Surprise! Aid flows are at a new all time high

So here’s a big surprise. Until last year, global aid flows were declining in the wake of the financial crisis – a trend that was widely expected to continue. But here’s what emerged when the OECD’s 2013 aid statistics came out last month:

Development aid rose by 6.1% in real terms in 2013 to reach the highest level ever recorded, despite continued pressure on budgets in OECD countries since the global economic crisis. Donors provided a total of USD 134.8 billion in net official development assistance (ODA), marking a rebound after two years of falling volumes, as a number of governments stepped up their spending on foreign aid.

An annual survey of donor spending plans by the OECD Development Assistance Committee (DAC) indicated that aid levels could increase again in 2014 and stabilise thereafter.

Admittedly, there are two important qualifiers here. One is that while aid may be at an all-time high in absolute terms, that’s not true for the arguably more important measure of aid as a proportion of donor countries’ gross national income: in 2013 they gave 0.30% of GNI, as compared to 0.32% in 2010 (and way lower, of course, than the 0.7% target).

The other point, flagged up by OECD Secretary-General Angel Gurria in his comments on this year’s statistics, is that the trend of falling aid to the neediest countries, especially in Sub-Saharan Africa (which saw a 4% real terms decrease against 2012), is still happening and appears likely to continue in the future. The new aid stats also show that donor countries only gave 0.09% of their GNI to least developed countries in 2012 – as compared to 0.10% the year before.

Donor countries have got to sort this out. While middle income countries now have access to a huge range of sources of finance for development – foreign direct investment, remittances, commercial debt, portfolio equity, and a vast increase in domestic resources from tax revenue and savings – that doesn’t hold true for low income countries, who are still highly reliant on aid. With the post-2015 agenda now about to move into the home straight, this is the year when donors need to set out a clear timetable for making good on their long-standing promise to give at least 0.15% of their GNI to least developed countries – and ideally go beyond it to 0.20%. And the OECD DAC’s High Level Meeting this December is the right moment to do it.

G20 gives U.S. until end of year on IMF reform

When finance ministers and central bankers from the G20 major economies met last week in Washington, they rapped the United States on the knuckles for its failure to ratify reforms of the International Monetary Fund. The reforms, which leaders from around the globe agreed in 2010 but which require U.S. Congressional ratification to be implemented, would increase the voice of emerging market economies on the IMF’s board and strengthen its general account (what the IMF calls “quotas”). In the G20 final communique, the global financial chiefs expressed how “deeply disappointed” they were, and fired off a stern warning, giving the U.S. until the end of the year before they request the IMF to proceed on reform (without the United States, to insert the subtext). Given that the U.S. was instrumental in founding the IMF and has always been its largest shareholder and exercised a veto over major institutional changes, the warning is serious stuff. Whether or not the IMF can actually do anything without the buy-in of its largest shareholder remains in question, but certainly the rest of the world is growing impatient with the extended delay.

In a recent analysis, I point out that the delay is undue. The IMF has traditionally enjoyed support from Democrats and Republicans, and the current proposal for reforms builds upon a process that began under the George W. Bush administration. The IMF helps to maintain global financial stability and prevent and mitigate economic crises, something both parties can get behind. The reforms strengthen the IMF’s core capabilities and improve its governance, equipping the IMF to better prevent and manage economic crises of the twenty-first century and creating a platform for constructive relations with emerging market economies such as India, Brazil and China.

And despite some claims to the contrary, the reforms do not increase U.S. financial commitments, because the new U.S. contribution to the IMF general fund would be offset by an equal reduction in its commitment to another IMF fund (the New Arrangements to Borrow). The Congressional Budget Office, Congress’ official budget scorekeeper, estimates the technical cost of implementing the quota reforms at $239 million – but also estimates that shifting the funds away from the NAB would save $693 million over the same time frame. So the reforms don’t increase US financial commitments, and the US might actually recoup money on account maintenance costs. A pretty good deal.

The case for the reforms seems obvious, so why the delay? The toxic political environment in Washington is the primary culprit. The Obama administration has not made the case for reforms as clear and compelling as it could and should, and delayed proposing them, while Congress is loath to give the Administration any kind of victory. And with the rise of tea party influence in the Republican party and an increasingly isolationist American public, Congressional blockers may actually reap political rewards. In return for ratifying IMF reforms, some Republicans are demanding a delay in the Obama administration’s proposed rules to limit political activities of non-profits. (If that seems like a a non sequitur, that’s because it is. Such is political deal-making in today’s Washington.)

All of this is bad news for the U.S., and bad news for the world. The fact is that for now and the foreseeable future, the U.S. is still the world’s preeminent power. And that power must be exercised with commensurate responsibility. As the G20 warning made clear, the rest of the world will not wait indefinitely. They are already eying a plan B if the U.S. does not ratify the IMF reforms. Whether they act without the U.S. remains to be seen, but everyone loses if the U.S. does not step up to lead the modernization of an international system that emphasizes cooperation over competition. The IMF is an early but important step in a revitalized, rules-based global order that can manage the challenges of the twenty-first century.

 

Sustainable development goals, targets and…clusters?

The UN’s Open Working Group on Sustainable Development Goals (OWG) will meet next week to discuss potential goals and targets to replace the Millennium Development Goals (MDGs), which expire in 2015. The OWG and its co-Chairs deserve praise for making significant progress in an incredibly complex process involving an overwhelming number of issues and actors.

The OWG co-Chairs have admirably attempted to reduce a long list of development priorities into 8 “clusters” for discussion (issued last week), following reactions to the 19 “focus areas” they released last month. Many asserted that 19 is too many, compared to the 8 goals of the MDGs. Though the co-Chairs are careful to caution that the focus areas are not goals – and that the clusters are simply for discussion – these caveats are generally ignored. The co-Chairs themselves have indicated they would like to have a better sense of the sustainable development goals and targets by the end of next week. Under considerable pressure to provide structure, producing the 8 clusters is a natural attempt to meet these demands. But any clustering of issues at this point will inevitably raise questions.

Continue reading

The paranoids versus the Pollyannas: what is driving Labour’s foreign policy?

The Fabian Society has a new pamphlet out this week which lays bare some of the big strategic fights underlying Labour’s emerging foreign policy. I’ve attempted to summarise them here.

Labour politics has taken an inwards-looking turn since 2010 but a new pamphlet, published by the Fabian Society this week, sees the party’s internationalists limbering up for a ruck with the opposition, the leadership and each other all at once. If the IPPR’s Influencing Tomorrow was a genteel debate in the officers’ mess, the Fabians’ collection is a squaddies’ bar room brawl between, in Mark Leonard’s words, “the New Labour tribes of globalisers, liberal interventionists and pro-Europeans and the Blue Labour apostles of localism and disengagement”.

10 Tips for a Bold & Ambitious Post-2015 Development Agenda

Climate negotiations in Warsaw made faltering steps towards a possible 2015 agreement. Trade talks in Bali were salvaged at the last minute. As global negotiations on trade, climate and development reach a crescendo between now and 2015, success or failure to reach agreement will be seen as signals of the future of multilateralism itself.

These talks remain fraught with complexity and technical and political disagreements that have considerable potential to derail agreement. As former chief of staff for the Secretariat of the High Level Panel on the Post-2015 Development Agenda, I know first hand how difficult it will be for these groups to arrive at consensus on the world’s most contentious issues- and how besieged they will feel by the demands of governments and stakeholders from around the world.

A number of lessons we learned from the Panel could improve the prospects for consensus and the ability to put forward recommendations that effectively address the challenges the world will face in the coming decades.

In this new commentary for New York University’s Center on International Cooperation, I outline 10 critical actions. Continue reading

The WTO Bali package’s thin offerings on development

So thank goodness that the WTO managed to agree something in Bali. Yet another multilateral failure, after Copenhagen, Rio, and so on would have been beyond disastrous, especially as we line up for final approach towards the two big 2015 deadlines on successors for the Millennium Development Goals and climate action beyond 2020.

But blimey, it was a pretty thin outcome. While almost all the media coverage focused on trade facilitation (the bit that global companies wanted) and food security (the bit that India was holding out about), the part of the so-called “small package” agreed in Bali that arguably mattered most was the third basket of issues: those on development.

One of the elements of that basket was duty-free / quota-free market access for least developed countries. Right now, about 80% of LDC exports enjoy DFQF access. Back at the 2005 WTO Ministerial in Hong Kong, developed countries promised to up that level to 97%. Bali would have been a perfect moment for developed countries to set out a concrete timetable for making good on that nearly decade-old promise. So did they? Nope. Instead, developed countries “shall seek to improve” DFQF coverage. Well, great.

Or what about cotton, where West African LDC producers have long faced an iniquitously unfair trade regime that protects cotton growers in the US and elsewhere? You almost couldn’t make it up: “we regret that we are yet to deliver” on promises made at Hong Kong in 2005, “but agree on the importance of pursuing progress” and “agree to hold a dedicated discussion” on it every couple of years.

This is lame. Let’s hope that the timing of the next WTO Ministerial – probably in 2015 – implies a more pro-development outcome.

A high ambition coalition of the willing on climate change

As the Center for Global Development’s Owen Barder and Alice Lepissier noted in their post from the COP19 climate summit in Warsaw last month, there was “lots of cloud and not much silver lining” in evidence there, what with Japan’s announcement of reduced emissions targets and the further diluting of the already dubious ‘pledge and review’ approach.

For me, though, the most depressing thing of all was the deafening silence among governments attending the COP about the issue of global carbon budgets. It’s a deep irony that, just as the IPCC publishes by far its most unequivocal analysis to date about the need to define (and then stay within) a safe global carbon budget, governments are less willing than ever to talk about the issue.

Part of the problem is that governments and other UNFCCC process hacks assume that a carbon budget is just too difficult to talk about. Not just because countries would have to agree on a way to share it out, but also, even more fundamentally, because of a sense that agreeing a carbon budget would depend on a ‘big bang’ moment at which all countries agreed on an allocation mechanism – and good luck with that.

This set Owen, Alice, and I thinking about whether there’s a way for some countries to go ahead with a carbon budget-based approach, but without all governments having to be on board at the outset: a high ambition coalition of the willing, in other words. Continue reading