK Secretary of State for International Development, announced ‘the FFD outcome is historic’.

Other commentators, however, have noted that while there was agreement on broad frameworks and ‘key messages’ the Outcome fell short in terms of concrete commitments. According to Mary Robinson, former President of Ireland and UN High Commissioner for Human Rights, the “Action Agenda falls short of committing concrete proposals to reshape the global framework for financing development; its business as usual approach does not match the aspirations of the post 2015 Development Agenda and SDGs.” The CSO Forum of 600 civil society organisations concluded that “on more than 20 areas, the AAAA represent a step backwards or, at best, maintenance of the status quo in relation to the pre-existing Monterrey/Doha body of commitments”. In their joint statement ‘Third FfD Failing to Finance Development’, the Forum concludes the AAAA “lost the opportunity to tackle the structural injustices in the current global economic system and ensure that development finance is people-centered and protects the environment.”

This mixed picture is perhaps most strikingly reflected in the closing plenary statement of the G77 which, while applauding progress made, noted a number of issues “important to, and fully endorsed by, the Group that have not been adequately accommodated in the current text.” That this diverse group, representing 134 countries “found common ground in expressing discontent with the Outcome cannot be overemphasized."

‘Beyond aid’

‘Beyond aid’ is the refrain that has pervaded post-2015 FfD negotiations throughout. According to Justine Greening “We’re all talking about the Beyond Aid agenda…  acknowledging that while aid is still necessary it’s not sufficient either for the next development leap, either in its scale or in its nature.” Erik Solheim of DAC summed it up thus: “From now on we will walk on three legs: Aid. Business. Tax.”

However, Oxfam argues that the “the Addis Action Agenda has allowed aid commitments to dry up” and on the issue of climate change “FfD has barely dealt with the huge additional burden which will be faced by countries least responsible for causing the problem”. Meanwhile the issue of debt relief, which played a central role in the development financing agenda in the MDG era, was not even on the table. As Bhumika Muchhala of the Third World Network explains, the AAAA “explicitly ignores a landmark initiative in the UN itself to establish an international statutory legal framework for debt restructuring. Instead, it reaffirms the dominance of creditor-led mechanisms, such as the Paris Club, whose inequitable governance was criticised in the Doha Declaration of 2008.”

Furthermore, the hoped for action on international tax cooperation - a key reform needed for developing countries to be able to mobilise domestic resources for sustainable development - also failed to materialise. As Romilly Greenhill of the Overseas Development Institute observed: “The key question was whether discussions on tax cooperation should take place in the United Nations - where every country has an equal say - or the Organization for Economic Cooperation and Development, a rich-country club.” In the end OECD members blocked proposals to upgrade the UN Tax Committee to an intergovernmental body, asserting the OECD’s continued leadership role on tax issues. Nobel prize-winning economist, Joseph Stiglitz was particularly scathing of this manoeuvre. ‘“It’s not just that they’ve failed to live up to their moral obligation, their social obligations, their own commitments,” Stiglitz told Devex on the sidelines of a debate on international tax reform, “They’re actually doing harm.”

If outcomes on aid and tax were less than was hoped for, the one ‘leg’ that was strengthened in the conference outcome was ‘business’. According to Oxfam, “the outcome document puts private finance front and centre of financing for development”. ‘Catalytic aid’ (where aid is used to ‘leverage’ private finance) and ‘blended finance’ are now the watchwords. As Aldo Caliari of the civil society group Centre of Concern explains, ‘the AAAA placed strong optimism on the role of the private sector without evidence to back it up and without parallel recognition of the developmental role of the State and commitments to safeguards States’ ability to regulate in the public interest or to protect human rights and the environment’.

These developments give new impetus to the promotion of private finance initiatives or public private partnerships (PPPs) as a preferred mechanism for development financing (particularly infrastructure development). However a recent report from Eurodad (European Network on Debt and Development) strikes a note of caution, with evidence that ‘shows that liabilities from PPPs can pose a huge risk to the public sector’. Meanwhile, another point of contention is the conflict, as yet unresolved, between “States’ ability to regulate in the public interest or to protect human rights and the environment” and terms of preferential trade agreements which include Investor State Dispute Settlement (ISDS) mechanisms that are “more coercive than any review mechanism we can hope for in defence of sustainable development."

‘A shaky start’

The FFD3 summit in Addis Ababa is the first of a three landmark conferences this year, including the UN summit to adopt the UN post-2015 development agenda in New York in September and the Climate Change conference (COP 21) in Paris in December. Simon Maxwell of the Overseas Development Institute has predicted, reassuringly perhaps that “on content matters, the Post-2015 settlement will outrank the FfD document” (which begs the question why FfD3 came first…). Nevertheless, FfD3 has been a “shaky start to the three conferences of this year”. It remains to be seen how these not insignificant differences will be resolved (or not) as the year progresses.

Sally Brooks