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Financing Development (Global Finance)

FINANCING DEVELOPMENT Global Finance Series Edited by John J. Kirton, Munk Centre for International Studies, Universit

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FINANCING DEVELOPMENT

Global Finance Series Edited by John J. Kirton, Munk Centre for International Studies, University of Toronto, Canada, Michele Fratianni, Indiana University, United States, and Paolo Savona, LUISS University, Italy The intensifying globalisation of the 21st century has brought a myriad of new managerial and political challenges for governing international finance. The return of synchronous global slowdown, mounting developed country debt, and new economy volatility have overturned established economic certainties. Proliferating financial crises, transnational terrorism, currency consolidation, and increasing demands that international finance should better serve public goods such as social and environmental security have all arisen to compound the problem. The new public and private international institutions that are emerging to govern global finance have only just begun to comprehend and respond to this new world. Embracing international financial flows and foreign direct investment, in both the private and public sector dimensions, this series focusses on the challenges and opportunities faced by firms, national governments, and international institutions, and their roles in creating a new system of global finance. Also published in the series Corporate, Public, and Private Governance The G8 Contribution Edited by Michele Fratianni, Paolo Savona and John J. Kirton ISBN 978 0 7546 4046 2 Governing Global Finance New Challenges, G7 and IMF Contributions Edited by Michele Fratianni, Paolo Savona and John J. Kirton ISBN 978 0 7546 0880 6 Sustaining Global Growth and Development G7 and IMF Governance Edited by Michele Fratianni, Paolo Savona and John J. Kirton ISBN 978 0 7546 3529 5 Global Financial Crime Terrorism, Money Laundering, and Offshore Centres Edited by Donato Masciandaro ISBN 978 0 7546 3707 3 Governing Global Banking The Basel Committee and the Politics of Financial Globalisation Duncan Wood ISBN 978 0 7546 1906 0 Elements of the Euro Area Integrating Financial Markets Edited by Jesper Berg, Mauro Grande and Francesco Paulo Mongelli ISBN 978 0 7546 4320 4 New Perspectives in Global Governance Why America Needs the G8 Edited by Michele Fratianni, John J. Kirton, Alan M. Rugman and Paolo Savona ISBN 978 0 7546 4477 4

Financing Development The G8 and UN Contribution

Edited by MICHELE FRATIANNI Indiana University, United States JOHN J. KIRTON University of Toronto, Canada PAOLO SAVONA LUISS University, Italy

© Michele Fratianni, John J. Kirton, and Paolo Savona 2007 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior permission of the publisher. Michele Fratianni, John J. Kirton, and Paolo Savona have asserted their right under the Copyright, Designs and Patents Act, 1988, to be identified as the editors of this work. Published by Ashgate Publishing Limited Gower House Croft Road Aldershot Hampshire GU11 3HR England

Ashgate Publishing Company Suite 420 101 Cherry Street Burlington, VT 05401-4405 USA

Ashgate website: http://www.ashgate.com British Library Cataloguing in Publication Data Financing development : the G8 and UN contribution. (Global finance series) 1. Group of Eight (Organization) 2. Economic development Finance 3. Economic assistance 4. Africa - Economic conditions - 21st century 5. Africa - Economic policy I. Fratianni, Michele II. Kirton, John J. III. Savona, Paolo, 1936338.9'1 Library of Congress Control Number: 2007933335 ISBN 978-0-7546-4676-1

Printed and bound in Great Britain by TJ International Ltd, Padstow, Cornwall.

To Nicholas Bayne Diplomat and Scholar Sir Nicholas Bayne, KCMG, served with distinction as a British diplomat, G7 participant, and G8 scholar, participating in some capacity at almost every summit from the G7’s start at Rambouillet, France, in 1975 to the 2005 G8 Gleneagles Summit, hosted by the United Kingdom. Born in 1937, Sir Nicholas was educated at Christ Church, Oxford, where he received his BA and MA in Literae Humaniores (Classical Studies) with first class honours and his D.Phil in Greek archaeology with a dissertation on The Grey Wares of North-West Anatolia and Their Connexion with the Early Greek Settlements, published as Asia Minor Studien 37 in 2000. Sir Nicholas dedicated his life to public service through a career in the British Diplomatic Service from 1961 to 1996. As Financial Counsellor at the British embassy in Paris, he was present at the first 1975 Rambouillet Summit. As Head of the Economic Relations Department for the Foreign and Commonwealth Office, he was responsible for briefing for the G7 summits in Tokyo (1979), Venice (1980), Ottawa (1981), and Versailles (1982). He served as Ambassador to Zaire, Congo, Rwanda, and Burundi and represented the UK at the Organisation for Economic Co-operation and Development, where he monitored the G7 summits in Tokyo (1986), Venice (1987), and Toronto (1988). As Foreign Affairs Sous-Sherpa, Sir Nicholas attended the G7 summits at Paris (1989), Houston (1990), and London (1991), before serving as High Commissioner to Canada and attending the 1995 Halifax Summit. For his distinguished service he was chosen as a Companion of the Order of St. Michael and St. George (CMG) in 1984 and a Knight Commander (KCMG) in 1992. Following his retirement from diplomatic service, Sir Nicholas was chair of the Liberalisation of Trade in Services (LOTIS) Committee of British Invisibles and Honorary President of the British Committee of the Canada-UK Colloquia. Sir Nicholas was an FCO Fellow at the Royal Institute of International Affairs and has been a Visiting Fellow at the Centre for Research on the United States and a Fellow of the International Trade Policy Unit at the London School of Economics and Political Science. He has taught in the master’s programmes in economic diplomacy at the LSE and global governance at the School of Policy Studies, Queen’s University, Canada. He served on the editorial boards of Government and Opposition and The Round Table and is a member of the G8 Research Group’s Professional Advisory Council. For decades, Sir Nicholas has served as the de facto dean of scholarly G8 studies through his many landmark works: Hanging Together: Cooperation and Conflict in the Seven-Power Summits, with Robert Putnam (1987), Hanging In There: The G7 and G8 Summit in Maturity and Renewal (2000), The New Economic Diplomacy: Decision-Making and Negotiation in International Economic Relations, with Stephen Woolcock (2003, revised 2007), and Staying Together: The G8 Summit Confronts the 21st Century (2005). In 1997, upon his retirement from public life, Sir Nicolas joined the G8 Research Group’s field team at the annual summit. The 2005 Gleneagles Summit marked the last occasion at which he served in this capacity. For his exceptional contribution to the work of the G8, and to the global community in making its operations more transparent, we are honoured to dedicate this book to him.

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Contents List of Tables List of Figures List of Contributors Preface and Acknowledgements List of Abbreviations and Acronyms PART I: INTRODUCTION 1 Introduction, Arguments, and Conclusions John J. Kirton, Michele Fratianni, and Paolo Savona PART II: THE GLENEAGLES G8 SUMMIT 2 Has the G8 Summit Met Its Objectives? The Answers from Gleneagles Nicholas Bayne 3

4

5

6

9

3

25

Gleneagles G8 Summit Perspectives Martin Donnelly

43

Energising Sustainable Development: The G8’s Gleneagles Performance John J. Kirton

53

Blair, Brown, and Gleneagles: Making Poverty History or Confronting Unequal Development Anthony Payne

79

Russia and the G8: Matured Partnership Victoria V. Panova

99

PART III: AFRICA 7 The G8 Africa Action Plan: How Much a Partnership? Princeton N. Lyman 8

ix xi xiii xv xix

121

The Commission for Africa: Accomplishments and Unfinished Business Myles Wickstead

133

Africa and the G8: Political Aspects Ade Adefuye

143

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10 African Finance and Lack of Development George M. von Furstenberg

155

PART IV: THE INSTRUMENTS 11 What Does International Aid Mean to the G8? Olivier Charnoz and Pierre Jacquet

185

12 Doing Doha for Development: A Development Perspective Sheila Page

201

13 Asymmetry in the Post-Doha Trading System Sylvia Ostry

219

14 Financing Development: A U.S. Perspective Robert C. Fauver

235

15 Global Development and the Dollar: A Conflict to Be Solved Paolo Savona

241

16 Controlling Climate Change Beyond Kyoto: The American Contribution Frank E. Loy

253

APPENDIX 17 Overcoming Evil with Good: Impressions of the Gleneagles Summit, 6–8 July 2005 Nicholas Bayne

263

Bibliography Index

281 303

List of Tables Appendix 4-1 Appendix 4-2 Appendix 4-3 Appendix 4-4 Table 10-1

The Concert Equality Model of G8 Summit Performance The Physical Summit G8 Summit Policy Performance by Function, 1975–2005 Money Mobilised by the Gleneagles Summit The Projected (Worst-Case Scenario) and Actual (Even Worse) Growth Records of Tanzania, 1990–2003 Table 10-2 Monetary and Financial Components of the Fraser Institute’s Economic Freedom of the World Index for Tanzania Table 10-3 Twelve Years of Uneven Financial Development, Tanzania, 1992–2004 Appendix 10-1 Technical Derivation of the Missing Capital Table 13-1 Number of World Trade Organization Delegates Table 13-2 Participation in World Trade Organization Dispute Settlement Cases, 1995–2007 Annex Documents Issued by the G8 at Gleneagles on 8 July 2005

73 74 75 77 158 167 168 180 222 225 280

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List of Figures Figure 11-1 G7 Foreign Aid after the Cold War, 1990–2004 189 Figure 11-2 Geographical Allocation of G7 Official Development Assistance, 1997–2003 190

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List of Contributors

Ade Adefuye is a special advisor to the Commonwealth Secretary General on African Affairs. Sir Nicholas Bayne, KCMG, is a Fellow at the International Trade Policy Unit of the London School of Economics and Political Science. Olivier Charnoz is chargé de mission and researcher at the Agence française du développement. Martin Donnelly is Director General of the Globalisation Directorate at the Foreign and Commonwealth Office of the United Kingdom. Robert C. Fauver is a former senior advisor to the U.S. Under Secretary of State for Economic Affairs. Michele Fratianni is the W. George Pinnell Professor and Chair of Business Economics and Public Policy at the Kelley School of Business at Indiana University in Bloomington, Indiana. Pierre Jacquet is chief economist at the Agence française du développement. John J. Kirton is Director of the G8 Research Group and a professor of political science at the Munk Centre for International Studies of the University of Toronto. Frank E. Loy is a former under secretary of State for Global Affairs in the State Department of the United States. Princeton N. Lyman is Adjunct Senior Fellow for Africa Policy Studies at the Council for Foreign Relations in New York. Sylvia Ostry is a Distinguished Research Fellow at the Centre for International Studies at the Munk Centre for International Studies at University of Toronto. Sheila Page is a senior research associate with the Overseas Development Institute.

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Victoria V. Panova is the director of the Moscow office of the G8 Research Group and teaches in the Department of International Relations and Foreign Policy of Russia at Moscow State University of International Relations. Anthony Payne is a professor of politics at the University of Sheffield. Paolo Savona is a professor of political economy at LUISS Guido Carli University in Rome. George M. von Furstenberg was J.H. Rudy Professor of Economics at Indiana University in Bloomington when he participated in this work. He has since become a program director with the National Science Foundation in Washington DC. Myles Wickstead is a visiting professor at the Open University and was the head of the secretariat of the Commission for Africa.

Preface and Acknowledgements This book is the tenth in Ashgate Publishing’s Global Finance series. It continues a tradition, begun in 1998, of using the annual G7/8 summit as a catalyst for edited volumes that explore the central themes in the emerging dynamic of global governance with a particular relevance to the field of finance. This volume continues the series’ central concern with core finance issues. It focusses on the critical component of financing development, a global challenge for more than half a century and one that the 2005 summits of the G8 and the United Nations took up as priority concerns. This book thus takes a close look at the way the G8 and UN summits and systems devised new ways of financing development and delivered more resources, especially in the central aid, trade, and debt relief domains. This volume reports the results of research conducted by the Research Group on Global Financial Governance, a joint venture between the Associazione Guido Carli and the G8 Research Group, and by the Centre for International Governance Innovation (CIGI) and the Global Governance Group and the New School of Athens as core partners. These strands of research were brought together at an authors’ workshop on ‘Development, Sustainability, and Finance: The Role of the G8 and the Gleneagles Summit,” held at the University of Glasgow on June 29–30, 2005. The chapters initially presented have been subsequently anonymously reviewed, revised, and updated for their presentation here. This book draws its contributors from virtually all of the G8’s constituent regions and countries of North America, Europe, and Japan. It also reaches out to involve leading scholars and practitioners who bring first-hand continuing professional experience with the Organisation for Economic Co-operation and Development (OECD), the European Union, and the Commonwealth. These contributors come from the disciplines of economics, the international political economy field of political science, management studies, and sustainable development and from leading universities and institutions in France, the United States, Canada, Italy, Britain, and Russia. Many of the authors have experience at senior levels in core governmental and intergovernmental institutions involved in managing and governing the international economy or have served in senior advisory capacities. With this wide variety of perspectives, analytical approaches, and judgements, the collection combines the insights of scholars and practitioners who draw on a rich assortment of regional experiences, theoretical traditions, interpretative frameworks, and concluding convictions, on a G8-wide and fully global scale.

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Acknowledgements In producing this volume, we have enjoyed the exceptional support of those who contributed in many different ways. Our first debt is to Antonio Fazio, the former governor of the Bank of Italy, who as chair of the Associazione Guido Carli provided part of the funding that made our research possible. We are also grateful to David Dodge, Governor of the Bank of Canada, his senior advisor John Murray, and Canada’s former Associate Deputy Minister of Finance, Jonathan Fried, for their support of the Research Group on Global Financial Governance. We also owe much to Canada’s Department of Foreign Affairs and International Trade (DFAIT), where Peter Harder, Patricia Malikail, Nicolas Dimock, and their colleagues provided consistent support. We thank the University of Glasgow and its outstanding vicerector, Malcolm McLeod, who saw the exceptional opportunity that such a project offered, provided essential support, rich collegiality, and warm hospitality, and mobilised the superb intellectual resources of his colleagues at the university in Glasgow and Scotland beyond. We are most grateful for the essential financial support from the Associazione Guido Carli, CIGI, DFAIT, the United Kingdom’s Foreign and Commonwealth Office (FCO), and the Scottish Executive. We also acknowledge the financial support of the Social Sciences and Humanities Research Council of Canada, through the research projects on which this work draws. We further appreciate the willingness to take a major role in our project of several members of the G8 Research Group’s Professional Advisory Council: Nicholas Bayne, Alan Rugman, Pierre Jacquet, Olivier Giscard d’Estaing, and Robert Fauver. We also appreciate the contributions of Duncan Green, Head of Research at Oxfam, Simon Fraser, Chef de Cabinet of the European Trade Commissioner, and others who contributed so much to our authors’ workshop, including Lynn Robertson of the OECD, Lena Wilson of the Scottish Executive, Natasha Gerson of the Scottish Trades Union Council, Richard Gledhill of Price Waterhouse Coopers, and the Honourable Roy MacLaren. We are particularly grateful to Jack McConnell, the First Minister of Scotland, who served as the keynote speaker at our authors’ workshop, and the Scottish Executive and its CEO members who assembled for a special session with many of our authors. We also owe much to the FCO’s Martin Donnelly, who spoke at our workshop despite a most demanding schedule on the eve of the Gleneagles Summit and who helped forge our partnership, and also to Tim Shaw, the director of the Institute of Commonwealth Studies at the University of London. We very much appreciate the efficient help from the talented staff that made our venture possible. At the University of Glasgow, Eileen Reynolds and her team were models of tireless efficiency and co-operation. We are grateful to Francesca Camilli and Sabrina Canossi in Rome and Milan. In Toronto, we owe a special thanks to Madeline Koch, managing director of the G8 Research Group, whose managerial and editorial skills were essential in helping organise the contributions and ensuring that initial thoughts and rough drafts were transformed into this polished, integrated

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book. We are also grateful to Helen Walsh, President of Think Content for her role in ensuring that a global audience could participate in our authors’ workshop. More broadly, we note with appreciation the indispensable contributions of Ella Kokotsis, Director of Analytical Studies of the G8 Research Group, of Sandra Larmour, the Director of Development of the G8 Research Group, and of Shinichiro Uda, Director of the G8 Research Group’s office in Japan. In France, Lynn Robertson remains a source of constant encouragement and assistance. At the University of Toronto, we are grateful to former president Robert Birgineau, Carolyn Tuohy, and their colleagues for their support. We also acknowledge the continuing support of our colleagues at the Centre for International Studies: its director, Professor Louis Pauly, who oversees our research activities, and Professor Peter Hajnal, who assumed the vital task of securing the anonymous referees who reviewed our draft manuscript and who collectively approved it for publication. We owe much to the comments of those referees, whose often trenchant but always supportive comments have been taken fully into account. At Trinity College, we acknowledge the critical support of former provost Margaret MacMillan, bursar Geoffrey Seaborn, who manages the G8 Research Group’s accounts, head librarian Linda Corman, who oversees the development of the G8 Research Library Collection, and Robert Bothwell, director of the International Relations Programme. At the Department of Political Science, Robert Vipond and David Cameron, as chairs, have always provided encouragement and support. At the University of Toronto Library, chief librarian Carole Moore and her colleagues Marc Lalonde and Richard Hydal have been indispensable. As always, we reserve a special word of thanks for Kirstin Howgate and her colleagues at Ashgate for recognising the virtue of producing this volume and for working so effectively to ensure the smooth publication of this book. Finally, we acknowledge the understanding, patience, and support of our families as we laboured to convert raw drafts into published text. We are also indebted to the alumni of the G8 Research Group and our students at universities throughout the G8. They provide a constant source of inspiration and constructive criticism as we pursue our work. Our greatest debt is to Sir Nicholas Bayne, for this book and for all the research and related activity that has underpinned it over many years. This project marked the last in which he participated as a leading figure, although his legacy will live on in our research programme in so many ways. It is to him that this volume is dedicated, upon his retirement as the dean of G8 studies, in honour of his immense contribution to the practice of, and scholarship on, G8 summitry since its very start in 1975. Michele Fratianni, Paolo Savona, and John J. Kirton June 2007

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List of Abbreviations and Acronyms ACP AfDB APEC APF APP APR APRM AU ACWL BATNA BIS BMENA CAFOD CAP CDB CDM CfA CG18 CHOGM CIS CMAG COMESA COP CTBT DAC DATA DFAIT DfID DRC EBRD ECB ECOWAS EFW EITI FASS FATF

Africa, the Caribbean, and the Pacific African Development Bank Asia-Pacific Economic Cooperation Africa Partnership Forum Africa Progress Panel Africa Personal Representative (of the leader) African Peer Review Mechanism African Union Advisory Centre on WTO Law better alternative to negotiated agreement Bank for International Settlements Broader Middle East and North Africa Catholic Agency for Overseas Development Common Agricultural Policy Caribbean Development Bank Clean Development Mechanism Commission for Africa Consultative Group of Eighteen Commonwealth heads of government meeting Commonwealth of Independent States Commonwealth Ministers Action Group Common Market for Eastern and Southern Africa Confernece of the Parties (to the United Nations Framework Convention on Climate Change) Comprehensive Nuclear Test Ban Treaty Development Assistance Committee (of the Organisation for Economic Co-operation and Development) Debt AIDS Trade Africa Department of Foreign Affairs and International Trade Canada Department for International Development (United Kingdom) Democratic Republic of Congo European Bank for Reconstruction and Development European Central Bank Economic Community of West African States Economic Freedom of the World Extractive Industries Transparency Initiative foreign affairs sous-sherpa Financial Action Task Force

xx FCO FDI FSS G7

Financing Development

Foreign and Commonwealth Office (of the United Kingdom) foreign direct investment finance sous-sherpa Group of Seven (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) G8 Group of Eight (G7 plus Russia) G10 (agriculture) Bulgaria, Iceland, Israel, Japan, Liechtenstein, Mauritius, Norway, South Korea, Switzerland, and Taiwan G20 Group of Twenty finance ministers and central bank governors (G8 plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, South Korea, and Turkey) G20 Group of Twenty developing countries, led by Brazil, India, and South Africa, formed to challenge trade issues at the 2003 Cancun ministerial meeting of the World Trade Organization G33 Group of 33 developing countries that coordinate on agricultural issues and food security G77 Group of Seventy-Seven (developing countries) G90 Group of Ninety (developing countries) GATT General Agreement on Tariffs and Trade GCAP Global Call to Action against Poverty GCI Growth Competitiveness Index GDP gross domestic product GNI gross national income GWP gross world product HIPC heavily indebted poor country IAEA International Atomic Energy Agency ICF Investment Climate Facility ICT information and communications technology IDA International Development Association IDB Inter-American Development Bank IEA International Energy Agency IEF International Energy Forum (see Chapter 6) IEF Index of Economic Freedom (see Chapter 10) IFF International Financing Facility IFFIm International Finance Facility for Immunisation IFIs international financial institutions ILEAP International Lawyers and Economists Against Poverty IMF International Monetary Fund IMFC International Monetary and Financial Committee (of the International Monetary Fund) IPCC Intergovernmental Panel on Climate Change IPR intellectual property rights IT information technology ITC International Trade Commission

Abbreviations and Acronyms

JODI L20 LDC LISCA effect LNG MAI MCA MDG MDRI MFA MFN MFP MIT MNC MNEPR MNF-I MOP MPH NATO NEPAD NGO NIEO OAU ODA OECD OPEC PAYGO PD PPP PRC PRSP PSI R&D SAARC SADC SAFTI SARS SDR SDT SMEs

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Joint Oil Data Initiative Leaders Twenty (proposed grouping of the G20 [finance ministers and central bank governors] at the leader’s level) least developed country liberalisation, internationalisation, securitisation, computerization, and apoliticisation effect liquefied natural gas Multilateral Agreement on Investment Millennium Challenge Account Millennium Development Goal Multilateral Debt Relief Initiative Multi-Fibre Arrangement most-favoured nation multifactor productivity Massachusetts Institute of Technology multinational corporation Multilateral Nuclear Environmental Programme in the Russian Federation Multi-National Force – Iraq (of the United Nations) Meeting of the Parties (to the Kyoto Protocol) Make Poverty History North Atlantic Treaty Organization New Partnership for Africa’s Development nongovernmental organisation New International Economic Order Organization of African Unity official development assistance Organisation for Economic Co-operation and Development Organization of Oil Exporting Countries pay-as-you-go political director public-private partnership People’s Republic of China Poverty Reduction Strategy Paper Proliferation Security Initiative research and development South Asian Association for Regional Cooperation South African Development Community Secure and Facilitated Travel Initiative severe acute respiratory syndrome special drawing right special and differential treatment small and medium-sized enterprises

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SPS Agreement Agreement on the Application of Sanitary and Phytosanitary Measures TB tuberculosis TBT Agreement Technical Barriers to Trade Agreement TFP total factor productivity TRIPS Trade-Related Aspects of Intellectual Property Rights TZS Tanzanian shilling UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme UNEP United Nations Environment Programme UNFCCC United Nations Framework Convention on Climate Change UNGA United Nations General Assembly UNSC United Nations Security Council USD United States dollar WHO World Health Organization WMD weapons of mass destruction WTO World Trade Organization

PART I Introduction

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Chapter 1

Introduction, Arguments, and Conclusions John J. Kirton, Michele Fratianni, and Paolo Savona

In September 2005, the leaders of virtually all the world’s national governments met at the United Nations World Summit in New York to assess how far they had come, and what remained to be done, to meet the ambitious Millennium Development Goals (MDGs) they had set five years before. In New York there was broad agreement on the importance and appropriateness of the goals, but also on how little had been accomplished, and how large was the task that remained. The leaders also acknowledged that they would fail to meet their goals unless major new financial resources for development could be mobilised, properly targeted, assembled into well-designed packages, delivered through the right mechanisms, and closely monitored to ensure they were effectively used. The longstanding challenge of financing development had reached a critical stage. This same challenge served as the key focus for the G8’s annual summit at Gleneagles, Scotland, on 6–8 July 2005. Gleneagles was the culmination of the central concern devoted to African development by the modernised G8 during the previous five years. In 2001, the year after the MDGs had been set at the UN, African leaders had come to the G8 summit with a new plan to develop a continent that still remained the poorest one in the world. G8 leaders declared that they would support the plan and invited the Africans to return the following year. To the G8’s 2002 Kananaskis Summit, the Africans brought their New Partnership for Africa’s Development (NEPAD). The G8 responded with its own reinforcing G8 Africa Action Plan. At the summits at Evian in 2003 and Sea Island in 2004, the African leaders and their agendas again assumed a prominent place and secured G8 support across an expanding domain. But as 2005 opened and the G8 and UN summits in Gleneagles and New York loomed, the world wondered if the G8 would finally raise the resources required to finance Africa’s NEPAD and global development more generally to bring the MDGs within reach. More than money was needed to meet the challenge. As the Africa Action Plan had recognised, the task of developing Africa and other poor regions required decisive action across a broad range of fields. Indeed, the plan’s seven-step programme had begun with the political imperatives of stopping the wars, strengthening good governance, and restoring confidence to stop capital flight and attract foreign direct investment (FDI). Only on this foundation came the traditional economic instruments of more debt relief, official development assistance (ODA), and liberalised trade.

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This new 21st-century approach to development was broadly endorsed by African and developed country governments, by the world’s major multilateral organisations, by many in civil society, and by G8 leaders themselves. With the MDG destination and Africa Action Plan roadmap so widely accepted, the outstanding question for 2005 was whether the G8 at Gleneagles and afterward could mobilise the massive monies required to deliver the programme and produce the supportive political conditions needed to make these monies effective in the field. Behind lay the deeper question of whether the model itself, based on a genuine partnership for democratic development led and owned by the Africans themselves, was still the right approach, in light of the changed conditions and accumulated experience since 2002. A more immediate concern was whether the G8 governors at Gleneagles, preoccupied by pressing global issues such as climate change, terrorism, and the conflict in the Middle East, would devote to African and global development enough attention, mutual adjustment, and political will to get the highly ambitious, historic job done. In short, would the G8, with its great push at Gleneagles, finally succeed in financing development to reach the MDGs, in a world where the UN, with its galaxy of multilateral organisations and their members, had itself failed for the past 60 years?

The Purpose This book addresses this central question of financing development. It has four key purposes. The first is to assess how well the G8, the UN, and the broader global community have done in meeting the many challenges of financing development, especially at and after the Gleneagles G8 Summit in 2005. The second is to explore more deeply what Africa really needs for its development by way of financing and supportive measures, and how well these needs were reflected in the G8’s Africa Action Plan and Tony Blair’s Commission for Africa (CfA) — the two great guides for Gleneagles’s work. The third is to re-examine the traditional instruments for financing development — debt relief, aid, and trade — to ask how much of what forms of each are required to get the job done. The fourth is to explore, after the two great summits of 2005 of the G8 at Gleneagles and the UN in New York, what the G8, the UN, and others should do to advance the MDGs and the broader development task. G8 Performance The first purpose directs attention to the performance of a G8 summit that was redesigned by Tony Blair as its host at Birmingham in 1998, subsequently adopted Africa as a major priority and partner for the 21st century, and then culminated at Gleneagles in 2005 by giving the issue of African development pride of place. Certainly there is much scepticism that the G8 did, and could do, as much for global development and Africa as the poor in the world need and deserve. The prevailing view is that despite some advance, the G8 has been following the wrong model (Dixon and

Introduction, Arguments, and Conclusions

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Williams 2001), that even the most committed G8 member countries and leaders have fallen short (Black 2005; Lewis 2005), and that Gleneagles’ accomplishments were modest indeed (Moss 2006). Yet some suggest that Gleneagles did meet its financing development challenge (Clarke 2005). And others argue that in important areas such as debt relief, the Gleneagles G8 made major moves forward, driven by the United States and its concerns about Iraq and evangelical conservatism (Mistry 2005; Helleiner and Cameron 2006). Yet many point to the outstanding question of whether the major commitments will be implemented, consolidated, and sustained (Landsberg 2005). To advance this debate, this book examines with analytical discipline and empirical detail how well the G8 and Gleneagles Summit did, why they performed as they did, and how effective their approach and execution were in meeting the real needs of Africa and the global community. In doing so it builds, applies, assesses, and advances some of the major models developed to evaluate and explain G8 performance, from both mainstream and more critical domains. Here it asks if the G8 acted primarily as an American-led coalition serving U.S. goals (Putnam and Bayne 1987), a concert of equals promoting open democracy, individual liberty, and social advance (Hodges, Kirton, and Daniels 1999; Fratianni, Savona, and Kirton 2005), a collective management forum pulling together for the common global good (Bayne 2005), a group hegemon protecting the privileges of the rich and promoting the neo-liberal order they prefer (Bailin 2005), or a catalyst for multilateral institutions that respond to their political will (Kokotsis 1999). It also asks, in more open-ended fashion, several more specific questions about the performance of the 21st-century G8 summits. Where and why do they work well? Where along the spectrum of their functions — from domestic political management, through deliberation, direction setting, decision making, and delivery, to the development of global governance — are they most likely to succeed and to fail? What is the proper blend of iteration and innovation, or continuity and creativity, required for them to succeed? How do the G8’s participants from outreach countries, from civil society, and from multilateral organisations help or hinder its work? And how did determined leaders, notably Tony Blair as host of Gleneagles in 2005, respond to or transcend electoral and other domestic pressures and international constraints to pioneer the big deals needed to get the financing development job done? Models of Development The second purpose of this book is to look behind the high-profile G8 and UN summits of 2005 to ask how well the approach of the G8 and the UN more broadly understood and reflected Africa’s real needs. It takes up questions that have long preoccupied the development community in both the scholarly and policy-making spheres. A central concern is whether the traditional instruments of aid, debt relief, and trade liberalisation offered by developed country donors should still command centre stage, or whether an approach that recognises the primacy of the political and the responsibility of the recipients should now be put in first place. NEPAD and the Africa Action Plan have long been subject to close and critical scrutiny, in themselves,

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in relation to one other, and in regard to the MDGs (Hope 2002; Maxwell and Christiansen 2002; De Waal 2002; Melber 2002; Matthews 2004; Akopari 2004; Manby 2004; Ramsbotham, Bah, and Calder 2005; Landsberg 2005). That attention has now extended to the CfA (Landsberg and Kalete 2005; Mistry 2005). Some have charged that the CfA, established by Blair as the successor to G8 Africa Action Plan, and the many advocates affiliated with the UN unwisely emphasised the singular demand for more aid (CfA 2005; 2006; Mistry 2005; Taylor 2005, 2006). Yet others vigorously reply that the CfA, faithful to the Africa Action Plan paradigm, presented a much broader, more balanced, politically sensitive, and developmentally appropriate approach, even if it had some defects in process and product along the way (Mayhew, Tibenderanas, and Haines 2005; Wickstead 2006; Adefuye 2006; Mbiba 2006). The focus in this volume is on the adequacy and the consistency of the Africa Action Plan and the CfA’s report with each other and with Africa’s realities and needs. Did these designs and, more generally, the MDGs comprehend and consistently work to achieve what was really required? Particular attention is given to three issues. First, how much of a genuine partnership has emerged between African and developing countries on the one hand and G8 and developed countries on the other (Abrahamsen 2004; Busumtwi-Sam 2006)? Second, how much are the political preconditions for making effective use of development finance in place? Third, how much of the responsibility for success and failure lies with the Africans and developing countries themselves? Debt, Aid, and Trade as Instruments The third purpose of this book is to examine in detail the three major instruments of debt relief, aid, and trade. These assumed pride of place in 2005, as they were highlighted by the Gleneagles G8, by civil society’s Make Poverty History (MPH) campaign, by Jeffrey Sachs (2005), Stephen Lewis (2005), and others associated with the UN and by the MDG programme itself (UN Millennium Project 2005). Yet their contribution is surrounded by controversy, with regard to each instrument used individually and to their configuration overall. Regarding the most venerable instrument, ODA, some claim that aid does deliver development when the policy context is right (Burnside and Dollar 2000) or even when it is not (Clemens, Radelet, and Bhavnani 2004). Others respond that better evidence shows it does not and that its role has been badly oversold (Easterly 2006, 2003, 2002; Easterly, Levine, and Roodman 2003; Birdsall, Rodrik, and Subramanian 2005; Mistry 2005; Calderisi 2006). Similar doubts arise over debt relief (Moss 2006). This book’s central concern is with the relationship among ODA, trade liberalisation, and debt relief, and in particular with whether the Doha Development Agenda of the World Trade Organization (WTO) has the right approach and the proper support from the G8. Yet the analysis goes beyond the traditional big three instruments to consider other mechanisms, such as remittances, micro-credit, and private philanthropy, that may play a more important role in today’s rapidly globalising world. It also looks more broadly at two more basic forces that can overwhelm any

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successes in financing development — global growth in a world economy beset by big financial imbalances and competing development models, and by the overriding challenge of ecologically sustainable development with climate change at its core. Recommendations for Reform The fourth purpose of this book is to assemble a set of recommendations for policy reform in both the important international institutions and the national governments that bring policy change to life. Certainly there is already an abundance of proposals for how to finance, promote, and secure development in more effective ways. These cover a broad array of political, economic, and legal measures, and the role of developed and developing countries, the G8 and the UN, and civil society alike. A few of those issues, such as the need for all G8 and other countries to ratify the UN Convention against Corruption, command wide agreement across otherwise divided groups (Taylor 2006; Wickstead 2006). The emphasis in this book is on proposals that meet three criteria: They flow directly from the underlying analysis of what works and what does not. They are moves that are readily available and realistically capable of being adopted and put into practice in the short term. And they aim broadly at the many actors involved, from the G8 itself to the broader multilateral system and to civil society itself. These proposals take full account of the considerable uncertainty about whether many of the existing favourites will actually have the intended effects. On this basis this books offers some suggestions for future research before any rush to advocacy or adoption is begun.

The Contributors To accomplish these purposes this book has assembled contributions from leading scholars from the disciplines of economics, political science, and development studies and selected practitioners from the G8 countries and multilateral organisations centrally involved. The contributors come from most G8 countries and regions, from the academic disciplines of management studies, economics, and political science, and from the university and research communities. This group features those who have senior-level experience in national governments and international organisations. They also balance and bridge the worlds of North America, Europe, and the developing world. Together they offer the new thinking and useful policy advice that can result from such interdisciplinary and cross-community research.

The Contributions This book takes up in turn these four central questions that lie at the core of the contemporary financing development debate. Part I, ‘The Gleneagles G8 Summit’,

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focusses on G8 performance. It examines directly how well the G8 and its major developing country partners met the many challenges of financing development at and after the 2005 summit, especially the task of providing the momentum for the UN summit and the major multilateral meetings that took place during the following year. In Chapter 2, ‘Has the G8 Summit Met Its Objectives? The Answers from Gleneagles’, Nicholas Bayne evaluates the success of Gleneagles by comparing it on four key criteria with the performance of the other summits held since Britain last hosted at Birmingham in 1998. Bayne concludes that the summits since Birmingham have done better in launching initiatives and striking deals among the heads themselves, as did Gleneagles with its important agreements on Africa and climate change. The post-1998 G8 summits also maintained their collective management, despite the divisions over the 2003 invasion of Iraq, and modified it with greater outreach to non-G8 countries. At Gleneagles this solidarity was strikingly displayed when the G8 leaders closed ranks behind Blair after the London terrorist attacks on 7 July and when the outreach meetings, with heads from five major developing countries and with seven African leaders, were unusually productive. The new G8 objective of integrating economic and political programmes was pursued at Gleneagles on Africa and the Middle East. The recurrent failures on reconciling international and domestic pressures were overcome at Gleneagles, despite the electoral weakness of many of the participating leaders, by important commitments on Africa and by setting a clear path for dealing with climate change. Iteration thus worked on Africa, although the lack of a clear structure for follow-up meant that success in implementation could only be judged in the years ahead. Nonetheless, one year later, Gleneagles could be given a grade of A– for its performance, and thus judged to be one of the most successful in the 32 years of the G7/8 forum. The results of the St. Petersburg Summit in 2006 and the Heiligendamm Summit in 2007 sustain this judgement, even if the success in implementing Gleneagles commitment over the longer term remains to be seen. In Chapter 3, ‘Gleneagles G8 Summit Perspectives’, Martin Donnelly details, from the perspective of the UK presidency, the preparations and negotiations for Gleneagles and its results. He outlines how agreement was reached on African development and climate change and how implementation of these agreements could be advanced. He argues that after lengthy and at times difficult negotiations, the summit produced substantial and ambitious policy commitments backed by a strong, shared political will to carry them out. The results since Gleneagles support this view. The UK’s presidency thus demonstrated that the G8 remains a unique and valuable part of global governance, with the capacity to mobilise political and economic resources to confront shared challenges. In Chapter 4, ‘Energising Sustainable Development: The G8’s Gleneagles Performance’, John Kirton examines the plans and preparations for Gleneagles, the positions of the G8 members, the six forces highlighted by the concert equality model that pushed and pulled them toward high performance and the historic success that came as a result. Kirton argues that Blair planned from the start to make history on

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the two highly ambitious global priorities of democratic development in Africa and climate change control. His summit succeeded to an exceptional degree, producing new highs in domestic political approval, deliberation, direction setting, and money mobilised, and performing well in decision making, delivery of its commitments, and the innovative development of G8-centred governance. This success was partly pushed from the outside by shared vulnerabilities to global forces and shocks such as terrorism, by the failures of the old multilateral organisations, and by the equalising capabilities of G8 members and participants. But it was primarily pushed from the inside, as Blair skilfully mobilised the G8’s common commitment to democratic principles as they applied to Africa, the vast summit experience of his G8 colleagues, the strong domestic political control he and his key partners had, and the carefully constructed participation of the ‘Plus Five’ (or ‘Outreach Five’) powers and African leaders from outside. His achievement served as a foundation and model for Russia’s solid performance in 2006 and the latter’s innovation in the civil society participation needed to make the G8 and all its members a genuine democratic success, and carried over to the German-hosted Heiligendamm Summit in 2007. In Chapter 5, ‘Blair, Brown, and Gleneagles: Making Poverty History or Confronting Unequal Development’, Anthony Payne presents an alternative perspective on Blair’s performance. He examines critically the political logic of Blair’s Gleneagles agenda, its aspirations and achievements, and the conceptual framework within which Tony Blair, Gordon Brown, and the MPH campaign all seemed to operate. Payne argues that the Gleneagles agenda could never have worked to ‘make poverty history’ because the global politics of development is no longer driven by what the ‘North’ is willing to do for the ‘South’. All 192 countries of the world operate amidst structural inequalities in relation to the material capabilities they bring, the dominant ideas that shape policy debates, and their influence over the major global institutions. In the resulting ‘global politics of unequal development’, the G8 has substantial dominance of global financial politics, but its members are rivals in some aspects of trade and very divided on climate change. The shortcomings of Gleneagles were thus to be expected, as powerful countries that gain hugely from unequal development would not voluntarily give up the short-term benefits this brings. Blair and Brown’s Gleneagles agenda and achievements were twisted and turned within these political constraints. In Chapter 6, ‘Russia and the G8: Matured Partnership’, Victoria Panova examines the contribution of Russia, made a new full member of the summit in 1998 and allowed in 2002 to host the summit in 2006. She shows that at Gleneagles, Russia performed as a normal member, bringing distinctive positions, a willingness to adjust to its partners, and critical capabilities in debt relief and energy to the summit club. Russia built on these strengths and on the Gleneagles agenda when it hosted in 2006 by assigning major importance to the energy and social dimensions of development. Russia also emphasised the political security agenda, where it looms large, while avoiding discussion of economic and financial matters where its economic position is less strong. Russia’s 2006 presidency led to sound initiatives in energy and social affairs that further contributed to securing sustainable development in the world.

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Part II, ‘Africa’, deals with differing models of development. It shifts attention beyond the wealthy G8 to the poorest continent in the world. Africa served as the central theme of the Gleneagles Summit and its surrounding civil society movement, and as the continent where the needs for and obstacles to financing development are most acute. In Chapter 7, ‘The G8 Africa Action Plan: How Much a Partnership?’ Princeton Lyman analyses the degree of partnership represented by the Africa Action Plan. He looks in turn at UN and G8 action in the ‘Year of Africa’ in 2005, the origins and early evolution of the plan, the involvement of Africans in the process, and the need to move beyond charity and ‘more aid’ into genuine partnership. He concludes that after the G8 Gleneagles and the UN summits, the future of the Africa Action Plan remains an open question. To steer it in the desired direction, a more genuine partnership needs to be created by having Africans report annually as part of the G8 process on how they are keeping the promises they made. In Chapter 8, ‘The Commission for Africa: Accomplishments and Unfinished Business’, Myles Wickstead takes stock of how Blair’s innovative CfA informed the debate and the decisions at the summits, during the critical moment just before the Gleneagles Summit started and then also in the second half of 2005, with the UN Summit and the resumption of WTO ministerial discussions in Hong Kong in December. He concludes that the commission produced a credible report, based on intensive consultations, and contained conclusions that were very well received. The report reflected Africa’s own development priorities, built on the commitments made at the 2002 Kananaskis Summit and later summits, and made clear, costed recommendations consistent with other reports and campaigns and forming a coherent package themselves. The unfinished business was to get the G8 to accept them and deliver on them by putting in place a robust, high-profile political mechanism to ensure the implementation of those recommendations. Swift progress could be made in Africa if the world’s leaders demonstrated the requisite political will to support the positive trends. In Chapter 9, ‘Africa and the G8: Political Aspects’, Ade Adefuye assesses the CfA report from the standpoint of Africa’s needs, examines the contribution to African develoment of the Commonwealth, la Francophonie, and the African Peer Review Mechanism (APRM), and considers the importance of conflict prevention, arms control, and corruption control. He argues that Africa is facing an immense crisis that could destroy more than one third of the continent’s adult population. Africans no longer tolerate despotic and undemocratic rulers. They understand the importance of education and development and are beginning to hold themselves accountable and responsible for peace, development, and stability. The leaders of the G8 must thus use their political power and financial resources to support and enhance the radical changes necessary to allow Africa to fulfil its potential and take its seat as an equal partner in world affairs. In Chapter 10, ‘African Finance and Lack of Development’, George von Furstenberg examines in detail the case of Tanzania. It is a country relatively untouched by war that had been widely hailed as ‘reformed’ by the early 1990s. Yet it

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turned in a disappointing growth performance that is hard to explain. While Tanzania has improved the soundness of its money and financial regulations and its growth has improved, financial and other forms of repression remain. The Tanzanian experience shows that aid programmes that try to bypass the national and local authorities in recipient countries do not encourage institutional development or strengthen the ethos and capabilities of public and civil service. In contrast, domestic private interests have been more successful at generating cumulative development in China, where the central government, for its own survival, has been keenly interested in promoting the rise of people’s living standards. In sub-Saharan Africa, as a rule, the incentive compatibility of good governance still has to be found before cumulative progress becomes possible. Part III, ‘The Instruments’, addresses aid, trade, and debt relief as the major traditional tools for delivering development finance. It looks in some detail at these key mechanisms that connect the G8 to Africa and that are vital for raising the financing and delivering the development that Africa and other poor countries need. In Chapter 11, ‘What Does International Aid Mean to the G8?’, Olivier Charnoz and Pierre Jacquet document the relationship between global sustainability at the world level and local development in southern countries, consider ODA as an instrument of global governance, highlight changes that have made it more effective in recent years, show that it remains a central tool, and review some possible tensions ahead. They argue that the ultimate goals of the international community should be set by the UN General Assembly (UNGA), as well as the Security Council (UNSC) in times of crisis. Within this framework, the G8’s role is to provide political leadership to launch new ideas, break longstanding blockages, and coordinate its own members’ domestic policies to bring them into greater international coherence. Development aid is likely to become a more structural G8 issue. As international civil society increases its expectation that the G8 will provide political momentum for development issues, the G8 will become an ever more important forum in designing the future of international aid as a central instrument for better managing the NorthSouth dimension of globalisation. In Chapter 12, ‘Doing Doha for Development: A Development Perspective’, Sheila Page asks whether a trade negotiation round can or should be a ‘development round’, looks at the trading interests and capacity of the developing countries, and examines the interest of developing countries in special and differential treatment (SDT). Page concludes that while countries determine their own development paths, trade can contribute. Learning to identify and to achieve their own trading objectives is one of the ways in which countries develop. Developed countries can help by ensuring that the trade regime is inclusive and flexible enough to accommodate countries with very different levels of development and approaches to policy. They can also liberalise their own trade. At a time when preferences and SDT tools that have been useful in the past are now being weakened, they can help developing countries discover and use alternative approaches, and give them the flexibility to search for these. Financially, they can help meet any costs imposed on developing countries previously favoured by the trading system, even when the trade benefits

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are more likely to go to other developing countries as preferences are eroded and trade is ‘undistorted’ back to the more efficient developing countries. In Chapter 13, ‘Asymmetry in the Post-Doha Trading System’, Sylvia Ostry addresses the basic structural aspects of the global trade system. She looks particularly at the WTO, the institutional home of global trade, as it relates to the poorest countries, especially sub-Saharan Africa, and at the unintended consequences of the Uruguay Round of trade negotiations. She highlights the asymmetry that is the fundamental feature of the trading system created by the Uruguay Round. She offers policy options that, while not part of the Doha Development Agenda, could be considered by the G8 and proposed as part of a final package. In Chapter 14, ‘Financing Development: A U.S. Perspective’, Robert Fauver explores why there has not been a sustained period of rising income and improved living standards in developing countries in Africa or even a thorough debate on what works and does not work to secure real development. He suggests that focussing solely on the dollar amount of development assistance is a serious mistake. He evaluates the strengths of the Bush administration’s 2002 Millennium Challenge Account (MCA), which focusses not only on aid, but also on trade and debt. Fauver concludes that a development strategy that works in partnership with developing countries has the potential to improve the fate of rich and poor partners alike. In Chapter 15, ‘Global Development and the Dollar: A Conflict to Be Solved’, Paolo Savona addresses the broader global economic environment in which financing development unfolds. He notes the present collision between two economic models — the U.S. locomotive and emerging economy autopoietic growth. The first, based on the international use of the U.S. dollar, requires exogenous pushes coming permanently from the U.S. foreign and federal budget deficits. The second, based on growing domestic demand in emerging economies, is fed by FDI induced by liberalisation and integration. The structural weakness of the U.S. dollar creates problems for the emerging economies model, creating a risk of a global currency crisis and a fall in the global growth rate. A U.S. dollar reflecting American policy choices harms the economies of the rest of the world, especially those where growth is led by exports. It is not possible to ask the market to manage the potential policy effects of the conflict between the two different models. That is a job for the G8. In Chapter 16, ‘Controlling Climate Change Beyond Kyoto: The American Contribution’, Frank Loy takes up three issues: the fact that the U.S. does not have a meaningful regime for reducing domestic greenhouse gas emissions, the important developments at the state level rather than federal level, and how the U.S. can be brought into an effective international regime. Loy concludes that the U.S. can be brought in by negotiating a two-step progress that will ensure the participation of developing countries and an equitable sharing of the international effort. Requiring countries to take on some quantified commitment is crucial in order to move forward on the UN Framework Convention on Climate Change (UNFCCC). An effective regime can be developed by starting negotiations with a small group of countries with more or less similar economies in order to produce a simple set of rules. These can then be reinforced by institutions and compliance procedures.

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Conclusions Taken together, these analyses offer virtual unanimity on a few fundamental points, considerable consensus on several others, and much disagreement as a foundation for policy debate, innovation, and further scholarly research. The Unanimous Premises The virtual unanimity resides in the conviction that the G8 matters, must work more closely with others, and must itself work better. First, almost all contributors agree that the G8 is a consequential, essential, and central actor in financing development. None argues that the UN system has done, will do, or can do the job by itself. To be sure, there is a role for all of the possible alternatives to the G8 — the UN and multilateral system, a superpower America, networks of nongovernmental organisations (NGOs), philanthropists and other empowered individuals engaged in celebrity diplomacy, multinational corporations (MNCs), microfinance entrepreneurs, or family members sending remittances through the market back home. But the G8 stands as an essential actor among them, in a prominent and even central place. Almost no one argues that the G8 should give up on the effort to finance development and leave it to others. Indeed, virtually all authors have considerable hope in the potential of the G8 to contribute to the cause and even find the solution to a challenge that can be solved. A 21st-century faith in the possibility of, and even prospects for, development and Africa, and in the G8’s capacity to contribute pervades this work. A second shared conviction is that an improved partnership among the G8 and other consequential actors is needed. The G8 itself has discovered and acted on the increasing need for partnership with the UN and multilateral system, the leading developing countries of Africa and the emerging world, and civil society of an ever broader scope. Gleneagles marked a major step forward in this regard. And the record of that summit and its predecessors in the redesigned G8 summit since 1998 shows that carefully constructed, more inclusive outside participation helps rather than hinders summit success. A third consensus is that there is much work still to do in improving G8 performance, inside the institution itself and in its relationship with its growing array of partners, to make the shared task of financing development a success in the field. Even though the G8 since 1998 has been improving — and Gleneagles added notably to that trend — there are many challenges still outstanding that the G8 can reasonably be expected to meet. Indeed, virtually all the contributors suggest new directions and often concrete policy proposals of how this can best be done. The Consensus Convictions There is considerable consensus, as well as some rich contestation, about how well the G8 and Gleneagles did, how its performance can best be assessed, and what its

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role in financing development is and will be in the years ahead. Most agree that the recent G8 summits including Gleneagles were successful, but also contained failures as a multidimensional global governance institution that must do better in implementing the bold principles, processes, and promises it pioneers. Most authors, led by Kirton, Bayne, and Donnelly, declare Gleneagles to be a success. Indeed, Kirton sees it as the most successful summit ever and Bayne concludes that it could become the most successful since Bonn 1978 if its commitments are implemented over the long term. Lyman agrees in respect to the relationship between Africa and the G8. But Payne acknowledges its contribution only in the field of finance. And Fauver considers the emphasis of Gleneagles and the preparatory CfA on raising more money for ODA as a major, undesirable departure from the new consensus on shared responsibility reached at the UN’s International Conference on Financing for Development in Monterrey in 2002. Many contributors also assert that Gleneagles made a desirable difference on climate change by creating principles and a process that brought the U.S. and major developing countries into a ‘beyond Kyoto’ carbon control regime. Most see Blair as a skilled practitioner of G8 summit diplomacy in many different ways. Among his many innovations, the CfA meets with the approval of Wickstead, Lyman, Adefuye, and Charnoz and Jacquet. Blair’s outreach to African partners and the Plus Five and to civil society organisations and global mass public are generally applauded as well. There is also much consensus over where the G8 and its Gleneagles instalment has failed or where it could fail in the future, in regard to implementing its often ambitious agreements, in part by putting in place the processes that will turn brave declarations at the summit into effective action on the ground. There is also widespread doubt that the Gleneagles G8 did as much as it could or should have in the field of trade. This is an area where the G8 has always governed in the past, and always helped launch and conclude multilateral trade negotiation rounds. It is one where the broader agenda and new objective of the Doha Development Agenda requires G8 leadership to succeed. Moreover, in a world beset by the economic imbalances and competing models highlighted by Savona, no authors claim that the G8 at Gleneagles managed the global economy with the vision and skill that are needed and that the G8 has displayed in the past. A third consensus exists on how G8 performance should be assessed, and thus on the proper role of the G8 in a world crowded by several cooperating and competing global governance institutions. While each contributor offers a different list and emphasis, there is considerable overlap and convergence on what elements of performance are key. For Bayne there are now four clear criteria: political leadership to launch new ideas and overcome bureaucratic blockages, the reconciliation of the international and domestic pressures generated by globalisation, collective management, and the integration of economic and political programmes. For Kirton there are six: domestic political management, deliberation, direction setting, decision making, delivery, and the development of G8-centred global governance. Most others’ views of the proper role of the G8 coincides with these lists. Charnoz and Jacquet endorse Bayne’s view that the UN should set the objectives of the global

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community, while the G8 helps to deliver them. However, they also call for G8 leadership on aid and suggest that the G8 should set more flexible development goals than the often unrealistic MDGs, by acting in a way that the bureaucratic UN cannot. While Kirton notes that the G8 can be a great global fundraiser, as shown by the US$205 billion in new money mobilised by Gleneagles, his broad array of performance dimensions is consistent with Fauver’s caution that there is much more to G8 governance than the amount of new money raised. Moreover, Bayne, Kirton, Donnelly, Lyman, and Adefuye share the view with others that the delivery or implementation of collective decisional commitments is central, and that stronger G8-centred governance processes must be put in place to get this done. While multilateral organisations play an important role, as Charnoz and Jacquet argue, no one thinks that they can be left alone to execute the G8’s will. Thus Bayne and Donnelly argue that implementation of the commitments made at Gleneagles is critical and remains in doubt, so it remains difficult to judge the success of Gleneagles. Kirton provides evidence that a year after the Gleneagles Summit, considerable compliance with the priority commitments had been made. Donnelly shows how the British host created new instruments to improve implementation. Most agree that more are needed, especially to strengthen a real partnership between the G8 and its democratic African friends. The Outstanding Uncertainties Beyond this consensus lies a much larger realm of uncertainty and disagreement. It dominates on the critical questions of what the future role of the G8 will be in financing development, why G8 summits succeed or fail, why Africa has not developed, what instruments are most important in financing development, who is responsible for past failure and future success, and what the G8 and others should do in the years ahead. The first disagreement arises over the future role of the G8. Charnoz and Jacquet see a growing role for the G8 in the field of aid. Most share this optimistic assessment in regard to financing development as a whole, as seen in the large number of proposals for the G8 to pursue in the future. Yet Bayne cautions that the high achievements of Gleneagles could be squandered, and Panova points to how the G8 could easily turn its attention to other priority issues in the years ahead. The second disagreement arises over the question of why G8 summits in general, and Gleneagles in particular, succeed or fail. Here the generally favourable view of Blair’s leadership, the CfA process and the Africa Action Plan behind it, and the outreach to other government leaders, civil society, and mass publics often comes with limited analysis or evidence to show how these factors produced summit success. The most comprehensive general explanation of G8 summit performance comes from Kirton’s concert equality model, which offers the six key causes of shared G8 and global vulnerability, UN system failure, and the G8’s equalising capabilities, common principles, political control, and constricted participation. To account for the success of Gleneagles, Kirton has extended his model to account for

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the performance-enhancing effect of outside participation, civil society involvement, mass public awareness, and the skilful strategy of an experienced host. Bayne (2005) emphasises the importance of iteration and continuity, consistent with his collective management model. While he disputes Kirton’s claim that the electoral strength of G8 leaders generates summit success, he shares Kirton’s new view that G8 leaders are importantly in charge of their own fate. In contrast, Payne, echoing the group hegemony model of Alison Bailin (2005), points to the self-interest of the G8 and the inherited structural inequality in the global politics of unequal development as severely limiting the success of both the G8 and the Gleneagles Summit. This unresolved issue of how the agency of G8 leaders confronts, overcomes, or is constrained by the structure of an inherited, institutionalised, and international system unequal in many ways is a central issue for the next generation of G8 research (Kirton 2006). The third disagreement goes beyond the G8 to deal with that global system as a whole. It arises over the closely connected questions of why Africa has not developed, what is now needed, and whether the model employed by the G8 is basically right. Most authors endorse, with various degrees of directness, the analysis and approach largely shared by the Africa Action Plan, the CfA, and the Gleneagles G8. Fauver does note that the latter two focussed unduly on new ODA, rather than on the genuine partnership emphasised by the UN’s International Conference on Financing for Development and the Africa Action Plan. But no contributor calls for an approach narrowly focussed on immediately spending massive amounts of new ODA, as endorsed by the report of the UN Millennium Project (2005). Wickstead underscores the need to proceed with the CfA’s fully integrated and comprehensive package. Adefuye endorses this call. Yet both the report and the Africa Action Plan necessarily had to set priorities and a sequence of what to finance first. The latter did so by calling in turn for peace and security, good governance, repatriation of capital, and private sector investment including FDI, and only then moving to trade, debt relief, and aid. This seven-step sequence was not fully followed by the Gleneagles G8, and is contested in places by the contributors here. The authors are faithful to the 2002 formula in underscoring the preconditions required if financing development through the instruments of trade, debt relief, and aid is to work. All agree that good governance in developing countries comes first. The call to combat corruption comes from Wickstead, Adefuye, von Furstenberg, and others. Von Furstenberg notes that developing public institutions and the ideals of public service are key. Adefuye and Kirton put democracy on the list. Adefuye and Wickstead affirm the importance of peace and security, through conflict prevention and arms control. Beyond these political preconditions, the divergence grows. Von Furstenberg notes the importance of stopping capital flight from Africa. Adefuye adds stopping the flight of human capital — such as the out-migration of medical and educational professionals. Wickstead notes the need for physical infrastructure in Africa. Charnoz and Jacquet add financial stability and environmental sustainability. No one includes gender equality, as the Africa Action Plan did.

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There is a similarly large debate over the three central financing instruments highlighted at Gleneagles — debt relief, aid, and trade. Most authors accept debt relief as the major achievement of Gleneagles and its value in financing development, even if Fauver and von Furstenberg show its limits. The debate on aid is much larger. Wickstead is the greatest believer in ODA, noting the value of the never-ending international plea for donors to commit 0.7 percent of gross national income (GNI) in ODA, and of the goal of having annual ODA to Africa raised to US$75 billion by 2015. Yet most others are doubtful. Charnoz and Jacquet show that ODA has already been rising steadily since 1996, in part because of the actions of the G8. Kirton endorses the Gleneagles G8’s refusal to endorse either the 0.7 percent pledge or the full-blown International Finance Facility (IFF) proposed by the British. Lyman, Charnoz and Jacquet, Fauver, and von Furstenberg all underscore the serious problems of absorptive capacity and aid dependence brought by massive infusions of more ODA. Fauver notes that ODA leads to accounting gimmicks and Lyman points out that it usually comes as charity in emergency relief rather than in the long-term assured forms that genuine partnership demands. Fauver notes that much more plentiful and valuable are the financial flows coming from access to markets, private remittances, direct investment, emergency humanitarian relief, and private charitable donations. The debate over trade is more limited but still real. Lyman, Fauver, and others emphasise that trade liberalisation is key and that there is a need for G8 action to get it done. But Ostry and Page note that it by no means guarantees development and is at best only a partial step. As Ostry and Wickstead highlight, even if developing countries had free access to G8 markets, for agriculture and other products and services, they would still encounter an institutionalised trade system, centred in the WTO — which is deeply asymmetrical and presents powerful new barriers in the complexity, legalisation, and standards it contains. While Page notes the growing capacity of developing countries to identify and assert their interests in detail in trade negotiations, the need for greater trade capacity remains, especially as the old formula of SDT may no longer be adequate. Who, then, is primarily responsible for taking the steps required to make these instruments for financing development more effective and to reach the MDGs? Most authors acknowledge that development begins at home, and that African and other developing countries are thus the actors that matter the most. Adefuye asserts that they know this and are committed to democracy and peer review as the foundations on which to proceed. But Lyman notes that the G8 and its members are still dealing with them largely as the objects of charity and that the genuine partnership called for at Monterrey and Kananaksis in 2002 has still to be forged.

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Proposals for Progress Proposals for Action and Reform The many shortcomings identified in these analyses give rise to a plethora of proposals for policy action by the G8, the UN, their major member governments, and civil society at large. The first and largest set is directed at the G8. Many contributors call for a major move toward genuine G8-African partnership by having both sides of the development bargain review their record in keeping the promises they have made to each other and to themselves. Wickstead wants a robust, high-profile permanent mechanism to monitor compliance with the CfA’s and the G8’s Africa commitments, perhaps along the lines of the two ‘wise men’ (one from the G8 and one from Africa) unsuccessfully proposed by Britain as Gleneagles approached. Lyman calls for an annual report to be issued by both the G8 and the Africans on the Africa Partnership Forum (APF) as part of the preparations for the summit. Adefuye proposes a G8 Africa forum as a permanent, prominent part of the G8 summit itself, to review implementation at a high level. Here the Africans would report annually to the G8 through the NEPAD or the African Union (AU). Yet whatever the particular formula, all agree that much more systematic and comprehensive monitoring is required than that done fitfully in the past. Another set of recommendations for G8 action is more ambitious and outward looking. Adefuye argues that the G8 should use its influence with key international organisations to ensure that they have a coherent African strategy. Charnoz and Jacquet want the G8 to create more flexible mechanisms than the MDGs to set development objectives, in a world where the UN cannot. Ostry calls for the G8 to reduce the asymmetrical legacy of the Uruguay Round by creating within the WTO a policy forum supported by a significant research staff to serve as the hub of a knowledge network to support developing countries, identify how trade can support development, and assess the continuing value of SDT. Loy asks the G8 to pioneer a climate agreement beyond Kyoto that does not mirror Kyoto, includes the major developing countries, and starts with a few committed but critical countries rather than the full membership of the UN. Most ambitiously, Savona proposes that the G8 integrate the two competing models for global growth in order to bring the rising powers of China and Asia into the system in a way that is non-disruptive and supports development. A second set of recommendations is aimed at the UN and multilateral system as a whole. Adefuye and Ostry call for it to promote greater institutional coherence among its separated and competing components by mounting a specific project for Africa that would ensure that all agree on and work to the same end. Others call on the UN system and its dominant national governments to set aside internalised but ineffective approaches from the past. In regard to trade policy, Page recommends an inclusive and flexible approach to the Doha Development Agenda, trade liberalisation in the North, and supplementing the SDT of old by offering direct financial support.

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In regard to development, von Furstenberg recommends promoting an ethos of public service in developing countries as the key goal. A final set of proposals is aimed at civil society. Lyman asks that they show the Kananaskis spirit of partnership by putting Africans themselves visibly and equally on stage and in the leadership of civil society movements that demand that more for Africa be done. And von Furstenberg asks that civil society groups not ask governments and international organisations to bypass national governments in Africa in favour of direct action, for such a temptation — often born of frustration in the field — will erode the local state institutions essential for delivering development in the long run. Priorities for Analytical Advance The analyses and policy proposals in this book point to two clear directions for further research. The first concerns implementation, which most agree is the key challenge for the post-Gleneagles G8. Here one task is to explain what causes compliance with G8 commitments — the first step on the implementation journey that leads to removing the roadblocks to financing and enables the destination of the MDGs and genuine development to be reached. Amidst the many potential causes of compliance across all levels of analysis, a premium should be placed on what G8 leaders themselves can do at their summit to improve the chances of their deliberations, directions, and decisions being reliably converted into real action in the field. Given the attention given in this book to targets and timetables, money mobilised, and G8-created follow-up mechanisms, there is a need to see if more of these presumed ‘compliance catalysts’ embedded by the leaders in their commitments actually produce the improved compliance they want. A second research agenda concerns the role and relationship of international organisations, both in improving the implementation of G8 commitments and in more broadly financing and fostering development and strengthening global governance as a whole. The dominant view that an informal, self-selected, rich, upper class G8 should merely deliver whatever world’s goals are as decided by the legal, legitimate, universal UN is contradicted by the record of what global governance systems actually do and by the demands that the G8 revise and replace the objectives, in the form of the MDGs, set by the UN. The great failure of the WTO to deliver its Doha Development Agenda long after its own declared completion date of 2005 cannot plausibly be entirely or primarily attributed to the failure of the G8 to provide enough political will or money or willingness to adjust on the part of its member states. Yet, in the past, the G8 has helped launch and successfully conclude such trade negotiation rounds, and is being called on to cope with the Doha Development Agenda failure so that the causes of trade liberalisation for growth and development can be served.

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References Abrahamsen, Rita (2004). ‘The Power of Partnerships in Global Governance’. Third World Quarterly, vol. 25, no. 8, pp. 1453–1467. Adefuye, Ade (2006). ‘The Commonwealth and Millennium Development Goals in Africa’. Round Table, vol. 95, no. 385, pp. 387–397. Akopari, John (2004). ‘The AU, NEPAD, and the Promotion of Good Governance in Africa’. Nordic Journal of African Studies, vol. 13, no. 3, pp. 24–26. Bailin, Alison (2005). From Traditional to Group Hegemony: The G7, the Liberal Economic Order, and the Core-Periphery Gap (Aldershot: Ashgate). Bayne, Nicholas (2005). Staying Together: The G8 Summit Confronts the 21st Century (Aldershot: Ashgate). Birdsall, Nancy, Dani Rodrik, and Arvind Subramanian (2005). ‘How to Help Poor Countries’. Foreign Affairs no. 84, pp. 136–152. Black, David (2005). ‘From Kananaskis to Gleneagles: Assessing Canadian “Leadership” on Africa’. Behind the Headlines, vol. 62 (May), pp. 1–17. Burnside, Craig and David Dollar (2000). ‘Aid, Policies, and Growth’. American Economic Review, vol. 90, no. 4, pp. 847–868. Busumtwi-Sam, James (2006). ‘Architects of Peace: The African Union and NEPAD’. Georgetown Journal of International Affairs, vol. 7, no. 1, pp. 71–82. Calderisi, Robert (2006). The Trouble with Africa: Why Foreign Aid Isn’t Working (New York: Palgrave Macmillan). Clarke, Michael (2005). ‘A Good Diplomatic and Development Opportunity for the UK: The G8, the EU, and a New Start for Africa’. Conflict, Security, and Development, vol. 5, no. 1, pp. 119–126. Clemens, Michael, Steven Radelet, and Rikhil Bhavnani (2004). ‘Counting Chickens When They Hatch: The Short-Term Effect of Aid on Growth’. Working Paper 44, Center for Global Development, Washington DC. (June 2007). Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007). Commission for Africa (2006). Our Common Interest: An Argument (London: Penguin). De Waal, Alex (2002). ‘What’s New in the “New Partnership for Africa’s Development”?’ International Affairs, vol. 78, no. 3, pp. 463–476. Dixon, Rob and Paul Williams (2001). ‘Tough on Debt, Tough of the Causes of Debt? New Labour’s Third Way Foreign Policy’. British Journal of Politics and International Relations, vol. 3, no. 2, pp. 150–172. Easterly, William (2002). The Elusive Quest for Growth (Cambridge MA: MIT Press). Easterly, William (2003). ‘Can Foreign Aid Buy Growth?’ Journal of Economic Perspectives, vol. 17, no. 3, pp. 23–48. Easterly, William (2006). The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good (New York: Penguin). Easterly, William, Ross Levine, and David Roodman (2003). ‘New Data, New Doubts: Revisiting “Aid, Policies and Growth”’. Working Paper No. 26. Center for Global Development, Washington DC. (June 2007). Fratianni, Michele, Paolo Savona, and John J. Kirton, eds. (2005). New Perspectives on Global Governance: Why America Needs the G8 (Aldershot: Ashgate).

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Helleiner, Eric and Geoffrey Cameron (2006). ‘Another World Order? The Bush Administration and HIPC Debt Cancellation’. New Political Economy, vol. 11, no. 1, pp. 125–140. Hodges, Michael R., John J. Kirton, and Joseph P. Daniels, eds. (1999). The G8’s Role in the New Millennium (Aldershot: Ashgate). Hope, Kempe Ronald (2002). ‘From Crisis to Renewal: Towards a Successful Implementation of the New Partnership for Africa’s Development’. African Affairs, vol. 101, pp. 387–402. Kirton, John J. (2006). ‘Explaining Compliance with G8 Finance Commitments: Agency, Institutionalization, and Structure’. Open Economies Review, vol. 17, no. 4, pp. 459–475. Kokotsis, Eleanore (1999). Keeping International Commitments: Compliance, Credibility, and the G7, 1988–1995 (New York: Garland). Landsberg, Chris (2005). ‘Toward a Development Foreign Policy? Challenges for South Africa’s Diplomacy in the Second Decade of Liberation’. Social Research, vol. 72, no. 3, pp. 723–758. Landsberg, Chris and David Kalete (2005). ‘The Africa Commission: A Critical Assessment’. Paper commissioned by the Nelson Mandela Foundation, Civicus. (June 2007). Lewis, Stephen (2005). Race against Time: Searching for Hope in AIDS-Ravaged Africa (Toronto: House of Anansi). Manby, Bronwen (2004). ‘The African Union, NEPAD, and Human Rights: The Missing Agenda’. Human Rights Quarterly, vol. 26, no. 4, pp. 983–1028. Matthews, Sally (2004). ‘Investigating NEPAD’s Development Assumptions’. Review of African Political Economy, vol. 31, no. 101, pp. 497–511. Maxwell, Simon and Karin Christiansen (2002). ‘“Negotiation as Simultaneous Equation”: Building a New Partnership with Africa’. International Affairs, vol. 78, no. 3, pp. 477–491. Mayhew, Susannah, James Tibenderana, and Andy Haines (2005). ‘Commission for Africa: Can It Make a Difference to Health?’ Lancet, vol. 365, no. 9465, pp. 1122–1124. Mbiba, Beacon (2006). ‘Untold Stories: The Commission for Africa and Zimbabwe’. Round Table, vol. 95, no. 384, pp. 201–218. Melber, Henning (2002). ‘The New Partnership for Africa’s Development: Old Wine in New Bottles’. NUPI Forum for Development Studies, vol. 1. Mistry, Percy (2005). ‘Reasons for Sub-Saharan Africa’s Development Deficit that the Commission for Africa Did Not Consider’. African Affairs, vol. 104, no. 417, pp. 665–678. Moss, Todd (2006). ‘The G8’s Multilateral Debt Relief Initiative and Poverty Reduction in Sub-Saharan Africa’. African Affairs, vol. 105, no. 419, pp. 285–293. Putnam, Robert and Nicholas Bayne (1987). Hanging Together: Co-operation and Conflict in the Seven-Power Summit 2nd ed., (London: Sage Publications). Ramsbotham, Alex, Alhaji Bah, and Fanny Calder (2005). ‘Enhancing African Peace and Security Capacity: A Useful Role for the UK and the G8?’ International Affairs, vol. 81, no. 2, pp. 325–339. Sachs, Jeffrey (2005). The End of Poverty: Economic Possibilities for Our Time (New York: Penguin). Taylor, Ian (2005). ‘“Advice Is Judged by Results, Not Intentions”: Why Gordon Brown Is Wrong about Africa’. International Affairs, vol. 81, no. 2, pp. 299–310. Taylor, Ian (2006). ‘Challenges Facing the Commonwealth and the Millennium Development Goals in Africa’. Round Table, vol. 95, no. 385, pp. 365–382.

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United Nations Millennium Project (2005). ‘Investing in Development: A Practical Plan to Achieve the Millennium Development Goals’. United Nations Development Programme, New York. (June 2007). Wickstead, Myles (2006). ‘The Millennium Development Goals and Africa: A Response to Ian Taylor’. Round Table, vol. 95, no. 395, pp. 383–386.

PART II The Gleneagles G8 Summit

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Chapter 2

Has the G8 Summit Met Its Objectives? The Answers from Gleneagles Nicholas Bayne

Gleneagles was the second G8 summit to be held in the United Kingdom and chaired by British prime minister Tony Blair. At the time of Blair’s first summit, held at Birmingham in May 1998, the G7 process was under severe strain. The G7 leaders had found a wealth of new tasks for the summit, with the end of the Cold War and the advance of globalisation. But the agenda had become so overloaded and the procedures so bureaucratic that the system was close to collapse. In recognition of this, at Birmingham Blair introduced radical reforms to the summit format. These reforms were to allow full membership for Russia, making G7 into G8, to have the heads of government meet on their own, without supporting ministers, and to draw up a simple agenda of a few topics only, with shorter documents. The new format became standard practice for subsequent G8 summits, although later the documents grew longer again. The changes were intended to enable the summit to meet its original objectives better. These objectives remained valid: political leadership, to launch new ideas and overcome bureaucratic blockages; collective management of the international system by Europe, North America, and Japan; and reconciling the international and domestic pressures generated by globalisation. This chapter examines whether the 2005 Gleneagles Summit was successful in meeting these objectives, comparing Gleneagles with the performance of the other summits since Birmingham.1 It concludes that the G8 summits, thanks to their simpler format, did better at political leadership — launching initiatives and striking deals among the heads themselves. Gleneagles was successful in meeting this objective, since it made important commitments on Africa and reached ambitious agreements on climate change. The G8 summits preserved the spirit of collective management, despite the divisions over Iraq, and modified it in the light of greater outreach to nonG8 countries. At Gleneagles the solidarity of the G8 members was strikingly displayed when they closed ranks behind Blair after the London terrorist attacks. The outreach meetings at Gleneagles, with heads from five major developing countries and with seven African leaders, were unusually purposeful. Since Birmingham the G8 also identified a wholly new objective of integrating economic and political programmes. This was pursued at Gleneagles in the discussions on Africa and the Middle East. But the G8 summits from Birmingham 1998 to Sea Island 2004 were not so successful in reconciling international and domestic pressures. The evidence of this was failed initiatives and unfulfilled commitments. The Gleneagles agenda of Africa

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and climate change obliged the G8 to confront these failings and challenged it to do better. In the event, the electoral weakness of half the G8 governments did not prevent agreement at Gleneagles and might even have been helpful. The practice of iteration — returning to issues in successive years — provided the best prospect of overcoming domestic obstacles. Gleneagles successfully applied this technique to its two main themes. The summit restored momentum to the G8’s Africa programme with a series of important commitments, although it did not build in a clear structure for following up these decisions at later summits. By contrast, the agreements on climate change, a new subject for the G8, provided a clear iterative path providing for treatment in coming years. Gleneagles did more than any previous G8 summit to reconcile international and domestic pressures. But the precautions taken at the summit could not guarantee full implementation. There was no serious backsliding during the first Russian G8 presidency in 2006, except perhaps on trade, but not much forward movement either. Chancellor Angela Merkel and the German presidency had to work hard to restore momentum in 2007. The level of implementation is still far from satisfactory. Even so, Gleneagles can be regarded as the most successful summit since the 1970s.

Meeting the Objectives I: Successes Political Leadership The summit’s first objective was political leadership, to come up with new ideas and reach agreements not available at lower levels. Here the G8 summits since Birmingham improved on the earlier record. The summits were highly innovative, launching new initiatives, for example, in financial architecture, information technology (IT) for development, infectious diseases, help for Africa, nonproliferation of weapons of mass destruction (WMD), and a collective approach to the broader Middle East region. The summits were also active in striking deals. Substantive agreements always built on the earlier preparatory work, but could only be concluded by the intervention of the heads themselves, such as on debt relief, Kosovo, aid resources for Africa, and Middle East reform. At Kananaskis 2002 the heads even struck a linked cross-issue deal, when the United States endorsed a US$1 billion replenishment of World Bank funds for debt relief in return for agreement by the others to subscribe US$10 billion over ten years to cleaning up nuclear installations and chemical weapons in Russia — the Global Partnership against the Spread of Weapons and Materials of Mass Destruction. In addition, the heads reached some procedural agreements without advance preparation, notably on the principle of helping Africa at Genoa 2001, and on Russia’s hosting the summit at Kananaskis 2002. Gleneagles matched the performance of earlier summits against this objective, relying on thorough preparation. Climate change was an innovative subject for the G8, because earlier exchanges had been frustrated by disagreement between the U.S. and the others over the merits of the Kyoto protocol. Blair took the risk of

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seeking a new basis for agreement on three elements: the scientific basis for urgent action to reduce greenhouse gas emissions, programmes of technological cooperation, and a new dialogue involving major developing countries such as China and India. Progress was made on the latter two elements as the preparations advanced. But the U.S. resisted movement on the first, to the point where France threatened to provoke an open breach at the summit. Consensus was only reached at the sherpa level a few days before Gleneagles and needed to be confirmed at the summit itself. Africa was less innovative, as Gleneagles was intended to accelerate and enrich work begun at Kananaskis in 2002 rather than introduce new elements. But the approach of the summit induced the G8 finance ministers to conclude a new agreement giving 100 percent relief on debt owed by poor countries to international institutions such as the International Monetary Fund (IMF) and the World Bank. This was the first major improvement in the terms of debt relief agreed to by the G8 since Cologne 1999. At Gleneagles the heads made an impressive joint commitment to double aid to Africa by 2010, amounting to an extra US$25 billion per year, as part of an increase of total aid by US$50 billion per year on the same timetable. This built on undertakings made by the European Union and its members earlier in the year to move to the United Nations aid target of 0.7 percent of gross national income (GNI) by stages (see Beattie and Dombey 2005). The Gleneagles commitment to US$25 billion for Africa and US$50 billion in total was completed at or shortly before the summit itself by U.S. president George W. Bush, Japanese prime minister Junichiro Koizumi, and German chancellor Gerhard Schroeder.2 These decisions could only be taken at the level of head of government. Collective Management The G8 summit also performed well against its second objective of collective management. The key test here was whether the summit initiative was coming from all members rather than a single source such as the United States or the European Union. The first four G8 summits since Birmingham showed a wide dispersion, with different countries in the lead in different subjects. The U.S. led on financial architecture, but the UK, France, and Canada were the leaders on debt relief. On Kosovo, the U.S. led on security aspects, the Europeans on economic support. The pattern of initiative changed, however, from Kananaskis 2002 onward, following the terrorist attacks of September 11, 2001. From now on the Americans always led on terrorism and nonproliferation issues, although they wanted to associate their G8 colleagues with the measures taken. But on other subjects, notably Africa and other development issues, the Americans were rarely in the lead, even though they were active participants. The American unilateralism that proved so divisive over Iraq thus did not derail the practice of collective leadership at the summit. However, the antagonism between George Bush on one side and Jacques Chirac, Gerhard Schroeder, and Vladimir Putin on the other was so strong in the run-up to Evian in 2003 that the prime purpose of the summit became to reach a reconciliation among them. Evian

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was successful in achieving a truce but could not go further in concluding major new agreements; tension persisted right up to the Sea Island Summit of 2004. This was more productive, especially in launching a far-reaching initiative on political and economic reform in the broader Middle East. But Chirac was still inclined to stress publicly his differences with Bush (see, for example, ‘A Bit of Gallic Grit: U.S. and France Inject Useful Tension into G8 Summitry’ 2004). The results achieved at Gleneagles suggested that collective management had regained all its earlier strength. Blair chose two topics — Africa and climate change — where the United States was not in the lead. The preparations proved arduous, but on both subjects the summit successfully reached agreements in which the Americans were fully engaged. The earlier differences over Middle East issues no longer affected the atmosphere, so that the G8 readily reached consensus on new moves to encourage the peace process between Israel and Palestine and a review of progress in Iraq. The terrorist attacks in London on 7 July, the first full day of the summit, produced some striking actions that symbolised the strength of solidarity among the G8 members, in which the non-G8 participants at Gleneagles also shared. The other G8 leaders insisted that Blair should leave Gleneagles and go to London, while they would continue work on the summit agenda with Michael Jay, the UK sherpa, in the chair.3 Before Blair left, he read out to the television cameras a joint statement condemning the bombings, with the other heads arranged behind him. Blair concluded the summit on 8 July with another statement, again backed by the assembled G8 and African leaders, in which he contrasted the G8’s positive achievements on Africa, climate change, and the Middle East peace process with the negativism of the terrorists. Collective management since 1998 was also tempered by the G8’s growing recognition that globalisation meant there were many more active players in the international system. Outreach to non-G8 countries enabled the summit to associate a much wider circle with its decision-making process and thus make it more transparent. This began with the African leaders associated with the New Partnership for Africa’s Development (NEPAD), who participated in every summit from Kananaskis 2002 through to Gleneagles 2005.4 A wider group of heads of government from developing countries was invited to Evian 2003, while regional leaders were associated with the launch of the broader Middle East initiative from Sea Island 2004. Gleneagles took the process of outreach several stages further. The five developing countries invited to the first day — Brazil, China, India, Mexico, and South Africa — were targeted as participants in the wider dialogue on climate change introduced by the summit (thereafter referred to as the ‘Plus Five’ or ‘Outreach Five’). The UK chair consulted them during the preparations for the summit, to make sure they were prepared to take part. The seven African heads of government present on the second day — from Algeria, Ethiopia, Ghana, Nigeria, Senegal, South Africa, and Tanzania — issued a joint statement with the G8 on Sudan.5 No other statements were issued from the outreach meetings. But the Gleneagles chair’s summary made it clear that the two groups of non-G8 leaders were associated with the G8 decisions on climate change and Africa generally.

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Integrating Politics and Economics A new summit objective — integrating political and economic programmes — was identified after the G7 became the G8. While earlier G7 summits had dealt with political as well as economic issues, they had normally kept them apart. But the presence of Russia, which had more to contribute politically than economically, encouraged a joint approach. The first topic that combined politics and economics was Kosovo at Cologne 1999. This demonstrated the value of having Russia at the table. The objective gained new salience after September 11, 2001, in the context of the fight against terrorism. The most ambitious integrated project was the sustained Africa programme, where peace, security, and improved governance were linked with economic development. The broader Middle East initiative similarly combined political and economic reforms, while many of the issues on the terrorism and nonproliferation agenda, such as transport security or the Global Partnership, used economic measures to achieve political ends. Gleneagles continued the explicit pursuit of this objective in its treatment of African and Middle Eastern issues. For example, the G8 renewed the earlier commitments to support peacekeeping and better governance in Africa, alongside the new agreements on debt relief and aid volume. The main decision on the Middle East peace process was to support the proposal by James Wolfensohn, the special representative of the Quartet (made up of the U.S., the EU, Russia, and the UN), for a US$3 billion aid programme for Palestine to encourage later political movement. In light of the successes of Gleneagles, it is worth drawing a contrast between it and the summits of 2006 and 2007. For St. Petersburg, the Russians proposed some new themes, highlighting energy and education. But few deals were struck at the summit, outreached marked time, and there was less integration of political and economic programmes. Putin provided little political leadership and even less collective management (‘Russia Triumphant: The G8 Summit’ 2006). Heiligendamm was much better. The Germans focussed on mainstream economic issues, although their innovative agenda suffered from being too long. Merkel showed political leadership in getting the summit to agree on a major advance on climate change, but there was less progress on Africa. Under collective management, the interaction between the G8 and the Outreach Five moved onto a more durable level. Yet the most important achievements at Heligendamm depended on the foundations laid at Gleneagles.

Meeting the Objectives II: Failures and Corrective Action Reconciling International and Domestic Pressures The G8 summits did much less well against the third original objective — reconciling the international and domestic tensions provoked by globalisation. The domestic issues raised at Birmingham and Cologne, such as employment, crime, and social protection, soon slipped off the agenda. The implementation of G8 commitments

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was uncertain. There were too many examples of the summit launching initiatives but then seeming to lose interest, for example in renewable energy and primary education. Even on debt relief and infectious diseases the early impetus was flagging by the time of Gleneagles. In some economic areas, such as the global environment, international trade, and parts of the Africa programme, the G8 leaders often failed to overcome domestic obstacles to progress — and sometimes had even been the obstacles themselves. The widespread perception that the G8 summit did not always keep its promises undermined its public reputation. Blair’s choice of Africa and climate change as the principal themes for Gleneagles laid down a direct challenge to the G8 to confront this weakness and refresh the summit’s capacity to deal with sensitive domestic issues. The summit could only restore momentum to its Africa programme by overcoming the domestic obstacles in G8 countries to forgiving debt, greatly increasing aid levels and improving market access. Likewise, progress on climate change required a major shift in the response to domestic pressures, principally by the Americans, so as to produce a common position at the summit after so many years of disagreement. Before examining the results achieved at Gleneagles, it is worth looking at two broader indicators of the prospects for getting better results under this summit objective. Reconciling international and domestic pressures goes beyond the limits of government. It also depends on the standing and the authority of each of the G8 heads in each country’s political system. The first indicator therefore analyses the domestic political standing of the leaders taking part in the summit, to consider how this affects the prospects for durable agreements. It assesses the impact of the electoral timetable and the length of time the leaders have been in office. The second indicator can be found in the summit’s use of iteration — deliberately bringing issues back to the summit to get better results. This proves to be the most effective technique developed by the summit for reconciling domestic and international pressures. In seeking evidence of these indicators at work, it is necessary to go back over the whole three-decade history of the summit, to include periods when the G7 heads were more effective in meeting this summit objective than their G8 successors. First Indicator: Electoral Considerations The personal interaction among heads at the summit has always relied on mutual confidence. Other heads would not place much confidence in colleagues they did not expect to endure in their posts.6 This might suggest that the chances of agreement were highest where there had been strong continuity among the heads. On that criterion, the prospects for Gleneagles should have been good, since almost all the heads would be meeting for at least their fifth summit — Paul Martin of Canada and José Manuel Barroso of the European Commission were the only newcomers since 2001. But while the heads might know each other well, this could easily lead them not to expect very much or to take each other for granted. The historical comparison was not encouraging. The last time there was such continuity among the heads was

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in the mid 1980s, under Ronald Reagan, Helmut Kohl, François Mitterrand, and Margaret Thatcher — when the summit went through its least productive period. A more potent factor seemed to be that heads were most active and innovative in summitry soon after they were first elected. Then they would settle down to more cautious approaches, as the constraints of office closed in on them, becoming least adventurous when they were facing new elections. But if they were successfully re-elected, they became innovative again. Blair and Schroeder were highly innovative summit hosts at Birmingham and Cologne, just after they took office; so was the reelected Bill Clinton at Denver in 1997. Even the Reagan administration became innovative in the G7 in the president’s second term, although all the new ideas came from James Baker as treasury secretary rather than Ronald Reagan himself. On this analysis both Blair and Bush would be encouraged to be active and ambitious at Gleneagles by their successful re-election in the months leading up to the summit. There were also drawbacks from length in office. Heads might have outstayed their welcome with their electorates and come to the summit shortly before they faced elections they were expected to lose. This prospect clearly overshadowed Gleneagles. Martin led a minority government in Canada, with elections expected before the end of 2005. Koizumi had threatened new elections in Japan if the Upper House rejected the bill privatising the post office. In Europe, Schroeder had called for early federal elections, in September 2005, because of major losses in Land (state) elections. Silvio Berlusconi faced elections in Italy early in 2006, also after suffering serious defeats in regional polls, even though he had survived longer than any other Italian prime minister since World War II. Chirac’s presidential term would last till 2007, but shortly before Gleneagles he had a bitter personal setback from the defeat in France of the referendum on the European Constitution. The resulting confusion in the EU also weakened Barroso. But electoral weakness need not prevent the heads from making progress at the summit and the historical record provided some comfort. Robert Putnam (1988) developed his model of ‘two-level games’ by observing the G7 summit process in the 1970s, particularly the Bonn Summit of 1978, which produced a complex, crossissue deal embracing macroeconomic, trade, and energy policies. He concluded that relatively weak, internally divided governments were, on balance, more inclined to conclude international agreements than strong, confident ones. Jimmy Carter in the U.S. and Helmut Schmidt in Germany both used the deals struck at the 1978 Bonn Summit as a means of getting domestic acceptance of unpopular economic measures (Putnam and Henning 1989). In contrast, a strong leader such as Reagan saw little need to strike international deals at the summit, at least on economic issues. As the American scholar John Odell (2000) put it, he had high BATNAs — better alternatives to negotiated agreements. Similar factors caused Clinton to overplay his hand at Denver. He had just been re-elected and the U.S. economy was booming. But his triumphalist attitude alienated the Europeans and the summit was unproductive. This analysis could be applied to the lineup at Gleneagles. The weaker leaders could well have had greater interest in a good result from Gleneagles than the stronger ones. Berlusconi, Schroeder, and the others were all in political difficulty

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because of their domestic policies. They therefore wanted to show their electorates that their external policies were effective and that they could play an influential role among their international peers. A good result from Gleneagles would increase their standing, while to be blamed for the summit’s failure would increase their troubles. For the same reasons, the bitter internal disputes in the EU, setting Blair against Chirac and Schroeder over the budget, would not spill over onto Gleneagles. The EU members of the G8 wanted to show the U.S., Japan, Canada, and Russia that the European Union was still an effective international force, despite some domestic disagreements. This was consistent with the strong support emerging in Europe before Gleneagles for Blair’s strategy for helping Africa: the commitment to double aid levels, leading to the attainment of the 0.7 percent target in a set timetable; readiness to overcome reservations to 100 percent debt relief; and some backing for an International Finance Facility (IFF), although subject to conditions. As for climate change, none of the European leaders tried to complicate Blair’s strategy of engaging the Americans until the French move very shortly before the summit, despite U.S. refusal to show any flexibility on the science. Much greater resistance to Blair’s proposals was coming from the U.S. before Gleneagles, where Bush’s domestic position had become much stronger since his re-election. But while U.S. presidents in their first term worry about getting re-elected, in their second term they are concerned about their historical legacy. Bush was already showing a more conciliatory attitude to America’s allies and partners, especially in Europe. At Gleneagles, Bush would want to have the United States appear as the leader in doing good in the world, rather than as the country that frustrated agreement. These calculations were precisely borne out by the leaders’ actions at the summit, which contributed to the successful outcome. Bush had just been re-elected, in conditions that made him inclined to promote agreement and entertain new ideas. After initial inflexibility, the Americans moved to join the consensus on debt relief, while Bush himself announced a doubling of aid to Africa and a shift of policy on climate change, just before the summit. Chirac was widely expected to play a badtempered spoiling role, being disappointed by the choice of London over Paris for the 2012 Olympics, which was announced on the day the heads arrived at Gleneagles. In fact he showed himself the most constructive of all the heads, stressing publicly how he and Blair had worked ‘hand in hand’ over Africa and climate change. Other leaders were less visible, but Koizumi raised Japanese aid by US$10 billion over five years at Gleneagles and Schroeder agreed to the US$50 billion total for additional aid, which German officials had resisted. They all wanted to be associated with positive results from Gleneagles, so that their international achievements could offset their domestic problems as elections approached. Second Indicator: Iteration at the G7 Summits The electoral prospects of the heads created a favourable atmosphere for reaching agreement at Gleneagles. But the disappointing results from earlier G8 summits in

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terms of this objective — reconciling domestic and international pressures — often derived more from what happened after the summits, rather than at the summits themselves. International agreements might be reached by the G8, but these were later frustrated or diluted by domestic resistance in one or more of the G8 members. Furthermore, the summit had become reluctant, over the previous seven years, to take up issues with a high domestic content in the G8 members. It had come to prefer wholly international subjects, or those where the greatest domestic policy change was made by others, in Africa or the greater Middle East. Blair reversed this trend for Gleneagles, by selecting an agenda where G8 domestic decisions were inescapable. What were the prospects for the international agreements reached at Gleneagles being followed up by thorough implementation? Over the three decades of summits, one technique has emerged very clearly as serving to ensure that summit commitments were met, so that international and domestic pressures were reconciled. That was the technique of iteration — coming back to the same subject at the summit in successive years. Every summit had to make a trade-off between iteration and innovation. If the summit had to keep coming back to old topics, it would have no time to devote to the new ideas that were essential to its first objective of political leadership. But with rare exceptions, iteration proved to be the foundation of most successful interventions by the summit, right from the start, in meeting its third objective.7 The blunt fact was that the summit rarely solved a problem on the first attempt. A shining exception was the monetary agreement concluded at the very first summit at Rambouillet in 1975, which gave a misleading impression of what summits could achieve. The other achievements from the heroic age of summitry, in the 1970s and early 1980s, relied on the process of iteration to bring domestic policy in the G7 countries in line with the heads’ international undertakings. In macroeconomic policy coordination, the commitments made at the first three summits reinforced existing strategy, at best. Real policy change only took place with the first Bonn Summit of 1978. In trade negotiations likewise the deadlines set in 1975 and 1976 had little effect — real forward movement began after the first London Summit of 1977 and concluded with Bonn a year later. Energy required cumulative attention from Bonn 1978 through Tokyo 1979 to Venice 1980 to get G7 policies changed (Putnam and Bayne 1987, chs. 2, 4, 6). The decline in the summit’s performance under Reagan’s presidency from 1981 to 1988 was matched by a sharp reduction in iteration. Subjects such as the debt crisis came briefly to the summit but then dropped off the agenda again, although they cried out for iterative treatment. Even the political themes in which these summits made most progress were treated episodically, with no sustained attention to East– West relations or the Middle East. In economic subjects iteration was provided at the level of finance ministers, with the Plaza and Louvre meetings of 1985 and 1987, not at the summits (see Putnam and Bayne 1987, chs. 6, 8–9; Bayne 2000, ch. 3; Funabashi 1988). Iteration returned with the revival of the summits as the Cold War ended. Policy on helping central Europe, exceptionally, was resolved at the first attempt, at the

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1989 Paris Summit. But helping Russia required iterative treatment over the next four years. Throughout the 1990s, the summit’s main achievements came through iteration. The most notorious example was in international trade, where the G7 heads three times broke their summit promise to conclude the Uruguay Round, because of differences over agriculture. They succeeded only on their fourth attempt in 1993. The summits dealt with debt relief for low-income countries on six separate occasions between agreeing to the Toronto terms in 1988 and concluding the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative at Cologne in 1999. Iterative treatment of the environment between 1989 and 1991 revealed increasing difficulties, but at least brought the U.S. to sign up to the climate change treaty at the UN Conference on Environment and Development in Rio in 1992, if not the Convention on Biological Diversity (Bayne 2000, chs. 5, 6, 10). There were three main reasons why iteration was so important. First, summits dealt with complex and far-reaching issues. These often required first a consensus on broad principles, followed by agreement on specific measures. This, for example, was how the summits handled the global environment in the early 1990s. Second, summits were concerned with difficult and intractable subjects — easy ones were settled at lower levels. When initial solutions proved inadequate, as constantly happened with debt relief, the summit had to come back and try to do better. Third, it often took time for the heads to overcome domestic resistance to the international agreement — several years, in the case of agricultural trade in the Uruguay Round. This throws a new light on the electoral analysis earlier in this chapter. Successful iteration would often be easier when governments remained in office and could ensure that their international commitments were implemented. In this context, continuity among G8 leaders was positive. Conversely, electoral weakness undermined this process. Governments fighting for survival would yield before domestic obstacles and not try to overcome them. But sometimes a change of government was a condition of progress. Full agreement on debt relief in the 1990s was only possible after Clinton had taken over in the U.S. and Schroeder in Germany. Iteration at the G8 Summits The G8 summits’ poor results in reconciling international and domestic pressures reflected patchy performance in iteration. Successful iteration between Birmingham 1998 and Cologne 1999 produced good results on new financial architecture and debt relief for the poorest. From 2002 onward iteration was used to good effect with politically motivated subjects, such as nonproliferation of WMD and transport security. But on economic issues, the record of 21st-century summits was very mixed. The G8 made an excellent start with its Africa initiative, moving from general principles at Genoa 2001 to the detailed Africa Action Plan at Kananaskis 2002. But while there were political advances after that, the economic provisions ran into domestic problems in the G8 countries. The total aid promised to Africa at Kananaskis (US$6 billion, half the extra US$12 billion per year committed at Monterrey earlier

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in 2002) was the only example of a summit commitment on aid volume and was widely regarded as inadequate. The G8 replenished the financing for debt relief twice after Cologne, but did not improve the terms. Trade was on the agenda every year, but without much impact since negotiations on the Doha Development Agenda began in 2001. The Africans became increasingly disappointed at the slow progress in these items. It was therefore essential to give Africa iterative treatment at Gleneagles, so as to restore and accelerate the momentum of the African programme. The treatment it received would ensure that progress on African issues could be maintained without requiring an annual fix at head of government level, while providing for further iteration when necessary. Climate change was different from Africa, in that there was no track record of earlier agreements, at least since the Rio conference of 1992. Given the known differences over the Kyoto protocol, a comprehensive G8 agreement looked out of reach. But Gleneagles would prove worthwhile if it launched a process that embraced the U.S. and provided for explicit iteration at the summits of later years. Reconciling International and Domestic Pressures at Gleneagles The British G8 presidency sought to use both summit preparations and summit followup to overcome domestic resistance to the agreements concluded at Gleneagles. The long preparatory process for both Africa and climate change enabled outside opinion to be mobilised, in scientific circles, private business, civil society, and non-G8 countries. The summit agreements themselves were meant to incorporate protection against later failures in implementation. These strategies yielded some important advances, although neither was wholly successful. The key measures in the Africa preparations, many of which would also benefit other poor developing countries, were as follows: • To enhance aid volume, Gordon Brown, the British finance minister, had been advocating an IFF from late in 2002.8 Its purpose was to accelerate aid disbursement by raising funds now on the bond market against repayment from aid resources in later years. But while the Europeans, especially France and Italy, were prepared to back this concept, the U.S., Japan, and Canada were not. It therefore could not be used as the main G8 vehicle for new aid. It survived as a more limited project to raise funds for an immunisation programme.9 Instead of early disbursement through the IFF, the G8 aid commitments were targeted for 2010, still five years off. But the aid increases promised by all G8 members at Gleneagles still added up to a major achievement. • Brown’s promotion of 100 percent relief for poor countries’ institutional debt had more success in overcoming domestic resistance. The Americans supported the idea from the start, although Brown only convinced them at a late stage to commit new money to it. Germany and Japan originally favoured fewer beneficiaries, but were persuaded to extend eligibility to all participants in the HIPC programme.

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Agreement on debt relief was reached among the finance ministers and endorsed without change by the heads at the summit. • Trade was an area where better access for the products of African and other poor countries would require changes in domestic policy in the U.S., EU, and other G8 members. But here Gleneagles’s results were disappointing, in that they did not go beyond general undertakings to advance the Doha Development Agenda, where negotiations were moving at a glacial pace. • In February 2004 Blair launched the Commission for Africa (CfA), in order to promote wider public interest in resolving Africa’s problems. Its 17 members included a majority of Africans, but not all G8 countries were represented. The commission’s report, published in March 2005, contained crisp and well-costed recommendations on better governance, education, health, trade, infrastructure, and aid volume (CfA 2005).10 But the Gleneagles Africa document did no more than take note of the report; the measures agreed by the G8, although valuable, lacked the same precision and were short on financial commitments. • Blair and Brown also encouraged wide civil society interest in the African agenda. This came together in the Make Poverty History (MPH) campaign, which insisted that the summit must meet all Africa’s needs for aid, trade access, and debt relief. This strategy gave exceptional public visibility to the summit, but carried the risk that the high expectations raised would not be met. The results of Gleneagles did produce some initial disappointment, but most of the nongovernmental organisations (NGOs) involved decided it was still worth keeping up the pressure.11 The preparations for climate change were less elaborate. But the UK sought to mobilise scientific opinion with a conference at Exeter in February 2005 and a joint statement in June by the national scientific academies in the G8 countries, plus India, China, and Brazil (Connor 2005). An appeal to the G8 from an international group of chief executives, including U.S. firms, showed strong business support for greater predictability in climate change policy (Harvey 2005). This international advocacy of action on greenhouse gas emissions reinforced currents at work in the U.S., both in leading states such as California and in the U.S. Congress, which adopted a resolution calling for mandatory targets to reduce emissions (see Chapter 16). Under this pressure Bush showed just enough flexibility on the human origins of global warming to permit agreement at Gleneagles. This, however, was criticised by environmental NGOs, which wanted Bush to be isolated and publicly condemned. The main provisions for ensuring full implementation were as follows: • To stress the G8’s refusal to be distracted by the terrorist bombings, Gleneagles ended with an impromptu ceremony without precedent in summit history. With the African leaders looking on, each G8 head signed the summit documents on Africa and climate change, as a symbolic commitment to carrying them out faithfully. • There would be early follow-up on the main African issues — aid, trade, and debt relief — at international meetings due in the second half of 2005. But the UN

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Millennium Review Summit in September was disappointing on aid and did not advance beyond what was agreed at Gleneagles. The World Trade Organization (WTO) ministerial at Hong Kong in December likewise made limited progress on trade. Debt relief was the only issue that went according to plan, being fully adopted by the IMF and World Bank by the end of the year. • Thereafter the prospects for iterative treatment of Africa relied on the Africa Partnership Forum (APF), which the G8 Africa document charged with monitoring implementation. This, however, would require making this body more effective and more transparent. The UK co-chaired an effective meeting of the forum in October 2005. But responsibility then passed to Russia as the next G8 chair, for which Africa would clearly not be a priority. Unlike previous occasions, there was no requirement for the APF to report to a future summit.12 • Climate change provided a more visible pattern of future iteration. The summit documents inaugurated a new dialogue on climate change, clean energy, and sustainable development. A first ministerial was held on 1 November 2005 and set an annual pattern for ministers to meet in this format. Japan promised a report on climate change to the summit in 2008, when it would hold the G8 presidency. In short, the long preparations for Gleneagles overcame some — but not all — of the domestic obstacles to action on Africa and climate change. The decisions taken at Gleneagles also provided for pressure on the G8 members to ensure commitments were met, including the prospect of iteration at future summits. Iteration, however, was more assured for climate change than for Africa. There was plenty of scope for backsliding and foot dragging on aid, trade, and debt relief commitments, while the new climate change dialogue could struggle to get off the ground. The conclusions that follow will assess how far the unusual precautions taken at Gleneagles enabled the summit to live up to its promises over the next two years.

Conclusions: The Answers from Gleneagles The review of the results of the G8 summits from Birmingham to Sea Island showed that they performed well in meeting the summit’s first two objectives of political leadership and collective management. The G8 also identified a third objective of integrating political and economic programmes. Gleneagles reinforced this positive pattern of achievement. The heads reached innovative agreements on climate change and made some impressive commitments on increasing aid volume and extending debt relief as part of their overall programme of support for Africa. They showed strong solidarity in their response to the terrorist attacks in London during the summit, insisting on completing their main agenda despite all distractions. The divisions caused by Iraq were largely healed, so that the G8 readily agreed on steps to support the Middle East peace process. Outreach to non-G8 countries was more purposeful than before and better integrated into the G8’s agenda, thus enhancing the legitimacy of the decisions reached at the summit.

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But the earlier G8 summits had not improved their performance in reconciling international and domestic pressures, the most demanding of the summit objectives. Domestic obstacles not only frustrated agreement at the summit. They especially undermined implementation of commitments, causing summit initiatives to run into the sand. The summit’s public reputation suffered as result. For Gleneagles, Blair sought to reverse this weakness, by the choice of themes, the conduct of preparations, and the precautions built into summit agreements. The electoral positions of the G8 leaders, whether strong or weak, combined to facilitate agreement at the summit. The long, complex preparations on Africa took advantage of iteration of this subject, which the G8 had been treating since 2001. Preparations were simpler for climate change, a new summit theme, but iteration was built into its future treatment, up to 2008. By the time the G8 leaders met again in July 2006, the political changes anticipated at Gleneagles had worked through. Schroeder, Martin, and Berlusconi had all been defeated at the polls. Angela Merkel in Germany and Romano Prodi in Italy were leading diverse coalitions, while Stephen Harper in Canada headed a minority government. St. Petersburg would be the last summit attended by Koizumi and Chirac, while Bush was already expected to suffer a major setback in the mid-term congressional elections due in November. So the auspices for new agreements or for strong implementation of old ones were less favourable than at Gleneagles and the overall results from the summit were limited. On the key themes from Gleneagles the St. Petersburg results were as follows: • Africa As expected, this was not a major summit theme and African leaders were not invited, except from South Africa and the African Union (AU). The leaders did not return to debt relief (which was advancing well) or to aid volume (where performance looked better than it was).13 The summit’s main commitment on trade, to advance the Doha Development Agenda, failed within the month, as the negotiations were suspended. Yet the summit did adopt a useful ‘Update on Africa’, which recorded progress on several of the detailed issues covered at Gleneagles, such as infrastructure and infectious diseases, and promised to return to Africa at the 2007 Heiligendamm Summit. • Climate Change The Russians likewise showed little interest in discussing climate change in the context of energy at the summit. The subject was only briefly covered at the end of the St. Petersburg Plan of Action on Global Energy Security (G8 2006). Meanwhile, little progress was made outside G8 contexts during the year. The U.S. administration did not go back on any promises made at Gleneagles, but it did not move forward either. The EU had trouble with its carbon trading scheme, the new Canadian government was unenthusiastic and some key developing countries, such as India, were also reluctant.14 This lack of movement led the British government to sponsor a major new report, written by Sir Nicholas Stern (2006), focussed not only on the economic issues, but also (according to The Economist) on ‘the politics of getting America involved in the global effort to mitigate climate change’ (‘It May Be Hot in Washington Too — Climate Change’ 2006).15

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Thus neither of the Gleneagles themes advanced much during the Russian G8 presidency and this was not entirely unexpected. At least there was no evidence of backsliding, except perhaps on trade. Even so, it fell to the German presidency in 2007 to revive momentum in Africa and climate change, as in the G8 process generally. After initial hesitation, the Germans made Africa and climate change the major items for the Heiligendamm Summit in June 2007. Germany found it hard to give a strong signal on increased aid for Africa, because of the priority being given to balancing the domestic budget. But there would be a focus on specific areas of development, especially infectious diseases, infrastructure, and private sector investment. On climate change, too, Germany was able to provide convincing leadership, having a good record in reducing its greenhouse gas emissions in the 1990s (although less good in the 2000s) and being a pioneer in wind power generation (but resistant to nuclear power). There was therefore a good basis for fruitful iteration on both topics at Heiligendamm. The best progress was on climate change, where Bush acceppted the UN’s central role in any post-Kyoto regime. On Africa, doubts persisted on whether Gleneagles’s targets would be fully met. But iteration will continue in 2008: Japan had already undertaken to take up climate change again at its Hokkaido Toyako Summit in 2008, while the G8 accepted the need to returned to Africa. The electoral positions of the G8 members were also, on balance, positive. Angela Merkel was firmly established as German chancellor and had earned the respect of her G8 partners. By the summit in June 2007 there was a new French president, Nicolas Sarkozy, and a new Japanese prime minister, Shinzo Abe. Each was keen to make his mark on the summit process, and Abe was already preparing to host the 2008 summit. Blair was about to hand over to Gordon Brown as British prime minister, but Brown’s track record on Africa and climate change was just as strong. He had pioneered 100 percent debt relief and the IFF and sponsored the Stern Report. As for the U.S., Bush continued to pay attention to Africa as a potential source of terrorism. Meanwhile, the current movement of opinion in the U.S. in favour of stronger action to reduce greenhouse gas emissions had become so strong that it mattered less if Bush continued to resist it, since he would soon be gone. Gleneagles went further than any previous G8 summit in reconciling international and domestic pressures. Despite the results achieved and the precautions taken, however, Gleneagles’s success in meeting this summit objective could only be judged in the years ahead. The implementation of the commitments was hesitant at first, as political changes worked through in Germany, Canada, Italy, Japan, and France, while no one expected the Russian presidency to give priority to Africa or climate change. The German presidency provided a welcome opportunity to revive the momentum in both subjects and to hand the torch on to Japan in 2008. A definitive judgement on the success of Gleneagles on Africa and climate change would depend not only on what had been agreed at the summit, but also on the shadow it cast into the future. But even with persistent uncertainty over the implementation of the commitments made there, Gleneagles clearly set the pattern for G8 activity for the years ahead and its influence remains potent. For that reason, it can be recognised as the most successful summit for nearly three decades, since the G7 leaders met at Bonn in 1978.

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Notes 1

For a detailed account and assessment of the G8 summits from Birmingham 1998 to Sea Island 2004, see Bayne (2005), who considers these seven summits as comprising the first G8 summit sequence. Strictly speaking, however, the G8 sequence was not complete until Russia hosted the summit in 2006, for the first time. 2 Canadian prime minister Paul Martin made no new aid commitment at Gleneagles, relying on undertakings dating from the UN International Conference on Financing for Development at Monterrey in 2002. But budgetary provision for Canada’s aid looked secure, while Germany, Italy, and Japan all faced difficulties. 3 British foreign minister Jack Straw arrived later in the day and chaired the Middle East and other foreign policy discussions. 4 Three of the leaders most concerned — Abdelaziz Bouteflika (Algeria), Olusegun Obasanjo (Nigeria), and Thabo Mbeki (South Africa) — were also at Okinawa 2000 and Genoa 2001, but as guests of the G8 presidency rather than summit participants. 5 Bouteflika, Obasanjo, and Mbeki, with Abdoulaye Wade (Senegal), were regular summit participants; John Kufuor (Ghana) had been at Sea Island 2004. Meles Zenawi (Ethiopia) and Benjamin Mkapa (Tanzania) were newcomers but had been indirectly involved in summit preparations as members of the Commission for Africa (CfA). Trevor Manuel, finance minister of South Africa, was also a commission member. 6 In the past, this factor worked against Japan and Italy, which saw a rapid turnover in prime ministers, while it favoured the other G7 heads, who could be sure of at least four years in office and often longer. Over the first 27 summits, from 1975 to 2001, France and Germany had only two changes of head of government. Britain had four changes and the U.S. and Canada both five. But the prime minister changed 13 times in Japan and 16 times in Italy (for details, see Franchini-Sherifis and Astraldi 2001, 217–253). 7 See Bayne (2000, 201–208) for the first analysis of iteration. He then thought iteration was a consequence of advancing globalisation, but now perceives that it is integral to the summit process. 8 Brown’s proposals were first described by Christopher Adams and Alan Beattie (2002). Those proposals soon ran into opposition. 9 The International Finance Facility for Immunisation (IFFIm) plans to raise US$4 billion over ten years. In addition to the UK (which pledged one third), France, Italy, Spain, and Sweden agreed to take part (Hall and Jack 2005). The first bond was floated late in 2006. 10 The commission’s findings closely matched the conclusions of the UN Millennium Project, directed by Jeffrey Sachs, although this dealt with the worldwide requirements for meeting the Millennium Development Goals (MDGs) by 2015 (see UN Millennium Project 2005). 11 Oxfam, for example, concluded: ‘No previous G8 summit has done as much for development, particularly in Africa. However, along with other organisations and fellow campaigners, Oxfam is disappointed that … neither the necessary sense of urgency nor the historic potential was grasped by the G8 … The pressure remains on our leaders to live up to our expectations, to deliver what they have agreed and to go much further in the coming months’ (Lawson and Green 2005). 12 Genoa 2001 created the G8 Africa personal representatives (APRs) and charged them to draw up the Africa Action Plan for the next summit. Kananaskis 2002 called for the APRs to report on implementing the action plan to Evian a year later. Evian 2003 in turn called for a further report two years later and the APRs delivered this to Gleneagles.

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13 Oxfam issued another briefing note a year after Gleneagles, to assess progress (Lawson and Green 2006). This recognised the advance made on debt relief, but showed how aid figures were inflated by debt relief extended to Iraq. 14 For the troubles of the EU carbon trading scheme, see (‘Soot, Smoke, and Mirrors’ 2005); for India’s reluctance, see (‘How to Make Them Feel the Heat’ 2006). 15 The Economist notes : ‘Sir Nicholas’s policy prescriptions, as well as his analysis, seem designed to draw America in’ (‘It May Be Hot in Washington Too — Climate Change’ 2006).

References ‘A Bit of Gallic Grit: U.S. and France Inject Useful Tension into G8 Summitry’. (2004). Financial Times, 12 June. Adams, Christopher and Alan Beattie (2002). ‘Brown in Plea on Development’. Financial Times, 13 December. Bayne, Nicholas (2000). Hanging In There: The G7 and G8 Summit in Maturity and Renewal (Aldershot: Ashgate). Bayne, Nicholas (2005). Staying Together: The G8 Summit Confronts the 21st Century (Aldershot: Ashgate). Beattie, Alan and Daniel Dombey (2005). ‘EU Governments Agree Plan to Boost Development Aid by Euros 20bn a Year’. Financial Times, 25 May, p. 12. Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007). Connor, Steve (2005). ‘G8 Scientists Tell Bush: Act Now or Else…’. Independent, 8 June, p. 1. Franchini-Sherifis, Rosella and Valerio Astraldi (2001). The G7/G8: From Rambouillet to Genoa (Milan: Franco Angelo). Funabashi, Yoichi (1988). Managing the Dollar: From the Plaza to the Louvre (Washington DC: Institute for International Economics). G8 (2006). ‘St. Petersburg Plan of Action on Global Energy Security’. 16 July, St. Petersburg. (June 2007). Hall, Ben and Andrew Jack (2005). ‘Novel UK Funding for Vaccines Is Approved’. Financial Times, 3 August. Harvey, Fiona (2005). ‘Business Pushes G8 on Global Warming’. Financial Times, 10 June, p. 1. ‘How to Make Them Feel the Heat’ (2006). Economist, 25 November. ‘It May Be Hot in Washington Too — Climate Change’ (2006). Economist, 4 November. Lawson, Max and Duncan Green (2005). ‘Gleneagles: What Really Happened at the G8 Summit’. Oxfam Briefing Note. Oxfam International. (June 2007). Lawson, Max and Duncan Green (2006). ‘The View from the Summit: Gleneagles G8 One Year On’. Oxfam Briefing Note. Oxfam International. Odell, John S. (2000). Negotiating the World Economy (Ithaca: Cornell University Press). Putnam, Robert and Nicholas Bayne (1987). Hanging Together: Co-operation and Conflict in the Seven-Power Summit 2nd ed. (London: Sage Publications). Putnam, Robert (1988). ‘Diplomacy and Domestic Politics: The Logic of Two-Level Games’. International Organisation, vol. 423, pp. 427–460.

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Putnam, Robert and C. Randall Henning (1989). ‘The Bonn Summit of 1978: A Case Study in Coordination’. In R.N. Cooper, ed., Can Nations Agree (Washington DC: Brookings Institution). ‘Russia Triumphant: The G8 Summit’ (2006). Economist, 20 July. ‘Soot, Smoke, and Mirrors’ (2005). The Economist, 18 November. Stern, Nicholas (2006). ‘Stern Review Report on the Economics of Climate Change’. HM Treasury, London. (June 2007). United Nations Millennium Project (2005). Preparing National Strategies to Achieve the Millennium Development Goals: A Handbook (New York: United Nations Development Programme).

Chapter 3

Gleneagles G8 Summit Perspectives Martin Donnelly

The conclusions of the 2005 Gleneagles Summit represent substantial and ambitious policy commitments by the G8 countries. Arriving at those conclusions required lengthy and at times difficult negotiations. This chapter explores the negotiation from the perspective of the United Kingdom, outlining the process through which agreement was reached on the major themes of the UK presidency of the G8, African development, and climate change. It then considers how implementation of these agreements has been taken forward since then. This analysis shows that the Gleneagles Summit produced major achievements backed by a strong, shared political will to carry them out. The UK’s presidency again demonstrated that the G8, for all its imperfections, is a unique and valuable part of global governance, with the capacity to mobilise political and economic resources to confront shared challenges.

The G8 Machinery Preparation of the G8 summit is the responsibility of the sherpas, a group of senior civil servants appointed by their head of state or government. Each is a personal appointment by the leader. Sir Michael Jay, Permanent Under Secretary at the Foreign and Commonwealth Office, was chosen by Prime Minister Tony Blair, the host of the Gleneagles Summit, to be the British sherpa in 2005. Sherpas meet by themselves, with only a presidency assistant in the room, to ensure informal and private discussion. The UK convened five sherpa meetings during the four months leading up to the Gleneagles Summit, each meeting lasting a day and a half. Their discussions gave a political steer to negotiations in the subsidiary G8 groups: the foreign affairs sous-sherpa (FASS) group of directors general of the foreign affairs ministries, the finance sous-sherpa (FSS) group of directors of the finance ministers, and the group of political directors (PDs) of the foreign affairs ministries. On the basis of discussion at the first sherpa meeting, the UK produced papers on African development and climate change that set out a structure for eventual agreement at the Gleneagles Summit. These were refined over the following months as G8 partners offered suggestions on issues they wished to see highlighted in the British summit texts, and the draft documents began to take shape.

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Most of the detailed negotiations on the main texts took place within the FASS group. Each FASS was accompanied by an assistant to provide technical support and a record of detailed points under discussion. The FASS met for more than 70 hours of negotiations between January and July, going through each text several times, finally on line by line. Compromises were incorporated right up to the summit itself, with a four-hour meeting on the eve of the summit in Gleneagles to finalise the remaining texts. The G8 requires consensus on all outcome documents. This necessitates precision in the detail of the negotiation process. The formulation of the final agreement must be in line with the national policies of eight independent countries. This means that throughout the process there must be a stream of communication among the sherpa, the relevant ministries in each government, and their president or prime minister’s office to ensure effective coordination in house, as well as meeting the requirements of other G8 partners. Beyond the official G8 meetings, the UK sherpa and his G8 colleagues conducted intensive rounds of diplomacy in G8 capitals. The UK also drew on input from expert groups and non-G8 countries given that the issues under discussion were of international concern and that agreement might have global reach. In London, ambassadors from non-G8 countries were invited to briefing sessions for an explanation of British thinking and to listen to others’ views on the importance of these issues. The UK’s G8 presidency began with the response to a global disaster — the Indian Ocean tsunami. The G8 members were quick to respond with humanitarian assistance and worked successfully for Paris Club agreement on a debt freeze to support the longer-term reconstruction effort. Blair’s first letter to G8 heads in early January expressed the collective sympathy to all those affected by this tragedy and set out proposals for joint work on improved early warning and how best to reduce the risk of further natural disasters. The heads subsequently agreed upon a summit statement on these issues. The central themes of the UK’s presidency were Africa and climate change. Most of the preparatory process focussed on these two issues.

African Development On Africa the G8 were able to benefit from the expertise of the Africa personal representatives (APRs), established at the Kananaskis Summit in 2002. The APRs were tasked to report to the G8 meeting under the UK presidency on progress toward earlier G8 commitments on Africa in support of the New Partnership for African Development (NEPAD). Hilary Benn, the UK Secretary of State for International Development, chaired three meetings of the APR group in January, February, and May to prepare their report on collective and individual progress on G8 Africa commitments since the 2003 Evian Summit. The group also met with African governments and other donors in Abuja, Nigeria, in April. This dialogue continued

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the principle of mutual accountability and highlighted African willingness to take responsibility for its own sustainable economic growth and improving governance in the continent, should donors be willing to support these efforts. To draw together an international consensus on African development and provide additional input to the G8 debate, Tony Blair launched the Commission for Africa (CfA) in 2004. This eminent group, consisting predominantly of members of African origin and chosen to give a wide range of experience, was asked to produce a series of recommendations for how best to meet the challenges of African development. The CfA met three times and consulted very widely. These consultations included five major events with civil society across Africa, as well as a request for written submissions and many meetings between different groups and commissioners. Its work was supported by a secretariat based in London. The CfA’s report, Our Common Interest, was published in March 2005. It called for a new partnership between developed countries and African states and made a set of recommendations for a comprehensive approach to tackling the obstacles to development. The report was widely read. Together with the APRs’ progress report on the G8 Africa Action Plan, it provided a framework for the Gleneagles statement. The UK presidency’s focus on Africa had a high profile. The presidency fell in the year of the 20th anniversary of the Live Aid benefit concert and the five-year review of the United Nations Millennium Development Goals (MDGs). Nongovernmental organisations (NGOs) had joined in a global campaign — the Global Call to Action against Poverty (GCAP) — to press donors and recipient states alike to take decisive action to alleviate poverty. The proliferation of white wristbands symbolising the Make Poverty History (MPH) campaign — the UK incarnation of GCAP — demonstrated the high level of British public support to this cause. Bob Geldof, commissioner on the CfA, spearheaded the NGO initiative and helped to ensure a high profile globally for this work, with support from many other music and media celebrities. The UK arranged discussion meetings with NGOs and trade union leaders over the course of the G8 presidency at the FASS, sherpa, and prime ministerial levels. Action Aid, CAFOD (Catholic Agency for Overseas Development), Christian Aid, Comic Relief, DATA (Debt AIDS Trade Africa), Global Watch, GCAP, the Jubilee Debt Campaign, and Stop AIDS were among the NGOs represented. From December 2004, there was at least one meeting each month in the run-up to Gleneagles, focussed on the G8’s objectives for African development, the principle concern of the NGOs represented by the MPH campaign. Separate discussions on specific issues were also arranged. Officials from the prime minister’s office, Number 10, and key departments met with NGOs following trade issues on a number of occasions. The sherpa also held outreach discussions with NGOs from other G8 member states, including an early June videoconference with German NGO representatives. Prime Minister Blair then held a meeting with NGOs on 21 June to listen to final views. Following Gleneagles, follow-up sessions were held in August at Number 10 and with the FASS to discuss how to maintain momentum on the Gleneagles outcomes.

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Donor governments were encouraged by NGOs to look again at debt cancellation, aid volume, and effectiveness and issues surrounding international trade. The G8 was pressed to back the rhetoric of its leaders with tangible resources and action to demonstrate that it had gone further than previous summits. International trade was recognised by all G8 partners as essential to generate the economic growth to combat poverty. Against the backdrop of the run up to the ministerial meeting of the World Trade Organization (WTO) in Hong Kong in December 2005, the leaders agreed to redouble their efforts to achieve a successful conclusion of the whole Doha Development Agenda and to inject the necessary political momentum into the discussion to ensure an outline agreement by the Hong Kong meeting and a final agreement in 2006. Blair, in his statement after the Gleneagles Summit, called for agreement by the end of the year on a date for ending export subsidies for agriculture. Increasing aid was the main focus of the intense pre-summit negotiations. A major agreement by the European Union in May, the pledge by U.S. president George W. Bush on 30 June to redouble U.S. aid to Africa, a US$10 billion Japanese announcement at the summit, and Canadian and Russian commitments all came together to allow the leaders to say that they would double aid to Africa by 2010, as part of a projected extra US$50 billion a year worldwide. These resources would be used to: • provide extra resources for Africa’s peacekeeping forces so that they can better deter, prevent, and resolve conflicts in Africa; • give enhanced support for greater democracy, effective governance, and transparency, and help to fight corruption and return stolen assets; • boost investment in health and education, and take action to combat HIV/AIDS, malaria, tuberculosis, and other killer diseases; and • stimulate growth, improve the investment climate, and make trade work for Africa, including by helping to build Africa’s capacity to trade and working to mobilise the extra investment in the infrastructure needed for business. Leaders also confirmed their finance ministers’ agreement to grant 100 percent relief on multilateral debt to 18 highly indebted poor countries (HIPCs), with the possibility of more to follow for other countries coming through the HIPC process. Nigeria would also benefit from an agreed write-off of approximately US$17 billion of its debt.

Climate Change Since the signing of the Kyoto protocol, a comprehensive review of the global approach to climate change had been considered too divisive for productive G8 debate. The public profile of this issue had not reached the level of African development, nor was there external consensus among nongovernment stakeholders.

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Against this backdrop, Blair outlined three targets for the G8 in September 2004. These were to reach a better common understanding on the science of climate change, to advance the work of the G8 in promoting development and uptake of cleaner energy technologies, and to engage more closely with countries such as India and China on the best ways to meet their growing energy needs sustainably. From the outset all parties were clear that any discussion should complement the continuing work within the UN Framework Convention on Climate Change (UNFCCC). In advance of Gleneagles, two events highlighted developing scientific consensus on the urgency of the challenge. The Hadley Centre, based in Exeter, UK, a leading research institution in the field of climate change, organised a meeting of experts in February 2005. The conference discussed research that had emerged since the full meeting of the Intergovernmental Panel on Climate Change (IPCC) on the scale and potential impacts of climatic change. Then, in June 2005, the National Academies of Science from the G8 states, China, India, and Brazil issued a statement that reinforced the emerging scientific consensus. The role of the private sector was also important. At the World Economic Forum in Davos in January 2005 Blair asked 25 leading multinational corporations (MNCs), including BP, Deutsche Bank, and Ford, to consider the issue of climate change. The prime minister met with business leaders in London on 9 June. The Davos group of global businesses issued a strong message at this meeting, asking governments to take immediate action to send a strong policy signal to markets. In addition to affirming the direction of scientific consensus, they stated that they ‘share the belief that climate change poses one of the most significant challenges of the 21st century. With linkages to other important issues, such as the need to ensure economic growth, alleviate poverty, and provide access to adequate supplies of energy, climate change is an issue that demands the attention of governments, business, and civil society throughout the world’ (World Economic Forum 2005). These endorsements, while independent of the formal G8 process, gave further impetus to the profile of climate change issues. The leaders recognised this, agreeing to act ‘with resolve and urgency now’ to tackle the interlinked challenges of climate change, energy, and sustainable development. The summit text also noted the fact that the ‘increased need and use of energy from fossil fuels, and other human activities, contribute in large part to increases in greenhouse gases associated with the warming of our Earth’s surface’ (G8 2005a). The UK held a meeting of policy experts from G8 environment and energy ministries in April 2005 in London to discuss in detail the possible content and extent of a G8 programme of action on climate change. There was broad consensus on the importance of technology development, which was also an important aspect of the emerging dialogue between G8 countries and those emerging markets identified by Tony Blair before the British presidency began. A workshop for individuals from G8 research organisations on energy — a commitment from the Evian Summit — helped share information and improve collaboration. The UK presidency invited leaders of five non-G8 countries to Gleneagles. Brazil, China, India, Mexico, and South Africa — labelled the ‘Plus Five’ (and now

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also known as the Outreach Five) — agreed to participate. In preparation, each of the Outreach Five countries nominated a senior official to act as interlocutor with the G8 presidency. These officials met with the UK sherpa at a preparatory event in June to discuss the emerging content of the G8 programme of action and its relevance to the emerging economies. Also included in the preparatory debate were the International Energy Agency (IEA) and the World Bank. Early exchanges identified a clear role for the IEA and World Bank in the implementation of the emerging proposals and as a potential source of finance for jointly agreed ventures. Their representatives were also present at the relevant discussions in Gleneagles. Together these discussions produced the Gleneagles Plan of Action: Climate Change, Clean Energy, and Sustainable Development (G8 2005b). The programme set out ways to exploit cleaner technologies, such as bio-energy and cleaner coal, to promote energy efficiency, and to finance investment in clean technologies in emerging economies. It represented a wide-ranging commitment to G8 cooperation on new technologies that have the potential to lower emissions.

After the Gleneagles Summit The G8 leaders released a total of 17 summit documents at Gleneagles. These included a text on African development, a statement on international trade, and a climate change ‘chapeau’ statement and programme of action. For African development, Gleneagles paved the way for the UN Millennium Review Summit in September 2005. A meeting of the Africa Partnership Forum (APF) followed in October, involving African governments, the donor community, and multilateral partners such as the representatives from international financial institutions (IFIs). The G8 leaders agreed to strengthen the APF at Gleneagles as an effective means of focussing governmental attention and raising public profile where commitments are lagging. Since the summit, plans for specific new initiatives, such as additional funding for infrastructure and health have begun to be realised by G8 donors and to be considered by the governing boards of multilateral donors such as the World Bank. Before Gleneagles the European Commission announced €1 billion per year to support the trading capacity of developing countries aimed at helping them turn market opportunities into reality. The dialogue between the G8 and those emerging economies with increasing energy needs continued formally in November 2005. This meeting reviewed how best to follow up the Gleneagles programme of action. Similarly, the Gleneagles statement called for a report from this group to be presented to the G8 Hokkaido Toyako Summit in 2008, under the Japanese presidency. Preparation for the UNFCCC meeting in Montreal in December 2005 ensured that momentum was carried through to the following year. Russian president Vladimir Putin (2005) stated at Gleneagles that Russia proposed to make world energy policy a key issue for its St. Petersburg

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Summit, describing it as ‘only natural that Russia, the world leader on the energy market, should focus precisely on energy policy’. The IEA and World Bank were involved in the implementation of Gleneagles agreements. They already had wellestablished mechanisms to ensure accountability to their donors, so these bodies could provide a useful indicator of international progress. In addition, the UK presidency held a further meeting of the FASS and then of the sherpas before the end of 2005. These monitored the progress of implementation bilaterally and through the various relevant follow-up bodies, and considered areas where greater political engagement might be required. Both the FASS and the sherpas had a key role in ensuring momentum is maintained and that one presidency linked into the next.

Taking Forward the Gleneagles Commitments In 2006, Russia held the presidency of the G8 for the first time. Russia’s focus on global energy security, education for innovative societies, and the fight against infectious diseases allowed for a continued G8 focus on climate change and Africa during 2006, complementing progress made elsewhere on these themes. And the 2008 German-hosted Heiligendamm Summit picked up the themes of good governance, sustainable investment, peace and security in Africa as well as sustainable resource use and climate change. At St. Petersburg on 15–17 July 2006, the G8 leaders agreed that the challenges of providing energy security and protecting the environment and tackling climate change were interlinked. As part of their commitment to addressing the issue of energy security, leaders committed to the environmentally sound use of energy and the deployment and transfer of clean energy technologies, which help tackle climate change. In their communiqué on energy security they emphasised the important role of energy efficiency measures and clean, lower-carbon energy sources and renewables in tackling climate change (G8 2006a). The leaders also reiterated their commitment to implementing the Gleneagles Plan of Action, and noted the role the UNFCCC, the Kyoto protocol, and the Gleneagles dialogue could play in efforts to address climate change. Beyond the G8, the Mexico ministerial meeting of the Gleneagles Dialogue and the Nairobi XII Conference of the Parties to the UNFCCC made further progress on tackling the challenge of climate change, although more needs to be done. The head of the UK’s Government Economics Service, Sir Nicholas Stern (2006), issued a wideranging and influential independent report on the economics of climate change that made clear that, although there was still time to avoid the worst impacts of climate change, the task is urgent, and delaying action — even by a decade or two — would take the world into dangerous territory. In addition, the IEA (2006) took forward work on energy efficiency as commissioned by the G8 at Gleneagles, resulting in the publication of Energy Technology Perspectives: Scenarios and Strategies to 2050, providing a detailed analysis of key energy technologies for the next half-century,

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demonstrating convincingly that an alternative energy future, essential if the world is to meet the climate change challenge, is possible. In line with the Gleneagles commitments, the World Bank also launched the Energy Investment Framework to allow developing countries access to clean and sustainable sources of energy. At St. Petersburg, the leaders emphasised the importance of making progress in the fight against infectious diseases and in the provision of education in developing countries, and in Africa in particular. Leaders reiterated their support for the Education for All Fast Track Initiative, and underscored the importance of making further efforts to meet the education MDGs. Similarly, they reiterated their support to the Global Fund to Fight AIDS, Tuberculosis, and Malaria, with its particular emphasis on the fight against HIV/AIDS in Africa. Beyond the Russian presidency’s focus on education and infectious diseases, the G8 leaders also noted progress made on all the Gleneagles commitments in an overarching Update on Africa (G8 2006b). This picked up significant progress made on Africa in a range of other forums. For example, on the issue of peace and stability, the UN established the Central Emergency Response Fund with pledges of some US$264 million from some G8 members and other donors. Leaders welcomed the progress made by African and other countries on ratification of the UN Convention against Corruption, and on expansion of the Extractive Industries Transparency Initiative ([EITI] 2007), which now involved 14 African countries and 27 companies. Leaders also highlighted the impressive achievement in reducing the debt burden on the world’s poorest countries. Progress continues: by mid 2007, 18 African countries have had their debts to the International Monetary Fund (IMF), International Development Association (IDA), and the African Development Bank (AfDB) cancelled. Leaders also noted progress against delivery of their substantial aid commitments, reporting estimates published by the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) that in 2005 official development assistance (ODA) from DAC members rose by 31 percent to US$107 billion in 2005, of which 75 percent came from G8 members. But it is clear that collectively the G8 and the world still have a long way to go. Prospects for 2007 and beyond are good. Germany focussed on the global economy and Africa at Heiligendamm on 6–8 June, under the overarching theme of ‘growth and responsibility’, and Japan will maintain the momentum on climate change and Africa at Hokkaido in 2008. Climate change and energy efficiency will be a key component of the focus on the global economy, building on the Stern Report’s message that it is essential to tackle the threat of climate change now to secure global security and prosperity. Similarly, the German focus on Africa will allow the G8 to build on its previous commitments on Africa, maintaining the G8’s tradition of support to the continent.

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The Future Role of the G8 Increasingly discussions at G8 summits are dominated by issues of international concern. The UK central themes of environmental sustainability and poverty alleviation in Africa clearly fell into that category. They represented an intensification and development of previous G8 work on these themes. The flexibility of the G8 process brings drawbacks as well as advantages. There is no permanent secretariat and consensus is required on all texts. But there remains a strong, shared political will to deliver agreed outcomes, and to show that commitments made at summits by the heads are carried out. The experience of the UK presidency underlined once more that the G8 process, for all its imperfections, remains a unique and valuable part of global governance, with the capacity to mobilise political and economic resources to confront shared challenges.

References Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007). Extractive Industries Transparency Initiative (2007). (June 2007). G8 (2005a). ‘Climate Change, Clean Energy, and Sustainable Development’. 8 July, Gleneagles. (June 2007). G8 (2005b). ‘Gleneagles Plan of Action: Climate Change, Clean Energy, and Sustainable Development’. 8 July, Gleneagles. (June 2007). G8 (2006a). ‘Global Energy Security’. 16 July, St. Petersburg. (June 2007). G8 (2006b). ‘Update on Africa’. 16 July, St. Petersburg. (June 2007). International Energy Agency (2006). Energy Technology Perspectives: Scenarios and Strategies to 2050 (Paris: International Energy Agency). Putin, Vladimir (2005). ‘Meeting of Vladimir Putin with Russian and Foreign Media Following the G8 Summit’. 8 July, Gleneagles. (June 2007). Stern, Nicholas (2006). ‘Stern Review Report on the Economics of Climate Change’. HM Treasury, London. (June 2007). World Economic Forum (2005). ‘Statement of the G8 Climate Change Roundtable’. 9 June. Davos. (June 2007).

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Chapter 4

Energising Sustainable Development: The G8’s Gleneagles Performance John J. Kirton1

On 6–8 July 2005 the leaders of the world’s major democracies assembled at Gleneagles, Scotland, for their 31st annual G8 summit. There they sought, after 60 years of failure from the United Nations galaxy, to make history on two highly ambitious global goals: financing democratic development in Africa and controlling climate change. They succeeded to an exceptional degree, producing new summit highs in domestic political approval, deliberation, direction setting, and money mobilised, and performing strongly in decision making, delivery of their commitments, and developing G8-centred global governance. On African development, the G8 produced an unprecedented deal. Just before Gleneagles, G8 finance ministers agreed on a well-crafted US$55 billion package of debt relief for the poorest, inspired significant additional official development assistance (ODA), and prompted new commitments for famine relief. At the summit further promises came on development assistance and development-friendly trade liberalisation, conflict resolution and prevention, good governance and private sector development, famine relief, and a mini International Finance Facility (IFF) to develop vaccines. On climate change, more surprisingly, success came as well. Even as Gleneagles concluded the G8’s half-decade-long campaign on African development, it launched a new one on climate change control. Gleneagles produced new principles and a new process to build this ‘beyond Kyoto’ regime. It induced a hitherto resistant United States and the major developing countries to take carbon-constraining action, with the development, transfer, and use of clean technologies as the lead instrument. At Gleneagles a Kyoto-reluctant George W. Bush and his Kyoto-committed G8 partners joined the invited leaders of India, China, Brazil, and Mexico, the rising, top-tier climate change and energy powers, to launch the new regime as a foundation to build on in future years. Fuelling these historic achievements were the forces highlighted by the concert equality model of G8 governance (see Appendix 4-1). From the outside, G8 leaders were reminded of past shocks and present vulnerabilities by rising and volatile energy prices, driven by growing demand from the new systemically significant powers, political unrest in a terrorist-infected Middle East, an unstable Africa, and an unpredictable world. These vulnerabilities were brought home by the deadly terrorist attacks in London on the summit’s first full day. The 1944–45 generation of

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multilateral organisations centred on the UN were clearly failing to deliver either the UN’s Millennium Development Goals (MDGs) or a Kyoto protocol that would meet its targets and persuade the U.S. to join. The G8’s global predominance and internal equality in capabilities were increased by the growing power of Russia and Canada, both committed to Kyoto and both full-strength energy superpowers with fiscal surpluses available to finance development abroad. The G8’s seminal mission and shared principles of open democracy, individual liberty, and social advance drove an African strategy now focussed on democratic development and a climate change process that included the leading developing country democracies of India, Mexico, Brazil, and South Africa. Substantial domestic political capital and control came from host Tony Blair, just re-elected with a historic third majority government, from recently electorally refreshed George Bush, whose party controlled both chambers of Congress, and from Vladimir Putin and Junichiro Koizumi, both secure in their leadership positions. Yet success on the chronic problems of African development and climate change was ultimately driven by an exceptional performance from inside the G8 itself. Blair, highly skilled and experienced and hosting the G8 for a second time, brought both an ambitious agenda locked in at a very early stage and a dogged determination to stick to his major objectives to the end. To back his ‘British bulldog’ approach, he constructed an innovative preparatory process featuring many regular and creatively blended G8 ministerial meetings, the multi-stakeholder Commission for Africa (CfA), an energetic burst of bilateral summitry, and a creative mobilisation of business leaders. The climax came with the unprecedented gathering of hundreds of thousands of voters, and hundreds of millions of viewers, through the Make Poverty History (MPH) campaign and the Live Eight concerts. Also important was the momentum provided by unprecedented continuity and good compliance with the commitments made by these same leaders at the summit hosted by George Bush at Sea Island the previous year. This ‘summer-camp club’ significantly included Russia, which Blair had welcomed as a full member of the newly designed, leaders-only G8 he had hosted at Birmingham in 1998. Blair could thus look to Russia, as the G8’s incoming host in 2006, to implement and build on the bold new directions that Gleneagles launched. To demonstrate how this well-crafted internal process combined with supportive outside pressures to produce a significant G8 summit success, this chapter examines in turn the preparations for the summit, the positions of the G8 partners on the summit’s eve, the six forces highlighted by the concert equality model that pushed and pulled them toward strong success, and the historically high performance that came as a result.

The Road to Gleneagles The road to Gleneagles was unusually long but by no means winding. The journey started very early, proceeded with unusual intensity and innovation, and showed a singular sense of purpose to the very end.

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The British Plan Tony Blair had, rarely for G8 leaders, hosted the G8 summit before at Birmingham in 1998. There he had introduced several successful innovations that made it far more of a club for the leaders — and the citizens — of the most powerful countries in the world. With nine years of continuous summit experience, he was determined and well positioned to mount an unusually strategic, self-confident, and ambitious plan for Gleneagles in 2005. Blair defined and declared his priority agenda at an unusually early stage. At the final sherpa meeting of the French presidency in autumn 2003, after the Evian Summit, Britain announced that Gleneagles, almost two years later, would focus on Africa, climate change, and a third theme to be defined in the spring of 2005 as the international agenda unfolded at that time. To some, this seemed to be making a virtue of necessity, constructing an AngloAmerican two-year tandem to cover for George Bush, who intended to do nothing on Africa or climate change during the U.S. year as host in 2004. But even as Sea Island became a summit that did much for Africa, the British stuck with their picks. At the start of 2005, at the World Economic Forum at Davos and in the world’s elite publications, Tony Blair (2004, 2005) set forth specific, highly ambitious but largely achievable objectives on both African development and climate change. Each was a quite different kind of package, well tailored to the issue at hand. On Africa, it focussed on finally delivering the big breakthrough package on debt relief, aid, and trade, based on the principles that the G8 and Africans had been together developing and delivering down payments on since 2001. On climate change, it sought to start a process, by securing agreement on the science, on the need for action by the G8 and Kyoto-unbound systemically significant climate powers from the developing world, and on the foundational principles for a 21st-century regime beyond Kyoto. To build broader support for an ambitious, comprehensive, interlinked Africa package, Blair created the 17-member multi-stakeholder CfA. It was composed of finance ministers and other influential figures from key G8 countries and, above all, African states. Its weighty 427-page report, Our Common Interest, released on 11 March 2005, made a convincing case for ambitious action on many fronts, in a sequence that respected the seven-point strategy that the Africans had themselves asked for, which the G8 had supported at the Canadian-hosted Kananaskis Summit in 2002 (CfA 2005). It helped the G8 withstand unrealistic broadsides from UN advocates and other quarters, such as demands that the G8 give massive amounts of new ODA now and worry about corruption later, if at all (Keller 2005). A further British tactic was to invite carefully selected leaders of non-G8 countries and international organisations as full partners for joint sessions at the summit itself. From Africa, Blair invited the ‘original four’ who were at Genoa in 2001 and Kananaskis in 2002 — Thabo Mbeki of South Africa, Olusegun Obasanjo of Nigeria, Abdoulaye Wade of Senegal, and Abdelaziz Bouteflika of Algeria. He extended this core to the ‘Sea Island six’, by asking John Kufuor of Ghana back and

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substituting Benjamin Mkapa, the leader of Tanzania, for Uganda’s Yoweri Museveni, who had come in 2004. In addition, Blair created a new ‘African eight’, by inviting Egypt’s Hosni Mubarak and Ethiopia’s Meles Zenawi, a prominent regional figure but one whose repressive measures soon led the British and others to hope that he would stay home. To round out the roster, Blair invited the executive heads of the secretariats of the UN, the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO). These African leaders and international civil servants were scheduled to meet with the G8 leaders on 8 July, when Africa would be featured on the summit’s final day. Blair broke new ground by inviting outsiders on the previous day, when climate change was the featured theme. Here he invited Manmohan Singh from India, who accepted very early, Luiz Inácio Lula da Silva from Brazil, who also did so, and Hu Jintao from China, who said yes only during the third week in June. Blair also wisely invited Vicente Fox of Mexico, thereby adding Bush’s fellow rancher and Rio Grande neighbour, and a systemically significant emerging power that, along with Canada, was a net exporter of oil and a major supplier to an ever-thirstier United States. Together with Thabo Mbeki of South Africa, these ‘Plus Five’ powers would meet with their G8 partners for an hour and a half to discuss climate change. As the spring unfolded, the British mobilised the nongovernmental, research, and faith-based communities and mass publics to support their cause. At the sherpa meeting in London on 23 March, the host sherpa, Sir Michael Jay, and all his G8 colleagues met for more than an hour with the leaders of the major interested nongovernmental organisations (NGOs). When Jay later made a pre-summit tour of the partner capitals, he included sessions in other cities so he could consult with civil society throughout the G8. The British also provided financial support and their sous sherpa, Martin Donnelly, as a speaker for the annual pre-summit academic conference held at the University of Glasgow. They also financed a civil society consultative network organised by the Royal Institute of International Affairs. Blair and his chancellor of the exchequer, Gordon Brown, encouraged citizens sympathetic to the new MPH coalition — the descendant of Birmingham’s Jubilee 2000 — to come to Edinburgh on the eve of the Gleneagles Summit to make their voices heard. By June Bob Geldof appealed for a million people to come to Edinburgh. He also mounted star-studded Live Eight concerts in the G8 countries — a replay of his Live Aid invention for a starving Ethiopia in 1985. Blair inspired a meeting with major business leaders organised by the CfA on the eve of the summit. Many caught the spirit, effectively expressed in the made-for-TV film The Girl in the Café about the forthcoming summit, first aired on British and American television on 25 June, and the playwrights who contributed to the ‘G8 Plays’ that were performed at the end of June at London’s National Theatre. There were some bumps in the road. But they were mostly caused by Blair’s strategic plan and a process always closely under his control. The first bump came at the start of the British presidency when Blair, about to call a general election, changed his sherpa from a close political associate needed on his campaign to Jay, a permanent civil servant and head of the British Foreign and Commonwealth Office

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(FCO). The change delayed the start of the sherpa meeting sequence from January to February. Further delays came as Blair was distracted by the month-long campaign for the election he had called for 5 May. Thus the formal sherpa preparations for Gleneagles were unusually late, leading some G8 partners to worry into mid April that no draft analytical papers had been put into the sherpa net. Moreover, as the British stubbornly stuck with their core agenda and ambitions through the third sherpa meeting during the second week of June, frustrations mounted among their partners that the British were all in ‘send’ mode rather than ‘receive’, and not willing to adjust to produce a broad, big-bargain success. Inside the summit process other challenges arose. Apart from Jay and Canadian sherpa Peter Harder, there were few strong, experienced sherpas, and it took the newcomers some time to settle in when they met. A quiet struggle continued about the proper G8 institutional mechanism to continue the African work in the years ahead. A remit mandate from the 2003 Evian Summit had asked, unusually, for a report from the African personal representatives (APRs) — a group that had been created at the 2001 Genoa Summit with Canadian sherpa Robert Fowler in the chair from the start. Some worried that Blair’s new CfA had created a rival body — a replay of the 1999-created Anglo-Canadian competition between the IMF’s International Monetary and Financial Committee (IMFC) hosted by Brown and the G20 chaired at the start by Canada’s then finance minister and, by 2005, prime minister Paul Martin. The respectable rejoinder from the British was that the Commission for Africa was a temporary body designed to mobilise those with high-level influence on the current Gleneagles leaders, in a way that the less well-connected APRs could not. There were bumps from the outside as well. Public revelations about AngloAmerican planning for the 2003 invasion of Iraq, where no weapons of mass destruction (WMD) had been discovered, harmed Blair’s political standing and his ability to focus on democratising and developing the Broader Middle East and North Africa (BMENA). While Blair had deliberately scheduled his Gleneagles Summit immediately after he assumed the six-month presidency of the European Council, he unexpectedly began his presidency just after the European Union’s new constitution had been rejected by voters in France and the Netherlands and a budget deal to curb its costly, development-destroying, agricultural subsidies had failed. Sherpa Meetings Slowed down by such bumps, the sherpa process began to deliver big results only by late June. The first sherpa meeting in London on 16–17 February was uneventful. Its second meeting on London in March featured a session with civil society. Here the Russian sherpa, Igor Shuvalov, signalled that as hosts the Russians intended to fulfil all the traditional tasks up to the highest standard, including consultation with civil society. The third sherpa meeting, at Gleneagles on 15–16 June, went smoothly from a logistical standpoint. But at the end of the meeting a few important issues remained, requiring the sherpas to meet for a fourth time, on the eve of the summit in London on 1–2 July.

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Africa The first outstanding issue was Africa. The British stuck to their plan to raise an additional US$50 billion a year in ODA immediately by getting countries commit to giving 0.7 percent of their gross national income (GNI) by 2001. They also sought to convert this long-term commitment into immediate cash by floating bonds through the mortgage-like, off-balance-sheet debt scheme of a full-blown IFF proposed long ago by Gordon Brown. But U.S. and Canadian officials were adamantly opposed. As June ended, there was an evolving consensus in favour of adding up all the money already pledged to show that the G8 had in fact produced an additional US$50 billion a year. At Gleneagles the G8 would promise to raise additional money, but would not commit to doing anything new or specific to achieve that goal. The full-blown IFF scheme to borrow and spend now, shuffle the debt off the balance sheet, and pay back later would be set aside. But there would be the International Finance Facility for Immunisation (IFFIm), which would produce an additional US$4 billion in the near future for this analytically credible cause. Climate Change The second outstanding issue was climate change. An early draft of the relevant communiqué passage, leaked in March, had given hope that the U.S. had accepted Blair’s core objectives, as it noted ‘the world is warming’ and that humankind was partly responsible. Passages indicating that G8 countries would pledge money for specific projects showed a sense of urgency and a willingness to undertake immediate action as a result. Yet a subsequent leaked draft suggested that the now engaged U.S. president had forced the summit to relent on these points. The Americans seemed willing only to do more scientific research to learn more. Immediately after the mid-June sherpa meeting, phone calls flew back and forth, as officials rushed to save themselves from having to take to their leaders documents heavily laden with bracketed text (text in square brackets indicates at least one country disagrees). As June ended the positions came closer. But as the Americans were still reluctant to accept the basic scientific fact of human-caused global warming, there was much left for the leaders at Gleneagles to do. Optimism and pessimism about whether they would succeed held an uneasy balance. Those involved in climate change negotiations for many years judged that Gleneagles, with its limited time for leaders to dealing with this subject, would accomplish little. The British also sought to connect African development and climate change control. One link flowed from the fact that rising energy prices harmed not only an oil-thirsty and import-dependent America and most of its G8 partners, but also the poor countries — indeed, even more. The rise of energy prices to almost US$60 a barrel cost Africa an additional US$10 billion a year (Morrison and Giles 2005). Global warming dried African and Chinese soil and thus led to desertification, crop failures, famine, and other effects that harmed the poor more than the rich. G8 measures to impose a dedicated tax for development on passenger air travel would work simultaneously for both goals. The Summit Process The third outstanding issue was the summit process. An early draft of the summit schedule had the G8 leaders meeting alone all day on 7 July,

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discussing political security issues at a working lunch, and on the final day meeting both their African and climate change guests. The sherpas told their British host that this would leave the G8 leaders inadequate time alone together to deal with key files. The British thus delivered a new schedule on 25 June. A second concern was that the British draft documents were delivered to their partners at a very late date, leaving no time for careful consideration in the field and in capitals back home. Sometimes partners were given the documents only one or two days before the next meeting. The documents for the 1–2 July sherpa meeting were received only on June 25. A third concern was that the British kept pushing their own agenda and proposals despite what their partners said. This was due not to Jay’s inexperience as a sherpa but to his strict instructions from Blair to give nothing away. On the evening of 1 July, the prime minister’s office indicated that pre-summit agreement on key items was unlikely, as the British would push things to the wire at Gleneagles itself to ‘squeeze out’ as much as they possibly could (Baldwin and Charter 2005). Ministerial Meetings To create momentum, accommodate partners’ preferences on lesser items, and free up valuable time at Gleneagles, Blair mounted a vigorous program of lead-up G8 ministerial meetings that blended hitherto separated portfolios. It culminated in the three immediate pre-summit ministerials for finance, justice and home affairs, and foreign affairs. The biggest breakthrough came at the G8 finance ministers meeting on 10–11 June in London. This meeting produced the US$55 billion programme for debt relief for the 40 or so heavily indebted poor countries (HIPCs). The first 18 would benefit immediately, a further nine soon, and the remainder when they met the conditions. The resources of the World Bank, the African Development Bank (AfDB), and the IMF would be left largely intact, replenished by new additional grants from G8 countries so that newly needed loans could be made to the poor. The G8 ministers of justice and home affairs met in Sheffield on 16–17 June. Ron Noble, secretary general of Interpol, was invited to make a presentation on transnational organised crime. The sessions covered a wide agenda embracing immigration, narcotics, cybercrime, counterterrorism, corruption, and the work of the G8 Lyon-Roma Group, in addition to organised crime. The British sought an open discussion, rather than a drafting exercise to produce a document for public release. They brought all the topics into their domestic sphere, as hosts are wont to do. Home Secretary Charles Clark confidently stated that all the G8 countries would adopt biometric identification cards, although such a policy would be difficult to implement in North America. He soon found out identification cards were a subject of political controversy and a possible Labour Party backbencher revolt in Britain as well. Yet, on the whole, there was widespread agreement, even if the agreed conclusions contained square-bracketed text to be negotiated in the weeks that followed.

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On 23 June in London, the G8 foreign ministers gathered to discuss Afghanistan, the Middle East, Iran, and many other issues (Kirton 2005c). The meeting included James Wolfensohn, Special Envoy for Gaza Disengagement for the Quartet on the Middle East. They first discussed Afghanistan and then the Middle East peace process, about which Wolfensohn made a forceful presentation. They next discussed the other issues including Sudan and Haiti. All countries contributed in an equal, balanced, mutually accommodating way. There were no assigned leads on most subjects, so all spoke out in a free-flowing exchange. Although the Japanese and Italians led on some issues, the British led a discussion about an international arms treaty, the Americans led on BMENA and Iran, and the Canadians on Haiti and Sudan. The Russians spoke on all items save Haiti, offering a consistent position and adjusting to their partners’ concerns; they wished to avoid linking messages about nuclear restraint with other concerns or threats, seeking to separate nuclear and human rights issues and to treat Iran and North Korea the same way. Thus the Russians opposed any reference in the concluding chair’s statement to the forthcoming elections in Iran, but relented when the Americans and British insisted. Similarly, the Russians suggested that there be no reference in the statement to North Korean abductions of Japanese nationals, but deferred when the Japanese foreign minister, Nobutaka Machimura, declared that he would not be welcome at home if there was no such reference. The statement and subsequent news conference issued sharp, forceful, unified messages on immediate concerns. It displayed disagreement only on the fairness of the elections in Iran that would take place immediately after the meeting’s end. For their leaders at Gleneagles, the foreign ministers prepared a text on Afghanistan and the broader Middle East. The former dealt with how to raise the major new military and development resources required to build Afghanistan into a stable democracy free of terrorists and a narco-economy over the next ten years. The leaders’ text at Gleneagles on the Middle East peace process would likely be adjusted to include what Wolfensohn said. Blair’s Pre-Summit Diplomacy Tour As the summit endgame approached, Blair toured his G8 partner countries to give a personal push. He began in nearby and neighbourly Italy, then went to more distant and difficult Washington, and continued with Russia. France and Germany also received visits, while Japan and Canada were consulted by videoconference. The European visits helped secure pledges of more ODA, as part of the plan to build the momentum that would ultimately sweep in the U.S., Canada, and Japan. The Washington visit produced the big breakthrough of a bilateral Anglo-American deal on debt relief for the poorest that was accepted by the full G8 at the finance ministers meeting on 10 June. The encounter with Putin paved the way for Russia as host in 2006 to follow up the work launched at Gleneagles on international energy security and climate change. Yet as June drew to an end, Blair was forced to turn his attention to the crisis in the EU and Britain’s bilateral relations with the French and Germans. This left the

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real high-level deal making to the discussions among G8 leaders bilaterally or all together at Gleneagles itself. As chair of both the EU and G8 after 1 July, Blair could bring a single synergistic solution to both the EU’s budget dilemma and the G8’s trade dilemma by forging a deal at Gleneagles to curb or cut agricultural subsidies in the G8, the Organisation for Economic Co-operation and Development (OECD), and the developed world.

The Partners’ Preferences One week before the summit opened, there was still enough divergence among the G8 countries to force the leaders at the summit to really lead. To secure success, Blair needed to bring on board the G8’s leading sustainable development sceptic, George Bush. Bush would arrive self-confidently sporting the G8’s strongest currency and growth rate, the biggest recent electoral victory save for Blair’s own, and the glow of hosting a productive G8 summit the year before. Bush wanted the G8 to stay focussed on his Sea Island crusade of bringing freedom to BMENA, raising resources for the long haul in Afghanistan and Iraq, forwarding the Middle East peace process, and stopping the nuclear weapons’ capability and support for Islamic terrorism in Iran. Yet Bush owed Blair, Italy’s Silvio Berlusconi, and Japan’s Junichiro Koizumi for putting their troops into Iraq and keeping them there even while others pulled out. Bush also admired how Blair had switched his own wary voters’ attention from Iraq to Africa. With a rising American body count in Iraq, getting on board the great global crusade to save Africa had some appeal. Bush’s closest G8 allies in Iraq were committed to the Kyoto protocol. Bush’s Christian evangelical base wanted to develop Africa and to stop genocide in Darfur and the rapacious exploitation of an Earth they said belonged to God. Bush knew that poverty in Africa bred terrorism against America, and that he needed a coordinated programme of international energy conservation to control America’s growing energy insecurity, gas prices, inflationary pressures, and current account deficit. As a realist Texas oilman, Bush also knew that supply-side solutions lay in neighbouring democratic Canada, Russia, and Mexico, whose leaders, along with Nigeria’s, were all conveniently assembled at the Gleneagles. Koizumi sought support for Japan’s bid for permanent membership on the UN Security Council (UNSC). This was a goal that Bush and Blair as well as all their G8 partners except Canada had pledged to support. Koizumi also wished to contain the nuclear sabre rattling and abduction of Japanese nationals from his unpredictable, Stalinist North Korean neighbour and to manage a precarious partnership with regional rival and Gleneagles guest China. On Africa Japan was committed, but worried about its G8-leading fiscal deficit, cumulating debt, and rapidly aging population and soaring pension costs. On climate change, as a Kyoto pioneer, the most oil import– dependent member of the G8, and a country with more than 90 percent of its oil imports coming from the unstable Middle East, Japan sought to bring its G8 partners together to solve the sustainable energy challenge they all faced.

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Germany’s Gerhard Schroeder also focussed on sustainable energy. Germany had long called for greater transparency from hedge funds and other players in the energy market that it believed caused the fear-driven volatility and rise of oil prices that hurt Germany’s inflation rate, industrial input costs, aggregate demand, and growth rate. On Africa, Germany was reluctant to commit additional ODA when its population was aging rapidly and it already had a deficit — a breach of its original Maastricht obligations. As with Japan, a big breakthrough at Gleneagles on sustainable energy rather than African development would bring Germany relief. A deficit-afflicted France was in a similar position. But as a G8 leader in francophone Africa, it favoured a big deal on African development in ways that did not damage the agricultural subsidies of its wealthy farmers at home. It looked for approval of an international aviation passenger or fuel tax so that airline passengers would finance development and control climate change right away. Berlusconi sought support within the EU for his desire to keep running fiscal deficits beyond the Maastricht-mandated ceiling of 3 percent of gross domestic product (GDP). He was thus more than willing to offer firm if vague support for incoming EU president Blair. Italy was also to share the burden on Iraq, the Middle East peace process, and BMENA to help pave the way for its declared intention to pull its troops out of Iraq in the year to come. Canada, as a member of both the Commonwealth, with 18 members in Africa, and la Francophonie, with 28 members in Africa, had a singularly strong incentive to reduce poverty in this linguistically similar confrère (Kirton 2005a). As a Kyoto ratifier whose citizens had long chosen global environmental protection as their first foreign policy priority, Canada sought a stronger regime for climate change control. With proven oil reserves almost the size of Saudi Arabia’s, it also had the power and incentive to induce its American neighbour to join a secure sustainable energy regime. Canada, with a strong anti–nuclear weapons and anti-military tradition, favoured an international arms trade treaty and a reduction of nuclear weapons–related capabilities in North Korea, Iran, and Russia through the Global Partnership against the Spread of Weapons and Materials of Mass Destruction and in other ways. Canada was also the inventor and first host of the APR mechanism, and thus sought a strong role for it in the follow-up to Gleneagles. With a leader who, over the past decade, had made Canada the only G7 member with a fiscal surplus and declining ratio of debt to GDP, Canada strongly opposed any automatic big debt-inducing pledge to give 0.7 percent of gross national income (GNI) in ODA in ten years time, or a full-blown IFF. Prime Minister Paul Martin was eager to lead on global health, given his own experience with polio and that of his father’s. As a member of Parliament from Montreal, with the largest population of Haitians outside of Haiti — a community with consistent support for national unity in the province of Quebec, where support for separatism was rising — Martin was eager to keep the G8 engaged on Haiti. Canada also wanted the G8 to help the broader process of UN reform stay on track and not be held hostage to the issue of who would get any new permanent UNSC seats. Russia’s Vladimir Putin wanted the Gleneagles Summit to pave the way for the gathering he would host at St. Petersburg next year. With the 2006 summit to be

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devoted to energy, and with Russia as an energy and environmental superpower, he wanted Gleneagles to produce a strong, sustainable energy regime. He also wanted Gleneagles to take strong action against terrorism and on BMENA, especially in regard to Afghanistan and other places to Russia’s south, from which Chechenaiding terrorists came. He further sought to protect Russia’s distinctive positions on Iran and North Korea.

Propellers of Performance In addition to these different national interests, values, and preferences, powerful outside forces were pushing the G8 partners to come together as the Gleneagles Summit drew nigh. Growing Global Demands and G8 Vulnerability The first of these forces were the small shocks that reminded G8 leaders of their past nightmares and present compounding, interconnected vulnerabilities. A classic energy mini-shock forced leaders to recall the dangers unleashed in 1973 and 1979. In the lead-up to Gleneagles, from 1 January to 24 June, month-forward closing oil prices on the New York Mercantile Exchange rose 60 percent, compared to only 21 percent for the comparable period the year before. In the week from 17 June to 24 June, just before the 1–2 July sherpa meeting, oil prices reached new nominal highs on four of the six trading days, ending at a new record of US$59.84 a barrel at the close on Friday 24 June. During this week prices repeatedly went above US$60 a barrel in intraday trading. The futures showed that the market expected prices to rise further in the coming months and to stay at elevated levels in the years ahead. These increases took an immediate toll on prospects for the G8 and global economy. Stock markets in the U.S., Europe, and Japan started to drop, as the steady rise of oil prices damaged prospects for corporate profits, GDP growth, and stable prices and triggered memories of the stock market crash of October 1987. On the supply side, the price surge stemmed from new terrorist mini-shocks in Nigeria, where al Qaeda–affiliated Islamic fundamentalists threatened G8 diplomatic posts, from similar fusions in Iraq, Indonesia, and Saudi Arabia earlier, from unusually extreme weather — plausibly associated with climate change — that closed offshore rigs in the Gulf of Mexico, from strikes and social unrest in Norway, Nigeria, and elsewhere, from insecure oil tanker routes and liquefied natural gas (LNG) terminals to bring in supplies from abroad, and from a lack of refining capacity within the G8. Completing this tightly connected complex of reawakened energy-financial-terroristsocial shocks was the nuclear component, as the U.S. had not constructed a single new nuclear power plant since its Three Mile Island explosion in 1979. A new element came on the demand side, as this first embryonic energy crisis of the 21st century was driven by the take-off in growth and demand in the often newly democratising, dynamic powers and Gleneagles invitees of Mexico, Brazil, India, and China.

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On Friday 24 June, the G8 leaders decided to put energy as their top priority at the summit (Hoyos 2005). The long-awaited third priority theme for Gleneagles had arrived. Leaders would first concentrate on the clear and present danger of energy price, supply, and demand. But they would quickly realise the solution lay in the direct connection to clean energy, conservation, climate change control, intra-G8 cooperation with conveniently located, hydrocarbon-laden Russia and Canada, and Russia’s energy priority as G8 host next year. Other small shocks reinforced the sense of urgency. A bomb presumably set off by Chechen terrorists on a Russian train on June 12, the country’s national day, injured several and reminded Russia of the ongoing threat from terrorists at home with Islamic affiliates outside in Afghanistan, Iraq, and the broader Middle East. A Chechen blast that killed ten Russian service personnel at the end of June had a similar effect. The steady flow of caskets of American military service members killed by increasingly imported terrorist insurgents in Iraq and Afghanistan reached politically problematic levels for a Vietnam-sensitised U.S. public and Congress. It gave George Bush a particular incentive to cooperate with his G8 partners to find an adequate way out of what was quickly becoming his broader Middle East quagmire. Elsewhere, the still recent memory of the Asian tsunami on 26 December 2004 produced a reminder of the deadly costs of unpredictable extreme weather and natural forces and a close-at-hand referent for the suffering in Africa. It was a spur to a Gleneagles-generated earth observation system that could measure, warn, and thus help defend against both naturally caused tsunamis and earthquakes and humanfuelled climate change. On issues where clear, tightly connected mini-shocks were absent, the impetus for G8 attention and action was reduced. The small scares of the deadly severe acute respiratory syndrome (SARS) that infected the G8 in 2003, as reinforced by the spread of deadly avian influenza in Asia in the spring of 2004, provided some pressure for action against infectious disease. But the chronic rather than crisis-erupting deaths of innocent civilians in large numbers in Darfur and Congo produced little push for the G8 to perform there. Even on an especially menacing, nuclear-arming Iran and North Korea, it was the distant memories of the Indian nuclear explosion at the time of Tony Blair’s 1998 Birmingham Summit and the subsequent Pakistani explosion that had to serve as a cognitively constructed and remembered shock, rather than rationally recognised, recent material shock. Multilateral Organisational Failure These global demands received a poor response from the established multilateral organisations that constituted the global community’s first line of defence. The UN was in the throes of a major reform effort that would culminate at the World Summit in New York in September 2005. But the prospects for the secretary general’s proposals for reform of the UN Charter and Security Council were poor, and largely reproduced the Westphalian logic and punitive oligarchy of victors produced in 1945. One third of the way to the 2015 date by which the MDGs were to be reached,

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the global community was far behind schedule and looked to the Gleneagles G8 to provide the necessary money and political push. It did also over Darfur, where the UNSC was slow to prevent the genocide unfolding there. Among the functional bodies, the International Atomic Energy Agency (IAEA) was still unable to control the Iranian and North Korean threats. The World Health Organization (WHO) was freely admitting its inability to meet the year-end targets it had set for its ‘3 by 5 initiative’. The IEA remained unable to control oil supply or prices, or even provide the reliable information that would prevent hedge funds from moving the market in disruptive ways. The IMF did little to deal with global imbalances, the undervalued Chinese yuan, or Argentina’s historic and defiant default. The World Bank was waiting to see what new direction it would take under its new managing director, Paul Wolfowitz. The WTO had already missed its December 2004 deadline for completing the Doha Development Agenda negotiations and was looking to the Gleneagles G8 to give it the high-level boost needed to get a deal at its ministerial meeting in Hong Kong in December 2005. Predominant, Equalising G8 Capability The third force was the growth in the global predominance and internal equality within the G8 of the critical specialised capabilities at play. To be sure, in overall capabilities, the global predominance of the G8 was eroding, as the rising emerging powers, led by China and India, competed with a G8 reinforced by the recent eastern expansion of the EU. The G8 seemed destined to emerge as the loser, once the soon expected revaluation of the Chinese yuan arrived to lift its currency and measured GDP power. Within the G7 (that is, without Russia), the U.S. held the lead, both in the rise of its currency and in the growth of its GDP. While there were some signs of a long-awaited revival in Japan, once reliable Britain, Canada, and Russia were all falling behind and Europe remained in its familiar stagnant place. With these trends in relative capability, Bush arrived at Gleneagles with the sense of strength and selfconfidence that generates stubbornness rather than a rush to compromise. Yet, as a former oilman from Texas, Bush was preoccupied with the trends in a critical relative capability — the price and supply of oil. America, once a surplus producer, was declining and, unlike Japan and Europe, had no new nuclear reactors on which to rely. The new great global energy suppliers lay within the G8 in Canada and Russia, rather than in the outside Organization of Petroleum Exporting Countries (OPEC) with little surplus capacity and less control of prices in the new demand-driven crisis now taking hold. A similar story could be told about the other specialised capabilities critical for the Gleneagles agenda, notably environmental technologies, debt relief, development assistance, and trade. Common Principles A fourth force, now from the inside, was the close match between the G8’s core institutional values of open democracy, individual liberty, and social advance and

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the particular agenda and approach that Blair put at centre stage. The African agenda built directly on the 2002 fusion of the New Partnership for Africa’s Development (NEPAD) and the G8 Africa Action Plan, both of which put good governance as a top priority. The debt relief package from 11 June showed how seriously the G8 took the condition and value of good governance. Both Blair and Bush stressed the centrality of good governance and combating corruption to the aid and trade actions they took. Conversely, Sudan’s Darfur, Robert Mugabe’s Zimbabwe, and the Congo vividly displayed the deadly force of development destroying bad governance in Africa’s north and south. Similarly, open democracy and good governance were seen as integral to the energy security and end to terrorism that all G8 countries sought in BMENA, Nigeria, and Angola, and in Venezuela and Indonesia beyond. Fostering transparency in hedge funds to control the uncertainty, volatility, and rise in oil prices also flowed from a G8 democracy norm. And locking in the rule of law in Russia and bringing it to China were thought to encourage energy security, clean technology transfer, and sustainable development there. Political Control A fifth force, again from the inside, was both a cause of summit success and a constraint on it. With his recently secured third majority mandate, host Tony Blair was in a strong domestic political position, especially as the potentially rebellious Labour Party backbenchers, empowered by his reduced majority, pressed him to do more to help the poor. Bush, too, had a recently refreshed majority mandate, yielding an assured future for the next three and a half years, no fear of re-election compromises, and control by his party of both houses of Congress. Russia’s Vladimir Putin sported even more political control, and Japan’s Junichiro Koizumi and France’s Jacques Chirac almost as much. Less secure were Italy’s Silvio Berlusconi and Canada’s Paul Martin, who faced general elections at any time. The only leader with little control was Germany’s Gerhard Schroeder, who had engineered an early election in September. However, almost all these leaders had less political capital than in the recent past. Blair had a smaller majority in his House of Commons than in his previous mandate, and Bush had a plummeting approval rating for him and his Iraq war. Putin faced doubts about the economy and his war on terrorism, as did Schroeder about economic stagnation and persistently high unemployment, Chirac about his voters’ recent rejection of a new EU constitution, Martin about an ongoing corruption scandal, and Berlusconi and Koizumi about similar dissatisfactions as well. Such unpopularity at home reduced the leaders’ freedom to accommodate their G8 partners. But in particular cases it helped Gleneagles get its big deals done. Blair, Bush, Berlusconi, and Koizumi wanted to take their voters’ minds off Iraq and its deadly dangers by delivering successes on Africa, climate change, and other fronts. Bush knew that the soaring historically high gas prices his voters paid at the pumps had become Americans’ number-one domestic concern. And social democrat Schroeder, about to

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go to the polls with his Green Party coalition allies, wanted to show their core voters that he could deliver at Gleneagles the development and sustainability values they cherished at home. Constricted Participation A sixth force, also from inside, was the exceptional continuity of the eight leaders assembling at Gleneagles. Never before in G7/8 history had the same group of eight leaders come to the summit for five years in a row, with Canada’s Paul Martin having been involved since 1994 as finance minister (Bayne 2005). This familiarity and experience, together with the recent electoral mandates of Blair, Bush, and Martin, brought a burst of creative political energy, especially as none of these G8 leaders was looking to retire soon. They had learned how to work with one another even more successfully than had their long-serving predecessors in the 1980s. Moreover, for only the fifth time in the G8’s three-decade history, the summit was being hosted by the same leader for a second time. For only the fourth time had the repeat host been continuously in power during the intervening years. The record of Canada’s Jean Chrétien in 2002 after 1995, France’s François Mitterrand in 1989 after 1981, and Germany’s Helmut Kohl in 1992 after 1985 (if not Berlusconi just returned for 2001 after having been defeated just after 1994) suggested that a second chance would produce a better performance than the first time out. Furthermore, no leader had introduced such far-reaching innovations at his first summit as host, and built on this so strongly at his second, as had Blair. Blair had scheduled his summit just after he assumed the presidency of the EU council, giving him more authority and one less voice to cope with at the summit table. The latter was a real advantage, as shown by the time-wasting divisiveness caused by the talkative Guy Verhofstadt, the Belgian prime minister, at Genoa 2001. Russia was present at Gleneagles because Blair had transformed the G7 into a permanent G8 when he first hosted in 1998. He had also removed G7 finance ministers — a group that did not include the Russians — from the summit itself. Blair did invite to Gleneagles 17 non-G8 leaders and heads of international organisations to participate with the G8 within the middle of a rather short summit. Yet this was fewer than Chirac had invited to the modestly performing Evian Summit in 2003 and only slightly more than Bush invited to his high-performing Sea Island Summit in 2004. Four of Blair’s African guests had been to every summit since 2001, and one of them, Mbeki of South Africa, would participate in the discussions on both Africa and climate change. Virtually all the rest were veterans of G8 summits in the recent past who knew how to make good use of their brief time there. This move from constricted to comprehensive participation was less costly than it could have been, for Blair had carefully chosen his guests to help put his priority agenda, high ambitions, and far-reaching strategy into effect. This was also true for the unprecedented mobilisation of civil society, which drove the summit toward its core tasks, rather than distracted it. The 21st-century G8 summits showed that success had increased as more guests participated at

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the table, and as more civil society voters demonstrated outside in a non-violent way. For Gleneagles, Blair used a magnified 21st-century version of a technique he pioneered in 1998. Then, organised by Jubilee 2000, 70,000 demonstrators surrounded the summit site in Birmingham to link arms, demanded that their elected G8 leaders ‘break the chains of debt’, and pushed them further and faster in the direction Blair wanted to go. In the lead-up to the Gleneagles Summit, Blair and Brown encouraged citizens to go to Edinburgh on 2 July to demonstrate that they too wanted to make poverty history. The same day the ten Live Eight concerts drew an estimated one million spectators and an audience of three billion on television, radio, and internet around the world. This unprecedented mobilisation of peaceful, democratic demonstrators on the global level had a substantial supportive effect. The professional security forces easily coped with the limited number of demonstrators who were physically present.

The Gleneagles Endgame The combined result was a leaders-driven, broadly based grand bargain that produced a historic success on the African development and climate change control priorities and elsewhere. The Summit Schedule and Agenda The Gleneagles Summit began with arrival ceremonies during the day of Wednesday 6 July (see Appendix 4-2 for details on the physical aspects of the summit). It formally opened that evening with cocktails and dinner for the G8 leaders, their spouses, and the Queen. The largely ceremonial dinner allowed for informal conversations to advance issues still at play. On Thursday 7 July, the leaders met from about 1000 to 1130 to discuss the global economy (including trade and oil) and climate change. By then Blair was dealing with reports of the terrorist attacks in London, which had occurred between 850 and 950. He decided, urged by his G8 colleagues, to leave for London right away. With Michael Jay substituting for Blair, from 1215 to 1315 the G8 leaders met with the invited leaders from the Plus Five emerging economies to continue the discussions on the global economy and climate change. This session started with a presentation from the visitors, who had met earlier to prepare. Discussions continued over lunch from 1330 to 1500. Following a press opportunity at 1540, the G8 leaders met at 1700 for an hour, with British foreign secretary Jack Straw in the chair, to discuss regional issues including the Middle East specifically as well as BMENA. From 2015 to 2200, over a working dinner, they dealt with regional issues, counter-proliferation, nuclear issues, and foreign policy. Blair returned to Gleneagles that night. On Friday 8 July, from 1000 to 1115, the G8 leaders focussed on Africa. They met with African leaders, who led off, from 1130 to 1500. Discussions continued through lunch. The summit ended at about 1515, with a final news conference.

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Throughout their time together, the G8 leaders dealt with their prepared priorities, the built-in agenda, and the sudden interruption by the London terrorist attacks. They also addressed the many remit mandates from earlier summits on corruption and transparency, a G8 Africa Action Plan progress assessment, the Global HIV Vaccine Enterprise, terrorism, a nonproliferation action plan, sustainability of the poorest and debt relief, an action plan for African peace support, and the eradication of polio. The Summit Achievements The first outstanding achievement of the 2005 G8 Gleneagles Summit came on the dimension of domestic political management. The summit did much to boost the G8’s and host Tony Blair’s image in the domestic media (Kirton 2005b). In the two weeks leading up to 6 July 2005, the major elite and mass-circulation British and Scottish newspapers gave prominent front-page attention to the G8 and its associated events. Over that period, almost all their editorial pages approved and applauded what Blair, Britain, and the G8 as an institution were doing. Once the summit started, the announcement of London’s victorious Olympic bid on 6 July diminished front-page attention to the G8 and, not surprisingly, the terrorist attacks on 7 July drove G8 coverage to increasingly low levels over the following days. However, the suddenly more critical editorial evaluations of the G8 that appeared on the summit’s opening day were steadily transformed by the Olympic victory and London attacks to become unanimous approval of Blair’s performance at the summit by the event’s end on 8 July. A second achievement came in the dimension of deliberation (see Appendix 4-3). While Blair had been determined to concentrate his colleagues’ attention on basic principles, rather than the fine print of detailed communiqués, the leaders produced 14 documents, among the highest ever to that time. These included documents on Africa and on climate change, where the British desire for comprehensiveness and detail had competed with an American desire — supported by the Russians — for a short, general statement followed, if necessary, by a more detailed action plan. There were also documents on the Asian tsunami, the world economy, and politicalsecurity issues, one of which included Afghanistan (and thus gave it less attention than a separate statement would have). These documents contained innovations that made Gleneagles a directionsetting success. All G8 leaders, including Bush, affirmed Blair’s desired principle that climate change was a scientific fact, caused by human activity, requiring urgent action from the G8 as well as from major developing countries. Gleneagles was also a decision-making success. Driven by America’s desire for measurable results, and its G8 partners’ wish for clear, locked-in promises, Gleneagles produced 212 specific, future-oriented collective decisional commitments, more than any summit before 2004. Gleneagles also set a new summit record for money mobilised, as the estimated US$205 billion attributable to the summit far surpassed the previous high of US$50 billion raised at Kananaskis in 2002 (see Appendix 4-4). Gleneagles offered US$55 billion in debt relief and doubled ODA by 2010. On ODA the

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first members to move had been Blair’s fellow Europeans, just before he assumed the presidency of the EU. In late April came the Japanese, already the world’s second largest ODA donor, who offered to double their aid to Africa over the next three years. Finally, on 30 June, came the U.S., already the world’s largest ODA donor with a president already in the process of tripling America’s ODA from its level when he first took office. Bush pledged to double the already expanded figure before he left. These leaders felt pulled by the force of the Gleneagles G8 to announce these major new commitments just before and at their summit, rather than wait for the UN’s World Summit in September. Other commitments, notably up to US$9 billion for the Palestinian Authority, came as a direct response to the London terrorist attacks. These commitments were delivered to a rather high degree at the summit. There was a clear and credible desire to comply with these commitments. They contained a large number and wide variety of compliance catalysts — setting specific targets and timetables, specifying agents responsible for implementing commitments, generating remit mandates for reports to subsequent summits, and directing other international institutions. One year later, the priority commitments from Gleneagles had been delivered to an unusually high degree (G8 Research Group 2006). Its overall compliance score of +65 percent was led by Britain with 95 percent and the EU (which Britain chaired for the first half of the year) with 89 percent. These scores were followed by Germany with +88 percent, the U.S. and Canada with +81 percent each, France at +57 percent, Japan at +52 percent, Italy at +29 percent, and Russia with at least +14 percent. Seven of the 21 priority commitments assessed scored complete compliance — those for African debt relief, renewable energy, Middle East reform, transnational crime, terrorism, nonproliferation, and tsunami relief. G8 leaders were thus able to fully deliver some key parts of Gleneagles priority themes and the issues highlighted by shocks from terrorism and natural disaster. Gleneagles also created five new institutions of G8-centred global governance to help put its new directions and decisions into effect: the Dialogue on Sustainable Energy, the Working Group on Innovative Financing Mechanisms, Experts on IPR [Intellectual Property Rights] Piracy and Counterfeiting, the Global Bioenergy Partnership, and the African Dialogue Follow-Up Mechanism. On Africa the leaders decided, as Canada had urged, to turn down a proposal to appoint one ‘wise person’ from the G8 North and one from the outreach South to review and report on implementation of the G8’s African plans, and instead to continue with the APRs, who had functioned well since their creation in 2001. On climate change, where the British had pushed hard for a follow-up mechanism, which the Americans had resisting with equal force, a new G8 Plus Five dialogue was put in place. At the ministerial level, in addition to the usual autumn G8 foreign and finance ministers meetings, G8 home affairs ministers met in London on 9–10 November and G8 energy and environment ministers, plus ministers from twelve other countries, met in London on 1 November. Among these many achievements, there were some disappointments and lost opportunities. The British regretted that some of their most far-reaching ambitions, notably on the IFF and a specific date to end agricultural export subsidies, had to be

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abandoned or scaled back. More broadly, their high ambition and delay in adjusting to their partners’ input meant that collective commitments were often not possible, and that only individual, à la carte commitments emerged, with varying degrees of buy-in from the members. This was the case for the pledge of 0.7 percent of GNI in ODA, which only the Europeans agreed to, the overall resources for Africa, which were listed by country in an annex, and the airline tax, which only the French supported. Yet, on the whole, among these compromises, Gleneagles was a summit of historic success, and showed Tony Blair to be a master of concert diplomacy of the first rank. Blair’s achievement at Gleneagles appeared all the more remarkable as the subsequent Russian presidency came to an end on 31 December 2006. Gleneagles had set a model and platform that helped Russia deliver its first ever regular summit with considerable success, most notably in the domains of domestic political management, deliberation, and decision making. But perhaps the greatest legacy came in the realm of civil society and the ensuing democratisation in the G8 hosts, members, and the global community as a whole. There had been almost no civil society participation in the summit process in 2004. Tony Blair took it to historic highs, on a global scale, with resulting achievements in 2005. Russia as host in 2006 institutionalised civil society from the start, establishing the Civil G8, and used its connection with the G8 to deepen democracy in Russia itself. The challenge for Germany in 2007 was less on how to maintain the Gleneagles momentum on African development, climate change, counterterrorism, and peace in the broader Middle East than it was to construct a process of civil society in all G8 members and the global community beyond.

Note 1

The author gratefully acknowledges the financial support of the Social Sciences and Humanities Research Council of Canada, the research assistance of Laura Sunderland, Courtney Brady, and Janel Smith, as well as the editorial assistance of Madeline Koch and the analytical and empirical contribution of members of the G8 Research Group.

References Baldwin, Tom and David Charter (2005). ‘Rock Stars’ Plea to G8 — Don’t Fail World Poor’. Times, 2 July, p. 1. Bayne, Nicholas (2005). Staying Together: The G8 Summit Confronts the 21st Century (Aldershot: Ashgate). Blair, Tony (2004). ‘A Year of Huge Challenges’. Economist, 29 December. (June 2007). Blair, Tony (2005). ‘PM’s Speech at World Economic Forum in Davos, Switzerland’. 26 January, World Economic Forum, Davos. (June 2007).

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Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007). G8 Research Group (2006). ‘2005 Gleneagles Final Compliance Report’. (June 2007). Hoyos, Carola (2005). ‘$60 Oil Casts Pall on Growth’. Financial Times, 25 June, p. 1. Keller, Tom (2005). ‘Apostle of Aid’. National Post, 30 June, p. A22. Kirton, John J. (2005a). ‘America at the G8: From Vulnerability to Victory at the Sea Island Summit’. In M. Fratianni, J.J. Kirton, A.M. Rugman, et al., eds., New Perspectives on Global Governance: Why America Needs the G8, pp. 31–50 (Aldershot: Ashgate). Kirton, John J. (2005b). ‘Gleneagles G8 Boosts Blair at Home’. 1 August, G8 Research Group. (June 2007). Kirton, John J. (2005c). ‘Preliminary Assessment of the G8 Foreign Ministers Meeting in London’. 23 June, G8 Research Group. (June 2007). Kokotsis, Eleanore (1999). Keeping International Commitments: Compliance, Credibility, and the G7, 1988–1995 (New York: Garland). Morrison, Kevin and Chris Giles (2005). ‘Rising Cost of Oil Counters Debt Relief for Africa’. Financial Times, 2 July, p. 6.

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Appendix 4-1: The Concert Equality Model of G8 Summit Performance I. Dimensions of Performance 1. Domestic politics (media attention and approval, public opinion, national addresses) 2. Deliberation (agenda, documentation) 3. Direction setting (priority setting, democratic principles, issue interconnections) 4. Decision making (commitments, money mobilised) 5. Delivery (compliance) 6. Development of global governance (within and outside G8) II. Causes of Performance A. Past Propulsion and Preparations 1. Past performance of summit and host 2. Previous year’s performance of summit and host 3. Cooperation among G8 members in past year 4. Host plan for summit (how much and what) 5. Convergence of preparatory process among sherpa and ministerial meetings 6. Individual members’ priorities and preferences (closure and compromise) B. Present Pressures to Come Together 1. Shock-activated vulnerability (do we need something done?) 2. United Nations/United States system failure (can the UN or U.S. do it?) 3. Predominant equal capability (can we do it together as the G8?) 4. Common democratic principles (should we do it in the G8?) 5. Political capital and control (will our voters let us do it?) 6. Constricted participation (will the summit format let us do it?)

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Appendix 4-2: The Physical Summit Dimension 2004 2005 Site Resort Resort Length in days 3 3 42 48 Length in hoursa G8 leaders present 10 9 Early departures 1 (Martin) 0 Late departures Reagan funeral 1 (Koizumi) Outside country leaders invited 13 12 Outside country leaders attending 12 11 Heads of international organisations invited 0 6 Heads of international organisations attending 0 6 On-site bilaterals 17 6 Sessions at eight 4 4 Hours alone at eight 10 6 Hours alone at eight for working sessions 9 6 Hours of social/ceremonial sessions 3 4 Sessions with outsiders 2 2/4 Hours with outsiders 5 6.25 Media accreditedb 3,100 3,051 Media attendingc 1,492 2,100 Total costs £90.9 million Security costs US$37 million £71.976 million Economic benefits US$1 billion £618 million Security personnel 20,000 10,000 estimated Civil society activists on sited 500 100,000s estimated Arrestsd 15 358 Property damage 0 NA Personal injury 0 20 Deaths 0 0 Summit Schedule Efficiency Ratios Summit hours/Number of outsiders Number of documents/Hours of summit Number of words/Hours of summit

3.8 0.4 917.1

4.4 0.33 464.3

2006 Provincial city 3 45 10 0 0 6 6 9 9 28 4 11 11 4 2 4 3,107 3,107 US$397 million NA NA NA 600 200 NA NA 0 11.25 0.33 682.1

Notes: Numbers are the most reliable and mean estimates of news accounts or, where possible, direct evidence from G8 officials. All costs are in nominal U.S. dollars at prevailing exchange rates. NA means not available. a. Hours: 2004 = 42 hours (from 1800 on 8 June to 1200 on 10 June), 2005 = 48 (from 1700 on 6 July to 1700 on 8 July), 2006 = 45 hours (1800 from 15 July 2006 to 1400 on 17 July). b. Number of media representatives who successfully completed the accreditation process. c. Number of media representatives who picked up their credentials. d. Includes those at the summit, the international media centre, and nearby cities and those taking part in protests, demonstrations, and forums such as The Other Economic Summit. e. Includes those for minor charges such as blocking a highway or providing a false name.

Appendix 4-3: G8 Summit Policy Performance by Function, 1975–2005 Sitea L R C C C P L L R C C C P P C P C P C P P P P

Bayne Gradeb A– D B– A B+ C+ C C B C– E B+ D C– B+ D B– D C+ C B+ B C–

# Days 3 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

# Statements 1 1 6 2 2 5 3 2 2 5 2 4 6 2 11 3 3 4 2 2 3 5 4

# Words 1,129 1,624 2,669 2,999 2,102 3,996 3,165 1,796 2,156 3,261 3,127 3,582 5,064 4,872 7,125 7,601 8,099 7,528 3,398 4,123 7,250 15,289 12,994

# Commitments 14 7 29 35 34 55 40 23 38 31 24 39 53 27 61 78 53 41 29 53 78 128 145

Compliance Scorec +57.1 +08.9 +08.4 +36.3 +82.3 +07.6 +26.6 +84.0 –10.9 +48.8 +01.0 +58.3 +93.3 –47.8 +07.8 –14.0 00.0 +64.0 +75.0 100.0 100.0 +36.2 +12.8

# Ministerials 0 0 0 0 0 0 1 0 0 1 0 1 0 0 0 0 0 1 0 1 2 0 1

# Remit Mandates 1 1 1 0 1 1 1 1 1 3 1 1 1 1 1 3 3 2 5 2 6 2 10

# Official Bodies Created 1 0 1 0 2 1 0 3 0 0 2 1 2 0 1 3 0 1 2 0 2 3 3

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Year 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

76

Appendix 4-3: G8 Summit Policy Performance by Function, 1975–2005, continued Bayne Grade B+ B+ B B B+ C C+ AC+ B– C– C+ B B–

# Days 3 3 3 3 2 3 3 3 3 2.8 2.1 3 3 2.9 3

# Statements 4 4 5 7 18 14 16 16 15 5.6 2.9 3.3 4.0 6.7 15.3

# Words 6,092 10,019 13,596 6,214 11,959 16,889 38,517 22,286 30,695 8,475 2,526 3,408 6,446 10,880 27,097

# Commitments 73 46 105 58 187 206 245 212 317 72.5 29 34 56 106 183.8

Compliance Score +31.8 +38.2 +81.4 +49.5 +35.0 +51.0 +54.0 +65.0 +.37 +.32 +.32 +.48 +.41 +.62

# Ministerials 0 1 0 1 1 0 0 0 0 .34 .14 .29 .57 .57 0

# Remit Mandates 3 3 5 4 6 4 2 4 2 2.6 1.0 1.0 3.1 4.7 3.0

# Official Bodies Created 0 5 4 2 8 5 15 5 4 2.4 0.7 1.1 1.3 3.6 7.3

Notes: a. Site: L = Lodge on outskirts of capital city; R = remote resort; C = inside capital city; P = provincial (not capital) city. b. Bayne Grade is determined by Nicholas Bayne (2005). c. Compliance scores from 1990 to 1995 measure compliance with commitments selected by Ella Kokotsis (1999). Compliance scores from 1996 to 2005 measure compliance with G8 Research Group’s selected commitments (see G8 Information Centre website at ). British-hosted summits are in bold.

Financing Development

Year Site 1998 P 1999 P 2000 R 2001 P 2002 R 2003 P 2004 R 2005 R 2006 P All Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5 (to date)

Appendix 4-4: Money Mobilised by the Gleneagles Summit Cumulative US$3.5 million

US$101.2 billion

US$156.2 billion US$156.2 billion US$173.2 billion US$183.9 billion US$184.9 billion US$193.9 billion US$203.9 billion US$204.7 billion

Description Climate change in Africa Forestry biodiversity Legal timber procurement Legal timber procurement Doubling of aid to Africa (to US$1.6 billion over next three years) (800 million × 3 ÷ 2) US$100 billion Doubling of foreign aid, with German conditions (40 billion to 80 billion/year, or to 0.56% by 2010 and 0.7% by 2015) (40 billion × 5 ÷ 2) US$55 billion Debt relief for heavily indebted poor countries £3 million Official development assistance to Malawi US$5.3 million Official development assistance to Malawi US$17 billion Debt relief for Nigeria US$10.75 billion Doubling of aid to Africa (from 2004 levels), increasing to 8.6 billion by 2010 (4.3 billion × 5 ÷ 2) US$1 billion Aid for trading capacity of developing countries US$9 billion Palestinian Authority (up to US$3 billion per year over three years) US$10 billion Official development assistance (increased in aggregate over the next five years) US$750 million Debt relief for heavily indebted poor countries on non–official development assistance loans

Country UK

Source (Date) G8 environment and development ministers (2005/03/18)

Japan

Asian-Africa ministerial meeting (2005/04/22) Christian Science Monitor (2005/05/26)

EU

BBC World News (2005/06/11) Sunday Times of Scotland (2005/06/19) Paris Club BBC (2005/06/30) U.S. Washington Post (2005/07/04) UK

EU World Bank Japan

Briefing by EU president (2005/07/06) Statement on Middle East Peace Process (2005/08/09) Statement on Africa (2005/08/09)

Russia

Statement on Africa (2005/08/09)

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US$1.2 billion

Amount £500,000 £1 million £500,000 US$3.5 million US$1.2 billion

Note: Total new money: US$204.7 billion. 77

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Chapter 5

Blair, Brown, and Gleneagles: Making Poverty History or Confronting Unequal Development Anthony Payne1

Addressing the annual Labour Party conference in Brighton in England in September 2004, the Irish rock star Bono described Tony Blair and Gordon Brown, the prime minister and chancellor of the exchequer of the United Kingdom, as the Lennon and McCartney of global development. For two politicians steeped throughout their careers in the politics of spin it did not get much better than that. One journalist later reported that ‘both Blair and Brown grinned away like autograph-hunting schoolboys as the U2 man made his point’ (Wheeler 2004). Bono did indeed have a point. In February 2004 Blair had established the Commission for Africa (CfA) charged with systematically analysing all aspects of Africa’s plight with a view to placing these problems centrally upon the international political agenda. Brown, for his part, had devoted much of his speech on the opening day of the Labour conference to a call for a new debt initiative designed to help the world’s poorest countries and for significant moves to open up the international trade barriers that were hampering the economic prospects of so many non-industrialised countries. In a series of speeches, statements, and interviews given in the aftermath of the conference, both men pressed their joint agenda still further, focussing specifically on the opportunity presented by the year 2005, when it was the UK’s turn to hold the presidency of the G8 and thus host the annual summit, scheduled on this occasion to convene in Gleneagles in Scotland on 15–17 July. Brown (2004) delivered a powerful and moving lecture to the Catholic Agency for Overseas Development (CAFOD) in memory of Pope Paul VI, in which he described 2005 as ‘a make or break year for development’. He called specifically upon the richest countries of the world to enact a comprehensive financing programme to help poor countries, to advance further to meet the Millennium Development Goals (MDGs) agreed to by nearly all world leaders at the United Nations Millennium Review Summit in September 2000, and to deliver the Doha Development Agenda under the auspices of the World Trade Organization (WTO) on terms that would make it ‘the first ever world trade agreement to be in the interests of the poorest countries’. Blair, in turn, added another dimension to the emerging package in his speech to the World Economic Forum in Davos in January 2005. He reiterated his determination to act to help Africa and went on to identify climate change as the other great issue

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he wanted to address via the UK’s presidency of the G8 (Blair 2005a). His aim here, he said, was to inject new political will into the consideration of the problem and, above all, to ‘set a direction of travel’ for the G8 and all other countries in confronting the damaging consequences of climate change. Blair was even alert to those who downplayed the G8 presidency as ‘little more than a chance to showcase the host nation at the annual summit’ (Blair 2004). He saw it rather as ‘an important opportunity to influence the international agenda of some of the world’s most prosperous and powerful countries’, especially given that the summit was to be followed later in the same year by a series of other high-level meetings, including the UN MDG review conference to be held in New York in September, the United Nations Framework Convention on Climate Change (UNFCCC) meeting to be held in Montreal in November and December, and the WTO ministerial meeting to be held in Hong Kong in December. In sum, 2005 offered what Blair (2005a) himself was quite willing to highlight as ‘a unique set of opportunities’. The political stakes had thus been set at a high level by both Blair and Brown themselves even before the UK’s G8 presidency had really begun (Blyth et al. 2005). But, as the early months of the year unfolded, they were raised to an even greater, and probably unprecedented, level by the huge success of the Make Poverty History (MPH) campaign. This campaign was run by a UK coalition of nongovernmental organisations (NGOs), itself a part of a wider global movement of consciousness raising and protest organised through the Global Campaign Against Poverty (GCAP). Highlights of the campaign included the wearing of symbolic white wristbands by hundreds of thousands of people, a big march in Edinburgh just prior to the start of the G8 summit, and the series of Live Eight pop concerts put on around the same time by Bob Geldof and Bono. This chapter seeks to make political sense of Blair and Brown’s Gleneagles agenda and the outcomes of the key diplomatic meetings of 2005. It does not attempt to assess the source or the extent of the motivations of the two men, presuming them to be genuine. Nor does it seek to evaluate the strategy and ultimate impact of the MPH campaign, presuming that it can only have added to the political pressure felt by all the G8 leaders at the time they met in Scotland. Rather, it reflects on the aspirations and achievements of Gleneagles and all that followed, offers a critique of the conceptual framework within which Blair, Brown, and the MPH campaign all seem to operate, and proposes an alternative, and more hard-headed, political reading of the way that the Gleneagles agenda unfolded during the course of 2005.

The Gleneagles Summit G8 summits are the descendants of an initial, exclusive meeting of western world leaders (including Japan) held in Rambouillet, France, in 1975. They have become regular events and have grown increasingly formal, prepared meticulously by representatives of the leaders known as sherpas. The institution has come to acquire a reputation for launching bold new ideas and initiatives, and then failing to implement or live up to

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them (Bayne 2000, 2005). Nevertheless, on some notable occasions the leaders have given a decisive steer to the making of policy in key areas of global concern and, in general, the G8 process has not been given the attention that its centrality to global political decision making has lately come to merit.2 It is the case that the G8 is the closest institutional representation of an organising political intelligence at the summit level of the world order currently in existence. Indeed, John Kirton (1999, 46) has gone further and described it as ‘prospectively the effective centre … of global governance’. This claim is reinforced by the fact that the G8 network now also embraces meetings of foreign, finance, trade, justice, environment, home, employment, energy, and education ministers, as well as ad hoc meetings, task forces, and working groups to address pressing issues and embrace the leaders of other groupings. The Gleneagles Summit was thus preceded by a full programme of other G8 ministerial meetings, with finance ministers working especially hard in that they convened three times between February and June 2005. At the summit itself meetings with non-G8 countries — or ‘outreach’, as it has rather revealingly come to be called — took two forms. On the first day, the G8 heads met with the leaders of Brazil, China, India, Mexico, and South Africa, described in the official documentation as ‘emerging economy countries’, with a view to associating them with the deliberations on climate change (G8 2005). On the second day, the G8 members were joined for their discussion of Africa by the leaders of Algeria, Ethiopia, Ghana, Nigeria, Senegal, South Africa, and Tanzania. As ever, the summit was prolific in respect of the production of documents — a total of 14 in the leaders’ names, in addition to the chair’s summary and the emergency statement on terrorism issued at the end of the first morning. Early, imprecise reports of the terrorist attacks in London began to be received in Gleneagles just as the summit opened on 7 July. These events affected the mood of the entire gathering. It is likely that a desire to show what kind of leadership could be offered by democratic countries encouraged a willingness to make concessions in the some of the key areas of decision. It is possible that Blair’s absence for most of the first day (he flew back to London for seven hours), as well as the decision to shorten the discussion of Africa in order to end the summit early on the second day, may have generated some extra imprecision in what was actually agreed upon. Nevertheless, the main outcomes of the summit in relation to the substantive agenda set by the UK presidency in advance of the meeting can be summarised easily. In relation to Africa they included decisions: • to double aid to all developing countries by around US$50 billion per year, with at least US$25 billion extra per year for Africa; • to take forward via a working group discussion of innovative financing mechanisms to generate more aid, including the International Finance Facility (IFF), pushed for the past two years by Brown, and an air-ticket solidarity levy, recently suggested by the French government; • to cancel all of the debts (estimated to be more than US$40 billion) owed by eligible heavily indebted poor countries (HIPCs) to the International Development

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Association (IDA) of the World Bank, the International Monetary Fund (IMF), and the African Development Bank (AfDB); and • to boost investment in health and education in Africa, and to take action to combat HIV/AIDS, malaria, tuberculosis, and other killer diseases.3 In relation to trade, the G8 leaders pledged ‘to work to further increase momentum towards our goal of an ambitious and balanced outcome’ in the forthcoming WTO negotiations in Hong Kong, with a view to bringing them to conclusion ‘by the end of 2006’ (G8 2005b). In relation to climate change, a separate statement acknowledged at the outset that ‘human activities’ contributed to ‘the warming of our Earth’s surface’ (G8 2005a). It committed the G8 to ‘act with resolve and urgency’ to reduce greenhouse gas emissions, to ‘work together, and in partnership with major emerging economies’ to achieve ‘substantial reductions’ in such emissions, and to continue to pursue these ends within the existing UNFCCC process, which meant making a success of the Kyoto protocol by those member countries of the G8 that had ratified it. More adventurously, the leaders initiated the wider Dialogue on Climate Change, Clean Energy, and Sustainable Development and invited other interested countries to join. Blair agreed to convene the first meeting in the UK in the latter part of 2005. Russia indicated that during its G8 presidency in 2006 it would focus on energy (on which theme the leaders produced a worthy set of mostly technical proposals for common action). Japan undertook to receive a report on the dialogue’s achievements at the 2008 summit that it would convene. Blair’s summary as chair made it clear that the five emerging economy countries had agreed to participate in this new dialogue. They themselves issued no public comment beyond a presummit ‘joint declaration’ (Lula da Silva et al. 2005). In it, inter alia, they reiterated the founding Kyoto principle of the ‘common but differentiated responsibilities’ of countries with respect to climate change and pointed out, gently but firmly, that this meant that ‘developed countries should … take the lead in international action to combat climate change’, leaving developing countries to focus on economic and social development and poverty eradication as their ‘first and overriding priorities’. They did not make any mention of committing themselves to reduce the greenhouse emissions of their own countries. As one might expect, the implications of many of these agreements were not necessarily what was first implied. They had been drafted with skill and were designed obviously to boast about achievement and to obscure discord. A full and thorough exegesis of the whole Gleneagles agenda will show that much less was delivered by the summit than these headline outcomes seemed to proclaim. But it is interesting to consider first the immediate debate to which the publication of the summit’s various communiqués and statements gave rise. Blair typically sought to set the agenda of the world’s media. In the closing news conference he conceded that ‘it is in the nature of politics that you do not achieve absolutely everything you want … we do not simply by this communiqué make poverty history’ (Blair 2005d). But, he went on, ‘we do show how it can be done, and we do signify the political will to do it’. Indeed, pressed by a journalist on this last point, he declared that the various

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new commitments on aid, debt, and health were ‘strong’ and, perhaps injudiciously, went on to add that, if delivered, ‘they will make poverty history’. On trade Blair was prepared to admit that he had argued for the inclusion of a specific date for the ending of G8 agricultural export subsidies, but had not been able to get agreement. On climate change, though, he was distinctly optimistic, evaluating the summit’s statement as follows: What it isn’t … is a renegotiation of a climate change treaty, or a going back over the disagreement over Kyoto. What it is … is a firm consensus that this problem needs to be tackled, has to be tackled now, together with a dialogue for the future and a plan of action that brings on the one hand the major wealthy economies, including America, and on the other hand the emerging economies of China and India and other countries together. That … is something to be proud of.

Gleneagles, in his view, represented ‘significant progress’ and was a demonstration, in marked contrast to the terrorist tactics deployed in London the day before, that ‘there is a better and more hopeful way of doing politics in the future’. Blair’s accomplished use of spin created problems for the various NGOs that made up the MPH coalition.4 The truth was that the coalition had been cleverly co-opted by Blair and Brown in the run-up to Gleneagles, with the consequence that it was initially wrong-footed by the tone taken by Blair in particular in the immediate aftermath. The campaign’s official reaction reflected this uneasiness. ‘Today’, it announced on its website, ‘the G8 have chosen not to do all that campaigners insist is necessary to free people trapped in the prison of poverty. Important steps have been taken … but more action is urgently needed’ (MPH 2005). This barely concealed the very real differences of opinion expressed by specific individuals and groups. Geldof himself awarded the leaders impressive scores: ‘on aid, 10 out of 10; on debt, eight out of 10 … mission accomplished frankly’, a comment for which he has since been widely derided within many parts of the NGO movement (Monbiot 2005; see also Geldof 2005). At the other end of the spectrum, more critical voices felt not only a genuine disappointment that the G8 had not delivered more — CAFOD (2005), for example, stating that ‘warm words can’t replace concrete action’ — but also that the MPH campaign had actually weakened the main G8 summit protests in Scotland. For example, Walden Bello, director of the Bangkok-based NGO Focus on the Global South, argued that the MPH leadership ‘chose not to radicalise’ the main pre-summit march in Edinburgh (Shabi 2005). ‘This was a very different mood from previous G8 counter-mobilisation’, he asserted. ‘Here it was, “Let’s work with the G8”, and a rather mellow atmosphere, while other mobilisations have been more confrontational’. By implication, MPH had become unduly influenced by celebrities and had positioned itself too close to Blair and Brown and their like. These are, of course, classic dilemmas for all protest groups. However, what is striking is the high degree of consensus about how to think about the issues being tackled by the G8 — the key organising assumptions — shared by both Blair and Brown, on the one hand, and the mainstream MPH campaign, on

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the other. The problems were very much presented as if the G8 could solve them, if only it could summon the necessary political will to do so. The presumption, in effect, was that poverty could be made history by command of the leaders of the world’s richest countries. The difference of opinion was then reduced to the matter of whether they were serious about enacting and implementing such a programme of change. Some may have given them eight, or even ten, out of ten; others scores that were much lower; but all could engage in the game as if it was ice-skating rather than international politics. The commonalities even extended to the conceptual language deployed, specifically that the purpose of the politics in question was to bring what was always unquestioningly referred to as a ‘development’ dimension to the making of policy. The concept of development itself was rarely, if ever, defined, the presumption being that it referred in some uncontested way to the improvement of the lot of the least developed countries (LDCs) of the world. It was conventionally assumed that all could approach these events as if a simple dichotomy between developed countries and developing countries, between North and South, was the best — indeed the only — way to frame the issues at stake. For most, to be sure, the relationship between these two worlds was no longer to be conceived of as a matter of charity. For Blair, explicitly, what was desired was ‘a partnership’ between the G8 and Africa (Blair 2005c). Others in the MPH movement may more generally have preferred to think that what was required was better described as justice. But this was at best no more than a somewhat harder position on the same spectrum. However, what if the very notions of ‘developed’ and ‘developing’ countries, of ‘North’ and ‘South’, had long since become outdated as organising categories of both action and analysis to the point where they actually worked to mislead and were only being preserved because a professional ‘development community’ had built its existence on them and academics had become too lazy (or involved in that community) to bother to challenge their continued usage?

Rethinking the International Politics of Development inside the Study of Globalisation One must move on from the bipolarities that have characterised much of the classic terminology of the field of development studies and try to re-engage with the concept of development in a more complicated way by rethinking what it might sensibly mean within the context of those wider discussions of global economic and political change (‘globalisation’) that have been taking place inside the emerging field of critical political economy (Payne 2005). What follows are basic elements of an alternative and, one hopes, improved way of conceptualising the international politics of development than that deployed in most existing reflections on the significance of Gleneagles. The necessary rethinking can be effected via four moves. First, it rejects the ‘exceptionalism’ of a special category of countries deemed to be in particular need of development and instead casts the whole question of development as a universal

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question, as ‘a transnational problematic’ grounded in the notion that ‘all societies are developing as part of a global process’ (Pieterse 1996). Second, it focusses attention on development strategy, principally as still pursued by a national economy, society, or polity, albeit within a global or regional environment. More than a decade ago, in fact, Björn Hettne (1995, 263) described development as no more (but also no less) than ‘societal problem solving’, implying that ‘a society develops as it succeeds in dealing with predicaments of a structural nature, many of them emerging from the global context’. Third, it recognises that such strategy necessarily involves the interaction, and appropriate meshing, of internal and external elements, even if in many cases the latter do seem to be increasingly overbearing. In this vein Philip McMichael (2000, 150) has noted that ‘states still pursue development goals, but these goals have more to do with global positioning than with management of the national “household”’. Fourth, it insists upon due recognition of variations of time, place, and history in development predicaments, something that Stuart Corbridge (1990) called for years ago and that was not characteristic of a lot of classical development theory in both its modernisation and dependency guises. In these ways development can be redefined for the contemporary era as ‘the collective building by the constituent social and political actors of a country (or at least in the first instance a country) of a viable, functioning political economy, grounded in at least a measure of congruence between its core domestic characteristics and attributes and its location within a globalising world order, and capable on that basis of advancing the material well-being of those living within its confines’ (Payne 2005, 41). The salient point underpinning this definition is that it retains the traditional focus of the study of development on countries, but argues, perhaps distinctively, that all countries in the world should be seen as having to pursue development. In other words, it no longer makes sense to think of development as something that only ‘developing countries’ need to achieve or have done to them. By the same token, the so-called ‘developed countries’ cannot be thought somehow to have completed their development, for they too manifestly still have to engage with the world order and chart domestic strategies for so doing. In short, the argument is that development is an issue for every country. The further point is that all country development strategies inevitably also have a critically important external dimension upon which international relations specialists can properly focus their inquiries. Countries cannot avoid reaching outward in pursuit of advantage, interests, and position and, in so doing, they come into conflict with the strategies of other countries working to exactly the same dynamic. In an old-fashioned turn of phrase, this might be described as the international relations of development. To talk of a global politics of development is the best way of highlighting the full complexity of the patterns of inter-state conflict that emerge from the intrinsically competing development strategies of the whole range of states now in existence in the world because such a phrase signals better that international (inter-state) politics now takes place — and has to be understood as taking place — in the changed, and still changing, structural context that the concept of globalisation, however imprecisely, seeks to capture. It is certainly not presumed a priori that the

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countries involved in these relations fall neatly into ‘developed’ or ‘developing’, ‘North’ or ‘South’, or even ‘richer’ and ‘poorer’ groupings. Instead, they spread across the full spectrum of material capabilities, they are located in different regions of the world, they have experienced different histories, and they are characterised by different state-society relationships. In the final analysis, there is no alternative but to recognise, and try to analyse, the enormous complexity of the global politics that flows out of the great variety of positions taken up by states on all of the development issues around which they have to negotiate. This ‘global politics of development’ approach draws attention to the tough inter-state politics that actually ran through all of the areas of policy addressed by the Gleneagles agenda. In so doing, it exposes the Gleneagles outcomes to closer critical attention, explores relevant post-Gleneagles meetings and discussions, and, ultimately, establishes what of Blair and Brown’s Gleneagles agenda had, or had not, been agreed to by the end of 2005, and explain why. The analysis covers that agenda across three separate but obviously interlinked arenas of development diplomacy, namely, finance, trade and the environment. Finance The background to the analysis of the financial proposals made at Gleneagles is that there had begun to be revived over the preceding two or three years something akin to the pattern of the Cold War era, when aid flows were predominantly dictated by perceived security concerns rather than humanitarian needs (Woods 2005). As a consequence, it was becoming apparent that the attempt to shift the whole tenor of aid politics to a new level, which was what the strategy of formally adopting the MDGs was really about, was in grave danger of failing even before it had properly started. Official development assistance (ODA) has always been a controversial topic. The current orthodoxy, represented by a much-cited paper published by Craig Burnside and David Dollar (2000), argues that aid has a positive impact on growth in ‘developing countries’ with ‘good’ fiscal, monetary, and trade policies. Yet other studies, including some that use the very same data sets, come to much less confident conclusions about the presumed existence of a positive relationship between aid and economic growth and some cast real doubt on the firmness of the evidence (Easterly, Levine, and Roodman 2003). This suggests to some critics that aid is in danger of being used by many western governments as a form of political ‘spin’ by which to appear supportive of the development efforts of poor countries without having to tackle more difficult structural issues (Taylor 2005, 2006). Nevertheless, notwithstanding the persuasiveness of this argument in political terms, it is hard not to welcome increases in aid, including that promised by G8 donors at Gleneagles. The more immediate and relevant question was what exactly it amounted to. Oxfam has calculated that this much publicised sum — around US$50 billion a year by 2010, compared to 2004 — represents only an additional US$16 billion to the global aid budget above and beyond already current trends as projected by the Development Assistance Committee (DAC) of the Organisation

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for Economic Co-operation and Development (OECD). Oxfam also notes that it would need to be boosted by an astonishing further US$121 billion (in other words, to US$169 billion) if the pledge of granting 0.7 percent of gross national income (GNI), originally agreed to as a target as long ago as 1970, was actually to be met by the G8 (Lawson and Green 2005, 2–3, 4). The majority of the projected increase in aid was scheduled to come from the European Union members of the G8 and Japan. In May 2005, just before Gleneagles, the EU set an interim target of 0.56 percent by 2010, on the way to fulfilling the 0.7 percent pledge by 2015. At Gleneagles the Japanese prime minister, Junichiro Koizumi, responded to Blair’s entreaties by announcing increased ODA of some US$10 billion over the next five years. U.S. president George W. Bush agreed, albeit not quite specifically, to double U.S. aid to Africa between 2004 and 2010, but refused to be bound by the 0.7 percent target. Canada similarly refused to go beyond the increased aid commitments (to a mere 0.33 percent of GNI by 2010) that it had earlier made at the 2002 United Nations International Conference on Financing for Development in Monterrey. In short, it took a lot of political pressure to secure even the announcement that was made. It should be remembered, too, that the various commitments are only promises. Within the EU, the German and Italian governments have since warned of possible budgetary constraints. The U.S. government has long had a poor record of matching disbursements to commitments and still needs to get the support of Congress for its component of the Gleneagles aid deal. Finally, a large proportion of the increases in the two years following Gleneagles would actually be used to fund debt relief for Iraq: this alone would inflate overall ODA by some US$30 billion without any new money going to the poorest countries of the world (Taylor 2005, 2006). The overall picture revealed here in relation to aid is certainly not totally gloomy. But there is no doubt that, away from the limelight of the summit itself, some of the limits of the possible have become apparent. Despite being prompted by strong expressions of public concern about aid in the period before they gathered together, the G8 leaders can be said to have moved only cautiously and hesitantly beyond their own selfish interests. What was announced at Gleneagles was at best a collection of separate promises of varying quality, put together at the last minute. It was definitely not a plan to put delivery of the MDGs safely back on track. Nor did such a plan take shape at the UN World Summit held to review progress toward meeting these goals in New York in September 2005. The so-called ‘outcome document’ did in the end reaffirm the MDGs (United Nations General Assembly [UNGA] 2005). That was in itself a modest achievement since the new U.S. ambassador to the UN, John Bolton, had initially stunned those preparing the text by tabling no fewer than 750 amendments to the outline draft, including deletion of all reference to the MDGs (Borger 2005)! This was probably no more than a crude — but nevertheless effective — bargaining tactic, because the U.S. ultimately relented, at least on this highly symbolic matter. But, by general consent, the final text was a great disappointment, reflecting the lowest common denominator of agreement. No collective agreement could be reached on a timetable by which to meet the longstanding 0.7 percent ODA target, with recalcitrant countries that had

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not yet done so merely being urged to make concrete efforts in that direction. Nor did signatory governments offer any explanation for the lack of progress that was being made toward reaching the MDGs. The outcome document also applauded those European countries — the United Kingdom, France, Italy, Spain, and Sweden — that just a few days earlier had launched the pilot International Finance Facility for Immunisation (IFFIm), a scheme that aimed to raise an additional US$4 billion over the next ten years to support the vaccination of children. What was left unsaid was that this was all that had so far emerged from Brown’s (2003) original plan to set up a wider IFF capable of borrowing against future aid flows on the international capital markets. Although the European G8 countries had eventually endorsed this concept, albeit with some conditions, the U.S., Japan, and Canada had refused to entertain it, each for their particular development reasons. The idea was still not totally dead, and Brown certainly continued to promote it within the community of G8 finance ministers. But it is not likely to be realised in the near future. The UN summit document endorsed in similar broad terms the necessity of securing the financing to support the various health-related MDGs, just as the Gleneagles communiqué had done. But this too belied the harsher reality of the decisions taken, or rather not taken, at the First Replenishment Conference of the Global Fund to Fight AIDS, Tuberculosis, and Malaria held in London in early September. Itself the product of an earlier Italian-led G8 initiative, the Global Fund had opened its doors in January 2002 and had initially received and spent substantial sums of money, generally to good purpose. However, by the time of the replenishment conference, that growth had stalled (Rivers 2005). At the London meeting donors were willing to pledge enough money to continue ongoing programmes in 2006 and 2007, but their efforts fell US$3.7 billion short of what was necessary to finance fully the new activities the Global Fund (2005) had planned. Perhaps unsurprisingly, this meeting generated virtually no media coverage anywhere in the world, a far cry from the attention such issues received immediately before, during, and after Gleneagles. This leaves the debt deal to consider. The G8 has, in fact, been discussing the severity of the debt burden ratios built up by some of the poorest countries of the world since at least its 1998 summit at Birmingham. It later negotiated various improvements to the original, and much criticised, HIPC Initiative put together by the World Bank and the IMF.5 Thereafter, and to its credit, the UK government tried hard to keep the question of poor country debt in the minds of the other leading western governments, but it seemed increasingly as if the political energy had gone out of debt as a G8 issue. It is therefore again very much to be applauded that, in the run-up to Gleneagles, Brown was able to bring his fellow G8 finance ministers back to the problem of debt and to lead them to converge on a proposal to offer full relief of the debts owed to the World Bank, the IMF, and the AfDB by some poor countries. At Gleneagles the leaders endorsed it, but added nothing to what their finance ministers had agreed to do. Brown was not even present at the summit. The deal was unquestionably a significant move by the G8, even though there were still many ‘devilish details’ to weigh into the balance (Hurley 2005).

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Indeed, the proposal had still to be worked up properly and approved at the autumn 2005 annual meetings of the World Bank and the IMF. There were genuine worries that some (non-G8) countries would not agree to fund the write-off in ways that compensated the two multilateral institutions for the lost reflows. From his position as chair of the IMF’s International Monetary and Financial Committee (IMFC), however, Brown succeeded in piloting the proposal through most of the opposition (IMF 2005a; 2005b); the funds provided, while additional for the World Bank and the IMF, would still be taken from the ODA budgets of donor countries. Nevertheless, the decisive announcement was eventually made by the IMF in late December 2005 that, as of the beginning of 2006, a first group of 19 countries would be granted 100 percent debt relief under the terms of what was renamed the Multilateral Debt Relief Initiative (MDRI). Campaigners had again feared that several countries (possibly Ethiopia, Madagascar, Nicaragua, Rwanda, and Senegal) would be knocked off the list as publicised at Gleneagles, but in the event only Mauritania fell by the wayside (European Network on Debt and Development 2006). The deal possesses some other less attractive features. It requires that beneficiary countries receive dollar-for-dollar reductions in IDA flows equivalent to the amount of debt cancelled; it continues to tie them into the flawed HIPC process with its unpopular and often damaging conditionalities; it does not include debts to other multilateral bodies, such as the Inter-American Development Bank (IDB) and the Caribbean Development Bank (CDB); and it excludes many, many other poor, indebted countries (although it is the case that some other countries currently at or approaching their HIPC ‘decision point’ could become eligible with time). In all of these senses, therefore, ‘the G8 debt deal in no way represents 100% debt cancellation: it neither covers 100% of countries nor 100% of debts.’ (European Network on Debt and Development 2006). Finance thus emerges as an arena within the global politics of development where, notwithstanding considerable public pressure and sterling efforts to open up some room for social democratic manoeuvring by Brown, there nevertheless exists sustained evidence of the domination of the diplomatic and policy agenda by the most powerful countries of the world. Gleneagles presented the best public face that could be put on the raw power of the G8 countries. But it could not conceal some harsher continuing realities: that countries in need of aid are still, in essence, supplicants at the top table, that the HIPCs remain closely supervised by the IMF and the World Bank, and that the policies of rich countries are rarely driven for long by notions of generosity. Trade By the summer of 2005, the so-called Doha Development Agenda, initiated by the WTO in November 2001, had made little substantive progress toward an agreement. Time was running out if the ‘round’ was to be completed some time in 2006.6 The Gleneagles Summit discussed the matter but could not move beyond exhortation. Blair did seek to exact some specific commitments from the leaders. But everybody in the end preferred to leave the whole question to the forthcoming meeting of trade

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ministers in Hong Kong at the end of the year. The defence was made that the WTO was the appropriate arena for the work that had to be done and that the record of zthe G8 countries should be judged after Hong Kong, not after Gleneagles. The Hong Kong ministerial has since come and gone, with no deal struck and with no certainty as it ended that one could be agreed before U.S. ‘trade promotion authority’ (better known as ‘fast track’) would run out in June 2007. But a new deadline of the end of April 2006 was set, by which time Geneva-based talks were supposed to have settled upon broad modalities in all of the main negotiating areas. This too came and went, replaced by aspirations that an outline deal should be struck by the middle of the summer of 2006. Even in that eventuality it would have been difficult to have pushed through a full agreement in the available time, and some commentators were quick to note that expectations would in all probability again have to be lowered or the round would have to be dragged out into the medium-term future (Wilkinson 2006). It is, however, the case that the basic shape of the kind of deal that the G8 countries would probably like to have seen did at last begin to be revealed at Hong Kong. Contrary to all the promises made, dating back to Doha and repeated many times thereafter, including at Gleneagles, this would not have been a ‘development’ round, at least in the sense in which that phrase has always been understood, namely, a round that was meant to offer significant redress for at least some of the many disadvantageous features that the non-G8 countries had unwisely signed up to as part of the previous Uruguay Round. By contrast, the emerging prospectus would have generated once again a thoroughly unbalanced outcome that would have done little for the actual development prospects of the majority of the WTO’s member countries loosely gathered within what is now called the G110 — namely, the G20 developing countries, led by Brazil, India, and China; the G33, concerned above all with promoting concessions on trade in special products; and the G90, itself a coalition of LDCs, the Africa group, and the African, Caribbean, and Pacific (ACP) countries. How and why did this turn of events come about? The answer is that the G8 countries, in particular those belonging to the EU, negotiated at Hong Kong in a very tough-minded way on behalf of their own economic interests. It is true that an end date of 2013 was agreed on for export subsidies and their equivalents (WTO 2005). But this was later than wanted by everybody other than the EU; and it addressed subsidies that would in any case largely be eliminated by then and excluded many other forms of rich-country farm support that generates ‘dumping’ of excess production on world agricultural markets to the crippling disadvantage of other less wealthy countries. In exchange for this apparent concession, the G110 countries gave in on key liberalisation issues in relation to services and non-agricultural market access. They accepted that cotton would be treated as part of the wider agricultural negotiations, rather than as a special case needing urgent action to end U.S. domestic subsidies. They acquiesced in a tame offering of ‘duty-free, quota-free’ access to rich country markets for LDCs on an unspecific, so-called ‘lasting basis’ and for only 97 percent of products, thereby allowing key ‘sensitive’ products with export potential for LDCs still to be excluded. And they won only the establishment of a WTO task force to help build supply-side capacity to enable poor countries to take

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advantage of trading opportunities, when and where they exist (‘aid for trade’). These last three aspects of the agreement (cotton, market access for LDCs, and aid for trade) had originally been conceptualised as the core elements of a ‘development package’ that would serve to balance the round. Yet the precise terms of the concessions did not even come close to meeting such expectations (Khor 2005). The G110 countries appeared to have gone along with all of this, at least at Hong Kong, for a variety of reasons — partly the continuing impact of the kinds of rough bargaining tactics witnessed in previous WTO ministerials (Jawara and Kwa 2003), partly the fear of being blamed for the collapse of the talks, partly the belief that they had got something they wanted somewhere in the package, and partly, too, the fact that on the last day at Hong Kong representatives of the G20 developing countries moved to press the case for signing the proposed ministerial declaration. This last point is advanced only tentatively because detailed research on this has yet to be done. But it is striking that it was Brazil that took the lead after December 2005 in calling for a special summit of G8 and G20 developing countries to press forward the implicit Hong Kong deal.7 In sum, it briefly seemed that enough of a compromise could eventually be reached between the competing development strategies of these two blocs, even though it would have inevitably sold short the interests of most other WTO member countries. In the event, the gaps that still existed among the positions, and thus the core development interests, of the EU, the U.S., Australia, Brazil, India, and Japan (the informal post–Hong Kong ‘Group of Six’ charged with rescuing the round) proved to be too large to bridge. WTO director general Pascal Lamy suspended the round in July 2006. By comparison with finance, then, trade appears to be a diplomatic arena in which conventional inter-state political bargaining is the characteristic feature. To that extent, the power relations at work are somewhat less stark and the G8 countries do not control all aspects of the process. The traditional post-war control of trade rounds exercised by the U.S. and the EU countries, with perhaps a sideways glance at Japan and Canada, has been replaced by acceptance on their part of the need to take seriously, and ultimately draw in, the G20 coalition of developing countries, led by Brazil, India, and China. Other groupings too have fought their corner with greater skill and resolve than has been seen in previous international trade talks. That said, stark disparities remain, with many small or poor countries struggling to make any impact at all in the WTO’s infamous ‘green rooms,’ where a select group of the heads of delegations meet. At the end of the day, and regardless of what they say in public about ‘development’, all the major players — the G8 major market democracies and the G20 developing countries alike — press their core national developmental interests very hard in private. Environment The background to the discussion of climate change that took place at Gleneagles was the question of what steps — if indeed there were to be any — would follow Kyoto as further responses to the growth of greenhouse gas emissions in the

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Earth’s atmosphere. The protocol itself had at last come into being as a legal entity in February 2005. But it committed signatory countries to precise targets only for the period up to 2012. It was also clear beyond doubt in the lead-up to Gleneagles that the U.S. would not add its signature (Grubb, Vrolijk, and Brack 1999; Harris 2000; Meadowcroft 2002). Blair’s strategy, which was to shift the whole debate about climate change to the next stage in its history, initially ran into considerable difficulties. In the preliminary discussions among the various sherpas, or leaders’ representatives, in the months before Gleneagles, Blair’s representative encountered nothing but opposition to the idea of a new and wider dialogue — from ‘the U.S. and Russia because they feared pressure for new limits on emissions, Japan and Canada because it could undermine the Kyoto process, and the Europeans because it could institutionalise the G8’ (see page 265). Right until the last moment, the debate over the wording of the G8 statement was contentious. But the linking of the issue to energy helped bring Russia on board and, in the end, the U.S. moved just enough too for the statement reported earlier to be agreed upon. Blair’s gamble in bringing the climate change issue into the G8 process could be said to have worked thus far. In fact, with hindsight it may be seen as an influential moment in the global politics of climate change. The first meeting of energy and environmental ministers under the proposed post-Gleneagles dialogue (the ‘G8 Plus Five’) took place on schedule in London in November 2005 with ministers present from all G8 countries as well as Brazil, China, India, Mexico, and South Africa. It was addressed by Blair (2005b) himself. Much more importantly, and contrary to many expectations, the UN climate change conference held in Montreal between 28 November and 10 December 2005 succeeded in reaching agreement on a number of important future steps. The meeting served both as the eleventh session of the Conference of the Parties to the UNFCCC (COP 11) and the first Meeting of the Parties to the Kyoto protocol (MOP 1). In practice, the agendas of the two gatherings were interwoven and the outcomes can only be understood as part of a package. In the words of the summit’s chair, Canada’s environment minister Stéphane Dion, the challenges facing delegates embraced implementation, improvement, and innovation (Wittneben et al. 2006; Dion 2005). Under the first heading, the so-called ‘Kyoto rule book’ was adopted, setting in place the many highly complicated and technical aspects of the actual working of the protocol; under the second, a number of useful reforms were made to the Clean Development Mechanism (CDM), which allows investments in the ‘developing countries’ (the countries not listed in Annex 1 of the Kyoto protocol) to contribute to the meeting of their Kyoto targets by older industrialised countries. Under the third heading, a pair of decisions cleverly opened up two tracks to consider next steps. One, under the protocol, set up an ‘open-ended ad hoc working group’ to immediately initiate consideration of further commitments beyond 2012 (UNFCCC 2005a). The other, under the UNFCCC, promoted a ‘dialogue, without prejudice to any future negotiations, commitments, process, framework or mandate under the Convention, to exchange experiences and analyse strategic approaches for long-term cooperative action to address climate change’ (UNFCCC 2005b).8

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The EU, Japan, and Canada were the main countries promoting this parallel process as the best means of engaging both the U.S. and other big emitters such as China and India. The big shift at Montreal was the greater willingness of a number of non-Annex 1 countries to discuss contributions they could make. For example, countries as diverse as Brazil, South Africa, Mexico, Papua New Guinea, and Costa Rica all put forward positive proposals (Pew Center on Global Climate Change 2005). Consequently, the U.S. administration was isolated at the meeting to a quite unprecedented degree, with Saudi Arabia in the end standing as its only ally. At one point the U.S. delegation tried to undermine the talks by walking out. But at the very last moment it chose not to block future discussions. It certainly came under a lot of pressure from American environmental NGOs, mayors, and business associations present in the corridors at Montreal, from the urgings of senators in Washington, and from a surprise speech delivered to delegates on the final day by former president Bill Clinton. In it he said directly that Bush was ‘flat wrong’ to claim that reducing greenhouse gas emissions would damage the U.S. economy but also that the rest of the world should try to ‘work with’ the U.S. on the issue (Hanley 2005). It may be that European, African, Asian, and Latin American delegates were emboldened and encouraged to push that bit harder for a deal because of the extent of the isolation of the United States. In sum, climate change politics have been moved to the next stage and a set direction of travel, much as Blair set out to achieve before Gleneagles. The direction is controversial because many environmentalists think that the price of involving the U.S. will be to move away from governments setting precise targets to cut gas emissions toward reliance on technological fixes and ‘market-based opportunities’, the latter phrase being explicitly used in the decision of COP 11 to initiate a wider dialogue (UNFCCC 2005b). This remains to be seen, for the follow-up meeting, held in Nairobi in November 2006, did not do much at all to move the agenda forward. What is clear is that the G8 Plus Five have become the key grouping with which these different approaches will be fought out. That is a change of significance in the global politics of development. The environment, at first sight, can seem as though it is an arena of development diplomacy redolent of the old ‘North-South’ battles of the 1970s. It is different in that talks take place under the auspices of the UN. Indeed, the UNFCCC text explicitly refers to the twin categories of ‘developed’ and ‘developing’ countries. Despite this, in practice, at Montreal and Nairobi as earlier, the key bargaining took place among coalitions and groupings that cut across this divide. What is apparent, however, is that the G8 countries cannot force their interests upon other countries in this arena of development as effectively as they can do in finance and still do, to some degree, in trade. They are required to ask for action to be taken in favour of the environment. No agreement means no response, which is thus a defeat for the countries that want to see environmental controls imposed. It is certainly striking that the G8 forum scarcely discussed climate change until Gleneagles and very important that this topic is now on its agenda.

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Conclusion The Gleneagles agenda, which was undoubtedly assembled with a good deal of political skill by Blair and Brown, could never have worked to make poverty history. Such an achievement was simply not within the compass of the G8 to deliver, more or less regardless of what decisions the leaders might conceivably have taken. They could not even have been expected to bring about ‘the end of the beginning of ending poverty’, the ironic title given by Joseph Stiglitz (2005), the renegade former chief economist of the World Bank, to his reflection on the summit in implicit mockery of Blair’s (2005d) comment in his post-Gleneagles press conference that the meeting was ‘a beginning, not an end’. The global politics of development is not animated any longer — if indeed it ever was — by what the North is willing to do for the South. It is an altogether harsher political environment within which all the countries of the world — literally all 192 of them — pursue as effectively as they can their chosen strategies of development in the financial, trade, and environmental international policy arenas. They operate amid a complex pattern of structural inequalities in relation to the material capabilities they bring to these arenas, their access to and their command of the dominant ideas that shape the main policy debates, and their influence over the major global institutions that seek to govern different aspects of the making of development policy. There arises another complex pattern of agential inequalities in the three major arenas of development diplomacy, some more recent manifestations of which have been analysed here. This again points to the existence of a ‘global politics of unequal development’ (Payne 2005). The particular politics of unequal development generated varies from arena to arena. The G8 countries undoubtedly enjoy substantial dominance of global financial politics. But they are rivals in some aspects of trade policy and have also to concede ground to other powerful trading countries. Moreover, on environmental issues such as climate change they remain significantly divided on approach and have yet to work out a convincing and effective way of managing affairs, even in their own interests. The politics of all of this is complex, as ever. Nevertheless, this is where analysis and discussion of the agenda of meetings like Gleneagles should focus. One should not just bemoan the failings of Gleneagles and the absence of a ‘development’ dimension from global political decision making. Nor, of course, should one be puzzled by it. After all, why would one assume for a moment that powerful countries that gain hugely from patterns of unequal development would be likely to voluntarily give up the short-term benefits that this brings to their peoples? One should instead seek to take forward and deepen the mode of analysis of the international relations of development proposed here. The reality is that Tony Blair and Gordon Brown’s Gleneagles agenda had to confront the global politics of unequal development. It is now being twisted and turned within these political constraints.

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Notes 1 2 3 4 5 6 7

8

This chapter is based on an article in International Affairs and is used with permission; see Anthony Payne (2006). For exceptions, see Andrew Baker (2000) and Hugo Dobson (2007). The phraseology in these bullet points is taken from the so-called chair’s summary issued by the UK government in Blair’s name at the end of the meeting (G8 2005c). For a discussion of the perils of NGOs working too closely with the government of the day on these issues, see Katharine Quarmby (2005). For specific discussions of HIPCs, see Anthony Boote and Kamau Thugge (1997), Tony Killick (2000); and Jan Joost Teunissen and Age Akkerman (2004). For good accounts of trade negotiations under the WTO, see Rorden Wilkinson (2000), Amrita Narlikar (2003), and Narlikar and Wilkinson (2004). See the reported remarks of Brazilian president Luiz Inácio Lula da Silva and foreign minister Celso Amorim at a summit meeting of the leaders of the Progressive Governance Network held near Pretoria in South Africa in mid February 2006 (Katzenellenbogen 2006). Tony Blair was also present at the talks. For the precise terms of these two key decisions, see UNFCCC (2005a).

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Hurley, Gail (2005). ‘Devilish Details: Implications of the G7 Debt Deal’. 14 June, European Network on Debt and Development, 14 June, Brussels. (June 2007). International Monetary Fund (2005a). ‘Communiqué of the International Monetary Fund and Financial Committee of the Board of Governors of the International Monetary Fund’. 24 September, Washington DC. (June 2007). International Monetary Fund (2005b). ‘Press Conference on the 2005 Annual Meeting of the International Monetary and Financial Committee with Gordon Brown, UK Chancellor of the Exchequer and Chairman of the IMFC, and Rodrigo de Rato, Managing Director of the International Monetary Fund’. 24 September, Washington DC. (June 2007). Jawara, Fatoumata and Eileen Kwa (2003). Behind the Scenes at the WTO: The Real World of International Trade Negotiations (London: Zed Books). Katzenellenbogen, Jonathan (2006). ‘New Bid for Trade Breakthrough As Blair Warns of “Critical Stage”’. Business Day, 13 February. Khor, Martin (2005). ‘WTO Ministerial Outcome Imbalanced against Developing Countries: Brief TWN Analysis of the WTO’s Sixth Ministerial Conference’. 20 December, Third World Network. (June 2007). Killick, Tony (2000). ‘HIPC II and Conditionality: Business as Before or a New Beginning?’ Paper commissioned by the Commonwealth Secretariat for Policy Workshop on Debt, HIPC, and Poverty, 17–18 July. (June 2007). Kirton, John J. (1999). ‘Explaining G8 Effectiveness’. In M.R. Hodges, J.J. Kirton, and J.P. Daniels, eds., The G8’s Role in the New Millennium, pp. 45–68 (Aldershot: Ashgate). Lawson, Max and Duncan Green (2005). ‘Gleneagles: What Really Happened at the G8 Summit’. Oxfam Briefing Note. Oxfam International. (June 2007). Lula da Silva, Luiz Inácio, Jintao Hu, Manmohan Singh, et al. (2005). ‘Joint Declaration of the Heads of State and/or Government of Brazil, China, India, Mexico, and South Africa Participating in the G8 Gleneagles Summit Introduction’. 7 July, Gleneagles. (June 2007). Make Poverty History (2005). ‘Detailed Statement in Response to G8 Communiqué’. 8 July. (June 2007). McMichael, Philip (2000). Development and Social Change: A Global Perspective (Thousand Oaks: Pine Forge Press). Meadowcroft, James (2002). ‘The Next Steps: A Climate Change Briefing for European Decision-Makers’. RSCAS Policy Papers series, No. 02/13. European University Institute, Florence. Monbiot, George (2005). ‘And Still He Stays Silent’. Guardian, 6 September, p. 21. (June 2007). Narlikar, Amrita (2003). International Trade and Developing Countries: Bargaining Coalitions in the GATT and WTO (London: Routledge). Narlikar, Amrita and Rorden Wilkinson (2004). ‘Collapse at the WTO: A Cancun PostMortem’. Third World Quarterly, vol. 25, no. 3, pp. 447–460. Payne, Anthony (2005). The Global Politics of Unequal Development (London: Palgrave Macmillan).

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Payne, Anthony (2006). ‘Blair, Brown, and the Gleneagles Agenda: Making Poverty History, or Confronting the Global Politics of Unequal Development?’ International Affairs, vol. 82, no. 5, pp. 917–935. Pew Center on Global Climate Change (2005). ‘COP11 and COP/MOP1’. (June 2007). Pieterse, Jan Nederveen (1996). ‘The Development of Development Theory: Towards Critical Globalism’. Review of International Political Economy, vol. 3, no. 4, p. 543. Quarmby, Katharine (2005). ‘Why Oxfam Is Failing Africa’. New Statesman, 30 May, p. 134. (June 2007). Rivers, Bernard (2005). ‘Stalled Growth: The Global Fund in Year Four’. Global Fund Observer, 7 November. (June 2007). Shabi, Rachel (2005). ‘Was Africa Short Changed’. Guardian, 13 July, p. 13. (June 2007). Stiglitz, Joseph (2005). ‘The End of the Beginning of Ending Poverty’. Project Syndicate. (June 2007). Taylor, Ian (2005). ‘“Advice Is Judged by Results, Not Intentions”: Why Gordon Brown Is Wrong about Africa’. International Affairs, vol. 81, no. 2, pp. 299–310. Taylor, Ian (2006). ‘Challenges Facing the Commonwealth and the Millennium Development Goals in Africa’. Round Table, vol. 95, no. 385, pp. 365–382. Teunissen, Jan Joost and Age Akkerman (2004). HIPC Debt Relief: Myths and Reality (The Hague: FONDAD) (June 2007). United Nations Framework Convention on Climate Change (2005a). ‘Consideration of Commitments for Subsequent Periods for Parties Included in Annex I to the Convention under Article 3, Paragraph 9, of the Kyoto Protocol’. FCCC/KP/CMP/2005/8/Add.1. (June 2007). United Nations Framework Convention on Climate Change (2005b). ‘Decision 1/CP.11: Dialogue on Long-Term Cooperative Action to Address Climate Change by Enhancing Implemention of the Convention’. FCCC/KP/CMP/2005/8/Add.1. (June 2007). United Nations General Assembly (2005). ‘2005 World Summit Outcome’. 15 September. (June 2007). Wheeler, Brian (2004). ‘Bono Pushes the Right Buttons’. BBC News Online. (June 2007). Wilkinson, Rorden (2000). Multilateralism and the World Trade Organization: The Architecture and Extension of International Trade Regulation (London: Routledge). Wilkinson, Rorden (2006). ‘The WTO in Hong Kong: What It Really Means for the Doha Development Agenda’. New Political Economy, vol. 11, no. 2, pp. 291–303. Wittneben, Bettina, Wolfgang Sterk, Hermann Ott, et al. (2006). ‘In from the Cold: The Climate Conference in Montreal Breathes New Life into the Kyoto Protocol’. Wuppertal Institute for Climate, Environment, and Energy, Wuppertal. Woods, Ngaire (2005). ‘The Shifting Politics of Foreign Aid’. International Affairs, vol. 81, no. 2, pp. 393–409. World Trade Organization (2005). ‘Ministerial Declaration’. 18 December, Hong Kong. (June 2007).

Chapter 6

Russia and the G8: Matured Partnership Victoria V. Panova

Russia holds a special place within the G8. Although the 2002 Kananaskis Summit decided that Russia would host its first leaders summit in 2006, debates within expert and political circles continued over whether Russia was entitled to be in the club, what its place and role should be, and how it fit into the international system as a whole. Thus it is important to judge whether Russia’s inclusion was and is simply a political gesture of respect for a once powerful country or an attempt, by including the empire that lost the Cold War, to prevent it from falling prey to revisionist tendencies, as was the case of France within the European concert in the 19th century.1 The Incorporation of Russia into the G8 Although the G7 itself came into existence as a response to several economic, financial, energy, and political challenges that arose in the 1970s, it also was meant to be a western fortress to counter the Soviet Union. Yet almost 15 years later, in 1989, Soviet leader Mikhail Gorbachev sent a letter to the G7 leaders at their Paris summit to ask for cooperation and help. He attended the summit for the first time at London in 1991. After the collapse of the USSR, its place was taken by Russia, whose leader has attended the annual meetings since 1992. The 1994 Naples Summit marked the first time that the Russian president, Boris Yeltsin, participated on an equal basis in the political part of the discussions. In 1996 Russia co-hosted, along with France, the Nuclear Safety and Security Summit in Moscow. The ‘Denver Summit of the Eight’ was pushed through by U.S. president and host Bill Clinton in 1997, and 1998 marked the first G8 summit, in Birmingham, with Russia as a permanent member of the club. However, the first time that Russia came close to being a full-fledged G8 member was in 2002, when the Kananaskis Summit’s final document stated that the Russian Federation would host the G8 summit in 2006, between the British- and German-hosted years. Russia’s View of the Success at the Gleneagles Summit The 31st G8 summit took place on 6–8 July 2005, hosted by British prime minister Tony Blair, at the fashionable golf resort of Gleneagles, Scotland. The first two

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priority topics for the meeting — African development and climate change — were announced by Blair in October 2004. A third one — fair trade — was announced just before Gleneagles began. Prior to the summit the greatest attention was given to African development and climate change as well as to the possible compromises and stand-offs within the G8, especially between Blair and French president Jacques Chirac.2 However, the tragic terrorist attacks on the London transit system on 7 July changed the landscape of the event considerably. In addition to the regular sessions of the nine leaders at Gleneagles (with Britain holding the presidency of the European Union), the participants held several outreach sessions with the ‘Plus Five’ most dynamic developing countries of Brazil, China, India, Mexico, and South Africa, and with the heads of the International Energy Agency (IEA), the United Nations, the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO). After the news of the bombings came, Blair decided — with firm support from the other leaders — to go to London. At the same time it was decided that the summit proceedings would not be interrupted. The session thus went on.3 British foreign secretary Jack Straw replaced Blair on the climate change discussion and British sherpa Michael Jay took over the discussion on political issues.4 No documents were produced at the end of the day Blair was gone. Climate Change The first working day of the summit was devoted to the questions of climate change, clean energy, and sustainable development along with political issues. Climate change had seemed a very contentious issue from the start, causing considerable debate within the G8, especially between the United States and the Europeans. There had also been speculation within the media leading up to the summit about whether the climate change document would be that of the G7 — this time with Russia but without the U.S. — or one with no agreement at all. 5 The actual document, Climate Change, Clean Energy, and Sustainable Development, was only agreed upon at the very last moment (G8 2005b). Forecasts of failure had appeared in press after the Guardian published the leaked documents in the course of the negotiations, leading to a special meeting of the G8 sherpas, or leaders’ personal representatives, on 1–2 July. The sherpas also worked on the wording until late into the night of 6 July.6 The Europeans argued from the start that the document was not as ambitious as it should have been. However, their preferred substitute would not have been accepted by the U.S. and would have aroused reservations from Russia and Japan. Thus, in the end, the document was rather ambiguous, with few specific commitments. The big debates came over concrete targets for the reduction of greenhouse gas emissions. Russia argued that it was helpful first to discuss the issue on the scientific level and only then bring it to the G8 forum. There was also an attempt to hold a meeting of presidents of the academies of sciences of the eight members of the G8. In addition to the declaration on climate change, the G8 adopted a rather long, ten-page plan of action (G8 2005f). The formula used in the final document allowed

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each G8 member to interpret the problem the way it wanted. Four fifths of the plan was devoted to energy issues, the priority topic of the Russian G8 presidency the following year in 2006. The Gleneagles documents stressed the great need for developing new technologies (both within the G8 and within the Plus Five countries) as well as reducing carbon dioxide emissions. The developing countries declared that they would support the idea only if it would not contradict the development interests of their own economies. Rich industrial countries were to assist and share technologies with the developing states, so that the reduction in carbon emissions in poor countries would not be a large burden. The introduction of energy into the climate change documents created a followup process. Although it had been clear long before Gleneagles that energy would be the priority issue for the Russian summit, the discussions at Gleneagles contributed to the preparatory work on the matter for 2006. Global Economy With the first day devoted in part to the issue of the global economy, a document entitled Global Economy and Oil was adopted on the global economy and the international oil market (G8 2005g). From the very start it was supposed to be a voluminous and far-reaching statement. But the G8 countries failed to come up with comprehensive and innovative ideas. The leaders agreed that global growth in 2004 was strong and would remain so in the future. But they acknowledged that global challenges remained, given ‘persistent global imbalances and high and volatile oil prices’. Special recommendations on national economies were forwarded to each of the G8 countries, including Russia, whose set of recommendations joined those for the EU countries. Thus Russia was acknowledged as an important, systemically relevant part of the world economy.7 Rapid economic growth led to an increase in global demand for energy supplies and to high and volatile oil prices. The U.S. and China were noted as the frontrunners in world energy consumption. During the discussion among the leaders, the most articulate speech came from Germany’s Gerhard Schroeder. He argued that it was necessary to introduce the conditions for fair price formation, with all parties — both suppliers and consumers — coordinating their efforts. All noted that world dependence on carbon fuel had decreased over time. Japanese prime minister Junichiro Koizumi reminded his colleagues of the 1970s energy crisis, which was followed by high inflation, but noted that now, with oil prices soaring, deflation in Japan continued. This showed that in contemporary conditions modern economies were able to adapt to oil pricing. Much of the discussion addressed the need to invest in alternative energy resources, mostly in automobile engines. It was agreed in the outreach session with the Plus Five that modern economies require flexibility, although most depended heavily on oil and gas (with greater emphasis on gas in the future). U.S. president George W. Bush stressed the importance of Russia to the functioning of the world economy. He noted it was the sole big, stable oil exporter, because the countries of the Persian Gulf and Venezuela, despite having large supplies, posed a high risk for

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regional and internal instability. Russian president Vladimir Putin agreed, noting that Russia was extracting up to 470 million tons of oil a year, with a large share for export. He added that Russia was doing everything possible to raise its oil production and to invest more in developing transport infrastructure. He dwelt upon the pipeline projects in southeast Russia in detail. Here he disclosed which routes to the Pacific would be used and talked about construction of the oil pipeline from Siberia to the White Sea (which would allow for transport to American consumers) as well routes to Novorossiysk and the Baltic transport system.8 The Russian president also discussed the development of new technologies in gas liquefaction, possible future competition in the market, and the growing interest of American energy consumers in the plans. During this session Putin made it known that the topic of sustainable energy would be taken up during his year as G8 host and that Russia would do its share of work to provide for sustainable economic growth. This was natural for the country that, given its oil, gas, and nuclear resources, was ‘unquestionably the world leader’ in energy (Putin 2005). The declaration included an important passage for Russia, addressed in the way it wanted, in which the G8 leaders acknowledged that both oil-producing and oilconsuming countries should share responsibility and further investment in energy infrastructure, emphasising the role to be played by the International Energy Forum (IEF) — not the IEA (of which Russia was not a member). More difficult for Russia to accept, even if beneficial in the long run, was the agreement to increase transparency and come to a universally agreed system for reporting oil supply and demand, for Russian data on oil reserves had been kept in secret since Soviet times. Russian officials did make several proposals to enhance the agreed Joint Oil Data Initiative (JODI) that had been put forward by several international organisations, and by Germany within the G8, to encompass the whole value chain from oil extraction to the final stage of consumption. The declaration on international trade concentrated on the WTO’s Doha Development Agenda (G8 2005q). It was quite difficult for the G8 countries to agree on a coordinated text. In the end they managed a one-page document, given that Doha negotiations were not going well. Some countries even refused to confirm their commitments made earlier at the WTO ministerial in Cancun in 2003. There were no specific concrete ideas in the G8 document, as the leaders just called for an ambitious but balanced result — almost a contradiction in itself. WTO director general Supachai Panitchpakdi intervened at the session with the Plus Five leaders to argue against the existence of all forms of subsidies. He said that during such meetings leaders always agree on the necessity of alleviating subsidies, but as soon as the issue goes to the ministerial level, each representative starts interpreting the case in his or her own manner, which stalls the negotiations. According to Panitchpakdi, leaders should provide the impetus. Yet during the Gleneagles Summit no specific decisions — especially concerning agricultural issues — were formed for the Hong Kong ministerial, to be held in December 2005. Bush said that his own trade secretary had warned him not to raise the issue. Nevertheless, all eight leaders acknowledged the need to lift trade barriers in order to go beyond intraregional trade.

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Other Issues The other document adopted was titled Reducing IPR [Intellectual Property Rights] Piracy and Counterfeiting Through More Effective Enforcement (G8 2005m). IPR was a new subject to be taken up by the G8 as a separate issue. The document declared that the fight should be waged both within the G8 and abroad. Also initially planned to be ambitious, the final statement was kept to a single page. Nevertheless, it contained a few interesting ideas. One was the decision to convene a meeting of G8 experts in the field of fighting piracy and counterfeiting with follow-up mechanisms and progress reports due at the next G8 summit. Indeed, the G8 expected to set a deadline for a real progress report for the St. Petersburg Summit, but in the end it adopted a more flexible formula in the end. Although the Asian tsunami had happened half a year earlier, the issue remained important and the leaders released the G8 Response to the Indian Ocean Disaster and Future Action on Disaster Risk Reduction (G8 2005c). It simply stated that the reaction of the international community to the disaster had been appropriate, and noted that more than US$9 billion had been donated from around the world by both the public and private sectors. The document included initiatives to strengthen prevention mechanisms and to enhance the role of the United Nations in dealing with the natural disasters of this kind. On the evening of 6 July the G8 produced four documents on political issues: the Middle East Peace Process (G8 2005j), the Gleneagles Statement on Non-Proliferation (G8 2005e), Iraq (G8 2005i), and the Statement by the G8 and African Union: Sudan (G8 2005o). These were not agreed upon until the last moment, at the sherpas and political directors meetings. On the Middle East, the G8 leaders listened to the report of the James Wolfensohn, Special Envoy for Gaza Disengagement for the Quartet on the Middle East. He spoke of the need to provide Palestinians with jobs and housing, and argued that it should be demonstrated to them that international aid and investments could improve their lives in terms of security and economic growth. It was thus necessary to provide up to US$3 billion of aid per year over the next three years. This funding should come not only — and, moreover, not mostly — from the G8 countries, but first from the Arab world. The G8 leaders discussed plans to develop infrastructure, the security system, education, health, and housing, all intended to improve the quality of life for Palestinians. The leaders also unanimously hailed the planned withdrawal of Israel from Gaza, and again stressed strong support for both sides to meet their Roadmap commitments (see Quartet 2003). The evening session was devoted to the issues of the Broader Middle East and North Africa (BMENA), Syria, Lebanon, and Egypt. But it led to a discussion of the fight against terrorism. During this session Putin made quite an emotional intervention. He reminded his colleagues that a year earlier, over dinner at the Sea Island Summit in 2004, he had explained to Blair that Russian counterterrorism efforts had a separate character. Although western countries did not perceive Chechen rebels as terrorists, the Chechens were a big, well-organised group that acted much

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better together than the G8 leaders did. He added that in order for international terrorism not to take over, his G8 colleagues had to acknowledge that terrorism in all its forms and under all its motivations constituted a threat to be countered from coordinated common ground. Following the London attacks on 7 July this position was supported by all the G8 members, even the traditionally ‘liberal and tolerant’ British: Blair said that he perceived the problem rather differently now. On Syria and Lebanon, the G8 leaders stated simply that under international pressure Syria was withdrawing from its neighbouring country and that Lebanon now had a historic opportunity to establish its own democracy and develop its economy. The issue of Iraq was quite contentious. Nevertheless the G8 leaders concluded that it was important to join efforts to make future elections take place by 15 December 2005 for a government under a new constitution and also to make state institutions work. Everyone agreed that the U.S. and its allies were to leave Iraq (in the form of the Multi-National Force — Iraq [MNF-I] mandated by UN Security Council Resolution 1546), although no specific time frame was set. The Gleneagles Statement on Non-Proliferation turned out to be a summary of the current situation regarding weapons of mass destruction (WMD) and the means of their delivery, especially in light of the existing threat of their use by terrorist groups (G8 2005e). The G8 confirmed the importance of all existing documents and conventions on the issue and acknowledged the role played by the UN Security Council (UNSC) in addressing the challenges of proliferation as well as the work done by the International Atomic Energy Agency (IAEA). The document contained general wording and support for G8-launched or -affiliated efforts such as the Proliferation Security Initiative (PSI) and the Kananaskis Global Partnership against the Spread of Weapons and Materials of Mass Destruction, and reiterated the traditional concerns over North Korea’s nuclear programme and its reluctance to return to the Six-Party Talks. This united stand among the G8 countries seemed to have some impact, since soon after the summit North Korea started showing signs of possible compromise and return to the negotiating table. The text on another country in Bush’s ‘axis of evil’, Iran, contained firm but careful wording. The G8 welcomed the initiative of the European troika of Britain, France, and Germany and the EU’s High Representative for Common Foreign and Security Policy on long-term arrangements and economic incentives for Iran in return for its final suspension of its nuclear fuel enrichment and reprocessing activities. The leaders hailed Russia’s dialogue with Iran — especially the agreement on bringing back spent nuclear fuel — although it was not included in the document. The final day of the summit was devoted mostly to Africa. The British host had decided that with ten years left before the target for the Millennium Development Goals (MDGs) this G8 summit was a significant moment of opportunity for Africa. Blair hosted an outreach session of the G8 leaders with the African heads of states and the representatives of selected international organisations.9 The discussion was not as fruitful as the regular G8 sessions. It had a somewhat fragmented character, mostly due to the lack of time. However, each of the five visitors outlined his position and the G8 leaders offered their reactions, with little substance in the exchange.

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The G8 Statement on Counter-Terrorism was among the long-planned documents (G8 2005d). But the London attacks caused it to be changed at the last minute to strengthen it. The attacks also postponed the official release of the documents discussed on the first day of the summit. Everyone had to wait for the last day of the meeting to see the official results. The Russian president suggested that the statement on terrorist attacks on 7 July should be a joint one with the Plus Five, rather than a separate declaration of the G8 leaders on their own, to deliver a strong message of a common stand against the global threat and show resolve to uphold the most deeply held principles of G8 societies (G8 2005p). Although presented as a huge breakthrough, these documents caused little sensation. Being bold at first glance, the actual documents were less substantial, and were not finalized until the very last moment. The G8 members had reservations about the figures put forward by the British presidency. Yet Blair managed to push through the figure of doubling aid to the developing world and doubling aid to US$50 billion a year, with US$25 billion going to Africa. There were no figures from the report of the Commission for Africa ([CfA] 2005), which was issued in March, as it had been established by Blair without consulting his G8 colleagues. Blair appointed its members on his own and did not include representatives from all the G8 members. Thus the commission was technically not affiliated with the G8. None of the countries was prepared to state the exact percentage of its budget to be directed toward doubling aid to Africa. In addition to an ambitious (but still to be seen how effective) figure of US$50 billion in aid, the value of the 100 percent of debt for 18 countries, which the G8 finance ministers had agreed to write off prior to the summit, would amount to US$40 billion (although one Russian finance official said in the coming years the figure would reach as high as US$59 billion). The Russian share would come to US$750 million. The Russians argued that that in the past two years they had already forgiven US$2.2 billion under the HIPC Initiative (with Ethiopia alone receiving US$1 billion in debt relief).10 This relief would not come immediately. For a country to prove its eligibility, it must present all the necessary data over the course of a year. The debt relief can take place only once all the conditions are met.11 The biggest share of debts — roughly US$44.5 billion — would be written off within the framework of the International Development Association (IDA). The rest would be within the World Bank and the IMF. Indeed, the initiative also had to be officially supported by the shareholders of those international financial institutions (IFIs). The burden would thus be shared among the shareholders, so that the funds available to those institutions remained at the same level. The U.S. would have to write off the biggest sum. Russia would have to pay approximately US$13 million a year to these organisations. Russian officials believed that the real issue was not providing additional funding but the way those funds would be used. A member of the Russian Academy of Sciences calculated that approximately US$300 billion was allocated to the African countries as official development assistance (ODA) as of June 2002, but that not much progress was made. Moreover, when ODA first started, there were no failed states on the continent.12 They appeared only 10 to 15 years later. Furthermore, much

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less real money was available to Africa than was claimed, as the net inflow amounted only to US$9 billion.13 In the statement on Africa, the G8 leaders adopted a follow-up commitment to support the peacekeeping capabilities of developing countries, mostly in Africa (G8 2005a). They increased the peacekeeping forces trained and equipped by the G8 countries and confirmed the commitments to assist the African Union (AU) forces in Darfur and to continue cooperating with the Anti-Terrorism Centre in Algiers. In the document issued by the G8 leaders and the AU on the conflict in Sudan, the G8 hailed the AU mission in the country and noted its vital role in enhancing security on the ground, protecting civilians, allowing the humanitarian response to function, and giving the political talks a chance of success (G8 2005o). It emphasised that the G8 was heavily engaged in the problem and noted that the G8 had so far committed US$460 million, and was cooperating with the AU through the EU and the North Atlantic Treaty Organization (NATO). The G8 members also committed almost US$3.5 billion to Sudan over the following three years. Among the issues not discussed, despite the desire of some anti-Russian politicians and media, were the post-Soviet states and the problem of democracy in Russia. During the discussion one leader even gave his own spontaneous evaluation: knowing Russia more than anybody else and having a great affection for the country, and after watching the country closely for many years, he could claim that after the two previous leaders — namely Mikhail Gorbachev and Boris Yeltsin — Vladimir Putin had every right to do what he was doing. Moreover, he said that it was the only right thing to do, and that the outside world ought to thank the Russian president for conducting those reforms. The rest of the documents issued at Gleneagles were progress reports. One was a follow-up to the Secure and Facilitated Travel Initiative (SAFTI) (G8 2005n). Another was the Global Partnership annual report detailing the individual countries’ contributions (G8 2005h). There was also a progress report from the Africa personal representatives (APRs) and a report on the functioning of the BMENA initiative with its Forum for the Future (G8 2005l, 2005k). Thus the G8 Gleneagles Summit of 2005 stands apart from the usual G8 encounters. The procedures were usual for the G8, with no innovative mechanisms introduced or no ‘back to the basics’ moves as had been the case with the previous British presidency in 1998 at Birmingham. It would have been a normal summit if not for the terrorist attacks on London on 7 July. The tragedy took away a considerable portion of the attention otherwise allocated to this gathering of the world’s richest and most powerful countries. Yet the attacks led to the relative success of the summit. The very ambitious commitments on Africa and a common stand on climate change became possible not only because of Blair’s active lobbying, but also because of the need to demonstrate a united front against terrorists and achieve somewhat tangible results. This demonstration of strength was intended to prove that terrorists were trying to prevent a meeting of those individuals willing to help the developing countries reach economic prosperity and political stability and security, rather than to prevent a meeting of an elite club.

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Moreover, the last day of the summit demonstrated that all the speculation about possible setbacks for Russian membership in that club were unfounded. The G8 leaders accepted Putin’s invitation to the next encounter, to be held in St. Petersburg in 2006, with energy security and education as priority topics.

Sources of Success in 2006 The Gleneagles Summit occupied a relatively minor place in the hierarchy of Russian priorities, however, for it was overshadowed by the importance of hosting Russia’s first regular summit. It was clear from the start that everyone intended to watch closely for any mistakes, whether minor or major, in order to compare Russia with the other seven members. Russia’s priority topics of energy security, health, and education were carefully tailored issues on which the country could make a significant and sound contribution. As Gleneagles ended, the chance for Russia to deliver a successful summit in 2006 was much greater than at Kananaskis in 2002, when the decision was taken to let Russia host the summit. To be sure, Russia was still not fully included in all of the G8’s processes, notably those on finance and trade. Yet it had gained in power and held the right to hold an ‘equal’ place with its G8 colleagues. This occurred in part due to the state of the world energy market, which allowed Russia to accumulate financial resources and gain importance due to the growing demand from both developed and developing countries for energy resources. Russia had the right management for those conditions. Russia was not clinging to its ex-superpower status just for the memory of having once been a powerful state and the availability of an arsenal of nuclear weapons. By 2006 it had acquired more instruments for influencing the international system, mostly through soft power, rather than hard. Oil, gas, and atoms are very powerful tools in this regard. Thus the energy topic chosen as a priority for 2006 would allow Russia to bring the laurels of a successful host to the country. Even as a novice member of the G8, Russia had the chance to bring a solution of the energy tasks urgently needed not only for the geopolitical North, but also for the developing countries of the South. It would thus preserve the role of the G8 as the world’s leading mechanism for global governance, even if this is a role never acknowledged by the members themselves.

Energy Issues on the G8 Agenda One of the reasons that caused the G7 to come into existence was the energy crisis of the 1970s. The 1975 Declaration of Rambouillet had declared that ‘the industrial democracies are determined to overcome high unemployment, continuing inflation and serious energy problems … World economic growth is clearly linked to the increasing availability of energy sources’ (G7 1975). To these ends the leaders

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stressed their determination to ‘spare no effort in order to ensure more balanced conditions and a harmonious and steady development in the world energy market’. Another major step was the Nuclear Safety and Security Summit held in Moscow on 19–20 April 1996. The agreement to hold the event, to take place before the actual G7 summit in Lyon, to which Russia had been invited, had been reached in the autumn of 1995. The decision came in part due to the tenth anniversary of the 1986 explosion of the Chernobyl nuclear reactor. Given Yeltsin’s unpopularity in Russia, it was also important to schedule the meeting prior to the 1996 presidential elections in the Russian Federation. Other factors were the growing concerns over the security of nuclear stockpiles in the former Soviet Union together with a number of assurances by western partners to intensify nuclear cooperation with Russia. As a result of the Nuclear Safety and Security Summit, co-chaired by Boris Yeltsin and Jacques Chirac, several documents were approved by the leaders covering a wide range of issues. The documents included the Moscow Nuclear Safety and Security Summit Declaration, the Programme for Preventing and Combating Illicit Trafficking in Nuclear Material, and several background documents (G7 Plus Russia 1996b, 1996e).14 But there were also statements on the regional issues of Lebanon and the Middle East peace process, the Statement on the Comprehensive Nuclear Test Ban Treaty (CTBT), and the Statement on Ukraine with regard to Chernobyl, as well as one on the nonproliferation of nuclear material (G7 Plus Russia 1996a, 1996g, 1996h, 1996e). During the summit Yeltsin had tried to promote the idea that the nuclear weapons of all nuclear states should be concentrated within their respective borders. But this proposal was not taken up. Nonetheless, as a whole the meeting was considered rather successful, with basic non-discriminatory principles of relations among the countries of the world’s nuclear community being formulated. Although the Moscow Summit was of paramount importance, its topic of nuclear safety was but part of the more comprehensive energy security problèmatique. No real steps were taken until the ‘Denver Summit of the Eight’ in June 1997, when the G8 instructed their ministers to hold a meeting on energy security. That meeting — the first ever gathering of the G8 energy ministers — took place on 31 March– 1 April 1998. The energy communiqué included basic principles of cooperation (G8 Energy Ministers 1998). All participants agreed that energy problems were among the most important issues for the whole world, not only for the G8. They agreed that securing a stable, efficient, secure, and ecologically acceptable energy supply was one of the cornerstones of sustainable development for the G8 countries and the world. Although it was agreed that G8 energy ministerials would be held every year, the next meeting took place only in 2002, on 2–3 May in Detroit, co-hosted by the U.S. and Canada, which held the G8 chair that year. There ministers agreed on the importance of keeping oil reserves and coordinating their usage. Carl Smith, assistant secretary in the U.S. Department of Energy, announced the increase of American strategic oil reserves from 565 billion barrels to 700 billion barrels. The ministers also discussed coordinated efforts to stimulate more investment in the energy sector. The issue was

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taken on to the Asia-Pacific Economic Cooperation (APEC) forum. The meeting also signalled the importance attributed to Russia as a stable energy supplier to the west, which acquired additional significance in connection with possible ‘crisis situations’ in the unstable Middle East. The topic was taken up by the leaders the following year at Evian, when they adopted the G8 action plan on science and technology for sustainable development (G8 2003b). The Sea Island Summit saw another action plan with a section on ‘Cleaner, More Efficient Energy’ offering practical steps (G8 2004b). The follow-up meeting on the so-called ‘3R’ principles of reduce, reuse, and recycle was held on 29–30 April 2005 in Tokyo with the participation of 20 countries (G8 plus Brazil, China, Indonesia, Malaysia, Mexico, the Philippines, South Korea, Singapore, South Africa, Thailand, and Vietnam) and four international organisations — United Nations Environment Programme (UNEP), the Organisation for Economic Co-operation and Development (OECD), the secretariat of the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, and the Arab League). One month earlier another G8-related event took place in London on the topic. On 15–16 March 20 energy and environment ministers and representatives from international organisations, business, and nongovernmental organisations (NGOs) had gathered to discuss the challenge of creating lower carbon energy systems to combat climate change over the next 50 years.

The Current Energy Challenge Energy security is well suited to maintain the leading place in the summit agenda for 2006 and beyond. Energy issues, among the founding factors for the G7’s birth, regained their importance at the beginning of the 21st century. The rise of economic giants such as China was one underlying cause. In 1990 China and India accounted for only 5 percent of world energy demand. By 2004 this had risen to 11 percent. Of the entire increase in energy consumption during this time, 35 percent came from these two countries. Other rapidly developing countries such as Brazil and Mexico contributed too. A second reason is that the information revolution was not accompanied by an energy revolution. The hope placed on nuclear energy was not realised. Since the 1970s, the issue of nuclear energy provoked so many political problems that fears came to prevail, especially in regard to strengthening control over the proliferation of nuclear materials. Today most developed countries have come to agree that, seeing a definite limit to hydrocarbons and not being able yet to use alternative energy resources adequately on a commercial scale, there is a need to pay more attention and give a more prominent place to nuclear energy. Within the G8, Germany is one of the strongest opponents to the idea. But there is now an understanding to pursue the possibilities of developing nuclear power stations with further research and of building more secure

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fourth-generation reactors in a way that each country considers most suitable for its needs. There is a kind of agreement to disagree on the priorities, but with the promise not to impose one’s views on the others. Another weak link is the transportation of energy resources to consumers. The Evian action plan on marine environment and tanker safety was an important step (G8 2003a). But also urgently needed was the rapid development of pipeline nets and measures to secure their safety. Given the unstable countries surrounding Russia, the G7 members, particularly the U.S., take special interest in providing for control over those territories to secure their oil and gas fields as well as pipelines. Russia is now building new pipelines in all directions, trying to diversify the supply and reaching out to its traditional European partners, and also reaching out to China and Japan, and even the U.S. (in this case mostly in terms of future projects of transportations of liquefied natural gas [LNG] via Canada). These activities also can be considered among the reasons for a new interest in developing Africa — a continent rich in minerals, oil, and gas that needs investment in infrastructure to be able to supply the developed countries. The volume of hydrocarbon that the extracting countries can supply does not produce a very promising picture. The members of the Organization of Petroleum Exporting Countries (OPEC) are working at the limit of their possible output. Although it was claimed that by the end of 2006 it would be possible to increase production by 4 million barrel per day, it is believed that it could be possible only for Saudi Arabia, the United Arab Emirates, and Iraq. Indonesia, Venezuela, and Nigeria are already at full capacity. Huge investments are needed to modernise the industry. There are enormous ecological challenges. Other factors are increased prices for maritime freight, with the move to double-hulled vessels, as well as the activities of oil profiteers and the decline in the value of the U.S. dollar. All these add to the instability of oil markets and make the energy problems a priority. As the second largest energy exporter in the world, Russia is a huge player in this sector. It is thus natural that it is among the most active participant in the process. In late December 2004 Germany proposed a plan to stabilise world oil markets with increasing investments in prospecting and extracting, upgrading transparency, and introducing JODI within the framework of the IEA. The Russian proposal was not only to improve existing statistical elements, but also to introduce new ones to encompass the whole value chain. Other initiatives embraced energy efficiency, ecological components, and the harmonisation of taxation, many of which were taken up by the British G8 presidency in 2005. Over the past 15 years a new challenge has become more evident — climate change. Most scientific opinion attributes this phenomenon to growing greenhouse gas emissions caused by human activity, primarily in the energy sector. There is therefore an additional incentive to invest in energy research and development (R&D) to investigate less carbon-intensive technologies to satisfy the world’s energy needs. The environmental concerns, especially in relation to climate change, have come to the fore, with most G8 countries assigning it a high priority. Such

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technological innovations include bio-energy, ‘clean coal’ power plant technology based on coal and natural gas, carbon dioxide separation and storage, energy efficiency in buildings, fuel cells, hydrogen, and energy storage systems. Other topics include energy efficiency in industry and in the commercial sector, nuclear fission, renewable energy technologies (other than biomass and photovoltaic) including wind, solar energy, hydropower, geothermal power, and ocean energy. Many countries also cite nuclear research as a priority, although they often refer to different things. For example, a number are focussed on the next generation of power plants, but Russia and Germany are mostly interested in waste management, nuclear safety, and decommissioning. Another problem is nuclear safety and security. Since the Moscow Nuclear Safety and Security Summit in 1996, this problem has been high on the agenda in various forums. The most cooperation has occurred on a bilateral basis or within international structures other than the G8, such as the Bratislava Nuclear Security Initiative. It was created on the initiative of presidents Putin and Bush in February 2005 to seek a reduction of stockpiles and guarantee the secure storage of nuclear materials. Bilateral cooperation on energy security also occurs with Russia and the Asian member of the G8, Japan. As early as 1992 the Japanese government adopted a programme on the diagnostics of mechanical facilities of atomic energy stations.

The St. Petersburg Summit on Energy Issues On energy Russia can, and does, make a difference. For the G8 summit to be successful, with Russia acquiring a more positive image, other topics must also be given priority, especially with the importance of soft power in international relations. In the case of Africa, there is a need to take up social issues, notably education and health. This includes having the private sector in the G8 countries, stimulated by their governments, help teach those from the poorest countries how to run their state and do business, and, eventually, to get out of the chaos they are currently in. Simply doubling aid or writing off debt makes no sense without an educational component. Russia is active in this area, providing for state scholarships at various universities for the citizens of African and other poor countries. It can develop initiatives for improved mechanisms to share experience. The G8 countries, especially the U.S., are not ready to allocate funds to new initiatives, as the existing ones are still not properly financed. Thus the major challenge is to provide inexpensive but effective ideas. Energy is another area where Russia, providing initiatives and taking steps to stabilise energy supply and develop infrastructure, can contribute significantly to the cause of sustainable development and the alleviation of poverty. As contentious as they were, achievements in this area were important for rethinking the concept of comprehensive energy security as suggested by Russia. The course of negotiations in preparing for the summit showed that the other G8 partners were still not ready to acknowledge that there has been still another change in the global energy system that needed to be adapted to. Instead, Russia was often blamed for ‘energy blackmail’,

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when geographical and specific diversification of supplies were viewed as a normal practice to lower risks to consumers. Russian attempts to defend what it considered the necessity to diversify demand were considered unlawful, which led to vagueness of the term ‘energy security’ in the 2006 St. Petersburg statement (G8 2006b). Russia also attempted to stand by the principle of long-term contracts. Although the rest of the G8 members emphasised the capabilities of market mechanisms, they refused to consider long-term contracts as being in line with classic market instruments (although European countries themselves use more or less a market assignment of quotas of nuclear fuel supplies from Russia). In the end it became possible to come to a compromise when both long-term and spot contracts were mentioned. Another important achievement of the St. Petersburg Summit was the acknowledgement of the importance of improving the investment climate, the introduction of insurance schemes and division of financial risks, and the interpenetration of capital markets. The major challenge in this case, as in others, was whether commitments made on these issues were to be made real. Since then, on a bilateral level there have been both setbacks, as in case with the UK (when Gazprom was denied the right to buy Centrica), and advances, as in case with Italy and ENI (when ENI struck a deal with Gazprom that ensured mutual penetration into each others’ markets). Tired of the endless proliferation of all kinds of international institutions, mechanisms, partnerships, and working groups, the G8 leaders seemed reluctant to launch a new one at St. Petersburg, despite Russian suggestions. But in the end this resistance was more efficient, since the best way is to make the existing ones work well. While attributing major importance to energy and social topics, Russia continued with the traditional political security agenda. On the eve the summit, an unexpected war between Israel and Lebanon began; the leaders released a statement on Lebanon and the Middle East that was very well balanced (G8 2006c). It could have served as a basis for further discussions on the conflict, especially as it reflected differing views and showed a way to compromise. But the intensive military activities in Lebanon continued for a month after that. And there remains no peace in the region, nor is there a solution to the Israeli-Palestinian standoff or to the flammable tensions between Hamas and Fattah within the Palestinian Authority itself. Did the G8 really matter in that regard? No more than any other international institution so far: the conflict continues without an end in sight. Russia, even though it did not become a member of the WTO by the time of the St. Petersburg Summit, managed to stand as an equal player on economic and financial issues.15 There was no intention in Russia to make it a predominantly economic summit, as many desired. Russia is still not in a comparable economic position with the rest of its G8 partners. Among the agreements, however, an interesting one was reached on IPR, but also on trade, with Russia supporting the idea of abolishing export subsidies and endorsing complete opening of the developed countries’ markets to the LDCs (something the U.S. and Europe still cannot agree on within the WTO) (G8 2006a, 2006d). In general, Russia coped successfully with the 2006 presidency,

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leading to sound initiatives in energy and social spheres that contribute to securing sustainable development in the world. Another challenge, and prospective change, concerns the composition of the countries invited to the outreach sessions. In the lead-up to the St. Petersburg Summit there were arguments and competing ideas about which should be on the list. Russia considered inviting the Commonwealth of Independent States (CIS), then concentrated on the international organisations only, and finally, under pressure from the other G8 partners, came up with the final scenario of the same Plus Five countries from Gleneagles and international organisations (including the muchwanted CIS).16 It was perhaps still not ideal, since it gave way to possible thoughts of institutionalising the partnership among the same 13 countries. Nevertheless, it led the next G8 host — Germany — to follow suit and do exactly the same for its 2007 summit at Heiligendamm. It thus put another brick into consolidating the foundation for some kind of a ‘G13’, an attempt to cajole the five most rapidly rising and powerful developing countries into accepting the leadership of the ‘old’ eight with the ability to introduce some of their ideas and allow for participation in the process of global governance. Nuclear energy, although a component of the energy field, still holds an independent place, even sometimes surpassing purely energy problems. It involves such issues as the nonproliferation or reduction of WMD. The biggest step taken by the G8 in this direction was the Global Partnership against the Spread of Weapons and Materials of Mass Destruction in Kananaskis in 2002 (G8 2002). Among its priorities are the elimination of chemical weapons, decommissioning of atomic submarines, the handling of fissile materials, and the employment of former military scientists.17 To coordinate its activities, a senior officials group was created to meet monthly.18 Sea Island in 2004 saw a follow-up document adopted (G8 2004a). The programme expanded, attracting new donors such as Norway, the Netherlands, Poland, Sweden, Switzerland, and Finland. But there was no space for this issue to play a major role. The biggest challenge came from the implementation of the initiative, which was already at the lower levels of state hierarchy. At St. Petersburg the topic of nuclear energy was one of the most contentious, given the opposition of Germany (and to a lesser extent Italy) to any mention of the issue. Nevertheless, in the end, with the G8 leaders’ favourite ‘agreement to disagree’, the final document contained the phrase ‘those of us who have or who are considering plans’ relating to the use of nuclear energy and indicated the desire and resolve of those countries to pursue the further development of cleaner (from the point of view of greenhouse gas emissions) and peaceful nuclear energy (G8 2006b). Significant in this regard were also the two initiatives announced by the Russian and the American presidents: the establishment of international uranium enrichment centres under the auspices of the IAEA and the launch of the Global Nuclear Energy Partnership. All the G8 leaders supported the idea of combining those two programmes. The idea of equal and unhampered access to nuclear energy for peaceful purposes, under strict international safeguards, remains important, with security a high priority.

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Conclusion The past decade and a half, since Russia has been included in the western G7/8 process, has clearly showed that although the partnership has indeed matured, many problems lie ahead. Notwithstanding common democratic and market principles among all the members of the G8, differences persist, sometimes pushing Russia aside and regularly allowing for opposition forces and negative press in the rest of the G8 countries to use the policy of including Russia, practiced by the G7 governments, against the current leaders and parties in power. The 2006 G8 St. Petersburg Summit weakened the position of those who favour excluding Russia as an equal player, since it demonstrated that Moscow could act responsibly on a global level and that the topics it chose as its priority issues present a considerable challenge to the world community and must be dealt with by the G8. Ideally, the decisions adopted at the 2006 summit should lead to real improvements, primarily with regard to energy security, but similar with regard to the socially significant issues of education and health, as well as others, where all the G8 countries, including Russia, can make a difference — and are willing to do so — for a better and fairer world.

Notes 1

2

3 4 5

6

This revisionist view is held by, among others, Stephen Sestanovich (2000), a member of the Council on Foreign Relations and a former special advisor to the United States secretary of state on states of the former Soviet Union. The main points of difference between Blair and Chirac were clear after the failure of the European Union summit with great debates over farm subsidies and the vote against the European constitution in France and the Netherlands. Another contentious issue with an unclear outcome was the differing views among the G8 members over the priority topics. Moreover, London’s victory over Paris in the race for the 2012 Olympics on the eve of the Gleneagles Summit risked spoiling Chirac’s mood and contributing to already poor British-French relations. It was also noted by sources in the Russian delegation that the tragic events led to even more coordinated, clear-cut, and fruitful work. At first Blair thought the terrorist acts were likely connected with the start of the G8 work, but newspapers later disclosed the fact that they had been planned for May. Observers familiar with the way this elite club functions would know that no G8 member would allow for such disagreements to prevail and thus discredit the united western front in the international arena. If there are profound divergences within the club, then the members would either drop the issue completely or (as happens most of the time) adopt a document with general wording and little substance. One can gauge the contentiousness of the issue by the fact that the document was rewritten about eight times; it usually takes fewer drafts to come to common ground. The document was not agreed upon until the very last minute: although the bigger part of the paper was sorted out the day before at a late-night sherpa meeting, a few phrases were still left for 7 June. However, what was left did not directly concern Russia and was being coordinated on a bilateral level, mostly between the U.S. and the UK.

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10 11

12

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The finance ministers meeting scheduled for later in the fall of 2005 in Washington DC would show whether there would be a fully fledged financial G8 (G8 Finance Ministers 2005). The route of the Eastern Pipeline, built by Transneft, will be 4,188 kilometres long and will pass Taishet, Skovorodino, and Perevoznaya Bay. The project is expected to cost US$11.5 billion. On 8 September 2005, in the presence of Putin and Schroeder, an ambitious agreement was signed by Germany’s BASF and E.ON and the Russian gas and oil giant Gazprom (which, after acquiring three quarters of Sibneft from Millhouse Capital, became the fifth largest energy company in the world) to establish the North European Gas Pipeline Company. This company would build the Baltic pipeline, which would reach Germany, and possibly also Britain and Scandinavia, already near the limit of their gas extraction capacities, thus passing through Eastern Europe. The leaders were Thabo Mbeki of South Africa, Olusegun Obasanjo of Nigeria (also present as chair of the African Union), Meles Zenawi of Ethiopia, Benjamin Mkapa of Tanzania, John Agyekum Kufuor of Ghana, Abdoulaye Wade of Senegal, Hosni Mubarak of Egypt, Abdelaziz Bouteflika of Algeria, as well as Paul Wolfowitz, head of the World Bank, and Rodrigo Rato, head of the IMF. Putin had earlier said that although other mechanisms of assistance to the least developed countries (LDCs) are more effective, Russia will continue to write off debt. Some see this decision as not very well thought through. For example, Nigeria is a mineralrich country and is the seventh largest exporter of oil in the world, yet it is included in the list of LDCs that require special attention from the international community. This status might as well raise protests from the less privileged and poorer countries of the developing world. Nigeria has also begun to export gas, and if it realises its project to export more than 22 million tons of liquefied natural gas (LNG), it will occupy the first place in the world. The decision to include Nigeria in the list of LDCs was pushed through by the U.S. and Britain (on a bilateral basis). Russia is to forgive approximately US$30 million to the country (G8 Research Group 2006). Although the OECD’s Development Assistance Committee (DAC) was created in 1960, the term ‘official development assistance’ appeared somewhat later, in 1969, when it was separated from the other official flows, and where ODA was identified as those official transactions made with the main objective of promoting the economic and social development of developing countries and the financial terms of which are intended to be ‘concessional in character’. Africa became a hot topic after the destabilisation of Iraq, when the traditional ally of the west — Saudi Arabia — became less stable. Thus the U.S. had to diversify its oilimporting network even more, turning in part to Africa (for example, Equatorial Guinea has oil, although it has a tough military regime). The background documents are titled Nuclear Safety, Nuclear Material Accounting and Control and Physical Protection, and Safe and Effective Management of Weapons Fissile Material Designated As No Longer Required for Defence Purposes (G7 Plus Russia 1996d, 1996c, 1996f). Much was promised on the issue of WTO accession before the St. Petersburg Summit by officials, but the negotiations stalled with one G8 member — the United States. Georgia also removed its signature. Some observers regarded this development as a failure, but many in Russia believed that it was more advantageous for the country to take its time and negotiate properly, without discrimination and extra demands. Others genuinely oppose Russia’s accession to the WTO accession for commercial reasons.

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16 Russia had thought to include the CIS countries to bring to light problems experienced by their countries. Nursultan Nazarbayev, president of Kazakhstan and head of the CIS Council, was a good pick for the role, since his country could contribute to the energy discussion and the debate on the vital regional problems of drug trafficking from Afghanistan and Central Asia. However, after some consideration, Russia concluded that inviting the post-Soviet countries would be counterproductive, since it could turn the summit into a series of complaints and requests for financial aid from the G8. 17 On the elimination of chemical weapons, a facility was built in Gorny with assistance from Germany, Finland, the Netherlands, and the EU; 400 tons of chemical weapons (1 percent of the total amount) were eliminated. On the decommissioning of atomic submarines, there remain some shortcomings. First the agreement was reached, specifying a total of 80 submarines and requiring no less then US$4 billion. Donors have promised only US$2.5 billion, with almost all going to the 40 submarines in western Russia. But the other half of the submarines are in Asia, and the only country to have allocated money for their decommissioning is Japan, which pledged US$100 million (with only US$6 million being spent and only one submarine decommissioned) (Mingazhev 2005). Russia has proposed completing the disposal of all decommissioned nuclear-powered submarines by 2010. As of June 2005 the Russian Navy has decommissioned 195 nuclear-powered submarines, with 115 of them having been disposed (including 78 from northwest Russia); 59 submarines containing nuclear fuel remain. 18 The biggest shortcoming of the Global Partnership is that the majority of specific projects are the old ones and take place under one roof, no real statements about future plans, with the exception of Germany, with which cooperation develops on a pragmatic and effective basis. One indication of progress was the signing of the Agreement on the Multilateral Nuclear Environmental Programme in the Russia Federation (MNEPR) on 21 May 2003 by Belgium, Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden, Great Britain, the U.S., Italy, the OECD, the European Bank for Reconstruction and Development (EBRD), and Russia. One issue involves spending the allocated funds, not inside Russia, but in donor countries. According to unofficial evaluations by American experts, between 60 percent and 70 percent of all the funds stay in the U.S., which greatly decreases the efficiency of the assistance (Anin 2003).

References Anin, Anatoly (2003). ‘Globalnoye partnerstvo protiv rasprostraneniya orujiya i materialov massovogo unichtojeniya: god proshel, chto dalshe?’ Voprosy Bezapasnosti, vol. 8, no. 142 (October). (June 2007). Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007). G7 (1975). ‘Declaration of Rambouillet’. 17 November, Rambouillet. (June 2007). G7 Plus Russia (1996a). ‘Declaration on Lebanon and the Middle East Peace Process’. 20 April. (June 2007). G7 Plus Russia (1996b). ‘Moscow Nuclear Safety and Security Summit Declaration’. 20 April. (June 2007).

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G7 Plus Russia (1996c). ‘Nuclear Material Accounting and Control and Physical Protection’. 20 April. (June 2007). G7 Plus Russia (1996d). ‘Nuclear Safety’. 20 April. (June 2007). G7 Plus Russia (1996e). ‘Programme for Preventing and Combating Illicit Trafficking in Nuclear Material’. 20 April. (June 2007). G7 Plus Russia (1996f). ‘Safe and Effective Management of Weapons Fissile Material Designated As No Longer Required for Defence Purposes’. 20 April. (June 2007). G7 Plus Russia (1996g). ‘Statement on CTBT’. 20 April. (June 2007). G7 Plus Russia (1996h). ‘Statement on Ukraine’. 20 April. (June 2007). G8 (2002). ‘Statement by the Leaders: The G8 Global Partnership Against the Spread of Weapons and Materials of Mass Destruction’. 27 June, Kananaskis. (June 2007). G8 (2003a). ‘Marine Environment and Tanker Safety: A G8 Action Plan’. 2 June, Evian. (June 2007). G8 (2003b). ‘Science and Technology for Sustainable Development: A G8 Action Plan’. 2 June, Evian. (June 2007). G8 (2004a). ‘G8 Global Partnership Annual Report’. 10 June, Sea Island. (June 2007). G8 (2004b). ‘Science and Technology for Sustainable Development: “3R” Action Plan and Progress on Implementation’. 10 June, Sea Island. (June 2007). G8 (2005a). ‘Africa’. 8 July, Gleneagles. (June 2007). G8 (2005b). ‘Climate Change, Clean Energy, and Sustainable Development’. 8 July, Gleneagles. (June 2007). G8 (2005c). ‘G8 Response to the Indian Ocean Disaster and Future Action on Disaster Risk Reduction’. 8 July, Gleneagles. (June 2007). G8 (2005d). ‘G8 Statement on Counter-Terrorism’. 8 July, Gleneagles. (June 2007). G8 (2005e). ‘G8 Statement on Non-Proliferation’. 8 July, Gleneagles. (June 2007). G8 (2005f). ‘Gleneagles Plan of Action: Climate Change, Clean Energy, and Sustainable Development’. 8 July, Gleneagles. (June 2007). G8 (2005g). ‘Global Economy and Oil’. 8 July, Gleneagles. (June 2007). G8 (2005h). ‘GPWG Annual Report 2005: Consolidated Report Data’. 8 July, Gleneagles. (June 2007). G8 (2005i). ‘Iraq’. 8 July, Gleneagles. (June 2007).

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G8 (2005j). ‘Middle East Peace Process’. 8 July, Gleneagles. (June 2007). G8 (2005k). ‘Partnership for Progress and a Common future with the Broader Middle East and North Africa Region’. 8 July, Gleneagles. (June 2007). G8 (2005l). ‘Progress Report by the G8 Africa Personal Representatives on Implementation of the Africa Action Plan’. 8 July, Gleneagles. (June 2007). G8 (2005m). ‘Reducing IPR Piracy and Counterfeiting Through More Effective Enforcement’. 8 July, Gleneagles. (June 2007). G8 (2005q). ‘Trade’. 8 July, Gleneagles. (June 2007). G8 (2005n). ‘Secure and Facilitated International Travel Initiative Summit Progress Report’. 8 July, Gleneagles. (June 2007). G8 (2005o). ‘Statement by the G8 and African Union: Sudan’. 8 July, Gleneagles. (June 2007). G8 (2005p). ‘Statement by the G8, the Leaders of Brazil, China, India, Mexico, and South Africa, and the Heads of the International Organizations Represented at Gleneagles’. 7 July, Gleneagles. (June 2007). G8 (2006a). ‘Combating IPR Piracy and Counterfeiting’. 16 July, St. Petersburg. (June 2007). G8 (2006b). ‘Global Energy Security’. 16 July, St. Petersburg. (June 2007). G8 (2006c). ‘Middle East’. 16 July, St. Petersburg. (June 2007). G8 (2006d). ‘Trade’. 16 July, St. Petersburg. (June 2007). G8 Energy Ministers (1998). ‘The G8 Energy Ministerial Meeting on the World Energy Future Communiqué’. 1 April, Moscow. (June 2007). G8 Finance Ministers (2005). ‘Letter to World Bank President from G8 Finance Ministers’. 23 September, Washington DC. (June 2007). G8 Research Group (2006). ‘2005 Gleneagles Final Compliance Report’. (June 2007). Mingazhev, Sergei (2005). ‘Russia Urges G8 Partners to Step Up Aid for Submarine Utilization’. ITAR-TASS, 7 June. Putin, Vladimir (2005). ‘Meeting of Vladimir Putin with Russian and Foreign Media Following the G8 Summit’. 8 July, Gleneagles. (June 2007). Quartet [United States, European Union, United Nations, and Russia] (2003). ‘A PerformanceBased Roadmap to a Permanent Two-State Solution to the Israeli-Palestinian Conflict’. 30 April, Washington DC. (June 2007). Sestanovich, Stephen (2000). ‘Where Is the Real Place of Russia?’ Pro and Contra, vol. 6, pp. 153–170.

PART III Africa

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Chapter 7

The G8 Africa Action Plan: How Much a Partnership? Princeton N. Lyman

At the G8 Summit at Kananaskis in 2002, the G8 and African leaders developed the Africa Action Plan. The plan is an ambitious, multifaceted program to address African problems of poverty, security, health, and governance. Three years later, the Africa Action Plan was at a point where the question could be raised whether it was a true partnership, as originally envisioned, or rather a means of toting up the various aid and related commitments on the part of the G8 with only passing references to the progress being made in Africa itself. The G8 Gleneagles Summit in 2005 provided an opportunity for such in-depth analysis. However, the terrorist attacks in London on 7 July — but, perhaps even more, the fundamental structure of the Africa Action Plan — prevented it. While many significant achievements were made at the summit, the degree of true partnership remains to be determined. This chapter analyses the degree of partnership represented by the Africa Action Plan. It looks in turn at United Nations and G8 action in the 2005, the ‘year of Africa’, as well as the origins and early evolution of the plan, the involvement of Africans in the process, and the need to move beyond charity and more aid into genuine partnership. It concludes that even after the Gleneagles Summit and the UN World Summit in 2005, the future of the Africa Action Plan remained an open question. To steer it in the desired direction, a more genuine partnership is needed, with Africans reporting annually as part of the G8 process on how they are keeping the promises they made. By 2010, when many of the commitments made in 2005 will be measured, this process needs to be institutionalised, so their implementation does not depend, as now, on a few key African leaders.

2005: The Year of Africa The year 2005 was very much the year of Africa. British prime minister Tony Blair had signalled a year earlier that Africa would be the principal topic at the G8 summit in Gleneagles. A full review of the Africa Action Plan, developed at Kananaskis in 2002, was on the agenda. Building up to Gleneagles, there was also a groundswell of political activity and popular pressure calling for a major new level of commitment to overcoming Africa’s persistent poverty.

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Early in the year came the UN’s analysis of progress in achieving the Millennium Development Goals (MDGs) (UN Millennium Project 2005, 3, 55–57). These goals for combating poverty, health, education, and other aspects of development by 2015 had been established at the UN Millennium Review Summit of 2000. Not surprisingly, the report found that Africa was in the most danger of not reaching these goals. It estimated that aid to low-income countries, most of which are in Africa, would have to rise from US$15 billion in 2002 to US$108 billion annually by 2010 and to US$149 annually by 2015 in order for the goals to be achieved. The Commission for Africa ([CfA] 2005), a distinguished group of African and other world leaders and experts established by Blair in 2004, issued its report in the spring of 2005. A comprehensive document, Our Common Interest addressed trade, aid, conflict, and many other aspects of African development. The commission called for a doubling of annual aid to Africa to US$50 billion by 2010, not only to address the MDGs but also to invest in infrastructure and other aspects of development. It also recommended another 50 percent increase in annual aid by 2015.

The G8 Response Prime Minister Blair made the doubling of aid to Africa a major objective for the 2005 G8 summit. First he persuaded the European Union to pledge to reach a level of official development assistance (ODA) of 0.7 percent of gross national income (GNI) by 2015 with an interim collective target of 0.56 percent by 2010. The EU pledged to nearly double its ODA by 2010 with 50 percent of the increase going to sub-Saharan Africa. Blair then pressured other G8 members to follow suit. Japan and, finally, the United States joined in on the eve of the summit, each pledging to double aid to Africa — Japan by 2008, the United States by 2010. At the summit itself, the G8 also made an extraordinary pledge to help place all who will need it on treatment for HIV/AIDS by 2010 (G8 2005a, see Annex II). Popular pressure had been building up in the same period. Led by entertainers Bob Geldof (a member of the CfA) and long-time activist and singer Bono, a worldwide set of concerts, called Live Eight, was held a week before the Gleneagles Summit. Organisers claimed that more than 2 billion people watched on television or participated in person in what was a massive appeal to the G8 leaders to pledge sufficient aid and debt relief to end poverty in Africa. In retrospect, the outcome at Gleneagles was perhaps the most concrete and significant in the history of the G8-Africa relationship. The formal relationship between the G8 and Africa had begun to take shape at the G8 summit in Okinawa in 2000 and then became formalised in a decision of the G8 to endorse the New Partnership for Africa’s Development (NEPAD), a proposed programme of improved governance and economic reform in Africa that was presented to the G8 by African leaders at the summit in Genoa in 2001. At the G8 Africa Action Plan developed at Kananaskis in 2002 is quite comprehensive: it addresses poverty, special development sectors such as health, food security, and private sector development, as well as

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issues of governance, conflict, peacekeeping, and trade. Issues of transparency in oil and mineral proceeds and corruption in general were added as a major focus in 2004. The Africa Action Plan is structured as a partnership. African states pledge to take steps to improve governance, reduce corruption, and adopt improved economic policies. The G8 pledges in return to increase aid, provide debt relief, improve trade opportunities for Africa, and support a wide variety of initiatives in the areas listed above. In the first two years of the Africa Action Plan, there was considerable progress on most fronts. While pledges of aid were vague about whether they represented increases or not, there were many aid initiatives in line with the plan. These included support to the Global Polio Eradication Initiative, bilateral and multilateral programmes to combat HIV/AIDS, special initiatives on food security and private sector development, support for improved governance and the development of greater capacity in Africa, and steadily enhanced support to assist African peacekeeping. The G8 lent support to significant debt relief through the Heavily Indebted Poor Countries (HIPC) Initiative, which had been launched as far back as 1999. At the Sea Island Summit in 2004, the G8 agreed to a proposal from the U.S. to support the training and equipping of 40,000 African peacekeepers as part of a global peace support programme.1 At Gleneagles, however, the G8 made a specific commitment to double aid to Africa by 2010 to US$50 billion annually. No such specific pledge had been made before. The G8 also agreed to enable 14 poor Africa countries to have forgiven 100 percent of their debts to the World Bank and International Monetary Fund (IMF). Agreement was also reached to support debt relief for Nigeria, Africa’s most populous nation but which, as an oil producer, did not qualify for the HIPC Initiative. Beyond these commitments, there were numerous more general pledges to work on all the aspects of the Africa Action Plan, including governance, health, food, and transparency in oil receipts. New pledges were made on malaria. By and large, however, except for the commitment on AIDS treatment, these were generalised pledges to ‘do more’ in areas already agreed on in the past. Nonetheless, after the summit, the U.S. announced a larger malaria initiative, pledging US$1.2 billion over five years for this purpose. The run up to the Gleneagles Summit also produced some new thinking about financing aid. Gordon Brown, Britain’s chancellor of the exchequer, pressed for an International Finance Facility (IFF) that would borrow against future aid appropriations and thus produce a dramatic short-term increase in assistance. The IFF failed to gain the support of the U.S., Japan, and some of the European countries. But it did begin, on a smaller scale, to finance added research on badly needed vaccines. France subsequently began experimenting with a tax on air travel as a means to expand sources of assistance; several other European countries have expressed support for this programme. The U.S. some time earlier initiated the Millennium Challenge Account (MCA). Managed separately from the regular aid programme, the MCA is intended to provide substantial, multi-year pledges of

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assistance to countries that have a proven record of good governance, have taken action against corruption, and a commitment to their people evidenced by investments in such areas as education and health. Half of MCA funds are projected to go to Africa. In 2006, the MCA made major grants to Ghana (US$547 million) and Mali (US$460 million), raising substantially the level from its earlier grants. The 2006 G8 St. Petersburg Summit hosted by Russia paid less attention to Africa. Nevertheless, a review of commitments by individual G8 members was provided and a general statement on African performance was included in the chair’s summary (G8 2006a). One notable trend in G8 assistance, mentioned prominently in 2006 — perhaps as a response to China’s aggressive role in this sector — is steppedup aid for infrastructure. The G8 also responded to recommendations for this sector in the CfA report, as well as to recommendations from NEPAD, including working with a regional African structure to design and carry out some of the projects.

Where Are the Africans? African leaders have been invited to the G8 summit every year since 2000. It was the African presentation of NEPAD to the G8 in 2001 that spurred the creation of the Africa Action Plan. There was some initial resistance to continuing the practice of inviting African leaders when the U.S. was preparing to host the Sea Island Summit in 2004, but this was soon overcome (Atwood, Brown, and Lyman 2004).2 African participation has now come to be seen as de rigueur, and some review of the Africa Action Plan is becoming part of the regular G8 agenda. When Russia hosted the G8 in 2006, it too felt the same pressure as did the U.S. and did not want to offend African leaders by eliminating the practice. But what does it mean to have African leaders invited? The general practice at the G8 meetings is to focus most of all on how well the G8 has done in meeting its commitments under the Africa Action Plan. That does not mean that there is an in-depth critique. But as the various statements and communiqués make clear, the emphasis is on what the G8 members are doing or plan to do. What is missing in the declarations is any serious review of how well the Africans are doing to meet their commitments under the Africa Action Plan. At most there is a general statement in the G8 document, emphasising positive achievements (G8 2006b). Obviously this is a sensitive area. The G8 is not in a position to issue a report card on Africa and would be seen as neo-colonial if it did. Africans, in fact, bristled at suggestions that their actions — for example, their lack of response to the autocratic practices and severe human rights violations in Zimbabwe — should colour the responses of the G8 at Gleneagles. But how do the participants then measure the partnership that is at the heart of the Africa Action Plan? There is no mechanism for doing so. Because the G8 is not an implementing body, there is no formal follow-on mechanism for assuring implementation of any of the commitments made at the summits. But at least the G8 has established the group of Africa personal representatives (APRs), senior officials charged with following

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these recommendations, and the Africa Partnership Forum (APF), a grouping of Africans and donors beyond the G8 members; for instance, the APF includes the representation by the World Bank and smaller European countries that are significant donors. It meets several times a year and follows progress on G8 and related commitments. But these mechanisms, while providing to some extent a review of the commitments of both sides, do not issue any detailed evaluation thereof. In any case, the discussions at the G8 summit are so time limited, and the statements are mostly developed in advance without African participation, that the summit itself is not structured for such discussion. Indeed, African leaders come to the summit but for a few hours, mostly to hear the results and to bless them (or mildly criticise them on rare occasions). At a minimum, there should be a dual report on the Africa Action Plan each year as part of the preparations for the summit. The G8 and the APRs already prepare a report on what the G8 members have done and plan to do as an input to the G8 summits where Africa is prominently on the agenda, such as at Gleneagles in 2005 and Heiligendamm in 2007 (G8 2005; 2007). These assessments are now, in fact, the basis for the final statements. They are largely laundry lists rather than investigative analyses, but at least they provide a basis for further critiques. (One example is the list of individual G8 member accomplishments in the Update on Africa released at St. Petersburg [G8 2006b].) Outside experts are in a position to add analysis to these assessments, such as through the ongoing and highly competent work of the G8 Research Group based at the University of Toronto and associated research. But the African Union (AU) or NEPAD should be charged with coming up with a formal assessment of how Africa has performed. There would be lots of room for positive assessment. In recent years, African leaders have stepped in to reverse four coups on the continent and provide for a return to constitutional rule in those countries. African peacekeepers have played strong roles in Burundi, Congo, Liberia, Sierra Leone, and most recently in Darfur, Sudan. African economic performance has, on the whole, improved. The African Peer Review Mechanism (APRM), a unique process of intra-African assessment of governance and economic performance, is up and running. All these achievements and more are mentioned in the 2006 G8 statement. But there are serious problems as well that are not mentioned. Several African governments have struggled with elections that were not deemed credible, have responded with arrests of opposition leaders, and are wrestling with serious popular protest. Few African oil-producing countries have begun to implement the procedures under the Extractive Industries Transparency Initiative (EITI), which was specifically endorsed by the G8 and which a number of African countries have formally joined. Hardly any African countries have met their own pledge to put 10 percent of their national budgets into agriculture and 15 percent into health. Doing business in Africa is still more difficult than any place else in the world, because of numerous bureaucratic obstacles and anti–private sector laws and policies. The AU may well have overstepped its capacity in its peacekeeping undertakings in Darfur and with regard to its planned deployment to Somalia.

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If the AU produced a report along these lines, however coloured it may have to be (as are the G8 assessments of their own performance), the basis would be laid for a real assessment of the Africa Action Plan. Is it an effective partnership? Are both sides keeping to their commitments? Where are the fault lines between the pledges of the G8 — for example, on providing assistance for health and education, combating corruption, promoting transparency and good governance, and supporting the private sector — and the performance of African governments in these same areas? What benchmarks might be set for both sides? Now that the G8 has made specific pledges to increase aid, what are the equivalent benchmarks for African governments in receiving such aid?

The Public Appeals Are Not Much Better Africans are now present, if only for a few hours, and for photo opportunities, at the G8 meetings. But in the mass public events devised to drum up support to combat poverty in Africa, they are almost absent altogether. Except for a brief video appeal from former South African president Nelson Mandela, not a single African leader, official, doctor, nurse, or worker from a nongovernmental organisation (NGO) appeared on the Live Eight stages. The impression that was left was that Africa is an object of charity, a continent of sick and dying children, one that desperately needs the help of the rich nations to survive. But Africans are much more in control of their destiny than this implies. African leaders are in the forefront of major continentwide initiatives, such as NEPAD, are directing most of the political negotiations to end the conflicts on the continent, and are organised to demand better market access in the current trade round negotiations at of the World Trade Organization (WTO). Africans at the grassroots are addressing the enormous impact of HIV/ AIDS in remarkably courageous ways. A new generation of African entrepreneurs is demanding openings for their own energies and the opportunity to contribute to Africa’s economic growth. Treating Africa as an object of charity, rather than a potential partner, does no service to Africa. It conveys neither respect nor responsibility. That attitude also leads to what has happened in foreign aid over the past decade. United States assistance has increased steadily since the mid 1990s. George W. Bush, in initially resisting Blair’s pressure to double aid, pointed out that aid to Africa had already tripled under his administration. But a closer look at the figures reveals that almost the entire recent increase was in emergency aid, namely food and medicine and related emergency assistance to victims of drought and war (Lake and Whitman 2006, 111–112). Emergency aid is, of course, essential and morally correct. But it is not the same as assistance to agricultural productivity, research on Africa-specific crops, high-level education, or a host of other development sectors where investment is needed. Such aid has, in fact, been flat over much of the past decade. There is also little consistency in aid approaches to Africa. Both U.S. and World Bank aid to agricultural development in Africa declined by 90 percent in the 1990s. This

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happened despite chronic problems of food insecurity, now recognised by the Africa Action Plan as a high-priority concern. Aid to education has swung from primary to secondary, to technical, and back to primary over the history of the programmes. Before the advent of the MCA, the U.S. had not invested in infrastructure in Africa since the late 1970s. The one consistency in foreign aid seems to be the readiness, commendable to be sure, to provide emergency aid once a calamity has occurred.

The Problem with More Aid Even the emphasis on aid itself, so much a part of the activity in 2005, is problematical. Much of the effort of the year leading up to Gleneagles, by Blair, African leaders on the CfA, the UN, and the well-meaning entertainers and public advocates for Africa, was on doubling aid. A secondary emphasis was on debt relief. These are important goals. There is no question that the debt burden on many African governments has been debilitating and without economic logic. There is also no question that investment by aid programmes in health, education, food security, and infrastructure — costing far more than has been available in the past — would contribute to Africa’s well-being and eventual growth. It may well be difficult to spend effectively the levels of aid pledged by 2010. But there is little doubt that more aid is needed over the coming decade. But almost no attention has been paid to the danger of furthering Africa’s aid dependency. Today, numerous African governments receive upward of 40 percent of their national budgets from foreign aid, some countries such as Uganda more than 50 percent. Several African countries have for decades counted on foreign aid to cover as much as two thirds of expenditures for health and education (van de Walle 2001, 91–101). What are the implications for aid dependency if aid is doubled by 2010? Aid is also increasingly offered as a substitute, or temporary palliative, for addressing the one major issue in the Africa Action Plan on which the G8 has failed to deliver: trade reform. Every year the G8 pledges to make progress on eliminating the subsidies, tariffs, and non-tariff barriers that work against African access to European, Asian, and American markets for agricultural goods. At Gleneagles the G8 dutifully quoted World Bank estimates that elimination of these barriers could lift 140 million people worldwide out of poverty. The declaration makes positive statements about hoped-for progress in WTO negotiations. But the G8 is not the forum where trade decisions are made. Thus G8 pledges on this subject, made year after year, have not translated into progress at the WTO. Bush made a dramatic pledge at the UN Millennium Review Summit in September 2005 to eliminate all such U.S. barriers if all other countries would do the same. But neither the EU nor Japan is so ready. The trade issues are reaching a climax. The so-called Doha round of trade negotiations must reach agreement in 2007 to be approved ahead of the lapse of the U.S. president’s authority (so-called ‘fast track’ authority) to conclude such agreements without amendment in Congress. Unlike in previous such trade rounds, African countries are united, along with other developing countries, in pressing for

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greater market access for their agricultural products as a condition for agreement on areas where the U.S. and the EU want to make progress. These are difficult and very complex subjects for negotiations. As part of the bargaining, donors have begun increasingly to offer ‘aid for trade’ or trade facilitation assistance as a temporary measure in place of basic trade reform. Such assistance would help Africa be better prepared for eventual market openings. The EU has also initiated a series of free trade negotiations with sub-regional groupings of African countries, with a deadline set for the end of 2007. But the EU’s approach may only complicate the complex restructuring of sub-regional economic groupings in Africa and perhaps work against the growth of intra-African trade. These various initiatives are, in sum, enticing and have some logic, but they also miss the point. There is no doubt that opening up the American and other markets to Africa will not be an automatic boon for Africa. Many African countries are simply not able to compete or to move their products efficiently enough to take advantage of those markets. Food-importing nations in Africa may suffer from the higher world prices that result from the removal of subsidies. Facilitating intra-African trade may therefore offer more benefits, and build up longer-term capacity for international trade than breaking down American and EU barriers. These are the areas that are targeted in proposals for trade for aid or trade facilitation. The Gleneagles communiqué is replete with such pledges (G8 2005b). However, aid for trade is not a substitute for broad agricultural trade reform. Without the elimination of the barriers to the American and EU markets, there may not be sufficient incentives for trade reforms within Africa, and certainly will not provide the basis for attracting foreign investment in African export capacity as took place when the U.S. opened its textile markets to Africa under the African Growth and Opportunity Act. The U.S. is also using aid for trade as a substitute, at least temporarily, for unilateral action on removing all trade-distorting cotton subsidies, as ordered by the WTO. The U.S. would prefer to use concessions on cotton as a bargaining chip with the EU on other products. African cotton farmers would have to wait. In sum, the one area that could mitigate the growing dependency of Africa upon aid — trade — is the area of weakest response by the G8. Another problem with more aid is the question of Africa’s capacity to use it. African countries are already experiencing difficulty in managing the rapid increases in funds for HIV/AIDS. At one point in 2004 Ethiopia had more than US$40 million of such World Bank funds unutilised. The Global Fund to Fight AIDS, Tuberculosis, and Malaria is experiencing similar problems in Uganda and elsewhere. Limited technical staff, institutional weaknesses, transportation problems within countries, and accountability all inhibit the use of aid. Donors, moreover, despite many pledges to do better, overwhelm African countries with individual procedures, visitors, and requirements for the thousands of individual aid projects they sponsor. There are, of course, ways to increase Africa’s absorptive capacity, with investments in human resources, science, and technology, and aid targeted on growth-producing investments. But it quite likely that Africa will have difficulty in using US$50 billion annually by 2010. The several problems in doing so are well

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summarised in a study by Peter Heller (2005), appropriately titled ‘“Pity the Finance Minister”: Issues in Managing a Substantial Scaling Up of Aid Flows’.

The Importance of True Partnership The year 2005 could turn out to have been a major turning point for Africa. Mobilisation of public opinion, exceptional pledges of aid by major donors, new methods of financing being developed by the United Kingdom and some other European countries, new aid initiatives by the United States, and greater debt relief — these all offer a new beginning. But it could all turn sour as well. None of the initiatives will survive, at least at the levels anticipated, if they are based on charity alone. Charity can all too easily be managed by emergency aid in the face of humanitarian suffering. In the U.S., with growing budget pressures coming from the Iraq war and a series of natural disasters, the new initiatives are losing ground. Congress cut in half the president’s 2006 request for the MCA, delivering a blow to Bush’s promise to double aid to Africa by 2010. Furthermore, a one-way partnership is not sustainable as the basis for delivering more aid. The elements of true partnership are present in both NEPAD and the Africa Action Plan. But they are not activated either through the G8 or any other mechanism. Americans at least will question aid that is not accompanied by evidence of greater transparency, less corruption, and discernible results. Only through providing the public with evidence that there is a partnership, with benchmarks on each side, and evidence to back up the assessments of progress, will the commitment to doing more in Africa be sustained. The G8 has not provided that picture of partnership. Africans have been reluctant to treat the Africa Action Plan that way. But there must be transparency in the partnership itself to be sustainable. It is important to begin building this partnership and institutionalising it now, so that by 2010, when many of the 2005 commitments are to be achieved, there is a basis for a solid, candid, but fruitful evaluation of what has worked and what has not, and what needs to be done on both sides to do better in the five years after that. There are some tough questions here. Who should represent Africa in this partnership? Up to now there has been an ad hoc mixture of African countries invited to the G8, anchored by Nigeria and South Africa — two countries that spearheaded NEPAD and the Africa Action Plan. But by 2010, presidents Olusegun Obasanjo of Nigeria and Thabo Mbeki of South Africa will have completed their time in office. It is not clear that other leaders will be able to speak with such authority. Logically, the AU should assume this role. But the AU’s adoption of NEPAD was at best half-hearted and it is not clear it is structured to do this. A conversation between the G8 and the AU should nevertheless begin on how this partnership can indeed be institutionalised. One could envision, for example, an AU delegation to the G8 summit in 2010 that includes not only the leadership, but also representatives of the AU parliament, its human rights commission, and the NEPAD executive secretary. With proper advance preparation, there could be a full review of the Africa Action Plan, the strengths and

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weaknesses on both sides, and the development of a continued pathway. Africa is too important not to move in this direction. A 2006 report of the Council on Foreign Relations on U.S. policy toward Africa emphasised the need to recognise Africa’s importance for reasons that go beyond humanitarianism (Lake and Whitman 2006). It calls for a more comprehensive policy including partnership with Africa on a wide variety of political, energy, security, and developmental objectives. Humanitarian programmes themselves, including trade reform and improved aid programmes, would benefit from such an approach. The possibility of such a broader and deeper partnership exists on a wider scale between the G8 and Africa. But the momentum for such a deeper relationship, following on the build-up and achievements at Gleneagles, could just as easily slip away. Africa’s problems could once again be the object more of periodic expressions of concern and outpourings of emergency aid. The report looked back on the opportunities created in 2005, the year of Africa, and concluded: We will know that the response to this opportunity has failed, however, if in another ten years, U.S. policymakers link hands once again with other world leaders around Africa’s problems and the world witnesses another global concert to end Africa’s poverty (Lake and Whitman 2006, 9, 111–112, 9).

Notes 1

2

For an assessment of the Africa Action Plan leading up to the 2004 Sea Island Summit, see ‘Freedom, Prosperity, and Security: The G8 Partnership with Africa, Sea Island 2004 and Beyond’ (Atwood, Brown, and Lyman 2004). For an assessment of the results of the Sea Island Summit and further analysis of the Africa Action Plan, see the appendix to this report (Atwood, Brown, and Lyman 2005). Brian Atwood and Robert Brown had written to the U.S. Secretary of State to urge that African leaders be invited.

References Atwood, J. Brian, Robert S. Brown, and Princeton N. Lyman (2004). ‘Freedom, Prosperity, and Security: The G8 Partnership with Africa, Sea Island 2004, and Beyond’. Special Report. Council on Foreign Relations, New York. (June 2007). Atwood, J. Brian, Robert S. Brown, and Princeton N. Lyman (2005). ‘Freedom, Prosperity, and Security: The G8 Partnership with Africa, Sea Island 2004, and Beyond — CSR Appendix’. Council on Foreign Relations, New York. (June 2007). Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007).

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G8 (2005a). ‘Africa’. 8 July, Gleneagles. (June 2007). G8 (2005b). ‘Highlights of the G8 Communiqué on Africa’. 8 July, Gleneagles. (June 2007). G8 (2005c). ‘Progress Report by the G8 African Personal Representatives on the Implementation of the African Action Plan’. 8 July, Gleneagles. (June 2007). G8 (2006a). ‘Chair’s Summary’. 17 July, St. Petersburg. (June 2007). G8 (2006b). ‘Update on Africa’. 16 July, St. Petersburg. (June 2007). G8 (2007). ‘Annex: Summary of G8 African Personal Representatives’ Joint Progress on the G8 African Partnership’. 8 June, Heiligendamm. (June 2007). Heller, Peter S. (2005). ‘“Pity the Finance Minister”: Issues in Managing a Substantial Scaling Up of Aid Flows’. IMF Working Paper WP/05/180. International Monetary Fund, Washington DC. (June 2007). Lake, Anthony and Christine Todd Whitman (2006). ‘More than Humanitarianism: A Strategic U.S. Approach toward Africa’. Independent Task Force Report No. 56. Council on Foreign Relations, New York. (June 2007). United Nations Millennium Project (2005). ‘Investing in Development: A Practical Plan to Achieve the Millennium Development Goals’. United Nations Development Programme, New York. (June 2007). van de Walle, Nicolas (2001). African Economies and the Politics of Permanent Crisis, 1979–1999 (Cambridge: Cambridge University Press).

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Chapter 8

The Commission for Africa: Accomplishments and Unfinished Business Myles Wickstead

As the United Kingdom prepared to host the Gleneagles G8 Summit in July 2005 and assume the presidency of the European Union for the next six months, it was an appropriate moment to take stock of how the Commission for Africa (CfA) had informed and influenced the debate and the decisions affecting Africa that were expected to flow in the second half of 2005. It was unusual for the same country to hold the G8 and EU presidencies simultaneously. The convergence provided an excellent opportunity to make progress on key international issues. Prime Minister Tony Blair had decided to focus the G8 summit in particular on climate change and Africa. There were other important opportunities for follow through in the second half of 2005 — notably the United Nations Millennium Review Summit and the annual meetings of the World Bank and the International Monetary Fund (IMF) in September and then, in December, the resumption of World Trade Organization (WTO) discussions at ministerial level in Hong Kong.

The Origins of the Commission for Africa There were clear advantages in creating a commission for Africa, rather than using existing mechanisms and structures. It was very specifically a short-term initiative: the CfA was established in February 2004 and finished its work in the summer of 2005. It was designed to generate political impetus, not as a further addition to the long-term international development architecture. Although created and funded by the British government and chaired by the British prime minister, the 17 commissioners — who were appointed in an individual capacity — were strongly independent throughout. Among them, they brought to the commission’s work a formidable range of backgrounds and skills. And, perhaps most important of all, nine of the commissioners were from Africa, giving the CfA a majority African shareholding.

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The Commission for Africa Process It was very clear from the outset that, if it were to succeed, the CfA had not just to produce a first-class report, but also to conduct a first-class consultation process. The commissioners and the secretariat had meetings and held discussion forums within all of the G8 countries and many of the EU member states and with key multilateral agencies. They talked to governments, to civil society, to academics, and to the private sector. Above all, the commission talked to Africa. As well as having discussions with governments, they consulted, through a comprehensive series of regional meetings, individuals from 49 out of the 53 countries of Africa. They also talked, in detail, to the African Union (AU) and the New Partnership for Africa’s Development (NEPAD). This was particularly important, because the AU/NEPAD needed to be satisfied that this was not some sort of alternative paradigm for Africa; it was, in fact, largely about how the international community should respond to and work with the plans that Africa was already developing for itself. One consequence of this was a strong resolution coming out of the AU summit just days before the G8 meeting. It set out clearly Africa’s commitment to make (and review regularly) progress and urged the G8 leaders to support that progress through signing up to the CfA recommendations. The consultation process continued throughout 2004. The commission did not begin the formal process of drafting the report until the beginning of 2005. This was a specific policy decision — the consultation process needed to be reflected fully (and be seen to be reflected fully) in the report. Completing it by the launch date of 11 March was thus something of a challenge — one of many. But it was met. The report — Our Common Interest — received a warm reception almost everywhere (CFA 2005). This was not just because of what it said and how it said it, but because of the way in which the commission set about the task of producing it.

The Commission for Africa’s Message What does the report say? Importantly, it takes a comprehensive and integrated approach, making it clear that to ignore any issue is to jeopardise the prospects of addressing other issues successfully (CfA 2005; 2006). The clear implication for the Gleneagles Summit was that the G8 must not choose to support certain recommendations and ignore others. The report also made it clear that the world must see the challenges and opportunities for Africa in the context of its heritage, culture, and traditions. The chapter that deals with this in the report is called ‘Through African Eyes’. Those eyes are the most important prism through which to view Africa’s development. The message to the G8 was that the outside world ignored this at its peril.

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Governance The starting point for the ‘Argument’ of the report is governance — not surprisingly, perhaps, when 80 percent of those the commission consulted, both within and outside Africa, told it that they saw this as one of the fundamental challenges. Perhaps contrary to popular belief, all the evidence suggests that governance in Africa is improving. Twenty-five years ago, there were only a handful of governments in Africa that had been elected by broadly democratic means. By 2005 there were 33. Africa had developed the African Peer Review Mechanism (APRM), under which African governments are able to put themselves forward for independent audit and review of their governance and accountability systems. By the summer of 2005, more than 20 African governments had signed up to this mechanism. The first two reviews — of Ghana and Rwanda — were expected to conclude shortly. The creation of the AU less than two years before the Gleneagles Summit and of the PanAfrican Parliament less than one year before was further evidence of the willingness of Africa to build the institutional framework necessary to make continuing progress on the governance front. Of course, there continued to be exceptions to this trend. They are the ones on which the media tended to focus. But they looked increasingly out of line. And Africa was increasingly ready to say so. When the president of Togo died, his son decided simply to assume the reins of power. The AU made it very clear that this was unacceptable, and that elections had to take place. They did. Peace and Security The same trend was true of peace and security. Conflict and insecurity are in many ways an extreme form of the breakdown of governance. Again, the media tended to focus on the bad stories. But the truth is that Africa was a more stable and peaceful continent in 2005 than it was 25 years earlier. Countries such as Mozambique, Uganda, and Angola — which had been synonymous with instability, poverty, and misery as brutal civil conflicts, often reflecting the dynamics of the Cold War, fought out on their soil — have made huge progress. Even in Sudan, the north-south peace process represented at least a step in the right direction. And the AU had made an effort to intervene in the appalling circumstances of Darfur. As the report said, the old doctrine of the Organization of African Unity (OAU) of non-interference had been replaced by a new AU one of non-indifference. This was a hugely positive shift. Health and Education With better governance and improved peace and security, it is possible to rebuild and develop the education and health systems that are required to pull people out of absolute poverty, to improve the quality of their lives, and to make progress

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toward the Millennium Development Goals (MDGs). The development of capacity, which the report linked strongly with governance, is a crucial to this. The report put a strong emphasis on the need to develop scientific, research, and technical expertise in Africa. Economic Growth None of this is sustainable without economic growth. China’s economy has been growing at 9 percent per annum in recent years; India’s is not far behind. Those are the sort of growth rates that Africa requires. A 7 percent growth per annum sustained over ten years would double the size of Africa’s economy. A number of countries in Africa were beginning to post growth of this magnitude by 2005. The latest forecasts then (subsequently borne out in practice) suggested that Africa’s economy as a whole would grow by more than 5 percent in 2006. With support from the international community — and with the right policy environment to unleash the energies of the private sector — an annual growth rate of 7 percent is a realistic aspiration. Infrastructure Why have growth rates in Africa lagged behind those elsewhere? It is partly because of governance issues, which have seen development funds misappropriated. Poor governance has discouraged both local and foreign investors. It is partly because of geography and the lack of infrastructure. It is interesting to compare the rail and road networks in India and Africa. In India, those routes tend to join the different parts of India together. In Africa, they tend to lead from the points of extraction of resources to the ports, and thence overseas. The international community has tended to move away from support for infrastructure projects and programmes in recent decades. The report recommended that this should be a priority in future. Of course, some of it — such as the development of mobile telephone networks — can be safely left to the private sector. But the roads and railways, the bridges and ports, need a combination of public and private expertise and resources. This again comes back to the crucial issue of governance. It is excellent to have a road capable of taking trucks and goods at 120 kilometres per hour between countries. But the beneficial effects are largely negated if those trucks then take days to cross the border because of a lack of customs harmonisation — or, even worse, because they have to bribe their way across. The need to take an integrated approach once again becomes clear. Trade An important part of the economic growth story has to do with trade. There are two parts to this. The focus of the debate tends to be on protectionism, on the application of inappropriate phytosanitary and other standards, and on trade-distorting agricultural subsidies. This is an important debate. Agricultural subsidies not only

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undermine the livelihoods of countless African farmers and producers. They also penalise European, North American, and other consumers and taxpayers. They must go. It was important that the WTO discussions that were to resume in Hong Kong in December 2005 should address these issues as a matter of urgency. But the major part of the problem is Africa’s capacity to trade — to produce goods of the right quality and consistency, and to move them within and between countries and the different regional economic communities in Africa. And that depends on all the elements already noted — from the need for a positive governance environment and conditions of peace and security to be in place if human and physical capacity are to be strengthened, to the importance of the development of health and education delivery systems, to the importance of economic growth (for which a functioning infrastructure and a vibrant private sector are key elements). That, and the need to address all the different components as a package, is in a nutshell the story of the CfA report. African and International Responsibilities But it is by no means the end of the story. The main responsibility for creating the right conditions for Africa’s development rests with Africa. The report’s contention is that Africa is taking those responsibilities seriously, and that the international community has a responsibility in turn to support Africa’s efforts. The report made a large number of recommendations — close to one hundred. The commission’s view was that the Gleneagles G8 Summit should endorse the whole package proposed.

The Challenge of the G8 and the United Nations Systems One of the interesting features of the year leading up to the Gleneagles Summit was the development of a broad (if loose) coalition of support for Africa. This coalition included civil society and the nongovernmental organisations (NGOs), politicians, academics, at least some parts of the media, and the private sector. It had an interest not just in the outcome of the G8 summit, but also in the UN Millennium Review Summit in New York in September, the annual meetings of the IMF and World Bank in the same month, and the WTO discussions that restarted in Hong Kong in December 2005. Like most movements, there tended to be a strong focus on a limited number of headline issues. It is thus worth considering how the CfA recommendations related to the key elements of the Make Poverty History (MPH) campaign. Aid The MPH campaign focused essentially on three different areas — more and better aid, debt cancellation, and trade. There was no inconsistency between this and the CfA report (or, indeed, the report of the UN Millennium Project [2005], led by Jeffrey Sachs, which fed into the New York meeting in September 2005). The CfA report said

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that there should be a doubling of development assistance to Africa within the next five years — from around US$25 billion per annum in 2004 to around US$50 billion by 2010. Under ideal circumstances, the commission would have liked to see an immediate increase to US$75 billion. But it recommended a two-stage approach given capacity constraints. It wanted the G8 to agree to an immediate doubling and then be ready to consider a further increase of a similar amount in five years if conditions remained favourable and absorptive capacity had improved. When the report was released, this might have seemed to be an impossible aspiration. But the decision reached by the EU member states (four of which are also members of the G8) in May 2005 to reach the development assistance target of 0.7 percent of gross national income (GNI) by 2015, with a smaller but significant target of 0.33 percent for the countries that had recently joined the EU, suggested that the G8 might indeed be ready to move significantly on this. Debt On debt, the report said that there should be 100 percent debt cancellation for those African countries that needed it. In many cases, that debt was incurred by autocratic rulers who used the loans intended for development entirely for their own benefit. The proceeds went straight into bank accounts in London or Geneva without benefiting the countries one bit. This was a huge millstone around the neck of those countries that were now serious about building their health and education systems. For many countries in Africa, for every US$2 that came in as development assistance, US$1 went out again immediately in debt service repayments. So the commission felt the G8 must address that and take a strong lead going into the annual meetings of the World Bank and IMF in Washington in September, when the whole international financial community would address the issue. Trade On trade, decisions rested largely outside the G8 framework. But the G8 could provide a lead. It could help to get the Hong Kong talks off on the right footing. This required sending a strong signal that they saw the forthcoming negotiations as a development round, in particular by setting a clear timetable for the elimination of trade-distorting agricultural subsidies.

Unfinished Business Given what the Commission for Africa had achieved by the time of the Gleneagles Summit, what unfinished business remained? The commission had produced a credible report, which had been very well received, and which followed a very intensive consultation process. It was consistent with Africa’s own development priorities, and built on previous commitments, such as those made at the Kananaskis

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Summit in 2002. It made clear recommendations, costed wherever possible, that were consistent with other reports and campaigns. It asserted firmly that those recommendations hung together as a package, and that trying to deal with them in isolation from each other was to run the risk that none of them would be achieved. The commissioners were very clear throughout that, however good the report, they would have failed unless action followed from their recommendations. Many — although not all — of the recommendations were directed at the G8. The first piece of unfinished business was to get the G8 first to sign up to the recommendations that were for them. The second, long-term objective was to ensure that they delivered on their promises. So another crucial element that had to be put in place was a robust, high-profile political mechanism to make sure this happened over the following months and years. Whatever unfolded in Africa, the Millennium Review Summit in September 2005 would show that in many parts of the world — China and India and other parts of eastern and southern Asia — real progress was being made toward achieving the MDGs. But a whole continent, Africa, was at risk of being left completely behind. This was not in the economic, security, or human interest of anyone. It was in our common interest — the title of the commission’s report — for Africa to thrive and move forward. The good news was that conditions in Africa were now such that swift progress was possible — if the leaders of the G8 demonstrated the requisite political will to support the positive trends that were increasingly evident in Africa. The question was ‘Would they?’ Envoi The structure of the G8 communiqué on Africa at Gleneagles follows very closely the argument and logic of the CfA report (G8 2005). Most of the commission’s recommendations are accepted in their entirety. Some of them lose their specificity (for example, the language about revitalising Africa’s institutions of higher education becomes more general, and the figures are missing). Some recommendations disappear altogether (for example, the need to establish an independent mechanism to monitor and report on progress). Of the three ‘headline’ issues, the language on aid (which endorses the call for a doubling of development assistance to Africa by 2010) and debt is very positive, although much less so on the trade agenda. On the whole, the commitments made at Gleneagles far exceeded the expectations of most people 18 months earlier, when the CfA was established. The first piece of CfA unfinished business — getting the G8 leaders to sign up to those recommendations in the report that were for them — was thus concluded largely successfully. More than two years and two further G8 summits (St. Petersburg and Heiligendamm) on, it is possible to draw some conclusions about how the G8 members are actually delivering on those commitments. Of the three headline issues, the most obvious progress has been on debt. The multilateral debt cancellation proposal was agreed to at the IMF/World Bank meetings

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in September 2005. Since then more than 20 countries (many of them in Africa) have qualified for debt relief, with a similar number becoming eligible when they reach completion point of the Heavily Indebted Poor Countries (HIPC) Initiative. The resources that have been released have been redirected into investment and social spending, and have helped a number of countries in Africa make significant progress in a number of areas — for example, toward the objective of free universal primary education. The picture on official development assistance (ODA) increases is more mixed. Two countries (the UK and Japan) are on track to meet their commitments to Africa by 2010. Both Germany and the U.S. announced significant additional resources in advance of the Heiligendamm Summit. Some progress has also been made on the implementation of innovative sources of finance, such as the International Finance Facility for Immunisation (IFFIm). But it is clear that, at current rates of progress, donors will fall short of their commitments and will need to increase aid substantially over the next two years if the 2010 targets are to be met. The major disappointment remains trade. The WTO meeting in Hong Kong in 2005 made very limited progress, although there was agreement to end agricultural export subsidies by 2013 and to provide for duty-free access for 97 percent of products from the least developed countries (LDCs). Negotiations for the WTO’s Doha Development Agenda were suspended in July 2006 following an impasse over issues relating to with market access and farm subsidies. While progress on more limited objectives (for example, improving market access for African products and providing significant resources for ‘aid for trade’) remains possible, a successful conclusion to the Doha negotiations will require a significant and substantial effort by the G8 (and others) in line with their commitments. Looking beyond the issues, there has been real progress in a number of areas. These include, for example, the ratification of the UN Convention against Corruption, the start of negotiations on an arms trade treaty, the launch of the Investment Climate Facility, and the implementation of a number of country and regional projects under the umbrella of the Infrastructure Consortium for Africa. Ultimately, continuing progress will depend on political will. While it was perhaps inevitable that in 2006 Africa would not have such a high international profile as it had in 2005, it nevertheless remained on the agenda at St. Petersburg and it was agreed that progress and priorities for continuing work should be reviewed at Heiligendamm (G8 2006, 2007). That happened, not least because of the continuing determination of Tony Blair that Africa should remain high on the international agenda, but also because of the personal commitment of German chancellor Angela Merkel. Political will depends not only on the pull factor of individual politicians, but also the push factor of their electorates. Many of the organisations and individuals (including those associated with the CfA) who put their effort and weight behind the Africa agenda in 2005 are ready to continue doing so. It is already clear that the key global challenges of Africa’s development and climate change will be linked and high on the agenda for Japan’s Hokkaido Toyako Summit in 2008, which will bring together powerful advocates for action.

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A secretariat for the Africa Partnership Forum (APF) has been established to monitor progress by Africa, the G8, and other donors against their commitments. It made its first reports in October 2006 (APF 2006a, 2006b, 2006c). The Africa Monitor has been established by the Archbishop of Cape Town, primarily to hold African leaders to account. And the idea of an independent monitoring mechanism, recommended by the CfA but not picked up in the Gleneagles communiqué, has now found new life in the Africa Progress Panel ([APP] 2007a), chaired by former UN secretary general Kofi Annan, which had its inaugural meeting in April 2007. Will this commitment and these mechanisms stimulate continuing progress? As the APP (2007b) recognised in its press statement following the Heiligendamm Summit, there have been positive developments in a number of areas. But it ‘gave clear warning that, as we approach the mid-point to the MDGs, G8 leaders must continue to complement their stated resolve to deliver on previous promises with concrete plans and action that will result in all their commitments being delivered and on time’. That is the unfinished business. That is what must now be accomplished.

References Africa Partnership Forum (2006a). ‘Progress Report: Agriculture’. APF/MOS/2006/09. 26–27 October. Paris. (June 2007). Africa Partnership Forum (2006b). ‘Progress Report: HIV/AIDS’. APF/MOS/2006/08. 26–27 October. Paris. (June 2007). Africa Partnership Forum (2006c). ‘Progress Report: Infrastructure’. APF/MOS-2006/07. 26–27 October. Paris. (June 2007). African Progress Panel (2007a). ‘Africa Progress Panel Communiqué’. April. (June 2007). African Progress Panel (2007b). ‘Africa Progress Panel Response to G8 Summit, 2007’. Press statement. (June 2007). Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007). Commission for Africa (2006). Our Common Interest: An Argument (London: Penguin). G8 (2005). ‘Africa’. 8 July, Gleneagles. (June 2007). G8 (2006). ‘Update on Africa’. 16 July, St. Petersburg. (June 2007). G8 (2007). ‘Growth and Responsibility inAfrica’. 8 June, Heiligendamm. (June 2007). United Nations Millennium Project (2005). ‘Investing in Development: A Practical Plan to Achieve the Millennium Development Goals’. United Nations Development Programme, New York. (June 2007).

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Chapter 9

Africa and the G8: Political Aspects Ade Adefuye

According to British prime minister Tony Blair, the state of Africa today is a scar on the conscience of the world. About half of the continent’s population lives on less than US$2 a day. More than 40 million of African children do not go to school. Every minute, a woman dies in pregnancy or child birth or of a preventable disease. There is a steady and persistent decline in food production. In the last two decades, the continent has been the one most affected by violent conflicts. At this rate, Africa will not achieve the Millennium Development Goals (MDGs) by the deadline of 2015, and if the HIV/AIDS pandemic, which in some countries cuts life expectancy by as much as 50 percent, is not tackled, the MDGs will never be met. The current situation can be traced to the lingering effects of slavery and colonialism, which, at independence, bequeathed weak states and dysfunctional economies to the first generation of African leaders. The situation was aggravated by poor leadership, corruption, and bad governance, leading to the classification of some African countries now as failed states. One notable effect of the appalling situation in Africa is the migration of young people in their prime to the developed world. It is now generally accepted that the rot in Africa must stop, lest poverty become globalised. What happens in the weak and failed states will, if not checked, begin to affect those in the successful states. As the report published by the Commission for Africa ([CfA] 2005) pointed out, the future of the richest people in the richest countries is tied irrevocably to the fate of the poorest people in the poorest countries of the world. Failed states constitute good recruiting grounds for terrorism. With the United States poised to take as much as 25 percent of its oil from Africa within the next ten years, there is a need to show concern now for events on the continent. These realities partly explain why Africa was at the heart of several global initiatives in 2005 and why 2005 was described as the year of Africa. The initiatives include the 25 percent replenishment of resources by the World Bank to developing countries, the progress report by the United Nations Millennium Project (2005) on efforts to achieve the MDGs, the World Bank’s (2005) Global Monitoring Report, the Live Eight concerts, the Make Poverty History (MPH) campaign, the CfA, and the G8 Gleneagles Summit with Africa on top of the agenda. All these attested to a renewed commitment on the part of the international community to improve living standards on the continent and combat poverty and disease.

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The Commission for Africa Report Assessed Critics of the CfA report, Our Common Interest, describe it as nothing more than an elaboration of the obvious, a rehash of previously stated views. The balance of learned opinion in Africa is that the contents and timing of the report testify to Tony Blair’s genuine and abiding interest in Africa and his sympathy for the continent. History and posterity will be kind to him for this. Those who witnessed at first hand the contribution of Blair’s government toward halting Sierra Leone’s slide into a failed state between 1997 and 2002 can testify eloquently on this point. The same clarity of purpose and genuine commitment to improving matters are being demonstrated in regard to the situation in Africa. Blair will not be the first to hold the presidency of the European Union to deal with Africa; neither will he be the first host of the G8 summit to do so. But by deciding to make Africa a priority for international action in this period, he deserves the support of all those who believe that Africa should have a place in the sun. It is impossible to disagree with the recommendations of the CfA. The fact that Africans constituted a majority of the membership of the commission, and that its recommendations tallied with the objectives of the New Partnership for Africa’s Development (NEPAD), gives Africans a feeling of commitment to the report and, to some extent, a feeling of ownership of it. The challenge is effective implementation. Recommendations for Implementation To translate the ideas contained in the report into effective and long-lasting action, consideration should be given to the following initiatives: • The creation and sustenance of the political will within the G8 to implement the recommendations of the CfA successfully. Blair’s pre-G8 diplomatic shuttle and the EU decision to double its aid to Africa by 2015 and wipe off debts to the heavily indebted poor countries (HIPCs) in Africa are steps in the right direction. • The establishment of a G8-Africa forum to become a formal and prominent part of the annual G8 summit. This should involve political leaders from Africa as well as the UN secretary general. This forum should review the implementation of existing commitments and design a checklist for progress on Africa’s development. • In view of Africa’s being at the heart of a number of global initiatives, the G8 should use its influence on key international bodies such as the EU, the World Bank, and the International Monetary Fund (IMF) to evolve a coherent policy for the development of Africa. • In view of the possibility of some G8 countries disagreeing with some aspects of the CfA report, particularly on the issue of doubling foreign direct investment

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(FDI) and the issue of the International Finance Facility (IFF), other countries should feel free to pursue the policies. There can be no meaningful discussion of the politics without reference to the economy. There is much truth to the view earlier expressed by the Blair and Gordon Brown, chancellor of the exchequer, that Africa needs a new Marshall Plan. The plan should include, among other things, more aid to help in meeting the MDGs, effective debt relief, and a levelling of the international economic playing field by measures that include greater market access. It would also help if adequate controls could be put in place to curb arms proliferation, which fuels violent conflicts and constitutes a great hindrance to political stability in the continent.

Democracy The foundation for political instability in Africa was laid in colonial times. The states were artificial creations with weak foundations. At independence, the new leaders inherited and strengthened systems that were authoritarian, despotic, bureaucratically over-centralised, and operating as a top-down form of government. In many African countries, the political system failed to internalise popular participation through failing to put in place an open political process that guaranteed freedom of expression, toleration of differences in opinion, and respect and acceptance of decisions achieved by democratic consensus. But things today are changing. Unlike 20 years ago, when it was fashionable for African governments to be run as dictatorships, the African Union (AU) and the Commonwealth have both refused to accept in their ranks regimes that are not democratically elected. The policy of the Organization of African Unity (OAU) of non-interference in the internal affairs of member states has now been replaced in the AU by one of non-indifference to the violation of democratic rights. The NEPAD agenda sees good governance as a prerequisite to development. The African Peer Review Mechanism (APRM), which is part of the NEPAD process, has been designed to foster the adoption of policies, standards, and practice that lead to political stability, high economic growth, and sustainable development. It is still early days for NEPAD. But support from the international community, especially the G8, increases its chances of success. The Commonwealth Contribution At their 2002 meeting in Coolum, Australia, the Commonwealth heads of government (2002) constituted a high-level expert group to recommend ways in which democracies might best be supported in combating poverty. A year later, the report of Commonwealth Expert Group on Development and Democracy (2003) emphasised the central role of states, markets, and civil societies as focusses in

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development policies that in themselves uphold and promote democratic values. It described the characteristics of a democratic state as: • a freely and fairly elected parliament that is broadly representative of the people in the country; • an executive (government) that is answerable to parliament; • an independent judiciary; • a police force that responds to the law for its operations and government for its administration; and • armed forces that are answerable to government and parliament (Commonwealth Expert Group on Development and Democracy 2003, x). The report emphasised that for democracy to survive and function properly, each of the following institutions must be held to account: • an independent electoral commission; • an independent human rights commission; • a freedom of information commission; and • an ombudsman (Commonwealth Expert Group on Development and Democracy 2003, x). The report was adopted by the Commonwealth heads of government meeting (CHOG). The Commonwealth Secretariat has since intensified its efforts to implement the report. Ever since the end of apartheid in South Africa in 1994, the Commonwealth has encouraged and assisted military and one-party states to adopt multiparty democracy. Now only Pakistan has a military head of state with a democratically elected parliament. The Commonwealth has developed a capacity for monitoring and observing elections in member countries and, through training and other technical assistance, has been strengthening institutions that uphold democracy such as the parliaments, the judiciary, and human rights groups. In the pursuit of these objectives, the Commonwealth has benefited tremendously from the support of two members of the G8, the United Kingdom and Canada, which are the two major contributors to the organisation. La Francophonie’s Contribution Of the 54 nations in Africa, only 18 are members of the Commonwealth. Other countries belong to la Francophonie, in which France — a G8 member — exerts considerable influence. It is significant that la Francophonie has adopted the Bamako Declaration (Organisation Internationale de la Francophonie 2000). It is akin to the Commonwealth Harare Declaration and underlies the fact that military governments will no longer be tolerated within the organisation (see Commonwelath Heads of Government 1991). In 2005 la Francophonie suspended Togo following the military’s attempt to impose Faure Gnassingbé as president following the death of his father.

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But there is still room for more action. It would be helpful if France, through la Francophonie, established a mechanism to deal with serious violations of the Bamako Declaration in a manner similar to what the Commonwealth does through the Good Offices role of the secretary general and the Commonwealth Ministerial Action Group (CMAG). Countries that do not respond positively to these mechanisms risk facing sanctions, including the suspension of their membership. This has strengthened the democratic process in Commonwealth Africa. It will help if France supports the democratic process in African members of the Francophonie as much as Britain and Canada do in the Commonwealth. Other members of the G8, particularly Germany and the U.S., have varying degrees of influence in some African states. The political climate of the continent will benefit much if the G8 countries stand very firm on the side of democracy. The Africa Peer Review Mechanism The recommendations of the Commonwealth expert group seem to be in line with the APRM, which seeks to pursue a development strategy in African based on good governance, respect for human rights, better conduct of government business, and action against corruption. African countries are expected to subject themselves to the scrutiny of their peers through a process involving consultation with governments, nongovernmental organisations (NGOs), and the private sector. They are also requested to develop a programme of action with clear objectives and a time frame. Although untested, the APRM is an important and innovative programme with real potential. It needs the G8’s support. Accession to the APRM is the most effective and concrete proof of Africa’s preparedness to comply with the requirements of good governance. By mid 2007, only 27 of the 54 African countries had signed up to it. Three countries — Rwanda, Ghana, and Kenya — have now been reviewed. The fourth one, South Africa, is almost complete (NEPAD 2007). The G8 members can encourage and influence the individual countries with which they interact to sign up. Without necessarily making it a condition, the G8 could use accession to the APRM as a measure for prioritising and considering competing requests for aid, debt relief, and other forms of assistance. There have been some recent improvements in governance and a stronger commitment to democracy in Africa. In 2005, there were two successful transitions in Mozambique and Namibia. Some mopping up still needs to be done in Togo. Nevertheless, some disturbing signals exist. The lines are blurred between international cooperation to prevent conflict and interference in the internal affairs of sovereign countries. Opinions are divided on the morality or otherwise of moves by some African leaders to extend their tenure by amending the constitution in parliament. Given the fragility of the constitution and the predominance of the personality factor in the politics of the continent, coupled with the seeming reluctance of the AU to comment on some of these issues, the G8 should support orderly transitions and discourage the ‘sit tight’ tendency of some of the African leaders. The tendency to

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cling to office and become career heads of state has been a major cause of political instability in Africa. It may be necessary to adopt a policy of zero tolerance to heads who want to stay beyond the agreed tenure.

Conflicts Between 1960 and the end of the 20th century, there were as many as 80 violent changes of government in Africa (Adedeji 1999). Many countries were engaged in internal strife, conflict, or war. Africa had earned the reputation of a continent that was perpetually at war with itself. The opportunity costs of conflicts are enormous. Not only do conflict countries forgo development, but they also actually retrogress. The origin of the conflicts can be traced to the arbitrary and artificial nature of African borders culminating in the emergence of new political entities that did not experience a long process of state formation. Ethnic groups were split across national frontiers. But for the wisdom of the founders of the OAU, who declared the sanctity of the inherited frontiers, interstate conflicts could have been a more common occurrence. The fact that the countries were made up of people of diverse origin and the political elite manipulated the people by feeding them with stereotypes about other groups to achieve self-centred objectives created a fertile ground for conflict. There was also the fact that at independence African governments inherited, sustained, and strengthened colonial authoritarianism and despotism. Many of them operated autocratic forms of government where freedom of expression was not tolerated and criticisms were frowned upon. These made conflicts inevitable. The Contribution of the Commonwealth and the African Union to Conflict Prevention In recent times, a number of organisations have focussed attention on the prevention and resolution of conflicts in Africa. The Commonwealth secretary general’s Good Offices role is the organisation’s institutionalised way of preventing and resolving conflicts in Africa as well as in other regions of the Commonwealth (Adefuye 2004). Through quiet, discreet, behind-the-scenes diplomacy, facilitated by the ability to win and sustain the confidence of conflicting parties, the Commonwealth has contributed to preventing and resolving conflicts in Sierra Leone, The Gambia, and Swaziland, among others (Adefuye 2001). The AU has shown itself to be more assertive than its predecessor, the OAU, in this regard. It has played a role in stabilising Liberia and Burundi. It kept firmly to its policy of not admitting non-democratically elected governments to its ranks. It refused to recognise the militarily established regime in Guinea-Bissau and indeed forced the abdication of Kumba Yalá, and insisted on a proper democratic procedure for succession in Togo in 2005. All these examples are evidence of the AU’s commitment to the NEPAD Peace and Security Initiative. This initiative is designed to support the proposed Protocol Relating to the Mechanism for Conflict Prevention, Management, and Resolution within the AU. Both cover actions and measures to

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improve early-warning capacity, especially information gathering and analysis, and ensure that early warning leads to early and effective action. In view of the fact that intra-African interventions are preferable to extra-African interventions as well as the generally accepted view that the primary responsibility for the prevention and resolution of conflicts in Africa should be placed on the shoulders of the AU, it is necessary for the G8 to support the AU and NEPAD Mechanism for Conflict Resolution. The report of the CfA (2005, 171, 176) suggested that to enable the AU to act quickly and effectively to resolve conflicts, donors should agree to fund at least 50 percent of the AU peace fund from 2005 onward. It also suggested that the UN and regional organisations should take steps to clarify their respective roles and responsibilities and the criteria for taking action to prevent conflicts (172). Donors should also be prepared to fund the rapid clearance of arrears for post-conflict countries in Africa to enable early access to concessional financing from international financial institutions (IFIs). These suggestions are worthy of consideration and support by the G8. Arms Control One major factor contributing to the prevalence of conflicts in Africa is the combatants’ relatively easy access to arms and ammunition. The availability of arms is not the cause of the conflicts. But it does exacerbate them. Arms proliferation also tends to increase tension and make disputes violent. Weapons flow into Africa from a variety of sources. In the days of the Cold War, the superpowers supplied arms to their proxies. After 1990, central and eastern European states become the major source. In recent times, China and Ukraine are the leading suppliers. To reduce the incidence of violent conflicts in Africa, the G8 should lead the way in tightening control of direct arms export to Africa. It is through the G8 that Russia, China, and other arms suppliers from Europe can be engaged. The G8 countries should establish an international arms trade treaty that sets high common standards to govern arms transfer to conflict countries in Africa and elsewhere. They could also put diplomatic pressure on African countries that have been engaged in arms proliferation while intervening in crises in neighbouring countries, for example Uganda’s involvement in the Congo. There should be specifically targeted actions against well-known international arms traffickers such as Victor Bout, known to have supplied arms to rebel movements in Angola, as well as Charles Taylor, the former leader of Liberia (Mepham and Lorge 2005).

Corruption Corruption has been one of the major hindrances to development in Africa. Apart from the negative impact on moral standards, it discourages hard work and initiative and breeds inequality. Corruption by government officials affects the style of governance. Large projects such as the construction of sports stadiums and the

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purchase of ships, aircraft, and military equipment take precedence over providing basic health services or improving the conditions of service of teachers. Corruption also encourages crime, in that judicial officials are bribed and court decisions are influenced. The effect on the national economy is usually very damaging. A corrupt country is not attractive to foreign investors. In the immediate post-independence period, corrupt politicians and officials invested the stolen money in projects in their countries. In recent times, the trend has been to lodge the stolen loot in banks in Europe and America. Overseas-based companies, particularly those in the extractive industries, collude with corrupt government officials to conclude deals. As it happened in many African countries, the national income is eventually depleted, genuine foreign investors are scared away, and they invest their money elsewhere. Much as African political and business elites can be held responsible for corrupt practices, there is a feeling that the scale had been exacerbated by the encouragement of and collusion with foreign-based companies. The availability of safe deposits in banks and financial institutions in Europe and America has encouraged the looting of African resources. A substantial amount of money stolen by African leaders such as Mobutu Sese Seko and Sani Abacha is lodged overseas. Because of the obvious negative impact of corruption, African countries have recently demonstrated some willingness and determination to deal with the malaise. South African president Thabo Mbeki sacked his deputy Jacob Zuma on grounds of corruption. Frederick Chiluba of Zambia is facing corruption charges. Nigeria has created the Economic and Financial Crimes Commission, which has convicted some leading public officials. Signatories to the APRM have pledged to tackle corruption. But there is a lot that the G8 can do to assist in tackling the problem of corruption. Companies based in developed countries, including in the G8, are often involved in corruption by paying large bribes to secure commercial deals. Some of these companies are sometimes supported by cover for export credit agencies. These agencies often underwrite the contracts that include the cost of commissions paid by a company to win the contract. There have also been instances when companies that have been prosecuted for corruption in their own countries win large contracts in Africa. It is possible for the G8 countries to establish a mechanism in their diplomatic missions whereby the record of companies competing for contracts could be checked to verify their reputation. Perhaps the most important factor stimulating the transfer of stolen assets from Africa to the developed world is the ease with which the loot can be deposited and later utilised. During his five years of brutal rule in Nigeria, Sani Abacha alone deposited between US$2 billion and US$5 billion in overseas banks located mostly in G8 countries. It is estimated that corrupt African leaders have as much as US$28 billion in Swiss and American banks. The Commonwealth Expert Group on Development and Democracy recommended that Commonwealth governments aid fellow member countries to repatriate the stolen assets to their countries of origin. Nigeria has been making efforts to recover the assets stolen by Abacha and his family. It has recorded some successes in Switzerland. Ironically, it has faced the most serious obstacles

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in the UK. It may be necessary to enact legislation that will remove whatever legal obstacles stand in the way of the repatriation of stolen funds. The lure of the good life in the developed countries is one of the reasons for the looting of funds by African politicians and officials. The British high commission in Kenya cancelled entry visas for a corrupt politician and his family. A Nigerian minister advocated that EU and American missions cancel the visas of some Nigerians who have beyond a certain amount of money deposited overseas. Immigration restrictions for well-known corrupt African citizens could discourage corruption. The Organisation for Economic Co-operation and Development’s (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions compels its signatories to introduce new laws that make it possible to prosecute companies in their home countries for paying bribes abroad. It came into force in 1999 and was signed by 39 OECD countries. But it has many loopholes and its monitoring process is weak. The convention does not address bribery by private officials. Many G8 countries accord low priority to its complementation. This needs to be corrected. By early 2006 only three countries — Russia, France, and the United States — had ratified the UN Convention against Corruption, despite the clear benefits such compliance would add in combating corruption. The activities of the Financial Action Task Force (FATF) on money laundering should be broadened to include Africa. African bodies with objectives similar to the FATF, such as the Eastern and Southern Africa Anti-Money Laundering Group, deserve to be supported by the EU.

Conclusion In the years since 2005, there has been some progress toward implementing the Gleneagles Summit’s conclusions with reference to Africa. Some of the objectives of the CfA, such as the doubling of aid, improved access to aid, debt relief, good governance, and accountability, have been seriously pursued. The decision to cancel 100 percent of outstanding debts of eligible HIPCs to the IMF, the International Development Association (IDA), and the African Development Bank (AfDB) has been implemented, and 32 African countries have benefited from this exercise. With the encouragement of the British government, the Paris Club — some members of which are G8 countries — cancelled a substantial part of the debt owed by Nigeria. These African countries have declared their intention and have taken tangible steps to use the extra resources available to accelerate the achievement of the MDGs. The AU has adopted the conclusion of the CfA and urged all member states to work toward its implementation. Tony Blair appointed Nigerian president Olusegun Obasanjo and outgoing UN secretary general Kofi Annan to monitor the implementation of the CfA report’s recommendations. The NEPAD Secretariat has been taking concrete steps to achieve its objectives. NEPAD is now an integral part of the AU Charter. The APRM has become a reality. The Commonwealth, the EU, and the UN have been encouraging African countries to

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accede to the mechanism. Of the 18 Commonwealth countries, 11 have acceded and there is pressure for the remaining seven to follow suit. Two of the three completed reviews are Commonwealth countries, and the review of a third Commonwealth country is almost complete. The Commonwealth has formally established links with the APRM: the secretariat’s Political Affairs Division will be involved in the next peer review of any Commonwealth African country. The APRM process has won the support of many G8 countries. It is not yet a precondition for assistance, but a country’s attitude to the APRM is fast becoming a factor. There has also been an increased consciousness of the need for reform of the political system, especially with regard to the adherence to democratic principles. Uganda changed from a one-party (movement) system to a multiparty democracy in December 2005. Credible elections were held in Zambia and The Gambia in October 2006. Implementation of the recommendations of election observers is closely monitored. There has also been progress in the area of conflict resolution and prevention since Gleneagles. Based on leadership provided by the UN and the active support of the AU and the EU, there is some hope that there might be peace in the Democratic Republic of Congo (DRC). The first fully democratic elections since independence in 1960 were held on 30 July 2006, with a runoff vote on 23 November 2006. Incumbent president Joseph Kabila eventually emerged the winner, but during the interval between the first election and the runoff, the AU elicited a promise from Kabila and Pierre Bemba, the main opposition leader, to respect the outcome of the elections and keep the peace. In Uganda the rebel Lord Resistance Army and the government signed a truce on 29 August 2006 aimed at ending a 20-year conflict. Although President Yoweri Museveni’s deadline of 12 September 2006 for a final peace deal was not met, hostilities have since ceased and discussions are under way with regard to the details of a comprehensive peace deal and the modality of its implementation. The fight against corruption seems to have had an added momentum. A clean bill of financial propriety is fast becoming a prerequisite for participation in politics and appointment to sensitive positions, as evidenced by the Kenyan government’s attitude to the report of the probe into the Goldenberg affair, in which millions of dollars were paid for nonexistent exports of gold and diamonds. Bakili Muluzi, the former president of Malawi, and leading members of his party have been publicly accused of corruption. In addition to the impeachment of five state governors for corruption practices, the anticorruption tribunal set up by the Nigerian government has been given more powers to deal with corrupt politicians, some of whom have been threatened with a ban from participating in the forthcoming general elections. In general, since Gleneagles Africans have shown a higher level of intolerance to corruption, abuse of office, and violation of human rights. While there has been some discernible progress in the continent since Gleneagles, more could — and ought to — have been achieved. There seems to be a light at the end of the tunnel on both the DRC and Uganda. But the challenge of Darfur still remains. Democracy seems to have been given a lift in Uganda and Zambia, but concerns still remain about the extent to which President Yahya Jammeh tolerates dissenting views

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in The Gambia. Africans have been very loud in condemning corruption and have been taking actions to discourage it. But they have not been receiving the quality of cooperation expected from the wider international community, including the G8 members. Some G8 countries, including the UK, have yet to sign the UN Convention against Corruption. The recommendations of the Commonwealth Working Group on Asset Repatriation have not yet been satisfactorily implemented because some developed countries, including G8 members, cite domestic legislation as the obstacle to the return of the stolen assets. On trade, all that has happened since the ministerial meetings of the World Trade Organization (WTO) in Seattle 1999, Cancun 2003, and Hong Kong in 2005 is the promise to abandon farm subsidies by 2013. This ought to happen earlier. The EU still insists on implementing a 39 percent cut in the agricultural tariff, instead of the 54 percent reduction that developing countries are demanding. Although some debts have been cancelled, there is the allegation that some G8 countries have included the debt write-off as part of their total aid package to African countries, thereby limiting the impact of the debt cancellation on the African countries. Furthermore, China, with its policy of aggressive trade and economic links with Africa, seems not to care much about the democratic and human rights credentials of its African trading partners such as Zimbabwe and Sudan. Thus, although there has been progress since Gleneagles, Africa continues to face a crisis of immense proportions. If unchecked, more than one third of the adult population of the entire continent could be wiped out. In spite of the debt cancellation, the continent continues to be burdened by crippling debt repayments that retard essential investments in health, education, and infrastructure. Obstructive subsidies and regulations continue to stifle African access to markets and inhibit the growth of African economies. At the moment, promises still abound, the air is still thick with optimism and solidarity, and some clearly positive steps have been taken. But it is clear that the leaders of the countries of the G8 hold the political power and the financial resources to support and enhance the radical changes necessary to allow Africa to fulfil its potential and take its seat as an equal partner in world affairs. Africa’s recovery must not be allowed to be derailed or diminished by individual or multinational hegemonic interests. Nor should efforts cease once the baton of leadership is passed from one G8 chair to the next. All G8 leaders must see this as a collective responsibility regardless of the leadership and initiative shown by the UK. Russia as the 2006 chair, Germany as the 2007 chair, and Japan as the 2008 chair should be urged to continue along the lines initiated by the UK. Africa’s position is clear. The continent will no longer tolerate despotic corrupt and undemocratic rulers. Africans understand the importance of education and development for the betterment of their lives. They are beginning to hold themselves accountable and responsible for peace, development, and stability on the continent. By the same token, Africans demand the respect, consideration, and fair treatment long overdue from their partners in the international community. The decisions and commitments made by G8 summits should be followed by strong political will, timely financial support, and equitable trade policies so that 2005 will achieve its potential of being the turning point in world history.

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References Adedeji, Adebayo (1999). Comprehending and Mastering African Conflicts: The Search for Sustainable Peace and Good Governance (London: Zed Books). Adefuye, Ade (2001). ‘International Peacemaker’. In R. Green, ed., Commonwealth Yearbook (London: Commonwealth Secretariat). Adefuye, Ade (2004). ‘Good Offices According to the Coolum Declaration’. In R. Green, ed., Commonwealth Yearbook (London: Commonwealth Secretariat). Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007). Commonwealth Expert Group on Development and Democracy (2003). ‘Making Democracy Work for Pro-Poor Development’. Commonwealth Secretariat, London. (June 2007). Commonwealth Heads of Government (1991). ‘The Harare Commonwealth Declaration, 1991’. 20 October, Harare. (June 2007). Commonwealth Heads of Government (2002). ‘The Coolum Declaration — The Commonwealth in the 21st Century: Continuity and Renewal’. March, Coolum, Australia. (June 2007). Mepham, David and James Lorge (2005). Putting Our House in Order: Recasting G8 Policy Towards Africa (London: Institute for Public Policy Research). New Partnership for Africa’s Development (2007). ‘African Peer Review Mechanism’. (June 2007). Organisation Internationale de la Francophonie (2000). ‘Déclaration de Bamako’. 1–3 November, Bamako, Mali. (June 2007). United Nations Millennium Project (2005). ‘Investing in Development: A Practical Plan to Achieve the Millennium Development Goals’. United Nations Development Programme, New York. (June 2007). World Bank (2005). ‘Global Monitoring Report 2005’. World Bank, Washington DC. (June 2007).

Chapter 10

African Finance and Lack of Development George M. von Furstenberg

Africa, as a whole, has failed to move forward in recent decades. As estimated by Angus Maddison (2001, 554), its real gross domestic product (GDP) per capita was 5 percent of the 1998 U.S. level in 1973 and it was still only 5 percent of that same level in 1998. For comparison, the world’s real GDP per capita rose from 15 percent to 21 percent of the 1998 U.S. level over this same period. For China, the jump had been from 3 percent to 11 percent — much poorer than Africa in 1973 and more than twice as well off in 1998. Sub-Saharan Africa has done worse yet. There the number of extremely poor people — those who live on less than US$1 (in 1993 purchasing power) a day — has almost doubled since 1981 to 313 million in 2001 (World Bank 2005, 4) and now accounts for more than 40 percent of the population. In no other major region of the world is this percentage as high. Correspondingly, all but 3 of the 36 countries ranked lowest (out of a total of 177 countries) by the Human Development Index and comprising the entire category of ‘Low Human Development’ in that index for 2002 come from sub-Saharan Africa (United Nations Development Programme [UNDP] 2004). From the private sector, Carlos Teixeira, Roopa Purushothaman, and Mike Buchanan (2005) have provided an excellent overview and several scenarios of varying degrees of optimism. While the purveyors of hope keep trying to animate progress, the militias of death appear to be winning. In too many west and equatorial African and African Great Lakes countries, ‘state failure and economic failure … chase each other in a dizzying and terrifying spiral of instability’, in the words of Jeffrey Sachs (2005, 60), written in a more general context. Given both the immediate and delayed fatalities of unequal wars and cross-border armed carnage directed mostly against civilians of another tribe, militia, race, or religion, and their livelihood, Africans have managed to slaughter between half a million and a million of their own on average per year for at least a dozen years. There is no end to the serial killing in sight. Adding those who die from the indirect consequences of these atrocities, such as famine and disease, in the Sudan and what is cynically called the Democratic Republic of Congo (DRC) alone could easily account for another half million dead in each recent year. AIDS, malaria, and tuberculosis (TB) have taken — and will continue to take for some time — a combined toll of invalidity and premature deaths that is several times larger. AIDS deaths in sub-Saharan Africa alone were 2.3 million in 2004 (Commission for Africa [CfA] 2005, 194). Malaria and TB add about 1.4 million

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annually, bringing deaths from these three diseases to 10,000 a day (Sachs 2005, 60, 215). Since sub-Saharan Africa’s population, excluding South Africa, is well over 600 million and women bear five children on average, even losing an extra 5 million — close to 1 percent — of its people annually through the combined effect of such ‘extraordinary’ causes is far from bringing population growth to a halt. Yet the destruction of organised life and its basic values and institutions and the waste of human and capital resources, not to mention the human suffering, are tremendous. At the international financial institutions (IFIs), few have dared give an honest and differentiated account of sub-Saharan Africa’s severe and treatment-resistant problems without raising false hopes for the region as a whole. Vicente Galbis (1995) and Ernesto Hernández-Catá (2000) are among the laudable exceptions. Statements in other publications produced by the International Monetary Fund (IMF) such as that ‘since early 2001, under the leadership of its new [hereditary] president, Joseph Kabila, the DRC has made remarkable progress in moving from conflict to reconstruction’ (Clément 2005, 1), are enough to make one’s blood boil.1 If, after decades of difficulties, a key to sustained economic and human development in sub-Saharan Africa (excluding South Africa throughout as a special case) is to be found, it still must be dug out in a number of its countries from under the ruin and putrefaction created by the blight of lawlessness, corruption, and official connivance — from inside and outside the region — with brutality. To start conveying a sense of what could realistically be expected in a comparatively peaceful sub-Saharan country that has gone through a process of reform, it is useful to focus on a country, Tanzania, which looked ready for a growth spurt around 1990. This chapter constructs a worst-case scenario for the country for 1990–2003, only to find that, for Tanzania too, this worst-case scenario is not bad enough. Factors, including financial factors, are examined that could account for the disappointment. After this sobering object lesson, this chapter considers what ‘sound money and finance’ might be expected to accomplish generally and in sub-Saharan Africa in particular. Of course, a precondition for sound money and finance usually is a fairly advanced level of institutional development and of tax and government expenditure control and administration. Other prerequisites include effective protection of property rights, adequate prudential supervision, and various manifestations of separation of powers, such as an independent judiciary and an independent central bank. Steve Hanke (2000) has emphasised that under certain conditions one can impose sound money from the outside by means of a strict currency board without any of these prerequisites. But then the benefits of sound money for financial and economic development would surely be quite limited. Determining the effect of any one of these several correlated factors that condition and reinforce each other in complex (multiplicative) ways presents formidable challenges. In actuality, few of these prerequisites, not equally obligatory, are met in most sub-Saharan African countries. If not, it is tempting to adopt a strategy that bypasses government-imposed obstacles to economic and financial development in subSaharan Africa by working directly for ‘the people’ and with ‘their’ nongovernmental

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organisations (NGOs). While such a strategy briefly may check some of the more malignant governments in the region, it does not help build self-confident local institutions and an essential ethos of public service on which cumulative development depends.2

Dashed Model-Based Expectations: Tanzania After long subjugation to colonial rule involving both the Second German Empire and then the British Empire under a mandate from the League of Nations, the United Republic of Tanzania was formed in 1964, attaching Zanzibar to Tanganyika. Tanganyika is a latecomer to the process of industrialisation and to this day derives almost half of its GDP from agriculture. The United Republic had a good economic start in 1964, but then fell into labouring under an increasingly ruinous experiment with its version of state-misdirected management, an indigenous brew of socialism known in Swahili as ujaama. This aberration did not begin to be scuttled until the end of President Julius Nyerere’s indefinite tenure in 1985 and was followed by a period of economic reforms commonly dated 1986–92. In the meantime, labour productivity in aggregate manufacturing had fallen from a peak of 11 percent of the U.S. level in 1973 to a mere 4 percent of that level in 1990, by one careful estimate (Szirmai, Prins, and Schulte 2002, 34). Having fallen so low and reformed so long, the outlook appeared good for a substantial rebound and sustained economic growth in the 1990s. For many decades, countries that have managed to enter a sustained process of development have been able to count on what is known as multifactor productivity (MFP) growth to contribute one percentage point or more to their growth rate annually on top of what is obtained from simply employing more identified factors of production such as capital and labour (and land). Progressive improvement in technology — through technology transfer, learning by doing, and research and development (R&D) — and in management practices, general know-how, infrastructure support, and international connectedness are supposed to provide this extra output gain. By the 1990s, with the hopeful conditions that had lifted the outlook for Tanzania, the ex ante worst-case scenario could reasonably be taken to be one in which MFP still would not grow appreciably from 1990 to 2003, but the use of ever more capital and labour would bear its proportionate fruit in raising income and output, merely assuming constant returns to scale. The technical details of this scenario of moving through capital deepening toward a steady state are laid out in Appendix 10-1. The results for the projected, as opposed to actual, growth of real income per capita are shown in Table 10-1. Column 2 of that table indicates that, by 2003, even in the worst-case scenario, GDP per capita still should have risen by 25 percent (or about 1.7 percent a year) from 1990 to 2003 on account of capital deepening alone. Reality, however, was much different. The first column in Table 10-1 shows that it took twelve years, to 2002, for per capita GDP merely to be restored to its 1990

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level — that hopeful level that was widely expected to be lifted on the wings of reforms. The last column in Table 10-1 has the shortfall of the actual from the worstcase projected level of GDP per capita peaking at 26 percent in 1997–98 before declining to 17 percent in 2003. As often in sub-Saharan Africa, worst-case scenarios constructed ex ante with conservative growth-accounting assumptions turn out to have been too high. What could be the reasons? Wasteful Government and Corruption-Affected Private Investment In Tanzania, allocation through markets rather than government directives was encouraged after 1985. As a result, the share of public investment in total investment declined from over 45 percent before the 1986–92 reform period to a seemingly more appropriate 25 percent after the reforms (Kweka and Morrissey 1999, 5). Nevertheless Josaphat Kweka and Oliver Morrissey (12) found a negative relationship between economic growth and ‘productive’ government spending — on human (health, education, information resources) and physical infrastructure capital Table 10-1 The Projected (Worst-Case Scenario) and Actual (Even Worse) Growth Records of Tanzania, 1990–2003

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

GDP per Capita Projected 1 0.986 0.892 0.865 0.848 0.852 0.863 0.869 0.882 0.904 0.928 0.961 1.000 1.037

GDP per Capita Actual 1 1.034 1.065 1.092 1.116 1.137 1.156 1.174 1.189 1.204 1.217 1.228 1.239 1.249

Output/Capital Actual over Projected Projected GDP per Capita 1 1 0.924 0.953 0.864 0.837 0.815 0.792 0.775 0.760 0.741 0.749 0.713 0.747 0.688 0.741 0.667 0.742 0.649 0.751 0.633 0.763 0.619 0.782 0.606 0.807 0.595 0.830

Notes: GDP = gross domestic product. Sources: The Column 1 index of actual GDP per capita in constant prices is calculated from International Monetary Fund’s Financial Statistics database, data items 73899BPP and 73899Z accessed April 2005. The steady state value of the output/capital ratio, Y/K, is 0.486 yielding a steady-state value of GDP per capita of 1.36. Of this 36 percent improvement projected from moving to the steady-state without multifactor productivity growth and a change in the effective investment rate of 22 percent, 24.9 percent (two thirds) thus is projected to have occurred by 2003.

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— for the 1965–99 period. They attributed this unexpected finding to the inefficiency associated with the use of public funds and public investment in Tanzania. From the IMF, Roger Nord, Michael Mered, Nisha Agrawal, and Zafar Ahmed (1993, 1) concluded already earlier that ‘Tanzania is getting very little return on domestic investment, in part because the economy is [still] dominated by a large and highly inefficient parastatal sector’. Yisheng Bu (2006) has shown that in developing countries depreciation rates of capital are increased by inefficient selection of projects that are difficult to monitor, and thus easy targets for corruption, and by planned under-maintenance of completed projects. Sachs (2005, 245–253), although assuming an inexplicably low annual depreciation rate of 2 percent in his numerical illustration, has noted that usable capital in place can also, in effect, be diminished as a result of the death of skilled workers due to AIDS and other epidemics, and that good investment comes in packages. Private capital, both at formation and in operation, also can be bled by pilferage and by the impositions, side payments, and rake-offs of corrupt outside agencies or gangs and thugs, public or private. Conversely, some private entrepreneurs who are political insiders may get favoured access to rationed credit resources even though their projects are patently inferior to the projects of others who do not get funded for lack of the right connections. Given the waste of both publicly and privately invested capital, the outcome could be considered analogous to one quarter of the capital funds invested each year simply being ‘lost’ or diverted to unproductive activities. Seen this way, the 22 percent gross saving rate realistically assumed for Tanzania as explained in Appendix 10-1 would produce an effective investment rate equal to only 16.5 percent of GDP. With that, per capita GDP would be expected to have increased by only 13.6 percent, rather than 25 percent, from 1990 to 2003. The expected increase would be reduced further, to 8.5 percent, if the true depreciation rate were in fact 0.10, rather than 0.08 as assumed in generating Table 10-1. In the first column it shows the actual increase in per capita GDP to have been just 3.7 percent over this 13-year period, or 0.28 percent on average per annum. Hence even these highly adverse assumptions do not yet suffice to explain why long-term growth was so anaemic. At least one other adverse factor must have been at work in this conjecture to account for the full amount of the actual growth deficit relative to what was intended to be a worst-case scenario. Falling Multifactor Productivity In developing countries, low or negative measured MFP growth may simply be a mathematical correction for overstating capital inputs by assuming an insufficiently high effective rate of depreciation. However, it could be said that the combination of deforestation, desertification, and influx of refugees from the murder and mayhem elsewhere in Africa’s Great Lakes region have made deployment of existing resources of capital and labour, correctly measured, less productive. The result would be true negative MFP (or synonymously, total factor productivity [TFP]) growth.

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Sachs (2005, 227–232) provides a case narrative of the factors jointly responsible for progressive productivity decline in a remote agricultural community in Kenya. Several of these factors are both the cause and consequence of extreme poverty. Long episodes of negative MFP growth have been reported occasionally even for countries not highly stressed by continuing catastrophe. For instance, the IMF (2004, 17) has estimated average actual TFP growth for Mexico of –0.5 percent (with a trend of –0.4 percent) for the period 1980 to 2003. Applying a more moderate, but still extremely disappointing, down-trend of –0.3 percent, rather than the rate of 0 assumed in the provisional worst-case scenario, would bring the growth of GDP per capita finally down from the already much-reduced estimate of the previous paragraph — 8.5 percent — to 3.7 percent over 13 years, which was all that was achieved. Foreign direct investment (FDI) as a percentage of gross fixed capital formation averaged 8.3 percent for 1992–97 in Tanzania, being attracted mostly to the exploitation of natural resources, while this percentage was 14.4 for Mexico (United Nations Conference on Trade and Development [UNCTAD] 2004, 391, 393). In Mexico, FDI went predominantly into manufacturing operations, business services, and retail networks where beneficial spillovers to the local economy and to improved business practices are likely to be greater than in resource extraction and cultivation. The absolute average annual amounts of inward FDI involved were US$90 million for Tanzania and more than 100 times as much — US$9,619 million — for Mexico (368, 369). To recapitulate, to account for Tanzania’s disappointing growth performance over the originally so hopeful period from 1990 on, a combination of highly adverse factors such as the following would need to be identified: • One quarter of capital invested goes to waste or a quarter of the funds ostensibly available for capital formation are not turned into productive capital at world market prices. • Because foreign donors and corrupt contracting practices both favour investment in new, negotiation-intensive, and approval-intensive projects over funding routine maintenance, the effective annual depreciation rate is 10 percent of the net stock of capital, about twice as high as in advanced countries. • Progressive degradation of the physical (reduced rainfall and water quality, deforestation, rural blight) and human (spread of urban slums) environment caused negative MFP growth of –0.3 percent per annum. In addition, the fact that Tanzania, unlike Mexico, had been unable to attract a substantial amount of FDI outside the natural resource sector meant that the technology transfer and the training and best-practice demonstration benefits frequently conferred by multinational corporations (MNCs) were low. Negative MFP growth may have been counteracted to some extent because Tanzania has been able to import technologies that imply important savings in the capital and educational investment needed for more advanced development. Such technologies are embodied, for instance, in cellular phones and internet connections that allow advanced information and communication technologies (ICT) to be

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obtained readymade and at very low cost from abroad by both businesses and other organisations and individuals alike. According to the UNDP (2004, 183), in 2002, per 1,000 people Tanzania had five telephone mainlines, but more than four times as many (22) cellular subscribers, and 2.3 internet users. In a favourable economic climate, which the IMF (2005) indicates did in fact prevail from 2002 until at least early 2005, these numbers per 1,000 could well have doubled by the latter year. This doubling may be among the factors making continued negative MFP growth during these most recent years less likely.

Villains, Victims, and Undertakers Given the past growth disappointments, there are of course other possible negative factors that need to be considered. Some of these, such as the ‘inexorable’ decline in the terms of trade of the primary commodities exported by African countries against the advanced-processed goods and services sold by industrial countries do not appear to square with the facts. According to the IMF and the International Development Association (IDA) (2001, 30), for instance, Tanzania’s terms of trade will improve 1.1 percent per year on average from 2001 to 2010 and 0.4 percent per year from 2011 to 2020, after having risen 9.9 percent in 1999 and then fallen 2.5 percent in 2000. Commodity prices have been quite volatile, with shifting trends, while the relative prices of high-tech goods, including consumer-oriented imported ICT goods, both in acquisition and operation, have been declining persistently. Other assertions — currently much more common and vehement — clearly clash with the facts. For instance, even though creditors are known as predators in Africa, there are no indications that foreign-debt collectors ever displayed any ability in Tanzania or elsewhere (such as Argentina) in recent years to suck up these countries’ budgetary resources that should have been spent on human and economic development. The Human Development indicators are gravely at fault for pandering to that notion by juxtaposing total foreign debt service in percent of GDP to public expenditures on health and education (and the military) while failing to explain that the heavily indebted poor countries (HIPCs) in their postcolonial history hardly ever have repaid anything except with new debts.3 These new loans not only had to be at least equal to any scheduled repayment obligation but were also usually much greater: they amounted to rollover in addition to a big plus. If this plus of net new borrowing was in danger of disappearing because foreign governments and IFIs started balking at continuing the rapid debt build-up, the country would get substantial amounts of debt forgiveness by one means or another, most commonly from the Paris Club of official creditors (and debtors). The HIPC initiatives of recent years are the most forthcoming in offering ever more forgiveness with the least questions asked — cancellation of up to 90 percent of the face value of their debt to official holders ‘or more if necessary’ under the terms of the 1999 G7 Cologne Summit — like a no-fault divorce made in heaven. Some African journalists also claim that to the extent that their country’s debts were contracted under the previous dictator and not the current

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one, these debts qualify for unilateral repudiation under the convenient Doctrine of Odious Debts.4 Disavowal of past debts is not normally conducive to being able to contract new debts, but for the poorest developing countries it has often worked. Here are some of the basic facts: Tanzania regularly receives a quarter of its fiscal resources from grants and a nearly equal amount of ‘exceptional’ financing or debt ‘forgiveness’. The latter is a polite term for interest and principal repayments in arrears on foreign debts finally being written off as a long-lost cause. The financial programming data contained in the ‘Completion Point Document for the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative’ for Tanzania provide some telling statistics (IMF and IDA 2001). That document shows official current account unilateral transfers to Tanzania in 2000, the last actual as opposed to projected year shown, of US$762.7 million, arrears rising by US$106.2 million, and new debt relief of US$130.5 million. Foreign loan inflow was US$319.3 million and amortisation due was US$273 million (including US$105.8 million in below-market interest). Ignoring debt relief as merely bringing a formal settlement to a long-lost cause, if one adds just foreign loan inflow and official current account transfers-in (US$1,082 million) and subtracts amortisation due that was actually paid out and not added to arrears (US$166.8 million), one finds that Tanzania did very well for itself, attracting a combined total of US$915.2 million in grants and net new lending. Since Tanzania’s 2000 GDP at the official average annual exchange rate of 800 Tanzanian shillings (TZS) per U.S. dollar was worth only US$9 billion, this 10 percent current resource inflow is neither small nor credibly debt creating. Of course, double or triple this amount of foreign aid, as currently demanded, would be ‘better’.5 HIPCs have always welcomed any opportunity to borrow to the hilt to generate debt forgiveness: ‘Grants only’ might have threatened to put them on short rations. A bit of storytelling may help to make the point: A man was asked by his grown daughter for a loan because she, quite sensibly, wanted to buy a condo or a cottage. The man offered to give her a grant equal to the down payment required at the bank. The daughter immediately declined, protesting that she would be ashamed to take such a large gift from father dear and that she would prefer a loan from him for the full amount of the purchase price at the same as the bank’s interest rate. She knew that her father would not want to let it appear that he did not believe that he would ever get his money back, thereby displaying a lack of faith in his upstanding daughter. Thus, instead of getting the down payment as a voluntary gift, she ended up getting the entire condo for nothing. Her father was not surprised and forgave her debt, there being no practical alternative. The taxpayers of developing countries appear ready to do likewise since radical debt forgiveness for the HIPCs is a cause that moves many people, although not so much that they would like the foreign-aid budget to be boosted directly. Debt forgiveness can be kept out of the sight of taxpayers in that it appears only as an obscure ‘capital transfer’ or ‘capital grant’ item in the international capital accounts years later. This political cover makes serial default (a term introduced by Carmen Reinhart and Kenneth Rogoff [2004]) possible on repeated transfers of official loan resources à fonds perdue.

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Teasing More Development Assistance Out of Future Taxpayers, Intransparently The CfA (2005, 319, 337, 367) has proposed to formalise this loans-to-grants programme (historically anticipated not by the Marshall Plan but by the LendLease military aid programme of World War II) by proposing ‘a transparent debt compact to include all sub-Saharan African low-income countries, including those excluded from current schemes. It should cancel debt stock and debt service by up to 100 percent, and cover multilateral and bilateral debt. As an urgent measure, financing should immediately be put in place to provide 100 percent multilateral debt service cancellation, where this is necessary to achieve the MDGs’ (60).6 Since the MDGs are stunningly ambitious for all of sub-Saharan Africa (still excluding South Africa), 100 percent debt forgiveness appears to be proposed for the entire region.7 The resulting hits to the capital base of IFIs and affiliates resulting from their own debt write-offs are to be made up through additional contributions by the advanced industrial countries and their taxpayers paying off over time what the subSaharan countries owed the IFIs. These taxpayers may be at least dimly aware that government or governmentguaranteed lending to sub-Saharan Africa has long been a way to provide foreign aid — of course not just for the benefit of its designated recipients or for the announced purposes — by other means. Nevertheless, disguising such aid as loans has been useful in providing more resources to those countries and assorted leeches for their own use, one of which may, of course, be capital flight linked to corruption (Nyoni 2000, ch. 9). When Sachs (2005, 280), like many others in or around the U.S. and other G8 governments and NGOs, writes that ‘rich countries should have given the poorest countries grants rather than loans, so that the poor countries would never have been indebted in the first place’, he might find reason to regret this protestation. If ‘grants only’ had become the official policy already earlier, as he advises, these outright grants would have been much smaller than the grant element in the ‘loans’ proved to be. In addition, aid was not given ‘to the poorest countries’ but to government officials and budgets often of dubious character, agency, and administration. With debt always so sweet and painless to forget, many of Africa’s sub-Saharan countries soon will find ways to become heavily indebted again by one means or another — government credit guarantees for external borrowing among them. They would be following the recidivism of tiny Cap Verde, or of countries such as Rwanda, Senegal, and Uganda, which are among the more than two dozen countries that had received forgiveness of most of their external debt under the Enhanced HIPC Initiative already. Thus the dance of over-borrowing, serial default, and debt forgiveness will continue, although the music and the partners may change. Perhaps aware that ‘grants only, right from the start’ may not be enforceable and not a way to maximise ODA flows, in January 2003 the United Kingdom proposed the establishment of an International Finance Facility (IFF) (HM Treasury 2004, ch. 2–4). It endeavoured to hand out loan proceeds in the amount of US$50 billion annually for at least ten years, until 2015, in return for donor countries obligating

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their future governments and citizens to repay these long-term loans through grants from their foreign-aid budgets over many years to come. The IFF proposal, in its own words, thus presumptuously proposed to ‘frontload’ aid to bridge the financing gap before development assistance is doubled as tentatively agreed, but not firmly committed, by donor nations in 2002 at the UN International Conference on Financing for Development in Monterrey (HM Treasury 2004). It proceeded through the issuance of what in substance are tax anticipation bonds on behalf of the 22 countries that are members of the Development Assistance Committee (DAC) that care to participate in guaranteeing the bonds issued by the IFF. Although resources would be disbursed mainly in grant form through existing bilateral and multilateral channels to the lowest-income countries, the document asserted gratuitously that disbursing resources to a wide range of such recipients ‘would ensure … also that the IFF receives the highest possible credit ratings for its bonds’ as if the principle of loan portfolio diversification applied (11). Chapter 2 of the 2004 version of the HM Treasury (2004, 4) document relishes the impatient imposition on future taxpayers by noting that ‘if we are to meet the MDGs we cannot wait for all countries to achieve the 0.7% [of ODA in percent in gross national income (GNI)] target — we need to urgently increase the amount of aid now’. According to the original plan with a 2003 starting date, donor debtservice payments to the IFF intermediary totalling US$720 billion (at an assumed interest rate of 5 percent) would be spread in a steeple-shaped pattern over 30 years with a peak after 15 years, or around 2018. The facility would supposedly wind up its operations in 2032, although the history of international agencies (for example, of the Bank for International Settlements [BIS], where the IFF would belong) suggests otherwise. The massive grants, however, would be paid out fast to help the poorest countries sprint to the MDG goal line by 2015. If they fail to cross that line or, after crossing it, do not keep running, donor countries will find their foreign aid budgets precommitted in good part to cover the costs of a splurge that has already failed, causing aid weariness to rise. The entire IFF proposal therefore represents a political presumption that it will fully succeed, regardless of Africa’s proven record of disappointment and with a number of its failing governments still in place. If it does not succeed, it will greatly destabilise aid flows to the poorest countries even though it claims to be designed to do the opposite. By containing no responsible risk analysis, the proselytising prospectus fails to pass the test of honesty and transparency toward the future taxpayers of donor countries. In going for broke now, it shortchanges future, perhaps more growth- and welfare-producing, potential recipients from the poorest countries as well. No matter how disguised as ‘investments’, making charitable commitments on behalf of future generations rather than on behalf of the present political generation is inherently dishonest and presumptuous: Let me, the kind and merciful politician, give now what I can obligate you, who are not yet politically alive, to pay with interest tomorrow since I certainly would not want us to pay for such a politically risky cause now. Pay-as-you-go, PAYGO, is a better principle than IFF for responsible fiscal policy, transparency of costs and benefits, and participatory public choice. That is what

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‘we’, in the murky royal idiom of the prospectus, like to preach so earnestly to the developing world. Yet the engineering of transfer schemes of official development finance that are disguised as something else has a long and inglorious history. With the Gleneagles Summit hypothecation scam, the IFF has joined proposals for new allocations of special drawing rights (SDRs), an international tax on airline tickets, and the Tobin tax on foreign exchange transactions in this masked line-up.

What Reform of Sub-Saharan Africa’s Own Money and Finance Systems May (Not) Achieve In the quasi-documentary film Hotel Rwanda, a five-star Hutu general who was later convicted of war crimes throws down a pile of Rwandan francs as worthless trash. It had been offered to him in desperation by the hotel manager, whose supply of U.S. dollars had run out, to continue buying protection from being massacred for the mostly Tutsi refugees whom the hotel had harboured. In actuality, Rwandan francs lost only a little over half their ‘official’ dollar value from yearends 1994 to 1995 and are still in use. So they were trashed by the commanding general presumably because they were not readily convertible and did not travel nearly as well as U.S. dollars to foreign hiding places to and from money laundries. Hence there are doubts whether having free access to foreign currency accounts inside the country (score five out of ten) or inside and outside the country (a perfect score of ten) would really be such an unmixed blessing in sub-Saharan Africa as the Fraser Institute’s Economic Freedom of the World (EFW) index assumes with its innocent rationale (Gwartney and Lawson 2003). That rationale is that currency competition keeps a national money healthy and strong, or, if not, limits the harm it can do by marginalising it in daily use and outsourcing most of the functions of sound money and finance to foreign carriers and suppliers. Yet the EFW index, which goes back to 1970, appears more discerning than its far less transparent competitor, the Index of Economic Freedom (IEF), put out since 1995 (Heritage Foundation 2007). The IEF, for instance, awards equal scores of 2.0 in the categories of both Monetary Policy and Banking and Finance for 2005 to Tanzania and to Spain, a member of the European Monetary Union and a financial services exporter. The Growth Competitiveness Index (GCI) that is produced by the World Economic Forum also is not satisfactory for this purpose (Porter et al. 2005). The GCI touches on money and banking matters only lightly in its macroeconomic stability sub-index. Results from a survey question on credit availability and hard data on the previous year’s inflation rate and the lending-borrowing interest rate spread are used. Jennifer Blanke, Fiona Paua, and Xavier Sala-i-Martin (2004) explain that the focus of the GCI lies elsewhere. Hence it is best to ascertain what can be learned about monetary stability and financial development of Tanzania since 1990, or since 1992 when a more complete set of data became available, by use of the EFW alone. What is it about ‘sound money’ (category three out of a total of five) and appropriate ‘credit market regulations’ (subcategory 5A) that the EFW finds supportive of

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economic growth on its own and because it strengthens other productive elements of economic freedom? Here are excerpts from the 2003 annual EFW report: Sound money is essential to protect property rights and, thus, economic freedom … Governments have used inflation and printing presses, in effect, to expropriate citizens’ property by devaluing it while using newly printed currency for government expenditures. It makes little difference who provides the sound money. The important thing is that individuals have access to it. … [Thus] in order to earn a high rating in this area [of access to sound money], a country must follow policies and adopt institutions that lead to low (and stable) rates of inflation and avoid regulations that limit the use of alternative currencies should citizens want to use them … Regulatory restraints that limit the freedom of exchange in credit, labor, and product markets are included in the index. The first component (5A) reflects conditions in the domestic credit market … Countries that used a private banking system to allocate credit to private parties and refrained from controlling interest rates received higher ratings for this component of the regulatory area (Gwartney and Lawson 2003, 7, 10).

Part A of Table 10-2 shows that in the ‘access to sound money’ category, Tanzania had an average score of five or less in the 0–10 range, ordered from the lowest, from 1975 to 1995, but that the rating then shot up to about nine by 2000, with lower money growth and lower inflation and inflation variability, and the granting of full freedom to own foreign currency deposits anywhere all contributing to the massive improvement. Progress in the other category of ‘sound financial regulation’ came later and more slowly. Here the average score rose solidly above three only after 2000, with ‘avoidance of interest rate controls and negative real interest rates’ contributing most to the eventual improvement. There is some doubt that the improvement has lasted. Michael Porter and his colleagues (2005), for instance, show Tanzania’s GCI ranking slipping markedly from 69 out of 101 countries in 2003 to 82 out of 104 countries in 2004. There may be some backsliding since the three components of the GCI — the technology index, the public institutions index, and the macroeconomic environment index, including the macroeconomic stability sub-index — all rate factors complementary to financial development and efficiency in risk analysis, risk pricing, and project selection. Hence further analysis of this mixed picture of improved inflation control but inadequate and fragile financial development appears worthwhile. Such an analysis is provided in Table 10-3. Its first column shows that while the Tanzanian shilling lost two thirds of its U.S. dollar value from 1992 to 2004, there was an up-tick in that value in the end. That small appreciation was shortlived, however, as the Tanzanian shilling stood at 1113.5 to the U.S. dollar on 5 May 2005, thereby continuing its trend depreciation against the U.S. dollar. The decline in nominal interest rates from 24 percent in 1993 to 2.45 percent in 2004 in the second column mirrors an almost equally impressive decline in Tanzania’s inflation rate to the lower single digits. Nevertheless taking an amount in Tanzanian shillings worth US$100 at the end of 1992 and investing it at Tanzanian savers’ interest in shillings

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Table 10-2 Monetary and Financial Components of the Fraser Institute’s Economic Freedom of the World Index for Tanzania A. Sound Money Components (weight in Economic Freedom of the World Index: 1/5) Growth of Inflation Recent Freedom to Own Access to Sound Money Supplya Variabilityb Annual Inflationc Foreign Exchanged Money Averagee 1970 9.4 9.3 0 6.2 1975 7.0 7.8 4.8 0 4.9 1980 5.9 6.5 4.0 0 4.1 1985 7.9 8.4 3.3 0 4.9 1990 4.0 8.7 5.6 0 4.6 1995 4.5 6.4 4.2 5 5.0 2000 8.7 7.8 8.8 10 8.8 2002 8.8 8.7 9.1 10 9.1 B. Sound Financial Regulation (weight 1/15) Private Avoidance of Ownership Credit to Negative Real of Banksf Private Sectorg Interest Ratesh 1970 0 4.2 1975 0 1.3 1980 0 0.9 4 1985 0 0.9 0 1990 0 7.2 4 1995 0 4.7 4 2000 0 4.5 4 2002 2 6.1 9

Credit Market Regulation Averagee 2.1 0.7 1.6 0.3 3.7 2.9 2.8 5.7

Real GDP Growth Rate Annual Averagei NA NA NA NA NA 0.16% 4.22% 5.95%

Notes: NA = not available. GDP = gross domestic product. a. Money growth equal to the long-term growth of real output scores 10; if 50 (or more) percentage points greater, score is 0. b. A perfect 10 would result if the standard deviation of inflation were zero over the preceding five-year period, zero if 25 percent or more. c. Perfect price-level stability scores 10; inflation ≥ 50% scores 0. d. Score is 10 if foreign currency deposits are allowed at home and abroad, 5 if at home only, 0 if disallowed entirely. e. Average of items shown in previous columns, excluding blanks. f. Score is 10 if percentage of deposits held in privately owned banks is between 95% and 100%, 0 if 10% or less. g. Score is 10 if percentage of total domestic credit extended to the private sector is close to 100%, 0 if close to 0%. h. When interest rates are determined primarily by market forces and real interest rates are positive, score is 10. Score is zero if interest rates are fixed by government and real interest rates < 0. i. Annual average from prior date. Sources: Based on Gwartney and Lawson (2003). The Economic Freedom of the World index is available at five-year intervals between 1970 and 2000, and annually since 2000.

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and then restating the entire accumulated balance in U.S. dollars at successive yearends shows the unsteadiness of international currency returns in the third column. The dollar value of principal and interest first drops by more than 13 percent from yearends 1992 to 1993, then rises 45 percent from US$86.60 to US$125.80 at the end of 1997. It then wobbles around, earning no net dollar return, until the end of 2000. Thereafter the gross dollar value of the Tanzanian shillings savings deposit headed down, falling to US$101.90 by the end of 2003, a value barely above the principal investment of US$100 in 1992, before recovering somewhat to US$106.43 by the end of 2004. Of course, a six-percentage point rise in the U.S. dollar value of principal and interest over twelve years is far below the gross return of US$156.37 that a rollover investment of an initial US$100 in U.S. treasury bills over the sample period would have yielded by the end of 2004. Table 10-3 Twelve Years of Uneven Financial Development, Tanzania, 1992–2004

Units: 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Exchange Rate with USD Yearenda TZS/USD 335.00 479.87 523.45 550.36 595.64 624.57 681.00 797.33 803.26 916.30 976.30 1063.62 1042.96

Interest Principal Claims Rate on with on PS/ TZS Interest Domestic Savingsb TZS to USDc Creditd % USD % NA 100.00 33.24 24.00 86.565111 33.22 23.98 98.388178 35.79 22.70 114.81955 28.97 14.25 121.20905 19.70 8.79 125.75543 28.54 8.29 124.89617 35.20 8.27 115.49582 36.17 6.55 122.15231 38.16 4.15 111.52684 50.09 3.36 108.1898 62.90 2.58 101.86988 90.58 2.45 106.43307 97.76

Domestic Claims Excess Credit on USD GDPe PS/GDPe Returnf % % % 29.31665 9.7447203 NA 32.505375 10.797262 –16.4549 27.104621 9.699548 9.368 22.972356 6.6551895 11.1906 15.702137 3.0937138 0.54482 12.422982 3.5452624 –1.31914 12.230469 4.3053175 –5.49328 12.985725 4.6972521 –12.1865 12.014644 4.5850657 –0.0866 9.7356854 4.8762419 –12.1485 9.68947 6.0945121 –4.61215 8.4366466 7.642157 –6.86151 NA NA 3.09943

Notes: GDP = gross domestic product; PS = private sector; TZS = Tanzanian shilling; USD = U.S. dollar. Sources: Data from International Monetary Fund’s International Financial Statistics database accessed April 2005: a. Shillings per U.S. dollar, end of year, Line 738AE. b. Savings rate (interest rate on TZS deposits), Line 73860K. c. Growth of TZS33,500 (= USD 100) with TZS interest on savings, from yearend to successive yearends, converted to U.S. dollars. d. Claims on private sector, Line 73832D, in percent of domestic credit, Line 73832. e. Denominator is nominal GDP, production based, from Line 73899bp. f. USD-equivalent rate of return on TZS savings minus average annual U.S. treasury bill rate.

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On an average annual basis, the mean rate of return on Tanzanian savings, after converting from shillings to U.S. dollars, thus was more than three percentage points lower than the 3.80 percent average annual rate earned on U.S. treasury bills. At the same time, the difference in dollar rates of returns was extremely variable from year to year, with a range of –16.6 percent to +11.2 percent and a standard deviation of 8.46 percent. Not only was the ‘excess dollar-equivalent return’ on Tanzanian shillings more than 3 percent negative, but it was also exceptionally risky, so that country, currency, and market risk all failed to be compensated and worse. This is not the way it comes out in financially more liberated countries such as Mexico, where the excess dollar-equivalent return characteristically takes on large positive values when calculated over a dozen or so years anytime after 1982. When earning is much less, not just in a few isolated years, but on average over twelve years, on a vastly inferior financial investment in a minor currency than on the international U.S. dollar benchmark investment, then financial repression and capital controls must be at work. Hence if there has been greatly increased financial development since 2000, as the EFW index suggests, corroborative evidence of greater financial openness is still lacking. The question marks on whether Tanzania is headed from sound money to financial development, transparency, and financial openness just will not go away. Furthermore, not addressed by any of these indexes is the important issue of whether poor households with productive activities constrained by liquidity find these constraints loosened by financial development.8

Bypassing Disappointment? During recent decades, sub-Saharan Africa has regularly turned worst-case scenarios developed ex ante into best-case scenarios after the fact, as worst-case scenarios rarely turned out to have been bad enough. Not only do aid and loan funds frequently go missing, but so also do the fruits of capital formation. Marauding militias in the land and the utter contempt with which most of those in power treat their common people are reminiscent of old history lessons about how things were in much of continental Europe between the twelfth and fourteenth centuries, and not much better in England. At the time, the rural population in many parts was neither safe nor free from oppression and most villages and towns were not either, even when there was a lull in the sieges, raids, and general tumult of local- and foreign-power skirmishes. Epidemics and pestilence were common. The Renaissance changed some of that as public spiritedness established itself here and there. But then the Thirty Years War put an end to benevolent government for some time in most parts of continental Europe. It is humbling to recall through these few asides that sub-Saharan Africa’s current tribulations mirror the people’s history of suffering at other times in other places. It is aiding and abetting evil to extend ODA in Africa to those rip-and-skip overlords who are not truly interested, or have no compelling political reason to be interested, in improving the lot of the masses and who have no abiding commitment to the welfare and development of the country. Conversely, once the motto of ‘let

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us build the country together’ compellingly and reliably motivates its elite and resonates with its various groups and peoples, a country should be greatly helped. A differentiated strategy thus appears to be called for, and not a comprehensive strategy for all of sub-Saharan Africa that undercuts the development of internal solidarity and those supporting reforms by treating all countries — that is, central governments — in the region far too equally. The many disappointments in post-colonial Africa have tempted donor countries and development agencies to try to bypass those governments, licence boards, corrupt institutions, and choke mechanisms that they hold most responsible for blocking progress. Waiting for reform in sub-Saharan Africa and for the emergence of public spiritedness, with its firm embrace of social and professional ethics, has been frustrating because that embrace has not come. Those from outside this extremely poor region who care for its welfare are tempted to stop waiting and to start acting on their own by pitching their political-economy sanitation programmes and getting them put in place. They do not shrink from offering aid incentives to get sub-Saharan countries to shape up for the occasion and to drink up when there has been a Gleneagles-type outbreak of donors’ largesse. This intemperance has led to a number of policy recommendations. For instance, if you cannot keep your money sound, the advice is just to use someone else’s, preferably the U.S. dollar or the euro, and dare not restrict that. As the EFW rationale proclaimed, ‘it makes little difference who provides the sound money. The important thing is that individuals have access to it’ (Gwartney and Lawson 2003, 7). If your own financial system keeps being stunted and periodically wrecked by insider deals and directed lending, the advice continues, just give up having your own system and invite the top foreign banks and investment houses to take over and straighten things out. If you do not have a comparative advantage in developing reliable business ethics or the rule of law, just let MNCs show you the proper practices and let them sue you, if necessary, in their home court or bring you before an international tribunal or dispute settlement panel to teach you a lesson. If your government is corrupt or incapable, the foreign saviours will just have to keep it from meddling in the country’s externally devised poverty reduction and development strategy. To keep up appearances, that strategy is supposedly ‘owned’ by the locals and by ‘their’ civil society usually represented by foreign-inspired NGOs. But do not worry too much: If you cannot afford to hold free and fair elections and are busy paining some of your own people or their neighbors, just pretend that you love the United States, France, Great Britain, or whichever profits you most, more than all others and that you have some resources that beckon, and they will send you arms, investments, and tokens of official respect anyway. The IFIs can be counted on to offer a fitting accompaniment of loans and praise, as they did for Mobutu Sese Seko, Laurent Desiré Kabila, and his surviving son, Joseph. There are no good options. Rapid aid actions may bring immediate, but largely transitory, benefits. For instance, an unexpected major increase in official transfers from abroad, a budgetary windfall, is bound to bring an end to budget deficits and inflationary finance in the near term. Credit can be then redirected to the private

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sector and credit to that sector may grow faster than GDP, much as the data in columns 4 to 6 of Table 10-3 suggest from 1996 on, even while the ratio of total domestic credit to GDP — a commonly used indicator of financial development — keeps falling. An aid windfall also will preclude balance-of-payments crises, and it may well inaugurate an episode of macroeconomic stability and higher economic growth. Yet it need not improve either budgetary expenditure planning and control or the tax administration system, even though Tanzania has made progress with the latter (see IMF 2005). This raises the issue of sustainability once aid dependence has grown because the budget has come to be based on the expectation that the higher flow of official foreign transfers to the country will be maintained indefinitely. Getting actively involved in sub-Saharan Africa with a bypass strategy that minimises reliance on a country’s own political, administrative, and institutional capabilities is likely to be a blessing also only in the short to medium run. Giving up on a money and financial system may be a beneficial stabilisation shock for inflationprone governments because they are then no longer able to generate seigniorage from inflationary finance of fiscal deficits. But this policy of precautionary restraints does not explain how, when unable to balance the budget, the government can be kept from issuing quasi-moneys and IOUs or simply failing to pay some of its workers and captive suppliers, including schools and hospitals, and running up budgetary arrears. When ‘active’ fiscal policy violating the intertemporal budget constraint unless changed collides with ‘active’ monetary policy seeking to safeguard low inflation and the central bank’s institutional independence, active monetary policy does not necessarily win, no matter how well protected by institutional armour such as the central bank law and charter or a currency board arrangement. Fiscal profligacy shocks due to distortions in the public choice process or in the federal structure of decision making that play into such shocks could bring down monetary (union) regimes not only in Argentina but also in West Africa and elsewhere (Debrun, Masson, and Pattilo 2005). Not all government payments in arrears are owed to foreigners and most expropriations do not concern them. Some interesting object lessons can be found in Argentina, writhing through the crisis of 2001–2002, and Ecuador, as lawless as ever after its formal dollarization in 2000.9 Steve Hanke (2003, 131) has written that ‘when national monetary arrangements fail to comply with the rule of law, “dollarization” is desirable’. However, it is hard to argue the converse — that formal dollarization has reliably advanced the rule of law, either in Ecuador or in Liberia during the four decades before it de-dollarized by introducing its own currency in 1986. Of course, one can always cling to prior beliefs and argue that things could have been even more broadly lawless in the way people are treated in the absence of dollarization. There could be some truth to that notion, even though the dollar is the favourite currency for both legal and illegal business and money laundering throughout the world, so that dollarization and financial transparency do not come in the same package. Foreign provision of the entire financial system means that one will have little incentive to invest in the type of expertise and risk analysis needed for effective

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banking supervision and regulation. Instead, one ends up relying on consolidated home-country supervision of the foreign financial institutions predominating in a country and submitting to the reporting directives imposed on and by them. Local investments in financial-product development and design are likely to be negligible under these conditions. Modern financial systems are the most important aggregators of business and personal information as they develop highly detailed, and increasingly mandatory, information about clients and customers and their activities. It is unlikely that this information can be kept from the information-sharing and monitoring requirements imposed by the external currency hegemon. Here, too, conditions for developing countervailing local expertise are adversely affected by outsourcing a financial system to the multinational banks and those who oversee them.

Minimalist Recommendations and Conclusions The G8’s rhetorical engagements with debt relief and African development in prior years already have been recorded by the G8 Research Group (2005). At British prime minister Tony Blair’s urging, the pace has quickened and the scope expanded. Thus, at the 2005 Gleneagles Summit, the hyperactive mega-recommendation cocktails that are being mixed for sub-Saharan Africa to make it meet its MDGs took not only centre stage but the proscenium and backstage as well. After that play (or rock concert tour) closed, the following four cautions might get a chance to be heard, if not heeded: • Limit the application of bypass strategies, whose logical endpoint is regime change, to cases where there is no conscionable alternative, such as when governments produce or promote genocide. Do not try to bypass just plain bad governments. Rather, do not feed them or their country so as not to extend their lease on bringing misery.10 Governments are bad until proven otherwise through credible institutions that keep those in power from abusing many of those over whom they rule. • Follow a differentiated strategy that rewards good governance, not good rulers, in those sub-Saharan African countries that qualify in order to help nurture beneficial and lasting system change and institutional development. Otherwise, over time, good rulers turn into bad rulers or are followed by the same, so that aid investments are siphoned off and ultimately wasted. • If bypass, outsourcing, or foreign-delegation strategies are adopted in matters relating to locally applied laws and regulations or to monetary, financial sector, information access, and education policies, there is a need to precommit to the build-down of any unilateral dependence on foreign management and expertise so created once certain performance standards have been met. Otherwise, a country would be permanently denied the learning and discovery benefits of self-reliance, ownership of reforms, and co-management of institutions that

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vitally affect it. It would be deprived of effective self-determination and of the democratising process of organised public choice. • Consider that sustained economic development is predicated on the credible adoption of an ethos of intentionally beneficent public service and of a political and economic incentive and selection structure and a business culture that sustain this ethos. Its discovery and institutional anchoring and subsequent support must come from within the region and cannot be forced or required from the outside, although technical assistance and both moral and financial support may be offered if officially welcomed. Anti-corruption codes and transparency pledges with regard to business and financial dealings between government and business, in particular MNCs, can help. But elections between evils should not be confused with democracy: democracy means that people actually can exercise political power to advance their welfare and not just to choose their abusers. Compared with the mountains of bold-faced, finely detailed, and commanding recommendations in the hundreds of pages of the report of the CfA (2005), the short list of cautionary recommendations above is like tuppence to a bank. Yet where recommendations are as rarely taken as in Africa, and where donors’ promises are as rarely kept to as Africa, very few recommendations should be made to minimise later mutual embarrassment, if there still is a capacity for shame on both sides. It is puzzling that domestic private interests, although often in cahoots with local authorities, have been highly successful at generating cumulative development quite without much foreign encouragement or dependence on foreign advice in the People’s Republic of China (PRC). There the central government, for its own survival, has been keenly interested in promoting the rise of living standards even while official corruption and one-party rule remain ingrained. In most parts of sub-Saharan Africa, incentive compatibility of good governance with remaining in office still has to be established before cumulative progress may begin.11 Such a transformation of systems and hence objectives can and should be encouraged and supported from outside on a country-by-country basis. But, to be credible and sustainable, it must be achieved from within. Unless that transformation has become firmly rooted in a country, even the worst-case scenarios constructed for sub-Saharan countries will again turn out to have been not nearly bad enough. It is, of course, tempting to throw caution to the wind in calling for ‘bold and decisive’ action and to think that higher income will lead to better governance, as Sachs (2005, 312) assures us, so that aid should not wait. However, there is no evidence for relying on such a chain of causation, particularly if higher income comes mostly from the transfer effect itself rather than from recipients’ own effort.12 Easy and indiscriminate help to corrupt organisations can only strengthen their hold. It is not the abundance of the hopes of donors, true or false, that will create cumulative development in sub-Saharan Africa, but the quality of the hope, motivation, resolve, and capability of its elites and of the way in which they assume and retain power and thus relate to their own people, country by country.

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Developments Since the Gleneagles Summit Since the G8’s Gleneagles Summit, what has changed and what has stayed in a rut in the countries most mentioned? In Tanzania, real GDP has been growing at no less than 5.5 percent each year, for five years running, starting in 2002. Tanzania is now widely hailed as a great success even though its real per capita GDP was still estimated as less than US$1 per day (at 2000 prices and exchange rates) in 2006 on account of its egregious failures over the dozen years before 2002 (see IMF 2006b, 36). Part of the recent growth spurt is due to the surge in grants and debt relief from several sources and programmes, recently including assistance from the Multilateral Debt Relief Initiative (MDRI). The overall result has been increased aid dependence, with donor funds now covering 45 percent (or own tax and non-tax revenue effort needing to cover only 55 percent) of rapidly growing public spending (see IMF 2006c, 33). In the short run, such increased spending financed by foreign grants stimulates domestic demand. Donor help also may produce a positive supply response if the economy in effect uses grant funds to import productive resources, such as fertiliser, machinery, and technology. Yet neither the implied cost reduction or production subsidy nor the stimulus to aggregate demand can keep Tanzania’s growth above its own potential indefinitely unless the share of grants in its economy keeps rising. Whether Tanzania will turn out to be a lasting, self-sustaining success in East Africa can be determined only when grants in aid have levelled off. In the DRC in November 2006, Joseph Kabila was declared the winner of an election that followed a process analogous to asking a terrorised person, sure to be raped and robbed, to choose (twice) which one of the contenders was to do the dirty deeds. So Kabila, who had already ruled and plundered the country’s wealth since 2001, could just continue. It is difficult to understand why such a cruel farce would be characterised by much of the western and world press as an exercise in democracy, instead of a macabre solemnisation of rape and robbery. Perhaps the dry language of the BBC (2007), which leaves little to the imagination, helps: ‘Kabila has enjoyed the clear support of western governments such as the US and France, regional allies such as South Africa and Angola and businessmen and mining magnates who have signed multi-million dollar deals under his rule.’ Even before the run-off election, a ‘Statement by an IMF Staff Mission to the Republic of Congo’ obsequiously either quoted as a fact or concocted that ‘the government will shortly adopt a final Poverty Reduction Strategy Paper (PRSP) — produced after broad consultations with the population — which summarizes the social needs as prioritized by the Congolese people’ (IMF 2006a). What statesponsored poverty reduction by those grasping hands? What broad consultations with the savaged population? Social needs prioritised by the Congolese people who have never been asked? What an abject mockery of those living in dismal poverty and a continual state of terror and pillage by a system that Kabila will surely uphold. That system has many western partners, mostly MNCs and their split personalities, but also elements of western governments and IFIs, just as guilty.

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Notes 1

2

3

4 5

For example: ‘A leaked U.N. report this month suggested that Rwanda has maintained a military structure in the DRC through proxy Congolese militias. The public threat to invade has created fears that the conflict, which has led to the deaths of 3.8 million people since 1998 and continues to kill more than 30,000 people monthly, could resume. This would have major implications for regional stability and could see a renewed proxy war between Uganda and Rwanda in the DRC. [Rwanda invaded the DRC in 1996, 1998, and 2004]’ (Oxford Analytica 2005). When rapaciousness and depravity become prevalent in public life, out of desperation economics really does become moral philosophy, as Adam Smith called it, because certain core values must be set and shared for economic value to flourish. The famous Scotsman went to study moral philosophy at the University of Glasgow in 1737 and later taught there — where an earlier version of this chapter was presented in June 2005. For the indicators, see UNDP (2004, 205). Even experienced NGOs such as Oxfam fall into this trap. Oxfam noted that in fiscal year 1998 ‘on a per capita basis … Tanzania has been spending [nine] times as much on debt servicing as on basic health [and four] times as much on debt as on primary education … Translated into human terms, excessive repayments to the external creditors means schools without desks, pencils and books and — in many cases — roofs; it means health centres without essential drugs; and it means women having to walk over three hours to collect water’ (Oxfam GB 1998). Sachs (2005, 236), in company with the Jubilee 2000 debt-forgiveness movement and its successors, also falsely equates a country’s scheduled debt service with the amount by which ‘its budget is still being drained by the international community, not bolstered by it’. Although Oxfam’s description of dire public and private poverty is apt for Tanzania, the implied identification of the contributing cause is based on incomplete accounting in that Tanzania repays foreign creditors as a group, if at all, with their own funds. In other words, sovereign debt repayment is fully financed through rollover plus, and not by reducing domestic government spending or domestic absorption. Most debts of the African HIPCs are paid by taxpayers in the creditor countries that can forgive foreign debts but cannot avoid servicing the increased domestic debt resulting from their government’s non-recourse lending or extension of credit guarantees, or from increased contributions to the IFIs. The benefits from the original ‘loans’ extended to the HIPCs are shared mostly between corporations and special interests in the creditor and debtor countries that lobby for such lending to finance their deals. John Perkins (2004, 16) characterises lender (government) attitudes as follows: ‘The larger the loan the better. The fact that the debt burden would deprive the poorest citizens of health, education, and other social services for decades to come was not taken into consideration’; he misrepresents the debt dynamic and who ultimately paid these debts, just like Oxfam and Jubilee 2000, but not who shared the benefits from extending them. See, for example, Olusegun Adeniyi (2005). Sachs (2005, 297) reports a calculation according to which Tanzania would require US$2,788 million (in 2003 U.S. dollars) in official development assistance (ODA) on average annually from 2006 to 2015 to reduce the percentage of its people living in extreme poverty from over 40 percent to 20 percent and to meet other Millennium Development Goals (MDGs). This is almost three times the resource transfer of US$915.2 million estimated for 2000 converted to 2003 U.S. dollars. Pointing out that current levels of ODA are insufficient to meet those goals is different from implying that Tanzania or other

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HIPC countries are net repayers of international debt forced to make perverse ‘transfers’ through the debt channel from poorest to richest. 6 In May 1940 Churchill wrote to Roosevelt that he would ‘like to feel reasonably sure that when we can pay no more you will give us the stuff all the same’ (Erlandson 1997, 270). In the end the Lend-Lease programme neither lent nor leased, never counting on getting back anything, but fully achieved its purpose all the same. One might think that 100 percent debt relief for sub-Saharan countries could provide a somewhat analogously inspired way and political subterfuge for advanced industrial countries to join the fight of sub-Saharan countries to meet their MDGs and poverty reduction targets. In fact, however, such debt relief by itself provides no new resources, since debts to sub-Saharan countries, just like Lend-Lease loans, were dead upon disbursement (under Lend-Lease, to U.S. arms manufacturers) and only the modalities of their formal burial with the necessary G8 fanfares are once again still to be decided. 7 In short form, the MDGs are, by 2015, to 1) eradicate extreme poverty and hunger, 2) achieve universal primary education, 3) achieve gender equality and empower women, 4) reduce child mortality, 5) improve maternal health, 6) combat HIV/AIDS, malaria, and other diseases, 7) ensure environmental sustainability, and 8) develop a global partnership for development (UN 2005). A full listing of all the goals and targets and 48 performance indicators is appended to the first section of the 2005 World Development Indicators (World Bank 2005). Tanzania’s announced National Strategy for Growth and Poverty Reduction sets concrete targets for the period 2005–2010 to advance these goals (United Republic of Tanzania 2005). 8 Alex Winter-Nelson and Anna Temu (2005) have addressed this issue for Tanzania. They find that, for poor growers, lack of finance constrains the use intensity of chemical inputs in the coffee sector even when greater fertilisation would promise a high rate of return. 9 Augusto de la Torre, Eduardo Levy Yeyati, and Sergio L. Schmukler (2004, 208–212) have written insightfully about the limitations of hard pegs as commitment mechanisms. 10 Sachs (2005, 315) has written dismissively, and prematurely, that ‘the charge of authoritarian rule as a basic obstacle to good governance in Africa is passé’. He has extolled the presidents (in 2004) of Mozambique, Kenya, Ghana, Nigeria, Botswana, Senegal, and Ethiopia as examples of ‘the powerful and visionary leadership that I have seen in abundance throughout the continent, in contrast to the typical uninformed American view of Africa’s governance’ (x). Hence it is surprising to find the following quote, advising abstention from certain kinds of regimes: Our compact, our commitment, in the rich countries should be to help all poor countries where the collective will is present to be responsible partners in the endeavor. For the others, where authoritarian or corrupt regimes hold sway, the consequences for the population are likely to be tragic, but the responsibilities of the rich world are also limited. Perhaps the most important action that rich countries can take in those circumstances is to help the well-governed neighbors of such countries to prove that there is help available for those that are organized politically to help themselves (269). 11 About half of sub-Saharan Africa’s current rulers have demonstrated, and may still or soon again, be demonstrating that they are quite prepared to sacrifice the common people’s welfare for their own power and enrichment. Some are using state-supported terror to keep themselves in office while they are running their country down or keeping

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it in misery. A few countries do not even have a functioning central government, having fragmented into the bloody chaos of lawlessness. 12 Lisa Chauvet and Paul Collier (2004) re-examined the question of whether there is reverse positive causation from income level to quality of governance. They concluded that aid does not cause policies and institutions to reform, or turnarounds to be maintained, except perhaps in the lowest-income countries with the poorest governance to start with that have nowhere to go but up or sideways. Of course, it is always possible to claim that a more cleverly and interactively designed aid programme would do better than such programmes have done in the past. Chauvet and Collier wisely refrain from doing so, emphasising instead the unremitting prospective longevity of lowest-income status, even for countries that have newly fallen into it (Zimbabwe, Côte d’Ivoire). William Easterly (2005) found that even whole series of adjustment loans to the same country did not diminish distortions or improve per capita growth.

References Adeniyi, Olusegun (2005). ‘The Verdict: To Hell with Our Creditors?’ This Day, 17 March. BBC (2007). ‘Country Profile: Democratic Republic of Congo’. 7 March. (June 2007). Blanke, Jennifer, Fiona Paua, and Xavier Sala-i-Martin (2004). ‘The Growth Competitiveness Index: Analyzing Key Underpinnings of Sustained Economic Growth’. In M.E. Porter, K. Schwab, X. Sala-i-Martin, et al., eds., Global Competitiveness Report 2003–2004 (Oxford: Oxford University Press). Bu, Yisheng (2006). ‘Fixed Capital Stock Depreciation in Developing Countries: Some Evidence from Firm Level Data’. Journal of Development Studies, vol. 42, no. 5, pp. 881–901. Chauvet, Lisa and Paul Collier (2004). ‘Development Effectiveness in Fragile States: Spillovers and Turnarounds’. Centre for the Study of African Economies, Department of Economics, Oxford University, Oxford. (June 2007). Clément, Jean A.P. (2005). Postconflict Economics in Sub-Sahara Africa: Lessons from the Democratic Republic of Congo (Washington DC: International Monetary Fund). Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007). de la Torre, Augusto, Eduardo Levy Yeyati, and Sergio L. Schmukler (2004). ‘Living and Dying wth Hard Pegs: The Rise and Fall of Argentina’s Currency Board’. In G.M. von Furstenberg, V. Alexander, and J. Mélitz, eds., Monetary Unions and Hard Pegs: Effects on Trade, Financial Development, and Stability, pp. 183–229 (Oxford: Oxford University Press). Debrun, Xavier, Paul R. Masson, and Catherine Pattilo (2005). ‘Monetary Union in West Africa: Who Might Gain, Who Might Lose, and Why?’ Canadian Journal of Economics, vol. 38, no. 2, pp. 454–481. Easterly, William (2005). ‘What Did Structural Adjustment Adjust? The Association of Policies and Growth with Repeated IMF and World Bank Adjustment Loans’. Journal of Development Economics, vol. 761, no. 1, pp. 1–22. Erlandson, Marcus R. (1997). ‘Lend-Lease: An Assessment of a Government Bureaucracy’. In A. Gropman, ed., The Big ‘L’: American Logistics in World War II, pp. 265–292 (Washington DC: National Defense University Press).

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G8 Research Group (2005). ‘The G8 and Africa Final Report: An Overview of the G8’s Ongoing Relationship with African Development from the 2001 Genoa Summit to the 2005 Gleneagles Summit’. (June 2007). Galbis, Vicente (1995). ‘Financial Sector Reforms in Eight Countries: Issues and Results’. IMF Working Paper No. 95/141. International Monetary Fund, Washington DC. (June 2007). Gwartney, James and Robert J. Lawson (2003). ‘Economic Freedom of the World: 2003 Annual Report’. Fraser Institute, Vancouver. (June 2007). Hanke, Steve H. (2000). ‘The Disregard for Currency Board Realities’. Cato Journal, vol. 20, no. 1, pp. 49–59. Hanke, Steve H. (2003). ‘Money and the Rule of Law’. Policy Reform, vol. 6, no. 3, pp. 131–145. Heritage Foundation (2007). ‘Index of Economic Freedom’. Washington DC. (June 2007). Hernández-Catá, Ernesto (2000). ‘Raising Growth and Investment in Sub-Saharan Africa: What Can Be Done?’ Finance and Development, vol. 37, no. 4. (June 2007). HM Treasury (2004). ‘International Finance Facility’. April. London. (June 2007). International Monetary Fund (2004). ‘Mexico: 2004 Article IV Consultation’. Country Report No. 04/419. International Monetary Fund, Washington DC. (June 2007). International Monetary Fund (2005). ‘United Republic of Tanzania: Third Review under the Three-Year Arrangement under the Poverty Reduction and Growth Facility and Requests for Waiver of Performance Criterion and Modification of Performance Criteria’. Country Report No. 05/181. International Monetary Fund, Washington DC. (June 2007). International Monetary Fund (2006a). ‘Statement by an IMF Staff Mission to the Republic of Congo’. Press Release No. 06/229, International Monetary Fund, Washington DC. (June 2007). International Monetary Fund (2006b). ‘Sub-Saharan Africa Regional Economic Outlook’. September. International Monetary Fund, Washington DC. (June 2007). International Monetary Fund (2006c). ‘United Republic of Tanzania: Ex Post Assessment of Longer-Term Program Engagement’. Country Report No. 06/198. International Monetary Fund, Washington DC. (June 2007). International Monetary Fund and International Development Association (2001). ‘Completion Point Document for the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative’. 8 November. International Monetary Fund, Washington DC. (June 2007). Kweka, Josaphat P. and Oliver Morrissey (1999). ‘Government Spending and Economic Growth: Empirical Evidence from Tanzania (1965–1996)’. University of Nottingham, Nottingham. Unpublished paper. Maddison, Angus (2001). The World Economy: A Millennial Perspective (Paris: Organisation for Economic Co-operation and Development).

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Nord, Roger, Michael Mered, Nisha Agrawal, et al. (1993). ‘Structural Adjustment, Economic Performance, and Aid Dependency in Tanzania’. IMF Working Paper No. 93/66. International Monetary Fund, Washington DC. Nyoni, Timothy S. (2000). ‘Capital Flight from Tanzania’. In S.I. Ajayi and M.S. Khan, eds., External Debt and Capital Flight in Sub-Saharan Africa (Washington DC: International Monetary Fund). Oxfam GB (1998). ‘Debt Relief for Tanzania: An Opportunity for a Better Future’. (June 2007). Oxford Analytica (2005). ‘Political and Ecnomic Outlook for East Africa in 2005’. 1 January.

(June 2007). Perkins, John (2004). Confessions of an Economic Hit Man (San Francisco: Berrett Koehler Publishers). Porter, Michael E., Klaus Schwab, Xavier Sala-i-Martin, et al., eds. (2005). Global Competitiveness Report 2004–2005 (Basingstoke: Palgrave Macmillan). Reinhart, Carmen M. and Kenneth Rogoff (2004). ‘Serial Default and the “Paradox” of Rich to Poor Capital Flows’. NBER Working Paper No. 10296. National Bureau of Economic Research. (June 2007). Sachs, Jeffrey (2005). The End of Poverty: Economic Possibilities for Our Time (New York: Penguin). Szirmai, Adam, Menno Prins, and Wessel Schulte (2002). ‘Tanzanian Manufacturing Performance in Comparative Perspective’. Research Memorandum GD-59. Groningen Growth and Development Centre. (June 2007). Teixeira, Carlos, Roopa Purushothaman, and Mike Buchanan (2005). ‘Africa’s Long Road Ahead: Laying Down the Potential’. Global Economics Paper No. 123. Goldman Sachs. United Nations (2005). ‘The UN Millennium Development Goals’. (June 2007). United Nations Conference on Trade and Development (2004). World Investment Report 2004: The Shift Toward Services. United Nations Conference on Trade and Development, Geneva. (June 2007). United Nations Development Programme (2004). Human Development Report 2004: Cultural Liberty in Today’s Diverse World (New York: Oxford University Press) (June 2007). United Republic of Tanzania (2005). ‘National Strategy for Growth and Reduction of Poverty (NSGRP)’. Vice-President’s Office. (June 2007). Winter-Nelson, Alex and Anna Temu (2005). ‘Liquidity Constraints, Access to Credit, and Pro-Poor Growth in Rural Tanzania’. Journal of International Development, vol. 17, no. 7, pp. 867–882. World Bank (2005). ‘World Development Indicators 2005’. Washington DC.

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Appendix 10-1: Technical Derivation of the Missing Capital In the open economy, the macroeconomic saving = investment identity implies that gross-of-depreciation saving from (a) domestic and (b) foreign sources must equal (c) gross domestic investment, where: (a) gross domestic saving is sY, where s is the gross-of-depreciation saving rate and Y is gross output or, equivalently, gross income, (b) saving from foreign sources is equal to the current account deficit, cad = cadY, and (c) gross domestic investment, I, is the sum of net investment, gKK, and depreciation (capital consumption allowances) δK, where K is the net-of-depreciation stock of capital at the beginning of the current period, gK is its annual growth rate, and δ its annual depreciation rate. Solving this identity, (s + cad)Y = (gK + δ)K , for gK yields: gK = (s + cad)(Y/K) – δ. (1) With the net stock of capital, K, and labour input, L, preceded by the multifactor productivity (MFP) scalar, A, Y = AKαL1-α is the aggregate (Cobb-Douglas) production function. Now assume that, at worst, MFP has not grown at all for some time in some of the world’s poorest and stagnant countries, so that gA = 0. Then: gY = αgK + (1 – α)gL. (2) Assuming that the rate of growth of labour and of the population as a whole are the same, the growth rates of per capita output and of the capital-to-output ratio are, after substituting on the right-hand side of the equations below for gK (from equation [1]): gY – gL = α[(s + cad)(Y/K) – δ – gL], (3) gK – gY = (1 – α)[(s + cad)(Y/K) – δ – gL]. (4) Hence the growth trajectory of a country’s per capita income and capital-output ratio can be obtained for what might tentatively be called a worst-case scenario characterised by gA = 0 using long-term averages of the domestic and foreign-source saving rates in relation to gross domestic product (GDP), s and cad, an initial outputcapital ratio, (Y/K)0 = 1, and the annual rate of population growth gL. Addition of equations (3) and (4) implies, of course, that the growth in the capital-labour ratio, gK – gL = (s + cad)(Y/K) – δ – gL. A consideration of 14 years of data, from 1990 to 2003, from the country pages for Tanzania from the International Financial Statistics database suggests that the following values may have been representative for that country over these years: s = 0.16 cad = 0.06 (so that 27 percent of gross saving, for investment totalling 22 percent of GDP, is from abroad) gL = 0.027. The value of other parameters and the initial condition are guesstimates, with the depreciation rate of 8 percent of the net stock of capital assumed to be considerably

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higher than the 4 percent to 6 percent usually encountered in advanced industrial countries. The capital share, α, on the other hand is lower than estimated for many developing countries, thus further assuring that the contribution of capital to output is, if anything, understated in the conjectures that follow. Finally, because Tanzania only began industrialising in the 1950s and then took a long and eventually ruinous detour through ‘state-guided’ socialism, the capital intensity of production, K/Y, by 1990 is assumed to have been less than half of the levels of 2 to 3 commonly found for advanced industrial countries. δ = 0.08 α = 0.30 (K/Y)0 = 1. With these (starting) values, the exponential growth rate of per capita output and income from 1990 to 1991, gY – gL, is found to be 0.034 while the capital-output ratio grows, and hence the output-capital ratio declines, by 0.079 from equations (3) and (4). As a result, (Y/K)1 = e–0.079(Y/K)0 = 0.924 is the output-capital ratio at the beginning of year 1991 that is used to derive the next solution for the rates of growth of per capita income and the output-capital ratio from 1991 to 1992. Starting with an index value of 100 for Y/N and an assumed starting value of Y/K = 1, as explained, the projected (superscript P) ‘worst-case’ trajectory is laid out for Y/N and Y/K in the second and third columns of Table 10-1. That trajectory is estimated on the assumption that growth is due entirely to physical inputs and not also to technological progress or other advances that make given inputs more efficient in the production of output over time. If left undisturbed, this dynamic growth process would lead to a steady state where all physical inputs, and hence output, grow at the same rate, so that both (gY – gL) and (gK – gY) eventually fall to 0. Hence, at that endpoint, (Y/K)steady = (δ + gL)/(s+cad) = 0.107/0.22 = 0.486. In other words, the capital-output ratio would rise from 1 at the beginning of 1991 toward 2.06 in the steady state. Table 10-1 indicates that, by 2003, the output-capital ratio would have fallen from 1 to 0.595 along this path and hence the capital-output ratio would have risen to 1.68, indicating that almost two thirds of the adjustment to the steady state should have been completed by 2003 and that GDP per head should hence have risen by 25 percent from 1990 to 2003.

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PART IV The Instruments

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Chapter 11

What Does International Aid Mean to the G8? Olivier Charnoz and Pierre Jacquet

The G8 countries provide more than 70 percent of the world’s total official development assistance (ODA). These flows bear different meanings and rationales for the various donors. For instance, they typically evoke national security interests for the United States, commercial objectives for Japan, and post-colonial ties for the United Kingdom or France. Still, as a group, the G8 is more than the sum of its parts. Notwithstanding important issues of legitimacy that bear on its future format and activities, there is no doubt that the G8 is in a privileged leadership position with respect to the future of development aid. This chapter first documents the relationship between global sustainability at the world level and local development in southern countries, because local development carries implications for global public goods. Second, it lays the basis for an approach to ODA as an instrument of global governance. Third, the chapter highlights a number of positive changes within the past few years that have made ODA a more effective tool. It also makes the point that official aid is not dwarfed by any other development finance flow to poor countries, contrary to some recent claims. Finally, the chapter reviews some possible tensions and contradictions posed by ODA.

Global Sustainability and Local Development as Joint Processes The world’s renewed interest in sustainable development brings to the G8 table two key issues: development and global sustainability. Conceptually, they are not identical. Global sustainability refers to the provision of such global public goods as financial stability, the fight against global warming or major pandemics, and the protection of biodiversity. Development is anchored locally and relates to the sustainable rise in people’s standards of living. However, from the practical and financing perspectives, the two issues are so intertwined that they should be thought of and dealt with jointly. In order to reach a greater level of global sustainability, local development must take place in developing countries and institutions must be strengthened. Conversely, it is difficult to secure higher levels of development in many such countries without the international community moving forward on some key global issues. Four cases stand out.

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The first case is financial stability. It is widely acknowledged that a lack of financial transparency was a critical factor in creating the Asian financial crisis of the late 1990s (for example, see Cartapanis 2004). Building developing countries’ capacity in financial management and regulation is thus a crucial component of world financial stability. On the other hand, more stable financial markets are a necessity for developing countries. Between 1975 and 1998, there were 244 currency or banking crises worldwide, of which 75 percent were in developing countries. More recently, East Asian countries, the Russian Federation, Brazil, Turkey, and Argentina suffered huge shocks to their gross domestic product (GDP) and paid a very high price in the wake of financial turmoil: their cumulative output losses ranged from 5 to 19 percent of annual GDP, translating into an average revenue loss of US$50 billion a year for developing and transitional countries (Sandler 2003). While some of these events undoubtedly relate to domestic policy and institutional weaknesses in developing countries, the functioning of global financial markets also bears a huge responsibility. The second case is environmental sustainability. It is a critical development factor for poor countries, since most poor people throughout the world rely on their immediate environment for their livelihood. Contrary to rich industrial countries, the poorest ones do not have the option of substituting human and physical capital for natural assets. Issues such as deforestation, soil erosion, water depletion, and desertification are thus key to fighting poverty. Conversely, in order to modify unsustainable consumption or production practices, stakeholders’ incentives on the ground must change. This, in turn, often means a higher level of development. One example is biodiversity: To be efficient and sustainable, conservation schemes for forests or marine areas must involve local populations and provide them with new ways of sustaining themselves. Conservation practices are only workable if they comply with local economic and social realities and are part of a development strategy. Similarly, emerging countries will take part in the fight against global warming only if they see it as a way to secure higher development levels. This means that the tension between fast and sustainable development must be resolved. If it cannot be resolved at the domestic level, it must be addressed with the help of the international community. Developing countries typically have shorter time horizons and higher rates of time preference than more developed ones (Jacquet and Marniesse 2004). Hence, global goods with benefits spread over time tend to be less valued in developing countries. Similarly, negative externalities whose costs are delayed are perceived to be much less of a problem in developing countries. This divergence of perceptions calls for international compensatory financing as well as for joint financial instruments in dealing with global development and sustainability. The third case is global peace and security. Countries with low economic growth and high socio-political inequalities are more prone to violent conflicts. A further well-known research result is that the presence of valuable natural resources (such as oil, diamond, or minerals) increases the challenge of maintaining peace in a developing country, because such resources often cause or finance conflicts, as many sub-Saharan countries have shown (Collier and Hoeffler 1998). To prevent violence,

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more development is needed in the form of higher growth rates, wider redistribution, and a more transparent governance of national rents and public money. Conversely, at a time when more than one billion people live in conflict-affected areas, no one can doubt that peace and security are crucial development factors; according to Paul Collier and Anke Hoeffler, a typical civil war increases the prevalence of absolute poverty by 30 percent in the affected population. The fourth case is global pandemics. World-class research is needed, and it will take place in the most scientifically advanced ones rather than in developing countries so as to minimise research costs. But the strengthening of local health capacities in poor and emerging countries is just as important, along with the spread of better reproductive health practices. Here again, the path to global sustainability is local development. Conversely, local development prospects can be greatly endangered by global health crises such as HIV/AIDS. Current projections (10 to 25 years) seem to reduce the impact of HIV upon per capita income growth (projecting an annual GDP loss of between 1 percent and 2 percent for the highest prevalence countries such as Botswana, Lesotho, or South Africa (UNAIDS 2004). However, these models underestimate the longer-term impact on potential growth in heavily affected countries, should the number of people affected and infected continue to grow rapidly. Few models capture the economic costs of social dysfunction, such as orphans dropping out of schools. Pessimistic estimates of the macroeconomic impact in the long run are reported in a recent joint study by Heidelberg University and the World Bank, using South Africa as a test case (Bell, Devarajan, and Gersbach 2003). The long-term economic costs of AIDS could be ‘devastating’ due to the cumulative weakening of human capital from generation to generation.

Aid as a Global Governance Tool ODA was born out of three critical factors: post-war reconstruction, decolonisation, and the Cold War. All three of these pillars have now vanished and the meaning of aid is changing. ODA is now becoming a tool for the international community to work toward global sustainability. In other words, ODA is transforming itself into a global public policy to help manage the North-South dimensions of globalisation (Jacquet and Severino 2002). Obviously, aid is not free from donors’ national interests: one has only to look at the reconstruction of Iraq and Afghanistan, which absorb a good share of the recent increase in ODA. Still, current patterns of aid allocations cannot merely be analysed in terms of narrow national interests. First, globalisation increases the number and significance of subjects of common interest and of necessary cooperation, giving rise to the strong nexus, described above, linking global sustainability to local development. Second, as argued by John Degnbol-Martinussen and Poul EngbergPedersen (2003), the end of the Cold War and the rise of international civil society have contributed to (partly) isolate international aid from foreign policy, thus creating space for action along different criteria. Environmental concerns first started to

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appear prominently on the G7 agenda precisely at that time, at the Toronto Summit in 1988 and the Paris Summit in 1989. The G7/8’s concerns over global stability have been rising since. At the national level, this move toward a more ‘isolated’ or ‘independent’ ODA has been exemplified in the UK by the 1997 creation of the Department for International Development (DfID), with full departmental status under the leadership of a senior minister. A similar move can even be seen in the U.S. with the creation of the Millennium Challenge Account (MCA) in 2004. Within a few years, this new entity was supposed to allocate about a third of American ODA along governance criteria that were not to be biased by geo-strategic concerns. Something new is happening. Looking at the G7/8 summits and their central concerns from 1975 to present 2004, Nicholas Bayne (2005) distinguished various thematic periods: reviving growth (1975 to 1978), holding down inflation (1979 to 1982), politics and the end of the Cold War (1983 to 1993), institutions for globalisation (1994 to 1997), globalisation and development (1998 to 2001), and fighting terrorism and its causes (2002 to 2004). The move toward development concerns as a path to global sustainability is especially clear since the mid 1990s. Before this time, development had already reached the heart of the G7/8 agenda, but only through the question of the debt crisis, as in 1984 in London or Toronto in 1988. Right after the fall of the Iron Curtain, the 1989 Paris and 1991 London G7 meetings put at centre stage the need to help central Europe and Russia: economic aid became an important issue. Part of the international aid was redirected toward post-Soviet countries in the following years. This reallocation contributed to the very sharp decline in G7 ODA — a 25 percent cut between 1990 and 1997 — because most of the ‘transition countries’ were not eligible for official development aid in the nomenclature of the Organisation for Economic Co-operation and Development (OECD); they are only entitled to ‘official aid’. However, as shown in Figure 11-1, official aid to former Soviet countries was not primarily responsible for the decline in ODA, the global fall in ODA was far from being compensated by the increase in official aid to these countries. The end of the Cold War and the reduced strategic significance of many developing countries fuelled a strong decline in G7 countries’ interest in aid to poor and emerging countries. The increased pressure on many donor countries’ public finances, due to continued slow growth and high unemployment, also played a role in this decline. The first time that poor countries, as such, were given top priority at a G7/8 summit was in Lyon in 1996, when debt and development came high on the agenda. The following year, in Denver, U.S. president Bill Clinton made Africa a central issue. In 2001, five African leaders were invited to attend the G8 summit in Genoa, where they unveiled the New Partnership for Africa’s Development (NEPAD). In response, at the Kananaskis Summit in 2002, the G8 developed its own Africa Action Plan, aimed at fostering a new partnership with the countries of Africa ‘based on mutual responsibility and respect’ (G8 2002). At the 2003 Evian Summit, Jacques Chirac once again placed Africa at the centre. While the 2004 Sea Island Summit was dominated by Middle Eastern and Iraqi issues, development was never far away: the U.S. concept of a ‘Broader Middle East’, although polemic, implied a

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major recognition of the need for more development. As for the 2005 Gleneagles Summit, Tony Blair had announced long in advance that it was to focus on Africa. The Russian Federation, for its part, when it assumed the G8 presidency for the first time in 2006, indicated early on that Africa would not figure prominently among its priorities, but it highlighted the need for increased aid to Caucasian countries, and it put education and the fight against infectious diseases — issues that relate directly to ODA — high on the agenda. Africa was once again among the top priorities at the German-hosted 2007 Heiligendamm Summit, and will remain there for the 2008 Japanese-hosted Hokkaido Toyako Summit. From 1997 to 2004, G7 ODA increased by almost 40 percent in real terms, shifting aid up to a historical high, both in nominal (US$56 billion) and in real terms. Who benefited from it? Chronologically, as shown in Figure 11-2, first came the countries of East Asia: its share in G7 ODA sprung from 13 percent to 23 percent within three years, between 1997 and 1999. This suggests that the Asian financial crisis was critical in getting ODA back onto the G7 agenda. The 1998 Birmingham Summit put a strong emphasis on the need for a coordinated management of this crisis. The second root of the upturn is the increase in aid channelled to sub-Saharan countries. Following strong advocacy work on the part of the civil society and the UN system, epitomised by the 2000 United Nations Millennium Review Summit that led to the Millennium Development Goals (MDGs), aid to Africa came to the top of the international agenda, notably on the G7/8’s agenda as described above. Finally, most recently, following the 2003 U.S. intervention in Iraq, aid to the Middle East has significantly increased. Still, one report from the G8 Research Group (2005) has found that the G8 has unevenly met its own commitments toward Africa since the 2001 Genoa Summit. Figure 11-1

G7 Foreign Aid after the Cold War, 1990–2004 (2003 prices, $ million)

Source: Organisation for Economic Development Co-operation.

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Logically enough, issue areas that have attracted the largest degree of attention are those that require less coordination among G8 states, that involve little obligation beyond the commitment of funds, and that produce results that are quantifiable and media-friendly. The G8 has thus delivered a good record on debt relief (with its Heavily Indebted Poor Countries [HIPC] Initiative), the bilateral financing of the Global Polio Eradication Initiative, the financing of African peace training centres, and the provision of funds and supplies for the African Union (AU) peace missions. This is fully consistent with transaction cost theories of international regimes (see, for instance, Keohane 1984): coordination is more likely on a given issue when it involves less contracting, monitoring, and informational costs. ODA complies fairly with these requirements. Commitments on the part of the UK, France, Germany, and Italy to raise their foreign aid to 0.7 percent of gross national income (GNI) arguably makes ODA an area of decent G8 success. On 24 May 2005, the European Union also made a bold commitment as its development ministers agreed to raise EU-wide foreign aid to 0.56 percent ODA/GNI by 2010, bringing the EU’s donor level to more than US$80 billion per year. Even more ambitiously, the 15 members of the EU before its expansion in 2004 collectively agreed to reach 0.7 percent ODA/GNI by 2015, with the ten countries that joined agreeing to reach 0.33 percent by 2015. Still, half of the G8 countries lack any committed timelines to reaching an ODA/ GNI ratio of 0.7 percent. Due to its economic situation, the Russian Federation is limited in the amount of aid it can deliver, although it continues to play a significant Figure 11-2

Geographical Allocation of G7 Official Development Assistance, 1997–2003, in percentage

Sub-Sahara Africa

Far East Asia

Source: Organisation for Economic Development Co-operation.

Middle East

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role in debt reduction efforts. Japan, for six year in a row, cut its ODA in the wake of a prolonged economic crisis (although by the beginning of 2007 there were some signs that recovery is on the way). Canada only committed to increasing its aid budget by 8 percent per year until 2010. The U.S. has promised to increase its absolute level of ODA, with a 14 percent increase in real terms in 2004; it pledged to increase its aid by 50 percent from 2000 to 2006 and triple its ODA to Africa. As a proportion of GDP, however, the U.S. ODA effort remains among the smallest. At Gleneagles, on the basis of the various donor commitments, a global pledge was made to raise world ODA by US$50 billion annually by 2010, as compared to 2004. As for Africa, the pledge was to increase aid by US$25 billion annually by 2010, which is more than doubling the 2004 level. It was also announced that a working group of G8 and other countries would work toward implementing two innovative financing schemes: the British proposal of an International Finance Facility (IFF), which would borrow on international markets in order to frontload aid, and the Franco-German proposal of a solidarity contribution on airplane tickets that could help finance the IFF or the fight against HIV/AIDS. The law introducing the levy in France was approved by the parliament on 22 December 2005 and entered into force on 1 July 2006; it is intended to collect some €200 million a year. These resources are to finance the international drug purchase facility UNITAID to fight pandemics in the developing world. To date, 19 countries have committed to introduce a voluntary contribution. Four countries joined France in levying a tax on airline tickets: Chile, Côte d’Ivoire, Gabon, and Mauritius (Ministère des Affaires étrangères 2007). Twelve other countries have engaged in interministerial or parliamentary procedures. Norway will allocate a portion of its airline tax on carbon dioxide emissions to UNITAID and the United Kingdom will participate by providing a budgetary contribution over a 20-year period (through a limited IFF scheme). At the 2006 St. Petersburg Summit, because Africa was not among the key issues, many observers and civil society organisations feared that development might leave the G8 agenda for good. However, beyond the issue of energy security, education and the fight against HIV were among priorities, and thus development aid was never far from G8 leaders’ minds. And Africa and development are high on the agenda of the German-hosted 2007 Heiligendamm Summit. However, as pointed out in the abovementioned report, the G8 has registered poorer levels of performance on issues and commitments that require a larger degree of long-term policy coordination and collective action (G8 Research Group 2005). Among these, one could mention some key trade issues, notably agricultural subsidies, the reform of which may be very costly for some G8 leaders from a national political perspective. The G8 also performs poorly on issue areas that lack clear, quantifiable policy outcomes, such as the push for better governance in developing countries or the African peer review process. Such diffuse issues attract only moderate G8 attention due to their openended nature and lack of clear, measurable, and communicable policy successes. This points to a strong specificity of G8 politics: its need for easily communicable results. This need may foster ODA as a structural G8 issue, now that the subject of

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development has elicited renewed interest, as ODA bears a quantitative dimension that makes it easy to communicate. In this light, the increasing influence of civil society upon the G8 cannot be overstated. As pointed out by the G8 Research Group (2005), the shift of policy focus on the part of the G8 toward development issues may also be understood as a response to criticisms of the G8’s legitimacy. Since the 2001 Genoa Summit, advocates of alternatives to globalisation have contributed to making the G8 a central focus in the debates on economic and environmental responsibilities from the North to the South. Gleneagles was no exception in this regard. Questions raised on issues of accountability and transparency in globalisation have contributed to shifting the G8’s attention toward global poverty, the MDGs, and the African continent. The mobilisation of civil society clearly appears as a strong factor of G8 change, making it a global governance mechanism oriented more toward the common good. All G8 members know that, at each summit, one of the key issues at stake is their global legitimacy as global leaders. In this restructuring of G8 politics, ODA is likely to play an increasingly significant role — unless it proves bluntly inefficient in dealing with its given objectives. But precisely on this very issue of effectiveness, much can be said about current improvements.

The Improvement and Continued Significance of Development Aid Over the past 15 years, the effectiveness of foreign aid as a development tool has come under closer scrutiny than ever before. With the end of the Cold War and the collapse of the traditional geo-strategic pillar of ODA, during the 1990s aid fatigue set in, following an apparent lack of development effectiveness in poor countries. This brought about a wave of research, in political economy and econometrics, on the relationship between economic growth and foreign aid. The early results suggested that aid quite simply did not work and was nothing more than a waste of public resources (Boone 1996). However, Craig Burnside and David Dollar (1997; 2000) found that a large part of aid worked well, particularly aid to countries that applied ‘good policies’. This thesis bought a sea change in mindsets, as it recommended a strong orientation for development assistance as well as an apparently easy way to make it efficient: restrict assistance to selected countries, the ‘well-run’ ones. But the shortcomings of such a recommendation are real. What exactly is the definition of a good policy? There is no agreement on this question. Moreover, other factors have a strong influence on the link between aid and growth, such as the degree of vulnerability of countries to external shocks, be they climatic or commercial (Guillaumont and Chauvet 2001; Amprou and Chauvet 2004). The work by Burnside and Dollar led to an abundant literature on aid allocation that tried to avoid the temptation of adopting a single formula or a rigid one-size-fits-all approach. Many good summaries articulate the lessons of this vast literature (Roland-Holst and Tarp 2003; McGillivray 2003; Amprou and Chauvet 2004). Most underscore that aid has a positive impact on per capita income growth, but that it exhibits diminishing returns. ODA thus stimulates

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economies and participates in the fight against poverty. More recent work, however, again questions the relationship between ODA and economic growth. William Easterly, Ross Levine, and David Roodman (2003) find no correlation, even when using Burnside and Dollar’s method with an extended data set. In the run-up to the Gleneagles Summit, Raghuram Rajan and Arvind Subramanian (2005) released a working paper that similarly found little robust evidence of a positive (or negative) relationship between aid inflows into a country and its economic growth: ‘We … find no evidence that aid works better in better policy or geographical environments, or that certain forms of aid work better than others. Our findings, which relate to the past, do not imply that aid cannot be beneficial in the future. But they do suggest that for aid to be effective in the future, the aid apparatus will have to be rethought.’ If anything, such findings send a strong message that aid should not be seen as a miracle solution for Africa. This is a rather healthy message, as so many issues affect this continent’s destiny. Moreover, the call for the betterment of international aid is a welcome one, too. This improvement is currently underway. Within a few years, development aid has undergone a result-oriented managerial revolution. ODA is being reframed within common objectives: the MDGs. There are eight of them, with 18 quantified targets and more than 40 quantified sub-targets (UN 2005). Even though there is still much to do to ensure that ODA is fully geared toward the MDGs, huge efforts are made on the parts of donors and development institutions to align their work with them. Both multilateral and bilateral institutions are trying to measure their development impact better in terms of the MDGs, along common criteria that are currently being discussed at the OECD’s Development Assistance Committee (DAC). New information systems and methodologies for quality measurement are being created. This is a key trend in aid improvement. ODA also shows a strong trend toward harmonisation of donor interventions in recipient countries. Problems that may follow from uncoordinated interventions are now well documented, notably the over-flooding of local administrative capacities. Harmonisation is all the more crucial in the absence of strong government leadership. Donor efforts are focussing on best practices such as joint upstream analysis, joint project assessments and field missions, joint strategies, coordination of political engagement, as well as practical initiatives such as the establishment of joint donor offices. At a conference in March 2005 in Paris, for the first time, both donors and partner countries agreed to define quantified commitments toward more coordinated interventions — such as target shares of ODA being used through common instruments. For instance, between 2004 and 2010, the share of ODA to be used within a ‘programme approach’ is to be raised from 24 percent to 52 percent. Although they do not necessarily deny the current improvement in ODA policies, some observers like to argue that ODA is being dwarfed by other development finance flows, notably private ones, such as flows from nongovernmental organisations (NGOs), remittances of migrants, or private investments. This view is misleading. Surely, NGO flows have greatly increased over the past few years and have now reached as high as approximately US$12 billion. But US$4 billion of that money stems directly from donor governments and is only channelled through NGOs (World

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Bank 2004). The remaining US$8 billion amounts only to a little more that 10 percent of world ODA. Flows of foreign direct investment (FDI) are indeed central to world development finance, totalling US$150 billion in 2003. However, ten countries take more than 70 percent of these flows and these are not the countries the G8 talks about helping. If one looks, for instance, at sub-Saharan Africa, the picture is rather clear: in 2002, net private flows (equity and debt) amounted to US$5 billion (of which US$3 billion was concentrated on Angola, Nigeria, and South Africa), while net official flows (aid and debt flows) amounted to US$15 billion. As for migrant remittances to sub-Saharan Africa, they stood at US$4 billion. At the world level, migrant revenue transfers now amount to about US$90 billion, but again, very little of that revenue goes to the poorest countries. Moreover, there is a heated debate over the extent to which this specific flow helps improve the stock of human and physical capital of developing countries, as some observers argue that it often goes to unproductive consumption, notably imports for conspicuous use’. Moreover, these transfers have as their counterpart the export of human capital in the first place and thus hardly compare with development assistance flows. Consequently, it does not seem appropriate to argue that private flows (be they NGO flows, remittance flows, or international private investments) dwarf ODA in development finance. At a time when it is clear that aid is necessary to poor countries, the world is arguably witnessing a sector-wide rationalisation of foreign aid for the better. This does not mean that donor national interests are not relevant any longer, but there is a clear trend toward aid focussed more upon common objectives and joint methodologies. This revolution in aid management and monitoring of its effectiveness makes aid a more reliable tool for the G8 countries and should contribute to its renewal as a key issue of high political visibility.

Future Challenges for International Aid: What Role for the G8? Beyond these improvements and positive prospects, there are also risks and contradictions ahead. The G8 may have to tackle them in the future even more proactively than the international community as a whole, given its function as a provider of political leadership. Three issues stand out. The Limits of the Millennium Development Goals Framework The first issue is the MDG framework itself. As seen above, the MDGs provide clear objectives that contribute forcefully to the improvement of international cooperation and aid. At the same time, they create risks. The first risk is to equate the attainment of the MDGs with the level of ODA mobilised, however necessary that mobilisation is. This equivalence seems strongly ingrained in the minds of many players of international civil society. It is fostered by the financial evaluations of the required amount of aid, generally said to be about an extra US$50 billion per year, as well as by recurring statements that donor countries are responsible for turning the MDGs

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into reality. The G8 is thus confronted with an international civil society that puts little emphasis upon the responsibility of recipient countries in reaching the MDGs. A second risk that may lie ahead for the MDG framework is a paradoxical disappointment with countries with fair performance and effective aid programmes. As pointed out by Michael Clemens, Charles Kenny, and Todd Moss (2004): ‘The rates of progress required by many of the goals are at the edges of or beyond historical precedent … Many countries making extraordinarily rapid progress on MDG indicators, due in large part to aid, will nonetheless not reach the MDGs. Unrealistic targets thus may turn successes into perceptions of failure, serving to undermine future constituencies for aid (in donors) and reform (in recipients).’ In this regard, a striking example is the education sector in Burkina Faso. Its primary education enrolments rates have been increasing very quickly over the past years, faster than in the typical western country at the time of their own development. This is an amazing historical achievement. Still, Burkina Faso will not meet the educationrelated MDGs. At the end of the day, this framework may send the message that this country is a failure, while it is rather — at least with respect to that MDG — a historical success. The setting of clear, ambitious, and quantifiable objectives is indeed useful and helps nurture a strong dynamic. Still, it can also be detrimental if not revised or adapted to what is realistically achievable. Uniform MDGs might send the message that aid does not work (which is not true) or that governments in poor countries are hopeless (which is not true either). Such a message could be very costly in terms of public opinion support for international cooperation. Thus the international community should move from common development objectives to a more flexible mechanism for setting its objectives. In the years to come, the G8 should take the lead on this issue, as this move is unlikely to appear within the UN system given its cumbersome decision procedures. Political Acceptability of Aid Dependency The second issue relates to questions of aid dependency, countries’ sovereignty, and the ownership of development strategies. There is a lingering contradiction between two modern development mantras: the focus on MDGs on the one hand and, on the other, the requirement of country ownership and civil society participation in the definition of development strategies — embodied in the so-called Poverty Reduction Strategy Papers (PRSPs). As Bettina Woll (2005) notes, the donor community requires that the process of PRSP formulation be participatory. In other words, it must take the input of civil society into account. This is a ‘methodological conditionality’. However, with respect to content, the PRSP must be a long-term development plan that focusses on poverty reduction and should incorporate the MDGs. This is a ‘thematic conditionality’. If civil society participates on a national level to voice what matters most to it, how can the content already defined be adjusted? There could be many situations in which civil society is indeed spontaneously most concerned with poverty reduction and the MDGs — but that is certainly not a given.

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Even if the PRSP were a government-only strategy, a definition of content (the quest toward MDGs, an externally originated idea) already takes away ownership. Broad international objectives such as the MDGs are very often difficult to articulate with local priorities without entailing a lack of local ownership. Moreover, if a huge aid increase does occur soon, as is widely hoped for, absorptive capacities of many developing countries will be put under intense pressure. To be spent efficiently, such an increase would require innovative channelling solutions yet to be imagined. An obvious option is to channel ODA directly to state budgets, assuming the money will be used efficiently. This is budgetary support as compared to project aid, whereby monitoring of funds is much closer, down to the micro level. However, the budget support approach has a clear limit: it only makes sense for fairly well-functioning public administrations, countries where there is ‘good enough governance’. Those are unfortunately in short supply. Moreover, many poor countries deemed to have ‘good policies’ already receive significant aid flows. Mozambique, for example, receives an ODA inflow more than twice as large as its domestic tax base. Other good performers, such as Ghana, Ethiopia, Uganda, Nicaragua, Honduras, Burkina Faso, and Tanzania, receive ODA flows well above 10 percent of their GDP (Clemens, Kenny, and Moss 2004). The dependency problem is thus twofold. In well-performing countries, the weight of ODA may prove to be so large that the independence of government policies may be greatly limited. The international community already funds more than half of the state budgets of countries such as Mozambique or Uganda. What kind of autonomy do such countries really enjoy when making their policy choices? Once the ratio reaches 80 percent or more, the rich-country taxpayer paying for the bulk of the wages for teachers, healthcare workers, and civil servants of well-performing poor countries may wonder about the reality of such countries’ political independence. As for the less well-performing countries, the ownership issue is perhaps in even sharper relief. Due to governance failure and lack of administrative capacities, aid will not be able to intervene rapidly and efficiently in such countries on a much larger scale, unless a significant share of governmental responsibilities is outsourced to, or overseen by, other entities, be they private, public, or international in nature, depending on the issue at stake. One example is the way the World Bank is currently overseeing the management of oil revenues in Chad. However necessary, it is clear political involvement by international aid into traditional areas of state sovereignty. This involvement may be necessary for fast development results in the context of a rapidly increasing ODA. A strong aid increase in poorly governed countries may thus face the international community with a difficult political trap: aid efficiency in the short term may require a massive involvement of foreign expertise and international overseeing that would run counter to country ownership. Moreover, such development results may prove short-lived, as long-lasting local institutions will not have been built. At the time of post-colonial independence, the solution to the absorption-capacity problem already relied upon massive external technical assistance through expatriated experts. Obvious problems soon appeared and proved

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intolerable, such as lack of country ownership and low rates of institution building, as knowledge and competencies were not sufficiently deeply transferred. Thus the perspective of a massive involvement of international aid in both wellgoverned and less well-governed poor countries may not be politically sustainable. The international community would be well advised to start discussing this issue more openly. Otherwise it may be heading toward a crisis over both the political legitimacy of foreign aid in poor countries and its long-term development effectiveness. The Excessive Reliance of Official Development Assistance on the Public Sector In the lead-up to the G8’s Gleneagles Summit, two major reports were released that began to structure development debates. The first one was the Investing in Development: A Practical Plan to Achieve the Millennium Development Goals, by the UN Millennium Project (2005), led by Jeffrey Sachs. The second was Our Common Interest, the report of the Commission for Africa ([CfA] 2005) appointed by British prime minister Tony Blair. Both share a vibrant call for a ‘big push’ type of effort on the part of the international community in favour of the developing world, especially Africa, notably in the form of more open markets and a sharp increase in ODA. They also have in common a strong faith in public investment and a more limited focus on the potential involvement of the private sector in financing key economic and social infrastructure. Broadly speaking, the Sachs report calls for massive international public investments in Africa and mentions, in passing, the role that the private sector may play in the short or medium term. The CfA report puts a larger focus on potential private financing of key infrastructure. It also puts forward two practical proposals for better articulating ODA and private flows: financing the proposed Investment Climate Facility (ICF) of the NEPAD programme and supporting a special fund of the Multilateral Investment Guarantee Agency to better insure foreign and domestic investors in post-conflict countries in Africa. These are very positive proposals. Both reports claim that better governance and investment climates are needed before private flows can significantly increase; thus international public funds are urgently needed to complement or substitute for domestic public investments. But both reports seem to underestimate the role that ODA can play beyond contributing to better governance and investment climates. The facts are that private flows to developing countries sharply decreased after the 1997 Asian financial crisis and that existing private flows are massively concentrated upon a limited number of high-growth countries. But this does not imply that poor countries do not need private involvement in their infrastructure — for crucial financial, managerial, and technological reasons. It does not imply, either, that foreign aid should substitute for private flows, rather than stimulate them. Much more could and should be done in order to design ODA as a catalyst of development finance rather than as a substitute for other types of funds. Such an orientation would imply more than simply refocussing ODA flows. Aid must work

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harder to develop financial instruments and institutional expertise to bring in the private sector in key areas such as transport, energy networks, water and sanitation, and even education and health. At least two deep transformations of ODA practices are needed. First, ODA should aim at providing the missing link between the private sector’s profitability interests and the public sector’s social objectives. This requires a clear strategic focus on public-private partnerships (PPPs) and involves financial innovation well beyond the gross instruments that today count as ODA, namely grants and (sufficiently) concessional loans. In this regard, aid statistics should be redefined to reflect a wider range of development efforts; this is not the case today and this sends wrong incentives to donors. To be sure, there have been great disappointments with PPPs in the last few years, but they are rather new instruments. Rather than forgetting about them, ODA should learn more about how they can work better. Second, ODA today mostly finances governments. Unbundling the various economic and social components of a development project would allow a joint focus on the social objectives and on the profit-making activities with various aid instruments. Increasingly, ODA institutions should develop working relations with a wider range of partners — the local private sector, local customers, and NGOs, local administrations, foreign private companies — well beyond simple loans or grants to local governments. This is the condition for moving from a narrow vision of ODA to a much more promising vision of development finance (Jacquet and Klein 2005).

Conclusion As Nicholas Bayne (2005) puts it, the role of the G8 is not to set up the ultimate goals of the international community. This responsibility lies with the United Nations General Assembly (UNGA), as well as with the Security Council (UNSC) in times of crisis or urgency. In pursuing the broad objectives of the world community, notably development and global sustainability, the G8 should provide political leadership to launch new ideas, break longstanding blockages, and coordinate its own domestic policies to bring them into greater international coherence. In this light, development aid is likely to become a more and more structural G8 issue, as local development is the path to global sustainability, and also for reasons of the political legitimacy of any global leadership. As international civil society increases its expectations of the G8 regarding the political momentum it is able to give development issues, the G8 will probably become an ever more important forum for designing the future of international aid and for using this public policy as a central instrument in better managing the North-South dimensions of globalisation.

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References Amprou, Jacky and Lisa Chauvet (2004). ‘Efficacité et allocation de l’aide: revue des débats’. Notes and Documents No. 6. Agence Française du Développement, Paris. Bayne, Nicholas (2005). ‘The G8: An Introduction’. In M. Fraser, ed., G8 Summit 2005: Mapping the Challenges (London: Agora Projects and Newsdesk Communications) (June 2007). Bell, Clive, Shantayanan Devarajan, and Hans Gersbach (2003). ‘The Long-Run Economic Costs of AIDS: Theory and an Application to South Africa’. World Bank Policy Research Working Paper No. 3152. World Bank, Washington DC. (June 2007). Boone, Peter (1996). ‘Politics and the Effectiveness of Foreign Aid’. European Economic Review, vol. 40, no. 2, pp. 289–329. Burnside, Craig and David Dollar (1997). ‘Aid, Policies, and Growth’. Working Paper No. 1777. World Bank, Washington DC. (June 2007). Burnside, Craig and David Dollar (2000). ‘Aid, Policies, and Growth’. American Economic Review, vol. 90, no. 4, pp. 847–868. Cartapanis, André (2004). ‘Le déclenchement des crises de change: qu’avons-nous appris depuis dix ans ?’ Économie internationale, vol. 97, pp. 5–48. (June 2007). Clemens, Michael, Charles Kenny, and Todd Moss (2004). ‘The Trouble with the MDGs: Confronting Expectations of Aid and Development’. Working Paper No. 40. Center for Global Development, Washington DC. (June 2007). Collier, Paul and Anke Hoeffler (1998). ‘On Economic Causes of War’. Oxford Economic Papers, vol. 50, pp. 563–573. (June 2007). Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007). Degnbol-Martinussen, John and Poul Engberg-Pedersen (2003). Aid: Understanding International Development Cooperation (London: Zed Books). Easterly, William, Ross Levine, and David Roodman (2003). ‘New Data, New Doubts: Revisiting “Aid, Policies and Growth”’. Working Paper No. 26. Center for Global Development. (June 2007). G8 (2002). ‘G8 Africa Action Plan’. 27 June, Kananaskis. (June 2007). G8 Research Group (2005). ‘The G8 and Africa Final Report: An Overview of the G8’s Ongoing Relationship with African Development from the 2001 Genoa Summit to the 2005 Gleneagles Summit’. (June 2007). Guillaumont, Patrick and Lisa Chauvet (2001). ‘Aid and Performance: A Reassessment’. Journal of Development Studies, vol. 37, no. 6, pp. 66–92. Jacquet, Pierre and Michael Klein (2005). ‘Using ODA to Engage the Private Sector in Poverty Reducton’. Paper prepared for the ABCDE-Europe Conference. 23–24 May. Amsterdam.

(June 2007).

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Jacquet, Pierre and Sarah Marniesse (2004). ‘Financing Global Public Goods: Issues and Prospects’. In, Cross-Cutting Issues, pp. 59–97 (Stockholm: International Task Force on Global Public Goods) (June 2007). Jacquet, Pierre and Jean-Michel Severino (2002). ‘L’aide au développement: une politique publique au coeur de la gouvernance de la mondialisation’. Revue d’économie financière, vol. 62. Keohane, Robert O. (1984). After Hegemony: Cooperation and Discord in the World Political Economy (Princeton: Princeton University Press). McGillivray, Mark (2003). ‘Aid Effectiveness and Selectivity: Integrating Multiple Objectives into Aid Allocations’. Paper prepared for the joint Organisation for Economic Co-operation Development Assistance Committee/Development Centre Experts’ Seminar. Organisation for Economic Co-operation and Development, Paris. (June 2007). Ministère des Affaires étrangères (2007). ‘UNITAID, United to Treat Those in Need’. Paris. (June 2007). Rajan, Raghuram and Arvind Subramanian (2005). ‘Aid and Growth: What Does the CrossCountry Evidence Really Show?’ IMF Working Paper No. 05/127. International Monetary Fund, Washington DC. (June 2007). Roland-Holst, David and Finn Tarp (2003). ‘De nouvelles perspectives pour l’efficacité de l’aide’. Revue d’économie du développement, vol. 17, no. 2–3. (June 2007). Sandler, Todd (2003). ‘Assessing the Optimal Provision of Public Goods: In Search of the Holy Grail’. In I. Kaul, P. Conceição, K. Le Goulven, et al., eds., Providing Global Public Goods, pp. 131–152 (New York: Oxford University Press) (June 2007). UNAIDS (2004). ‘2004 Report on the Global AIDS Epidemic’. (June 2007). United Nations (2005). ‘The UN Millennium Development Goals’. (June 2007). United Nations Millennium Project (2005). ‘Investing in Development: A Practical Plan to Achieve the Millennium Development Goals’. United Nations Development Programme, New York. (June 2007). Woll, Bettina (2005). ‘Recipient Ownership and Donor Harmonisation: The New Cooperation Agenda’. Paper presented at the Workshop for Researchers on the World Bank, 1–2 April, Budapest. (June 2007). World Bank (2004). ‘Global Development Finance 2004: Harnessing Cyclical Gains for Development’. World Bank, Washington DC. (June 2007).

Chapter 12

Doing Doha for Development: A Development Perspective Sheila Page

To understand how the World Trade Organization’s (WTO) Doha Development Agenda can contribute to development, one must first ask whether it is possible or useful to define a trade negotiation round as a ‘development round’. Then one should look at the trading interests of the developing countries in this round, and how they have become more able to articulate their interests. Next, it is essential to examine the particular interest of developing countries in special and differential treatment (SDT). This chapter looks in turn at these critical issues. It argues that there are many complexities and challenges in making trade work for development, both in general and especially in the Doha round. At the same time, developing countries have come a long way in understanding and articulating their own interests, making a speedy round of multilateral trade negotiations less likely and less desirable for them. In particular, there is a need to look well beyond the old tool of SDT if a deal that delivers development effectively is to be done. While countries determine their own development, and trade offers only a partial path, the G8 and other developed countries can help by taking an inclusive and flexible approach to the Doha negotiations, liberalising their own trade, and going beyond the old SDT approach by offering direct financial support. In the Doha negotiations, both developed and developing countries finally recognised this, and ‘aid for trade’ was introduced in spite of the breakdown of the talks.

The Relationship between Doha and Development The Direct Links Is it possible to combine trade negotiations and development? Trade negotiations are basically a mercantilist process, where offering market access is a ‘loss’ and ‘gains’ are measured by access to markets, not by welfare gains. Development, in contrast, has as its objective welfare and its distribution, and thus would see both offering and securing access as gains. Even if one assumes that there is an underlying world welfare objective for the WTO, this is based on gains for all, not special needs. Is the development dimension of the round to be seen as a constraint, or as the

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central objective, which other negotiations may add to, but not obstruct or alter? Is it true, as noted by the United Kingdom’s parliamentary International Development Committee (2003, s. 2), that ‘hard-bargaining between unequal players sits uneasily with the notion of a development round … Hard-bargaining is an inappropriate way to deal with some issues. It may have been suitable for tariff negotiations, but as WTO negotiations increasingly encompass complex “behind the border” domestic issues, the adversarial concessions-trading format becomes less suitable.’ Or is there evidence that hard bargaining has been successful? How important is trade as a development tool? The potential gains from trade are small for many countries. Analysis of the determinants of development and poverty suggests that these problems require national solutions, accompanied by international financial and technical assistance, not just favourable trade policies. Imposing a ‘development dimension’, if it means targeting gains at particular countries, may also risk losing the achievement of conventionally welfare-improving outcomes for the majority, without compensating gains for development. Three factors should lead to questioning whether trade should be the central issue in development policy and whether development objectives should be central to trade negotiations. In the current trade agenda, gains are now sought from countries in areas where there were previously preferences and other special arrangements. There is also a growing recognition that poor trade performance is likely to be the result of supply conditions as well as barriers in markets. That the trade preferences used to promote development are now proving difficult to disentangle and are an obstacle to poverty-reducing liberalisation does not offer support for a view that future trade policy should be guided by development. Distorting trade is rarely the first-best way of securing welfare gains. There are particular problems in making Doha a ‘development round’. There are two reasons why many developing countries expect few gains or even sharp losses as the most likely outcome from the Doha round. Least developed countries (LDCs) and many others that have strong ties to particular developed countries and that have followed the recent trend toward regional free trade areas now have virtually tarifffree access to all their major markets.1 There may be some exceptions for sensitive goods, but these are also those least likely to see liberalisation in the WTO. While a trade economist would argue that such countries can make gains by liberalising their own tariffs, this does not require a WTO round. Thus the potential gains from a round for them are close to zero. Second, for a few countries, the very high levels of some tariffs and the restrictions on levels of imports for some goods mean that those countries that do not pay those tariffs or have the advantage of quotas on the restricted goods, that is, those countries who have preferential access, will suffer ‘preference erosion’ if tariffs and restrictions are removed or reduced. Not surprisingly, they oppose change. One reason for the size of the current problem of preference erosion is that although the original purpose of preferences was to give new exporters an opportunity to increase sales, some of the quotas are of fixed amounts at high prices, and seem intended instead to give poor countries additional revenue, either to relieve poverty

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directly or to finance development. Both the European Union and the United States give quotas to some sugar exporters, which offer access and high prices. Reform, whether through disputes, negotiation, or direct action on the Common Agricultural Policy (CAP), will reduce these benefits. The U.S. and EU have had quotas on clothing from major exporters under the Multi-Fibre Arrangement (MFA), while the EU has allowed more favourable entry to the LDCs and the U.S. to African countries. These schemes are ending. For some countries, with high concentrations of exports in heavily protected commodities, the gains from preferences have been very large. The moves since 2000 to improve preferences, particularly for LDCs, have increased the potential loss. The role of concentration means that it is mainly small countries that have gained. But Bangladesh, with a massive response to the special concessions for LDCs exporting clothing during the period of the MFA, is now vulnerable. On the other side, however, if there is a significant reduction in barriers on agricultural and non-agricultural goods, there will be substantial gains for countries at a middle level of development. This includes those in the G20, which do not have favourable preferential access and which do have the potential and the competitiveness to use access.2 It is these countries, not LDCs with supply constraints, that can make significant gains from trade. Trade and Poverty Even if one could be sure that trade policy would help national income, whether an improvement in national income from trade is transmitted into poverty reduction depends crucially on national policies. The international trading system can only enable poverty reduction; it cannot ensure it. An apparently simple criterion of ‘evaluating each agreement and every progress from the point of view of its impact on sustainable development’ (Tubiana 2003) begs the question of whose choices will determine how the different components of sustainable development will be weighted for the evaluation. It also fails to distinguish between actual impact (given all a country’s other policies) and potential impact (assuming the observer’s ideal policies). Finally, it ignores the need to look not at each agreement, but at the net effect of all initiatives, because it is the complex of results of an agreement that determines the effect on national income. For those who target the broader elements of poverty, as defined in the Millennium Development Goals (MDGs), it becomes very hard to see the role of trade as a factor on its own. Countries with governments concerned about poverty reduction or, a better aim, development will use any increase in national income to promote this. Those that are not will not promote policies that produce a good first-round distribution. So looking for trade liberalisation with a good initial impact and not finding the best overall outcome is inefficient and ineffective. While trade can increase the income available to reduce poverty, how this is distributed among countries and within countries depends on other policies, both international and national. Only if one assumes that these other policies are not

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feasible should one treat the direct poverty or MDG effects of trade policy as more important than the traditional calculus of their welfare effects. Using Policy to Link Doha to Development This does not mean that the idea of ‘development friendly’ trade negotiations is meaningless. There are two requirements. First, no developing country should lose in the negotiations. If all countries are to accept the result, and thus give it the required consensus, then some gains must be found for those that do not have sufficient gains on the normal trade agenda. And the countries that will have a measurable negative outcome from any significant liberalisation of trade because their losses from preference erosion will be greater than their gains from other parts of the agreements need non-repayable support in order to be able to make the investments in physical and human infrastructure and in productive capacity to permit alternative production, adapted to the new trading conditions. The increase in world welfare, because the non-preferred and importers will gain, suggests that there is scope for direct funding to them. Compensating the second group, and perhaps the first, through a fund, rather than other trade concessions, will be a major new initiative for the WTO. It is one that could seem inconsistent both with its role as a trade agency and with other funding by developed countries through their aid programmes and the international financial institutions (IFIs). It would, however, be consistent with the proposal by the EU to help those losing benefits from sugar quotas by offering financial assistance. The reason for suggesting it is that the other proposals for dealing with the problem of preference erosion are more unsatisfactory and more difficult. Alternative gains from trade are either too small (in goods) or too sensitive (in services). If this means adding financial payments to the WTO agenda, this is in principle no different from the efforts by the EU to expand the agenda to the ‘Singapore issues’ — regulation of investment, competition policy, government procurement, and trade facilitation — to provide it with ‘compensation’ for what it might ‘lose’ (in the mercantilist sense) on agriculture. The second requirement is that the process of negotiations must respect the developing countries. The effectiveness of helping developing countries to participate themselves in order to obtain their objectives depends partly on how well donors know how to increase their capacity. But developing countries have been increasing their own effectiveness in negotiations. So the more important conditions are the degree to which the negotiations allow their participation and whether developed countries give more weight to developing countries’ defining their own choices of objectives or to the externally defined MDGs, which developing countries may or may not share. Forming interest- or issue-based alliances is an effective instrument for developing countries, and developed countries should not try to obstruct this. Until all developing countries have acquired experience in negotiations, however, the process should not impose excessive demands in speed and content.

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Trading Interests of the Developing Countries in the Doha Round The positions of many of the developing countries, particularly those of LDCs or in Africa, were originally embodied in joint declarations: for example, by developing country alliances such as the G77 or the African, Caribbean, and Pacific (ACP) countries, or by regions such as Southern African Development Community (SADC) or the Common Market for Eastern and Southern Africa (COMESA). These tended to be vague statements of what an outsider would consider normal developing country positions (such as more access, no reciprocity, SDT), rather than detailed statements of particular interests. Some declarations of this kind continue to emerge. But some of the group positions are now much more detailed. Increasingly, positions are defined by particular country interests, for example the ACP countries and the LDCs make points on compensation for loss of preferences and, for the ACP, rules for regions. These groups have been supplemented by a growing use of ad hoc groups for particular issues: the G20 — led by Brazil, China, India, and South Africa — on agriculture is the most obvious, but there is also the G90 for the smaller, more preference-dependent countries, as well as detailed individual country positions that are no longer simply compilations of their group commitments (for example, see Malawi 2003, Page 2001). It was another cross-group and cross-continent set of developing countries that called for development to remain ‘central’ ‘to the Doha package’, and stressed the need for a balanced package that provided ‘gains for all Members’ (WTO 2003a).3 This marks a new skill and familiarity with the process. Developing countries look not only at specific issues, but to the outcome as a whole. Business organisations have taken positions, internationally and within countries, and consumer groups and other interest groups are also seen increasingly often. There has thus been a clear shift from the position in early rounds of the General Agreement on Tariffs and Trade (GATT), where developing countries were largely silent, or acted as a group, first to forming broad interest groups and now to taking detailed positions, often reflecting the interests of national groups. These shifts are not complete, for there are still some issues on which the blocs are important. Countries not particularly concerned by an issue will support a bloc position, and those countries that do not yet participate actively will still act in blocs. The issues of cotton, which emerged in 2003, and compensation, which was increasingly pressed in 2004–05, are probably the major examples of new issues brought to the table by developing countries, as a result of an increasingly careful assessment of their possible gains in the existing agenda. Another is that of commodity prices. This they failed to get included at Doha (it was in the position of some countries and groups before that ministerial). But commodity prices have been repeatedly raised, and are now starting to appear in WTO documents (see WTO 2003b). They will not be a negotiating issue in themselves, but they are clearly relevant to any agricultural settlement (International Development Committee 2003,

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para. 127). Assistance in diversifying out of highly concentrated commodity exports is one of the possible uses of any transfer payments that might be agreed. Agriculture Agriculture is the central issue of the negotiations. It remains the most protected and most internally managed sector in world production, with a complex system of interventions to protect production in certain countries, and then to protect some countries from that protection through countervailing barriers or preferences, and occasionally to protect a third level of countries from the first and second levels (for example, sugar intervention to protect European farmers, quotas to protect some developing producers from the barriers, special rules for LDCs to help them in spite of the quotas). Any change in the structure of protection can have complex and major effects, both positive and negative, on those who lose or gain from the current arrangements. The average bound tariff in agriculture is ‘62 per cent, compared to 29 per cent for industrial products’ (WTO 2003c, 127). Although some applied rates are below those that are bound, the averages for these are also very different: 17 percent for agriculture and 9 percent for industrial goods. Agriculture is also a sector in which non-economic motivations are important. Concepts such as ‘multifunctionality’ or ‘non-trade concerns’ are used in the EU and some other developed countries to suggest that agriculture has a role in preserving natural or cultural environments. Beliefs about the role of agriculture in development or in the livelihoods of the poor in developing countries influence some observers. Therefore, calculating the economic costs and benefits from any change, and trading these off against benefits or costs in other sectors, may not be acceptable. The structure of tariffs also makes negotiations difficult. While the average for developed countries is normally substantially lower than that for developing, the structure tends to be fairly flat in most developing countries, but with some very high peaks in developed countries. Any formula that concentrates on high averages will hit developing countries, while one that focusses on peaks will hit developed countries. Agricultural products are now a declining, and in some cases small, share of developing country exports. This does not mean that this is a declining issue. The reasons for the decline can be misinterpreted. Manufactures overtook primary products in share of exports by non–oil-producing developing countries in about 1985 (Page 1990). In the 1980s, this was led by Asia, but even if China and India are excluded, the share had risen to 60 percent for all developing countries by the late 1990s (World Bank 2003).4 Latin America, which had been still low in the 1980s (30 percent in 1985) has risen as high as 60 percent. But there are two reasons not to interpret this change as justifying less interest in agricultural trade reform. The first is that the much higher protection for agricultural trade is itself an important reason for this difference in pattern. While different income elasticities would be expected to cause faster growth in manufactures trade than in agriculture, the differences observed are much greater than could be explained in this way. The second is that for sub-Saharan Africa the share of manufactures is still only about a quarter. For this region, the pattern of

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agricultural trade restrictions remains a vital trading interest. Of the 42 sub-Saharan African countries, 28 still have one to three agricultural exports that are each at least 10 percent of their total exports, as do 4 of the 13 Caribbean and 9 of the 20 Latin American countries. Of the LDCs, 24 face this problem (Page and Hewitt 2001). As a negotiating issue, agriculture has also acquired the status of a test of commitment. Agriculture and the debate on access to medicines were the two issues where the developed countries have to make substantial offers to developing countries. Other offers, even if quantitatively important, would not be considered sufficient for a successful negotiation. There is increasing dissatisfaction with the access that was negotiated under the Agreement on Agriculture in the Uruguay Round of WTO negotiations (see, for example, Nogués 2003). Although it provided for cuts of a third in nominal protection and subsidies, the combination of taking a high base period for prices, generous ‘tariffication’ of non-tariff measures, and countries’ option of meeting the average cuts by large cuts on the least sensitive products meant that the actual outcome was substantially less than had been hoped for. This dissatisfaction has been intensified by the over-optimistic estimates of the effects of agricultural liberalisation by the World Bank and the Organisation for Economic Co-operation and Development (OECD). The continued permissibility of subsidies to agricultural exports and production makes agriculture different from other sectors in the WTO and creates additional pressure for this to lead in any Doha settlement. The Uruguay Round provided for some reductions in subsidies, but the choice of base has meant that these were small. The question of whether the eventual elimination of subsidies should be seen as an objective helped to break up the WTO ministerial meeting in Seattle in 1999, and nearly caused failure at Doha in 2001. It is one of the two areas where there was progress at Cancun in 2003 and, following the July 2004 agreement, export subsidies, although not domestic subsidies, may now be on the way out. There has still, however, been no agreement on a formula that could give a significant increase in access. Agriculture caused the breakdown in negotiations in July 2006. In cotton, it is the negative effect on competitors that has been argued to be most serious. In the summer of 2003 four West African countries — Benin, Burkina Faso, Mali, and Chad — cited the cost to them of subsidies, notably by the U.S., and placed this as a separate item on the agenda for Cancun. Cotton is between 5 and 10 percent of their gross domestic product (GDP), and more than 60 percent of their exports (Goreux 2003; Gillson et al. 2004). They requested an interim settlement, in addition to any negotiations on subsidies in the Doha context. This demand to separate cotton from the round was in principle settled in the July 2004 agreement (WTO 2004). Other Trade Issues Non-agricultural access is a less important issue in aggregate than agriculture because barriers are lower. Therefore, the current structure of protection is less restrictive and less complex. Although most exports from developing countries are non-agricultural, these do not excite the same preconceptions about livelihoods and

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poverty that agricultural exports do. And no developed country would now admit to having industries that are protected for social reasons. The outcome will be defined in terms of the modalities of tariff cuts, the rules on binding, and the types of differential treatment of either export access or import tariffs by developing countries. There is still a significant proportion of tariffs that are not ‘bound’ (notified to the WTO, and therefore impossible to alter upward without renegotiation). While in agriculture most countries have bound their tariffs as part of the Agreement on Agriculture, even if some of the bindings are very high and some countries use ‘applied’ rates well below the bound rates, in non-agriculture negotiations there are still countries without bound tariffs. They therefore must ask, and negotiate, whether they should bind their tariffs, and if so at what levels and what weight should be given to this in the negotiations. Developing countries that are not among the LDCs or in Africa put the emphasis on reduction in peaks and escalation. The highest peaks, in both developed and developing countries, are in textiles and clothing. Other highly protected goods are fish (classified as non-agricultural in the WTO), rubber, and leather goods. Specific duties are also important in some non-agricultural goods, notably textiles and garments, and again these have increased because prices have fallen (von Kirchbach and Mimouni 2003). On services, developing countries have clear interests in aggregate, because of their abundance of low-cost labour. This is reflected in declared interests in liberalisation in a range of sectors and in the movement of temporary labour. Services still use the old GATT method of ‘request and offer’ (so that countries must formulate requests to each of their trading partners and make offers in response to all the requests that they themselves receive). This is not only a major impediment to general progress in the services negotiations (a system that was cumbersome in a GATT of 50 members is impossible to operate in one almost three times as large), but a particular burden on countries with limited capacity to identify interests or to negotiate. There are therefore potential major gains for at least some developing countries in the negotiations, if there is significant liberalisation and in particular if the services negotiations can be rescued from their current form. The move to plurilateral negotiations in early 2006 might have permitted some progress if the negotiations had not stalled over agriculture.

The Increasing Effectiveness of Developing Countries in Trade Negotiations Given the undoubted power of the leading developed countries, how has it been possible for developing countries to have made such progress in trade negotiations? The answer appears to be that, in multilateral negotiations, the bargaining power of the strongest nations is limited by the need for agreements to be finalised. If a powerful country wants market access and if this requires action by another country, a developed country may need to negotiate even with a developing one in order to secure its agreement. Studies on negotiations and country experiences identify when small

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countries have been able to turn this potential into reality by negotiating effectively and changing outcomes (Page 2001; Bojanic 2001; Durrant 2002; Hess 2001). The failure of the negotiations in 2006 suggests that in this case developed countries did not want anything from developing countries strongly enough to need to negotiate. The Importance of Experience Developing country trade-negotiating capacity has clearly benefited from the experience of successive trade rounds. In 1986, at the beginning of the last trade negotiations, developing countries did not realise that the open-ended or vague commitments in the agenda could become significant agreements. Services, traderelated intellectual property (patents and copyright), and the single undertaking were all in the negotiating mandate, but their implications were not clear. The contrast to the 1999 Seattle ministerial, which had the task of setting the agenda for the following round, is stark. A detailed rejection of points in the agenda by developing countries led to failure. At Doha in 2001, developing countries moved beyond rejection alone and were active in setting the agenda, realising that they could not remain outside any negotiation, however irrelevant or unimportant it might seem initially. At Cancun in 2003, they scrutinised the proposals in detail. In Geneva in 2004 and in Hong Kong in 2005, they were active in all the negotiating areas and supplied two of the socalled ‘five interested parties’ (Brazil, India, the U.S., the EU, and Australia). Developing countries are now able to develop more sophisticated positions, for example, on the issue of services. In the Uruguay Round they began with little information about their own interests. By the time of the Doha meeting, 15 years later, there was greater confidence and precision in offers and positions. The emergence of better-informed policy positions in the course of the Uruguay Round discussion of services and the improvements seen in the competence of individual country delegations in the round suggest that long negotiations can help to produce informed outcomes for new subjects or new participants. At the beginning, Brazil and India were almost the only countries to be effective: they had been active in the previous Tokyo Round. During the Uruguay Round, Argentina, Bangladesh, and other Asian and Latin American countries started to be active. At the Seattle ministerial and between then and the Doha ministerial, the countries that had been inexperienced participants in the Uruguay Round began to plan a more active role. Even the African countries started to define and present negotiating positions (more than half the position papers before Seattle and Doha were from developing countries). The countries that had participated without experience and with little success in the Uruguay Round were now seeing their second round, and started to share the advantages of the ‘old’ developing country activists. The pressure for limited-duration rounds may not be in the interests of developing countries. In the preparations for the Cancun and Hong Kong ministerials, again all countries, including the least active negotiators among the LDCs, presented positions and participated in meetings of groups, in particular the African Union (AU) and the LDCs. This greater participation was reflected in the way the negotiations

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themselves were organised. The groups were able to choose their own representatives to the consultations by subject and smaller, ‘Green Room’ meetings, rather than being selected by the chair of the meeting (as in the past).5 New countries started to come to prominence, such as Ghana for agriculture and Zambia for the LDCs. Negotiating Alliances A group that started to emerge in Seattle and is now a major part of any negotiation is a much more fluid group of leading developing countries. The long-established leadership of India and Brazil was extended to include Egypt, Nigeria, and South Africa, and then China. They are the core of the G20. All have a common interest in continuing liberalisation in the WTO context, although with very different (and potentially opposing) interests in particular elements of the negotiation. Their interests are in some respects very different from those of the smaller economies, where trade is a much more important part of the economy, so that they are not seen as (although they may see themselves as) leaders of the old developing country alignment. All could be seen as leaders of regional groups: Mercosur, northern Africa, the South Asian Association for Regional Cooperation (SAARC), the Economic Community of West African States (ECOWAS), and SADC. Brazil and South Africa, at least, have acted as informal ‘reporters back’ to their groups in the WTO negotiations. Other smaller countries, however, such as Jamaica, Mauritius, and Bangladesh, have also emerged as frequent leaders in taking positions, in chairing committees, and in other ways. They have built up a counter-alliance, the G90, of small African, LDC, Caribbean, and Pacific countries. Where there are general developed-developing country issues (for instance, SDT or the inclusion of the new issues such as investment and competition policy), the positions of these two alliances can stand for the developing country positions, although on more specialised questions, they are not representative. The G20 (or now G20+) of developing country agricultural exporters (but including the traditional leaders, Brazil, India, South Africa, and Egypt, now joined by China) emerged in the weeks before the Cancun ministerial. This group acted much more formally together than the others. It secured the two symbols of ‘recognition’ at the talks: representation in consultations in the Green Room and a meeting room of its own. Its emergence, combined with the emergence of a new group of the countries least willing to liberalise agriculture — the G10, led by Switzerland — on the other side of the agricultural negotiations, and the strong divide between the developed and developing countries on the developed country proposal to introduce the Singapore issues, meant that the Cancun ministerial was perhaps the first meeting since the 1970s where the divisions were almost uniformly between developed and developing countries.6 The divisions within each grouping were less important. The EU-ACP alliance of Doha, the Cairns alliance of all efficient agriculture countries of the Uruguay Round, and other developed-developing alliances were no longer important. At Cancun there was the first semi-formal recognition of groups among the developing countries (and of the new group including some developed countries, the G10). Countries presented positions saying that they were on behalf of groups

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such as the African countries and the LDCs and, toward the end, the G90; and the chairs of the groups were chosen to represent developing countries in both the informal consultations on various issues during the conference and in the Green Room in the final stages. There were explicit arrangements for them to report back to their ‘constituencies’. During the negotiations, individual groups had procedures for regular consultation and consideration of positions, and arranged negotiations with other groups to arrange common positions. In the negotiations in Geneva since Cancun, the leading countries in each group have been more prominent than the groups themselves, particularly since July 2004 as the negotiations have become more detailed. The major changes in July 2004 in the agriculture proposals and the removal of three subjects opposed by all developing countries show the strength of these groups.

Special and Differential Treatment and Conflicting Interests A good multilateral trade outcome is not simply the sum of good bilateral policies. Future trade policies by developed countries that are intended to be ‘developmental’ should consider the short-term consequences for all countries and not only the target countries. They should also take care for the long-term consequences for the international system of introducing new forms of differentiation among developing countries that could create future problems for reform. As long as special arrangements are small, it may be possible to ‘buy’ reform by finding financial compensation mechanisms, but the increasing use of special arrangements for LDCs or other favoured countries and the use of trade tools to transfer aid (such as the sugar quotas) have raised the potential costs. Only if it is assumed that further multilateral liberalisation is not possible, and that regional and preferential agreements can be an effective substitute, are these likely to be first choices for development-friendly trade policy. Past protection and the measures taken to attenuate its effects on particular classes of countries have created a complex set of gains and losses from trade. Liberalisation will therefore have equally complex effects. To avoid freezing the current distortions in the international trading system, financial transfers are likely to be necessary. This is more acute because of the new preferences, but also because of the alerting of developing countries to what they can lose in trade negotiations. They will therefore be active in the negotiations even if their potential gains appear small. This means that it is no longer possible for negotiations to leave them to one side. Proposals for a return to an effectively plurilateral system, in which the developed countries, with some major developing countries, reach agreements that are accepted by the others, are not feasible because almost all countries have reached a point where they will not accept exclusion. The eighth MDG of ‘partnership’ therefore has become a practical requirement of the international trading system, as well as a goal. Where does this leave the desirability and the feasibility of SDT for developing countries? The arguments for SDT were originally that development required different, more active trade policies than those necessary simply to sustain growth

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in developed countries. If developing countries need to transform the structure of their economies, not merely expand and alter at the margins an existing structure, the gains from the efficiency effects of trade (and thus the losses from not having these) may be less important for them relative to the gains from other types of economic policy (Kleen and Page 2005). Support for SDT in trade is based on the assumption that trade matters for development, usually that it is a significant influence, even a determining influence, on the success or failure of countries’ strategies for development. This is not a universal view, and certainly not a traditional one. Histories of developed countries’ industrial transformations focus on the role of innovation (UK), of governments (Japan), or of strong private sectors (U.S.). Trade is an instrument with some useful (or damaging) characteristics, but is not central to the story. One difference in developing countries is that for many trade became a significant element of national income early in their development because they were opened by more developed countries, in many cases by colonisers. Therefore, there may be historical reasons for expecting trade to be more important. Two forms of SDT have traditionally been most important: the right of developing countries to be more restrictive toward other countries than is allowed to developed countries (flexibility in trade and other policies) and the ‘enabling’ of developed countries to offer them more favourable treatment. These stem from two different types of conclusion on the role of trade in development. The first assumes that external income is a necessary condition, and imports a necessary cost, for a basically internal process. Arthur Lewis (1954) argued for industrialisation to increase incomes and for diversification (which, in a primary economy, could only mean industrialisation) to increase choice. For prices, Raúl Prebisch (1950) and Hans Singer (1950) pointed to the disadvantages of primary products, because of the changing composition of demand, the characteristics of markets, and price variability. Simple observation suggested that the richest countries were the most industrialised, and World War II had shown the advantages of strong, well-established industries and the damage that could be done to an economy by destroying its industry. All past history of developed countries and the recent history of countries such as Brazil suggested an internal dynamic, sometimes accompanied by control of trade. Countries needed to be able to use a range of national policies in order to industrialise, even if this required some restraints on imports or (in more recent negotiations) longer to adapt to new rules such as those on intellectual property. But then the Asian countries showed that developing countries could export manufactures, and that this was closely associated with very rapid growth and structural change. So the obvious, if not the logically flawless, conclusion was that exports led to development. But how does the obvious connection between exports and the various possible elements of development work? This became the subject of much analysis and more assertion in the 1980s. The important change in what could be identified as conventional views was from an emphasis on the efficiency role of trade to a view that there were dynamic effects. And, whatever the path of the effects, it seemed clear that offering more export opportunities would increase their magnitude.

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The modifications to the most-favoured nation (MFN) approach of GATT that were authorised in the 1960s and 1970s allowed both approaches to the role of trade in development; some countries succeeded in developing, and some attributed their success to the special treatment. But there is still no consensus understanding of the dynamics of development. Some development economists, notably Sanjaya Lall, had tried to develop a theory based on technology and innovation. This may be promising theoretically. But the policy consensus still points to some combination of ‘better’ access and ‘more flexibility’ for national policy. This therefore remains the demand in the Doha round. Now, however, the WTO is faced with some problems for SDT in the future, as follows: • A large number of countries that have had both access and experimentation in national policy have still not developed. It is still not known what might help them. • Many of the countries that still need to find a developmental path are smaller and with higher trade costs (the landlocked, for example) than the developing countries of the 1960s. Thus neither national nor trade-based strategies seem likely to be as effective as for the ‘successes’. • Tariffs are low or falling in most developed and developing countries, so preferential access is worth less and less. • The number of regions is growing, cutting across old tariff preferences and preempting any advantages of ‘better’ access. • Awareness is increasing among developing countries (and some developed) that any access that ‘prefers’ one country necessarily means that another is disadvantaged, coupled with the negotiating power and skills to try to prevent this. • There is growing awareness that flexibility for any developing country in its internal policy can affect any of its potential trading partners (more bluntly: even what an LDC does can hurt its neighbours, and some of them are also ‘deserving’ cases). • The international system is increasingly based on rules and disputes and will no longer allow fuzzy ‘enabling’ flexibilities. The GATT’s ‘enabling clause’ to allow differential and more favourable treatment offered developing countries flexibility and preferences provided this flexibility did not create ‘undue difficulties’ for other countries (GATT 1979). At the time, this potential constraint on favourable treatment had no legal force, but the combination of a stronger legal base for the WTO and the increasing negotiating power for developing countries has made the constraint operational. A development-friendly international system must allow more power for developing countries. But it thereby makes a paternalistic approach that might have benefited some of them no longer practical. So what is left? One approach is to turn to a more aid-based approach: to create institutions and funds that treat the problem as one of helping countries to do what is ‘good’ for them, in either an aid or a trade context (for example, a new World Bank

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facility, such as the Integrated Framework for Trade-Related Technical Assistance, or new provisions to concede flexibilities within the WTO). This can clearly replace the ‘preferences’ that are disguised financial transfers. But there are two objections to this as a replacement for preferences to promote exports. The first is practical. If donors knew what these countries should do to achieve development, they would have helped them to do it years ago. There is no obvious answer to the question of what they should do or, therefore, what donors should fund them to do. But the more fundamental objection is that this would reverse the increase in their ability to decide for themselves what flexibility and what gains they want to negotiate in the WTO. The WTO is, and should be, different in its approach from an aid agency, with the emphasis on countries’ identifying their own needs and trying to negotiate to achieve these, rather than asking for concessions. There is a fundamental incompatibility between the old SDT approach and the WTO approach that could only survive as long as the old GATT set the rules — that is, only as long as most trade rules were vague and unenforceable. This does not mean that the WTO cannot allow different rules for different groups of countries. If such countries can agree on what they want and convince other countries that the difference will not harm them, or that the benefits from securing some other concession will more than balance any harm, then there is no reason why this cannot be negotiated, just as countries without a pharmaceutical industry negotiated a concession to be allowed to import under the TRIPS Agreement. A group may define itself as poor or disadvantaged in trade, and if other countries want to preserve the WTO in its new role as a universal organisation, then this may be a sufficient incentive to allow it special treatment. The difference of such treatment from the old SDT would be that its scope is defined and then negotiated by the countries themselves, not by developed countries. Implicitly, a second difference will be that it is accepted by developing countries, not imposed on them.

Conclusion Countries determine their own development paths. Trade can contribute to this, and learning to identify and to achieve their own trading objectives is one of the ways in which countries develop. Developed countries can help in three ways. They can recognise that they will promote their own interests in a well-functioning international trade regime by ensuring that this is designed to be inclusive and to be flexible enough to accommodate countries with very different levels of development and approaches to policy. They can, as economists have been telling them for more than 200 years, led by a distinguished Glasgow professor of moral philosophy, promote their own interests by liberalising their own trade. And finally, at a time when preferences and SDT — tools that have been useful in the past — are being weakened, they can help developing countries to find and use alternative approaches and give them the flexibility to search for these. Financially they can help meet any costs imposed on previously favoured developing countries by the trading system,

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even when the trade benefits are more likely to go to other developing countries as preferences are eroded and trade is ‘undistorted’ back to the more efficient developing countries. How has the G8 process contributed? The indirect and uncertain relationship between trade and poverty suggests that an approach of promoting the MDGs through broad commitments on trade is unlikely to be effective. More seriously, in regard to the direct trading interests of developing countries, the interventions of the G8 have made little difference. The broad commitments to ensuring the success of the Doha round were never converted into a real change in the policy of giving priority to mercantilist and agricultural trading interests over both the G8 countries’ own welfare and that of developing countries. The absence of any institutional mechanism to incorporate G8 intentions into national policy decisions was a weakness. The contribution of the G8 process to the momentum of increasing aid may, however, have been useful in providing a favourable background for progress in finding a financial solution to the problems of potential losses or small gains from the trade negotiations. Analyses in 2005 by several groups, including the World Bank (International Monetary Fund and World Bank 2005) and a task force led by Ernesto Zedillo (Global Trade and Financial Architecture Project 2005), of the need to link any settlement to financial assistance helped to lead to the proposal for aid for trade that was adopted by the WTO’s Hong Kong ministerial in 2005. This led to formal proposals by a task force in July 2006 (WTO 2006). In October 2006, this report was adopted by the WTO General Council, and there is a consensus in the WTO and among donors that funding to help countries take advantage of trading opportunities can go ahead even in the absence of a round. The G8 process of side meetings with only a few developing countries is not consistent with the way in which developing countries have been improving their negotiating strength in the WTO. Developing countries are not willing to have the donors define their needs for them in their absence. The way in which common interests cross the conventional divisions among developing countries and between developed and developing countries limits the usefulness of any intervention by a small number of countries.

Notes 1 2 3

4

The WTO uses the United Nations–defined category of least developed countries as an official group eligible for differential treatment. In this chapter, G20 refers to the bloc of developing countries that formed just before the WTO ministerial in Cancun in 2003. These countries were Argentina, Bolivia, Botswana, Brazil, Chile, China, Colombia, Cuba, Dominican Republic, Ecuador, El Salvador, Gabon, Guatemala, Honduras, India, Malaysia, Mexico, Morocco, Nicaragua, Pakistan, Paraguay, Peru, Thailand, Uruguay, Venezuela, and Zimbabwe. According to the World Bank (2003, 66), the average, unweighted share was 50 percent for low-income developing countries and 48 percent for middle-income countries.

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6

There are no formal procedures for WTO ministerial meetings. The custom is for the chair to designate ‘friends’ to hold consultations on the principal issues, partly open, partly with the principal interest groups, and then to consolidate the positions in a ‘Green Room’ meeting of principal countries. At Seattle, these had been the largest countries, plus countries that the chair chose to represent the others (Page 2004). The G10 are Bulgaria, Iceland, Israel, Japan, Liechtenstein, Mauritius, Norway, South Korea, Switzerland, and Taiwan.

References Bojanic, Alan (2001). ‘Bolivia’s Participation in International Trade Negotiations’. Working Paper. Overseas Development Institute, London. (June 2007). Durrant, Nigel (2002). ‘Guyana’s Participation in Multilateral and Regional Trade Negotiations and the United Nations Framework Convention on Climate Change (UNFCCC)’. Working Paper. Overseas Development Institute, London. (June 2007). General Agreement on Tariffs and Trade (1979). ‘Differential and More Favourable Treatment Reciprocity and Fuller Participation of Developing Countries’. Decision of 28 November (L/4903). (June 2007). Gillson, Ian, Colin Poulton, Kelvin Balcombe, and Sheila Page. (2004). ‘Understanding the Impact of Cotton Subsidies on Developing Countries’. Working Paper. Overseas Development Institute, London. (June 2007). Global Trade and Financial Architecture Project (2005). ‘Strengthening the Global Trade Architecture for Economic Development: An Agenda for Action’. Yale Center for the Study of Globalization. (June 2007). Goreux, Louis (2003). ‘Prejudice Caused by Industralised Countries Subsidies to Cotton Sectors in Western and Central Africa: Background Document to the Submission Made by Benin, Burkina Faso, Chad, and Mali to the WTO’. TN/AG/GEN/4. World Trade Organization, Geneva. Hess, Richard (2001). ‘Zimbabwe Case Study on Trade Negotiations’. Working Paper. Overseas Development Institute, London. (June 2007). International Development Committee (United Kingdom) (2003). ‘Trade and Development at the WTO: Issues for Cancun’. Seventh Report. HC 400-I. 14 July. London.

(June 2007). International Monetary Fund and World Bank (2005). ‘Doha Development Agenda and Aid for Trade’. International Monetary Fund, Washington DC. (June 2007). Kleen, Peter and Sheila Page (2005). ‘Special and Differential Treatment of Developing Countries in the World Trade Organization’. Ministry for Foreign Affairs, Sweden, Stockholm. (June 2007). Lewis, Arthur (1954). ‘Economic Development with Unlimited Supplies of Labour’. Manchester School of Economic and Social Studies, vol. 22, pp. 139–191.

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Malawi (2003). ‘Communication from Malawi’. Position Paper on the Fifth Ministerial Conference. WT/GC/W/515. 2 September. World Trade Organization, Geneva. (June 2007). Nogués, Julio J. (2003). ‘Agricultural Exporters in a Protectionist World: Assessing Trade Strategies for Mercosur’. Unpublished paper. Page, Sheila (1990). Trade, Finance, and Developing Countries: Strategies and Constraints in the 1990s (New York: Harvester Wheatsheaf). Page, Sheila (2001). ‘Developing Countries in GATT/WTO Negotiations’. Working Paper. Overseas Development Institute, London. (June 2007). Page, Sheila (2004). ‘The Evolution of Special and Differential Treatment in the Multilateral Trading System’. Paper prepared for the joint International Centre for Trade and Sustainable Development on Situational Approach to Special and Differential Treatment in the WTO, 6 December, Overseas Development Institute, London. (June 2007). Page, Sheila and Adrian Hewitt (2001). World Commodity Prices: Still a Problem for Developing Countries (London: Overseas Development Institute). Prebisch, Raúl (1950). The Economic Development of Latin America and Its Principal Problems (Lake Success: United Nations Department of Economic Affairs). Singer, Hans W. (1950). ‘U.S. Foreign Investment in Underdeveloped Areas: The Distribution of Gains between Investing and Borrowing Countries’. American Economic Review, vol. 40, pp. 473–485. Tubiana, Laurence (2003). ‘Post-Cancun WTO: Focus on the Objectives, Not the Means’. Bridges, p. 8–10. (June 2007). von Kirchbach, Friedrich and Mondher Mimouni (2003). ‘Market Access Barriers: A Growing Issue for Developing Country Exporters?’ International Trade Forum no. 2. . World Bank (2003). ‘Global Economic Prospects 2003: Investing to Unlock Global Opportunities’. World Bank, Washington DC. World Trade Organization (2003a). ‘The Doha Agenda: Towards Cancun’. TN/C/W/13, 6 June. World Trade Organization, Geneva. (June 2007). World Trade Organization (2003b). ‘Non Paper on the Need for Urgent Action in WTO to Deal with the Crisis Situation Created by the Long-Term Trend Towards Decline in Prices of Primary Commodities to the Trade and Development of Developing Countries Which Are Heavily Dependent on Their Export’. Communication from Kenya, Uganda, and Tanzania. No. WT/COMTD/W/113. Geneva. World Trade Organization (2003c). ‘World Trade Report 2003’. World Trade Organization, Geneva. (June 2007). World Trade Organization (2004). ‘Doha Work Programme’. Draft General Council Decision of 31 July. WT/GC/W/535. Geneva. (June 2007). World Trade Organization (2006). ‘Recommendations of the Task Force on Aid for Trade’. WT/AFT/1. 27 July. Geneva. (June 2007).

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Chapter 13

Asymmetry in the Post-Doha Trading System Sylvia Ostry

The focus on poverty and its ills in 2005 was unprecedented. The Millennium Development Goals (MDGs) launched by the United Nations General Assembly (UNGA) in 2000 were set to be highlighted at the UN’s World Summit in September in New York. Before that was the G8 Gleneagles Summit and Bob Geldof’s Live Eight. At the end of the year, the World Trade Organization (WTO) ministerial in Hong Kong was also accompanied by lots of rhetoric on development and, therefore, on the links among trade, growth, and the reduction of poverty. At Doha the negotiation was not called a round but the Doha Development Agenda. To be sure, one can recall the pledge by Robert MacNamara on being appointed president of the World Bank in 1973 that his chief goal would be to eliminate poverty by the year 2000. But the emphasis on the MDGs should be welcomed and the G8 leaders and the 150 member countries of the WTO, it should be hoped, would exemplify the essence of leadership as defined by the Italian philosopher Antonio Gramsci: pessimism of the intellect and optimism of the will. It was encouraging that the Global Monitoring Report 2005 (jointly prepared by the World Bank and the International Monetary Fund) had as its central message: ‘without early and tangible action to accelerate progress, the MDGs will be seriously jeopardized — especially in Sub-Saharan Africa’ (World Bank 2005, xi). This was a clear warning that action was urgently required in dealing with Africa. There is no doubt that if the Doha negotiations collapse, the rules-based multilateral system established after World War II will be in jeopardy. The ongoing proliferation of preferential agreements will be unconstrained. The ensuing uncertainty and instability will severely exacerbate the problems of the poor. While trade liberalisation per se cannot solve the problems of the poorest African countries, rules-based multilateralism is fundamental to an effective and coherent policy approach. There have been many studies spelling out the key elements of a Doha package (UN Millennium Project 2005). Whether such a package is conceived as ideal or feasible and whichever econometric models are better, the basic issues for Doha are those of political economy. The ambience of trade policy is in a process of change, especially in the United States, but also in Europe, given the state of the European Union. Forecasting political outcomes is hazardous at the best of times. Right now it is impossible.

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Hence this chapter concentrates on the basic structural aspects of the global system, particularly of the WTO — its institutional home, as related to the poorest countries, especially in sub-Saharan Africa. It also suggests some policy options that, while not on the Doha Development Agenda, could be considered by the G8 and proposed to strengthen the system. This chapter argues that asymmetry is the fundamental, albeit unintended, characteristic of the trading system created by the Uruguay Round of trade negotiations.

The Uruguay Round’s Unintended Consequences These asymmetries arise from the unintended consequences of the Uruguay Round. The Uruguay Round was the eighth negotiation under the auspices of the General Agreement on Tariffs and Trade (GATT) created in 1948 as part of the post-war international economic architecture. The primary mission of the GATT was to reduce or eliminate the border barriers that had been erected in the 1930s and contributed to the Great Depression and its disastrous consequences. Before the Uruguay Round, the GATT worked very well. The concept of reciprocity — ‘you open your market and I’ll open mine’ — while denounced as mercantilism by economists, was very effective. Border barriers were significantly reduced. Agriculture was virtually excluded because, in Europe, the Common Agricultural Policy (CAP) was regarded as the heart of European integration and therefore sacrosanct. The system was managed by the transatlantic alliance and greatly helped by the Cold War’s constraint on trade frictions. The Uruguay Round was a watershed in the evolution of the system. Agriculture was at the centre of the negotiation, as American exports to the European Community diminished and the community’s heavily subsidised exports flourished and even penetrated the American market. A U.S. call for negotiations, started in 1981, was stalled by the endless foot-dragging of the European Community, aided by a small group of developing countries opposed to the so-called new issues of services, intellectual property, and investment, demanded by the Americans. The round was eventually launched in September 1986, at Punte del Este, Uruguay. It finally concluded in December 1993, four years beyond the target date agreed at the launch. The negotiations were almost as tortuous as the launch. The ‘grand bargain’ eventually reached was completely different from old-time GATT reciprocity. It was essentially an implicit deal: the opening of markets of the members of the Organisation for Economic Co-operation and Development (OECD) to agriculture and labour-intensive manufactured goods, especially textiles and clothing, in exchange for the inclusion into the trading system of services, intellectual property, and (albeit to a lesser extent than originally demanded) investment. Also, a virtually last-minute piece of the deal was the creation of a new institution, the WTO. It had the strongest dispute settlement mechanism in the history of international law and essentially no executive or legislative authority.

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The grand bargain turned out to be a bum deal. There was far less opening in agriculture than expected. The reduction of restrictions on textiles and clothing were backloaded and more than offset by the rise of China. The South side of the deal would require a major institutional upgrading and change in the infrastructure of most southern countries. These changes take time and cost money. The new issues did not involve border barriers but did involve domestic regulatory and legal systems. The barriers to access for service providers stemmed from laws, administrative action, or regulations. The intellectual property inclusion covered comprehensive standards for domestic laws and detailed provisions for enforcing corporate property rights. Social regulation covering product standards and health and safety involved sophisticated administrative procedures and law as well as highly trained scientific human resources. The trading system was transformed from the negative regulation of the GATT — what governments must not do — to positive regulation — what governments must do. The southern negotiators accepted the deal without full comprehension of its profoundly transformative implications, an incomprehension shared by the northern negotiators as well. A key element in the transformation, neither intended or predicted, was systemic asymmetry.

Asymmetry Complexity The member countries of the WTO vary widely in power and will. That was also true under the GATT, where the system was in effect managed by a ‘club’ of likeminded rich countries. The WTO houses a very different system that is characterised by ‘complexity’. The need for advanced and sophisticated knowledge is essential. Complexity requires knowledge and knowledge enhances power. The strong are stronger in the WTO because of their store of knowledge and the weak are weaker because of their poverty of knowledge. The system thus reinforces asymmetry. The concept of the poverty trap should be replaced by the knowledge trap. A number of case studies by the World Bank demonstrate both the capacity deficit in poor countries and their heavy costs of implementation (Finger and Schuler 1999; Hoekman 2002). There was very little participation by the African countries in the Uruguay Round because of both the lack of a secretariat in their Geneva delegations and the lack of coordination and expertise at home. The situation in Geneva has not improved very much, as Table 13-1 demonstrates. It has been estimated that the WTO councils, committees, working parties, and so on involve more than 2,800 meetings per year — impossible for the poorer countries to attend. Worse, the WTO delegates often have to cover the UN in Geneva as well as the WTO. There is still serious weakness in domestic coordination mechanisms among a number of ministries. This institutional deficiency is not confined to the poorest countries but affects many developing and transition economies (Shaffer 2006; Ablin and Bouzas

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Table 13-1 Number of World Trade Organization Delegates Number of Country Geneva-Based Delegates Angola 4 Benin 8 Botswana 8 Burkina Faso 4 Burundi 2 Cameroon 7 Central African Republic 2 Chada 4 Congo 4 Côte d’Ivoire 5 Democratic Republic of Congo 4 Djiboutia 1 Gabon 5 The Gambia 4 Ghana 3 Guinea 3 Guinea-Bissau 1 Kenya 4 Lesotho 4 Madagascar 3 Malawi 4 Mali 4 Mauritania 4 Mauritius 8 Mozambique 2 Namibia 1 Niger 6 Nigeria 8 Rwanda 3 Senegal 5 Sierra Leone 3 South Africa 9 Swaziland 5 Tanzania 9 Togo 4 Uganda 4 Zambia 7 Zimbabwe 8

Number of Delegates Not in United Nations Directory 0 0 0 0 0 1

Note: a. No United Nations delegation list found. Sources: WTO Directory (circa February 2006) and UN (2007).

4 0 0 2 1 0 0 0 0 1 0 0 0 0 0 0 7 0 0 0 0 0 0 0

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2004). Furthermore, there is little if any coordination between Geneva and the home country. A former delegate noted ‘during the entire duration of the Uruguay Round our Geneva-based WTO team received two instructions from our capital’ (Ablin and Bouzas 2004).1 Because the poorest countries depend primarily on agriculture and often on only a few commodities, the disappointing results of the Uruguay Round in agriculture have ensured that this subject remains at the centre of the Doha agenda. But what is equally important and far less studied is the impact of the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS). Case studies from the World Bank provide striking examples of the imposition of new standards for alleged (minor) health reasons that cut African exports of nuts and grains by 60 percent (UN Millennium Project 2005, 152; Zarrilli 1999).2 The poor countries play no role in the setting of international standards such as the Codex Alimentarius because they cannot participate, lacking both monetary and human resources. Thus standards developed by a limited number of countries secure the status of international standards. The situation is likely to worsen as developed countries increase regulation for high valued-added products and as large multinational buyers increasingly dominate the retail market. The ‘Wal-Martisation’ of standards may be the new wave. The small and medium-sized enterprises (SMEs) in poor countries, lacking information about export markets, are unable to compete. The gap between domestic and international regulation is widening. The need to reform agriculture by moving up the value-added scale would require major changes in institutional infrastructure. The cost would be high and the poor countries do not have the resources. Similar problems exist in the Technical Barriers to Trade (TBT) Agreement covering trade in goods. While both the TBT Agreement and SPS Agreement were supposed to provide technical assistance, such assistance has been inadequate. In any case, significant infrastructure investment is required. Once again, however, some case studies demonstrate that where investment in technology and institution building have been undertaken, successful export-driven growth is feasible (UN Millennium Project 2005, ch. 10; Anderson, Martin, and Van Der Mensbrugghe 2005). These are but a few cases of how the complexity of the global trading system requires more than ‘trade policy’ to integrate the poor countries. While the Uruguay Round agreements included some recognition of the need for technical assistance and the Doha Development Agenda is littered with reference to such assistance and capacity building, it has been repeatedly emphasised that the true jewel in the crown was the creation of the WTO and the Dispute Settlement Understanding. For the first time in international law, a truly effective institutional constraint on the powerful has been achieved. Legalisation But is the increased legalisation a welcome offset to asymmetry? The WTO was not part of the Uruguay Round agenda. The Canadian proposal to create the WTO was

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not put forward until April 1990. It was soon endorsed by the EU (which had opposed stronger dispute settlement in the Tokyo Round) because of growing concern about U.S. unilateralism. It was deemed a useful device for constraint of power. The U.S., dubious about the quality of legal expertise in the GATT secretariat, insisted on the creation of an appellate body to review the legal aspects of panel reports. So a paradigm shift took place. Joseph Weiler (2001, 339) refers to ‘the juridification of the process, including not only the rule of law but the rule of lawyers’. Since it is said that the U.S. has only 4 percent of the world’s population but 50 percent of the world’s lawyers, the legal culture of the WTO is, by and large, American. One could argue that the most important export of the U.S. has been its legal system: transparent, contentious, and litigious. It is based on the common law, often different from European systems. Thus, after the Multilateral Agreement on Investment (MAI) was killed at the OECD, a memorandum from the French negotiators pointed out that it would be very important for French universities to begin teaching experts in ‘le droit économique international qui est encore très largement anglo-saxon’ (Lalumière and Landau 1999).3 The main focus of concern in the context of asymmetry is whether the paradigm shift of juridification benefits the poorest countries. While it is not possible to get any data on the number of legal experts in their Geneva missions or in their domestic ministries, one can safely assume that the numbers are very small or even nonexistent. As may be seen from Table 13-2, there is no participation as complainant or respondent by any of the poor African countries. This is asymmetry writ large. Further analysis of the reasons for this situation is worthy of a brief review. There has been a number of studies on dispute settlement and the poorest countries in the WTO, many sponsored by the World Bank (Shaffer 2006; Horn and Mavroidis 1999; Hoekman and Mavroidis 1999; Bagwell, Mavroidis, and Staiger 2004; Bown and Hoekman 2005). The research clearly documents the absence of African countries in this essential ‘crown jewel’ of the trading system. What accounts for the mystery of the ‘missing cases’ (Bown and Hoekman 2005)? One clear reason is lack of money. The absence of government legal services either at home or in Geneva would require hiring private lawyers, which are far too expensive. A conservative estimate of attorney fees in trade litigation runs from around US$90,000 to US$250,000, depending on the complexity of the case, plus another US$100,000 to US$200,000 for data collection, economic analysis, travel, administrative assistance, and so on (Bown and Hoekman 2005, 12). Even India, with plenty of common law lawyers, finds it ‘safer’ mainly to hire American lawyers (Mehta, Kumar, and Lodha 2006, 8). The Advisory Centre on WTO Law (ACWL) was established in December 1999 and entered into force in July 2001 to provide some legal assistance for poor countries. It requires a membership fee based on per capita income and share of world trade. It is funded mainly by European governments plus Canada. The United States refused to join or provide funding. While the ACWL is certainly a welcome initiative, it requires further funding and coordination both with enterprises and governments in developing countries as well as with capabilities in economic research (Shaffer 2006). The role of sophisticated econometric research

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and economic evidence in WTO dispute settlement is another example of the reinforcement of power by complexity in the mechanism designed to constrain power.4 Moreover, a prominent Washington-based law firm, Sidley Austin LLP (2007), states on its website that its specialty involves advising ‘governments and companies in over 175 WTO disputes on intellectual property, government procurement, subsidy, trade remedy, environment, taxation, telecommunications and investment matters’. It is great for business since the Dispute Settlement Mechanism of the WTO is the ‘Supreme Court’ of international tribunals (Bown and Hoekman 2005, 879). But the cost side of the cost-benefit model for dispute participation often includes more than money or legal service subsidies. Political costs — threats by richer Table 13-2 Participation in World Trade Organization Dispute Settlement Cases, 1995–2007 Complainant Number of Disputes United States 88 European Communities 76 Canada 28 Brazil 22 India 17 Mexico 17 Argentina 14 Korea 13 Japan 12 Thailand 12 Chile 10 Australia 7 Guatemala 6 Honduras 6 New Zealand 6 Colombia 5 Hungary 5 Costa Rica 4 Philippines 4 Switzerland 4 Ecuador 3 Indonesia 3 Norway 3 Pakistan 3 Panama 3 Poland 3 Chinese Taipei 2 Peru 2 Turkey 2

Complainant Number of Disputes Antigua and Barbuda 1 Bangladesh 1 China 1 Czech Republic 1 Hong Kong 1 Malaysia 1 Nicaragua 1 Singapore 1 Sri Lanka 1 Uruguay 1 Venezuela 1 Belgium 0 Croatia 0 Denmark 0 Dominican Republic 0 Egypt 0 France 0 Greece 0 Ireland 0 Netherlands 0 Portugal 0 Romania 0 Slovak Republic 0 Slovakia 0 South Africa 0 Sweden 0 Trinidad and Tobago 0 United Kingdom 0

continued

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countries to reduce development aid or remove trade preferences — may also be very powerful deterrents to initiating a WTO dispute. An example of political deterrence is provided by a former U.S. trade official who argued in an African capital that ‘the U.S. might withdraw food aid were the country’s Geneva representatives to press a WTO complaint’ (Shaffer 2006, 17). Another clue to the missing-cases issue concerns the WTO’s institutional arrangements. WTO rules are self-enforcing. Retaliation (imposition of countermeasures) is, in theory, a means to induce implementation of obligations. But the threat of retaliation by a poor or small country means nothing to most OECD countries. So, it is argued, poor countries are increasingly sceptical about Table 13-2 Participation in World Trade Organization Dispute Settlement Cases, 1995–2007, continued Respondent Number of Disputes United States 97 European Communities 57 India 19 Argentina 16 Canada 15 Japan 15 Brazil 14 Mexico 14 Korea 13 Chile 12 Australia 9 China 8 Turkey 8 Egypt 4 Indonesia 4 Peru 4 Philippines 4 Belgium 3 Dominican Republic 3 Ecuador 3 Ireland 3 Colombia 2 Czech Republic 2 France 2 Guatemala 2 Greece 2 Hungary 2 Nicaragua 2 Switzerland 0 Source: WTO (2007).

Respondent Number of Disputes Pakistan 2 Romania 2 Slovak Republic 2 South Africa 2 Trinidad and Tobago 2 Venezuela 2 Croatia 1 Denmark 1 Malaysia 1 Netherlands 1 Panama 1 Poland 1 Portugal 1 Slovakia 1 Sweden 1 Thailand 1 United Kingdom 1 Uruguay 1 Antigua and Barbuda 0 Bangladesh 0 Chinese Taipei 0 Costa Rica 0 Honduras 0 Hong Kong 0 New Zealand 0 Norway 0 Singapore 0 Sri Lanka 0

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‘assured’ market access or other rights. Various ideas are being floated concerning this conundrum, but one proposed by Mexico suggests that countermeasures should be allowed to be auctioned (Bagwell, Mavroidis, and Staiger 2004). This is most unlikely to be accepted by WTO members, but it certainly highlights the problem that small and poor developing countries have in countervailing fundamental asymmetry. One hopes it will stimulate more research on a multilateral approach to enforcement for poor countries.

Conclusion Structural Reform The bum deal of the Uruguay Round was to be rebalanced by the Doha Development Agenda. After all ‘15 per cent of the space in the Declaration … is devoted exclusively to sections entitled “Technical Cooperation and Capacity Building” and “Least Developed Countries”’ (Panagariya 2002). This was termed ‘the new conditionality’ by one cynical participant. The declaration was a masterpiece of constructive ambiguity. The Doha negotiations resumed in February 2007 following a suspension of several months. However, the outcome still remains uncertain. Even the victory achieved through the declaration on the TRIPS [Trade-Related Aspects of Intellectual Property Rights] Agreement and Public Health is in some doubt concerning poor countries without domestic capacity to produce medicines. At a TRIPS council meeting in May 2005 the delegate from Rwanda, speaking on behalf of the African Group, quoted U.S. president George Bush who, in referring to Terri Schiavo, said: ‘Where there are serious questions and substantial doubts, our society, our laws and our courts should have a presumption in favour of life. It should be our goal as a nation to build a culture of life’ (Shashikant 2005; Reid 2005).5 The Rwandan ambassador asserted that the Africa Group fully endorsed the culture of life in the TRIPS Council (Shashikant 2005). But (Schiavo apart), the amendment required for enforcing the TRIPS Agreement has been agreed to by neither the U.S. nor the EU. In any case, ‘the U.S. reaction to developing country success on accessto-medicines issues at the WTO has been to shift negotiations on this subject to bilateral and regional fora. It has succeeded in negotiating significant restrictions on the ability of generic producers to introduce medicines in bilateral and regional deals’ (Abbott 2005, 349). Whatever the dizzying convolutions of the TRIPS outcome, the Doha negotiations should not preclude a strong and concerted effort by the G8 to propose reforms to help reduce the asymmetric legacy of the Uruguay Round. These suggestions could be considered along with report by former director general Peter Sutherland and his colleagues (2004) on the future of the WTO or another such group established by Pascal Lamy, the organisation’s director general. The WTO is a bizarrely asymmetric institution because it has no real executive or legislative power. It has a very small secretariat and a very limited budget (about

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equal to the travel budget of the International Monetary Fund [IMF]). Most important in the current context is the lack of a policy forum supported by a significant research staff. These structural deficiencies greatly exacerbate the asymmetries between rich and poor. Not only do the OECD countries have a wide array of research resources in government, academia, and private research institutions, but they also have their own well-endowed think tank, the OECD. The substantive scope of the OECD is very broad, with a secretariat that provides information and analysis for macroeconomic and microeconomic policy making, trade, financial regulation, social policies, agricultural policies, science and technology, statistics, energy, environment, and so on. Because of the broad array of analytical capacity and the flexibility and adaptability of the institution, it is easier to promote policy dialogue in the OECD than in national capitals or rules-based institutions such the WTO or the Bretton Woods twins, the IMF and the World Bank. But it is especially effective in securing adherence to rules and the need to foster changes in rules. It is a meta-regime, based on various means of knowledge diffusion, debate, peer group pressure, and policy dialogue. It played a key strategic role in the launch of the Uruguay Round (Ostry 1998). At the time of the long and difficult effort to launch the round in the 1980s there was a forum for policy discussion in the GATT termed the Consultative Group of Eighteen (CG18). While the GATT did not have adequate analytical capability, it was possible to discuss research papers on agriculture or services and other important issues, albeit with sharp disagreement among different countries. The CG18 was established in July 1975 as a result of a recommendation of the Committee of Twenty finance ministers after the breakdown of Bretton Woods. Its purpose was to provide a forum for senior officials from capitals to discuss policy issues and not, in any way, to challenge the authority of the GATT council. The Committee of Twenty also established the Interim Committee of the IMF and intended that consultation between the two institutions be facilitated. The main channel for policy analysis, cooperation, and coordination, whether at home or internationally, was the diffusion of knowledge to catalyse debate and dialogue. The composition of the membership was based on a combination of economic weight and regional representation and regular rotation. The CG18 was never officially terminated, but it ceased meetings at the end of the 1980s. Establishing a WTO policy forum would be a great step forward. But it is unlikely to function effectively without an increase in the WTO’s research capability. Analytical papers on key issues are needed to launch serious discussions in Geneva and to improve the diffusion of knowledge in national capitals. The basic issues of trade and development need country-specific case studies. There is no agreed model — indeed, there is growing dissent triggered by the emphasis on the need for a big push in aid to be sponsored by the G8 (Birdsall, Rodrik, and Subramanian 2005; Easterly 2005). Case studies should be viewed as data, and learning-by-doing as a source of policy innovation. Thus the WTO research secretariat would form part of a research network linked to other institutions including, of course, the World Bank as well as academics, NGOs, business, and labour organisations. This knowledge

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networking would also require enhanced research capabilities in the African countries and should form a high-priority item in capacity building. Moreover, establishing a research or knowledge network should enhance the ability of the WTO director general to play a more effective role in leading and guiding the policy dialogue. This will be politically contentious but is essential. If, to consider one example, the head of the IMF had had only the authority of the head of the GATT during the 1980s debt crisis, there would have been a series of meetings to discuss meetings while Latin America went down the drain. Sutherland’s consultative board, in fact, recommended there be more political involvement of ministers and senior policy makers from capitals (Sutherland et al. 2004). The report puts forward a number of suggestions, among them the establishment of a senior-level ‘consultative body’ — CG18 redux. It also makes some very useful recommendations to strengthen the director general’s secretariat. Obviously there will be opposition from some countries to these proposals. But the dissenters should be encouraged to consider the alternative — an ongoing erosion and decline of the multilateral rules-based system. A top priority for the policy forum should be to undertake a thorough analysis of the unresolved issue of special and differential treatment (SDT). A legacy of the oil shock of the 1970s and the aborted effort to create a New International Economic Order (NIEO), the concept is based on the idea that industries in developing countries need some protection in their home market and preferences in export markets. The SDT negotiations are going nowhere. Most poor countries are fearful of the impact of further liberalisation eroding their preferences. An increasing number of studies have raised questions about the value of SDT and of preferences. But others have defended the need for ‘policy space’ as exemplified by the development pattern not only of East Asia but also most of today’s rich countries. Often the debate resembles a dialogue of the deaf. An approach that focusses not on the details of SDT but confronts the basic issue of what would be required to enhance the development effectiveness of trade agreements could help catalyse a policy debate on substantive issues, and not just on rules as in the Doha negotiations. Furthermore, it would emphasise that there is no-one-size-fits-all approach by undertaking case studies. And it would underline what is now becoming conventional wisdom, that domestic policy and domestic institutions matter. Trade policy is only a piece of the package. The WTO is not and cannot be a development institution. Dealing with Asymmetry This points to the final proposal in dealing with asymmetry. One of the intents of the Uruguay Round was to improve the cooperation and coordination among the main international economic institutions. Driven largely by the experience of the wide exchange misalignment of the 1980s and its impact on trade, the euphemism of ‘international coherence’ was devised. But little emerged from the objective apart from worthy rhetoric and some subsequent agreements over who should attend what meetings and when (Ostry 1999, 2001).

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However, in 1997, a specific project was launched to coordinate trade and poverty reduction in the least developed countries (LDCs). This Integrated Framework for Trade-Related Technical Assistance involved the WTO, the World Bank, the IMF, the United Nations Conference on Trade and Development (UNCTAD), the United Nations Development Programme (UNDP), and the International Trade Commission (ITC), as well as a number of bilateral donors. An evaluation of the programme in 2000 was not very encouraging. Lack of clear priorities, an ill-defined governance structure, and low levels of funding were among the problems cited. The heads of the six agencies then decided to revamp the Integrated Framework. A new evaluation was undertaken in 2004 by the World Bank’s Operations Evaluation Department. The results of its very thorough analysis are worth quoting: Despite the restructuring, some of the weaknesses of the original program remain, including insufficient focus on improved trade outcomes rather than on the process alone, and the shortage of resources to meet the mounting demands for technical assistance in developing countries. … [The Integrated Framework] may have contributed to placing trade back on the development agenda of LDCs through the joint work of international agencies. But the objective of fully mainstreaming trade … calls for holistic, results-based program management processes to achieve improved trade outcomes for developing countries. These need to be combined with on-the-ground action, well-defined roles of partners, and minimum transaction costs, supported by the necessary financial and administrative resources for a program that has now created too many expectations on which it is unable to deliver (Agarwal and Cutura 2004, xv).

The study goes into considerable detail about the problem of the Integrated Framework. The message is quite clear. It is a good start but a great deal more needs to be done. Reading this material can be depressing — but should not be. This is new territory and policy innovation involves learning by doing, doing well, and often doing not very well. Case studies are data and the task of absorbing and contextualising will not yield to a minimalist mathematics model. The Integrated Framework project is one candidate for the aid for trade proposal agreed at the sixth WTO ministerial held in Hong Kong in December 2005. Following the G8 Gleneagles Summit, it was of singular importance to the development aims at the summit and should be recognised by the G8 as per se, regardless of timing. Indeed, the importance of development on a country-by-county basis (in the form of grants and of a long-term nature) is essential if poor countries can benefit from increased market access. The supply-side capacity and trade-related infrastructure are woefully inadequate in all these and often not only in the least developed. This view is underlined in a report sponsored by the British government’s Department for International Development (DfID). As part of the report, the Global Trade and Financial Architecture Project (2005) produced a paper titled ‘Strengthening the Global Trade Architecture for Economic Development: An Agenda for Action’, designed to complement the Doha negotiations and thus closely related to (although it preceded) the Hong Kong meeting.

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While the outcome of Doha remains unknown, Pascal Lamy has asserted that aid for trade is not part of the single undertaking and therefore could continue to be constructed whatever the Doha outcome. The G8 should use all its clout to ensure that this happens. While asymmetry will not disappear, it is essential to dedicate intellectual and financial resources to its amelioration. Aid for trade is a small step in the right direction. This is especially so since data from the OECD show that development aid for most of sub-Saharan Africa declined in 2005, despite Bono and Bob Geldof and Gleneagles and all that stuff (OECD 2005)!

Notes 1

2 3 4

5

See also remarks quoted by WTO official: ‘We set up a Subcommittee with a Chair and a Secretary who turned up for the first meeting on trade needs of LDCs [least developed countries]. No LDCs came. No developed countries came. No one came. Not one country showed up’ (Braithwaite and Drahos 2000, 196). Although the SPS Agreement included a provision for technical assistance, nothing much has happened (Zarrilli 1999, 24). ‘International economic law, which is for the most part Anglo Saxon.’ However, one important development has been the creation of ILEAP (International Lawyers and Economists Against Poverty), a nongovernmental organisation (NGO) created in 2002 to provide interdisciplinary advice in trade policy for developing countries. See . In 1998, Michael Schiavo petitioned the Florida court to remove the feeding tube on which his wife, Terri Schiavo, had depended since entering a permanent vegetative state in 1990. Her parents opposed the petition. The case dragged on for years. On 18 March 2005, the state legislature and the U.S. Congress passed laws, signed by the governor of Florida and president of the United States respectively, to prevent the removal of the feeding tube. These laws were overturned by the supreme courts of Florida and the United States; Schiavo died on 31 March 2005.

References Abbott, Frederick M. (2005). ‘The WTO Medicines Decisions: World Pharmaceutical Trade and Protection of Public Health’. American Journal of International Law, vol. 99, no. 2, pp. 317–358. Ablin, Eduwardo R. and Roberto Bouzas (2004). ‘Argentina’s Foreign Trade Strategy: The Curse of Asymmetric Integration in the World Economy’. In V.K. Aggarwal, R. Espach, and J.S. Tulchin, eds., The Strategic Dynamics of Latin American Trade, pp. 159–172 (Washington DC: Woodrow Wilson Center Press). Agarwal, Manmohan and Jozefina Cutura (2004). ‘Integrated Framework for TradeRelated Technical Assistance: Case Study’. World Bank, Washington DC. (June 2007).

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Anderson, Kym, Will Martin, and Dominique Van Der Mensbrugghe (2005). ‘Would Multilateral Trade Reform Benefit Sub-Saharan Africans?’ World Bank Policy Research Working Paper 3616. World Bank, Washington DC. (June 2007). Bagwell, Kyle, Petros C. Mavroidis, and Robert W. Staiger (2004). ‘The Case for Tradable Remedies in WTO Dispute Settlement’. World Bank Policy Research Working Paper 3414. World Bank, Washington DC. (June 2007). Birdsall, Nancy, Dani Rodrik, and Arvind Subramanian (2005). ‘How to Help Poor Countries’. Foreign Affairs no. 84, pp. 136–152. Bown, Chad P. and Bernard Hoekman (2005). ‘WTO Dispute Settlement and the Missing Developing Country Cases: Engaging the Private Sector’. Journal of International Economic Law, vol. 8, no. 4, pp. 861–890. Braithwaite, John and Peter Drahos (2000). Global Business Regulation (Cambridge: Cambridge University Press). Easterly, William (2005). ‘Big Push from the Top or Small Steps from the Bottom?’ Paper prepared for the IFPRI/Cornell Conference on Threshold Effects and Non-Linearities in Growth and Development, 11–13 May. Washington DC. Finger, J. Michael and Philip Schuler (1999). ‘Implementation of Uruguay Round Commitments: The Development Challenge’. World Economy, vol. 24, no. 4, pp. 511–525. Global Trade and Financial Architecture Project (2005). ‘Strengthening the Global Trade Architecture for Economic Development: An Agenda for Action’. Yale Center for the Study of Globalization. (June 2007). Hoekman, Bernard (2002). ‘Economic Development and the World Trade Organization after Doha’. World Bank Policy Research Working Paper No. 2851. World Bank, Washington DC. (June 2007). Hoekman, Bernard and Petros C. Mavroidis (1999). ‘Enforcing Multilateral Commitments: Dispute Settlement and Developing Countries’. Paper prepared for World Trade Organization/World Bank conference, 20–21 September, Geneva. Horn, Henrik and Petros C. Mavroidis (1999). ‘Remedies in the Dispute Settlement System and Developing Country Interests’. (June 2007). Lalumière, Catherine and Jean-Pierre Landau (1999). ‘Rapport sur l’Accord multilatéral sur l’investissement (AMI)’. Ministère de l’Économie, des Finances et de l’Industrie, Paris. (June 2007). Mehta, Pradeep S., Pranava Kumar, and Ritu Lodha (2006). ‘Suspension of Doha Round Talks: Reasons and the Possible After Effects’. CUTS Centre for International Trade, Economics, and Environment. (June 2007). Organisation for Economic Co-operation and Development (2005). ‘Final ODA Data for 2005’. Paris. (June 2007). Ostry, Sylvia (1998). ‘APEC and Regime Creation in the Asia-Pacific: The OECD Mode?’ In V.K. Aggarwal and C.E. Morrison, eds., Asia-Pacific Crossroads: Regime Creation and the Future of APEC (New York: St. Martin’s Press). Ostry, Sylvia (1999). ‘Coherence in Global Policy-Making: Is This Possible?’ 17 March. Royal Institute of International Affairs, London. (June 2007).

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Ostry, Sylvia (2001). ‘Institutional Design for Better Governance’. In R.B. Porter, P. Sauvé, A. Subramanian, et al., eds., Efficiency, Equity, Legitimacy: The Multilateral Trading System at the Millennium, pp. 374–375 (Washington DC: Brookings Institution Press). Panagariya, Arvind (2002). ‘Developing Countries at Doha: A Political Economy Analysis’. World Economy, vol. 25, no. 9, pp. 1205–1233. Reid, Tim (2005). ‘America Holds Its Breath over Woman’s Right to Live — or Die’. Times, 19 March. Shaffer, Gregory (2006). ‘The Challenges of WTO Law: Strategies for Developing Country Adaptation’. World Trade Review, vol. 5, no. 2, pp. 177–198. Shashikant, Sangeeta (2005). ‘Heated Discussions as TRIPS and Health Deadline Is Missed’. South-North Development Monitor (SUNS) 5772. 4 April. Third World Network, Geneva. Sidley Austin LLP (2007). ‘International Dispute Resolution’. (June 2007). Sutherland, Peter, Jagdish Bhagwati, Kwesi Botchwey, et al. (2004). ‘The Future of the WTO: Addressing Institutional Challenges in the New Millennium’. World Trade Organization, Geneva. (June 2007). United Nations (2007). ‘Permanent Missions to the United Nations Office at Geneva’. (June 2007). United Nations Millennium Project (2005). ‘Trade for Development’. United Nations Development Programme, New York. (June 2007). Weiler, Joseph (2001). ‘The Rule of Lawyers and the Ethos of Diplomatc Reflections on WTO Dispute Settlement’. In R.B. Porter, P. Sauvé, A. Subramanian, et al., eds., Efficiency, Equity, Legitimacy: The Multilateral Trading System at the Millennium (Washington DC: Brookings Institution Press). World Bank (2005). ‘Global Monitoring Report 2005’. World Bank, Washington DC. (June 2007). World Trade Organization (2007). ‘Disputes by Country’. Geneva. (June 2007). Zarrilli, Simonetta (1999). ‘WTO Sanitary and Phytosanitary Agreement: Issues for Developing Countries’. Trade-Related Agenda, Development and Equity Working Paper 3, South Centre, Geneva. (June 2007).

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Chapter 14

Financing Development: A U.S. Perspective Robert C. Fauver

The early G7/8 summits did not focus on the development process. They mentioned the desire to encourage development, and they pledged to work hard. Yet in substantive terms, little was proposed or agreed to. From a finance ministry perspective, there were significant differences between the ‘cold-hearted’ approaches of the finance ministers and central bank governors to development and the softer approaches favoured by foreign ministers and political leaders. Leaders liked to sound sympathetic and tried to pledge more — whether in the form of conferences, assistance, debt relief, or trade negotiations. But little real focus was put on the development process per se. The year 2005 represented the 30th year of economic summits among the major industrial countries. Regarding development, one might thus usefully ask whether there have been any successes in actually encouraging development. The world has witnessed significant increases in the flow of official development assistance (ODA) to developing countries since 1975. The world has also seen the proliferation of special ‘windows’ at the World Bank and the International Monetary Fund (IMF) for developing countries. The world has further seen concluded global trade rounds that extended the special and differential treatment (SDT) of developing countries. But has the world seen progress in generating a sustained period of rising income levels and improved standards of living among the developing countries? The answer is largely no. Moreover, the world has not engaged in a serious discussion on the process of development. It has not held a debate on what works and what does not work in securing real development. It has not undergone a fundamental change in the overall approach to providing more ODA and more debt relief. Yet significant development problems continue to face countries around the world — and particularly in Africa.

The New Monterrey Consensus and Gleneagles Retreat The United Nations International Conference on Financing for Development in Monterrey in 2002 was a major breakthrough in the political focus on the development process itself. There was significant surprise that a UN-sponsored event could break ground where years of IMF and World Bank conferences had

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failed to secure agreement. Both developing and developed countries seemed to share a commitment to the concept that there was common responsibility in the development process. They agreed that money alone would not solve the problems facing developing countries. For its part, the United States committed to working in partnership with developing countries to help them create the conditions for long-term growth, development, and durable poverty reduction. Despite what one often hears, the administration of George W. Bush has been working closely with the UN on this issue. Focussing solely on the total dollar amount of development assistance is a serious mistake. And the 2005 Gleneagles Summit seemed to focus on the quantity of official assistance. It was unfortunate to see so quickly a shift away from the concepts set forth at Monterrey. The idea jointly agreed to at Monterrey emphasised a partnership between developed and developing countries. Both sets of countries assumed responsibilities for the development process. Conceptually this would allow scarce resources to be targeted to those developing countries that chose to undertake good governance and good development policies. Good performance on the part of developing countries would thus be rewarded rather than ignored. The report of the Commission for Africa ([CfA] 2005) calls for a Marshall Plan for Africa. This does not reflect the consensus achieved at Monterrey, which links aid increases to commitments and capabilities of the developing countries. Sub-Saharan Africa has already received the equivalent of eight Marshall Plans with virtually no concrete results. This highlights the need to focus on governance and domestic policies — not resource flows. Some countries become dependent on perpetually high levels of foreign assistance (as a percentage of gross national income [GNI] over which they have little control). This undercuts their motivation to make difficult but essential economic policy reforms needed to bring growth and development. Neither the governments nor their people decide how to spend the money or what goals must be achieved. They are accountable for neither the use nor the results of the assistance they receive. These problems underlie the concept of the partnership agreed to in Monterrey. Focussing on resource flows inevitably leads to accounting gimmicks. This is evident from the number of times summit members repackage their aid commitments for the summit and try to suggest that this new configuration represents new money or commitments, when, in fact, the year before the package had already been announced. It is not useful to see accounting gimmicks dominate the issue. It is important to see a focus on results in terms of measurable progress on development. More importantly, it is critical to remember that ODA is only a small part of the resource flows going into developing countries. Trade access to markets, private remittances, foreign direct investment (FDI), emergency humanitarian relief, and private charitable funding are significantly more important in value terms to the overall development process. A focus solely on ODA ignores these other valuable resource flows. The U.S. remains the largest donor of ODA, the largest donor of emergency humanitarian relief, the largest donor of private charitable funding, and the chief

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source of private financial flows (imports, FDI, and remittances) to the developing world. The U.S. provides nearly 70 percent of the total financial flows to the developing world provided by the G7. This is a staggering share. It reflects the simple fact that private American citizens are extremely generous to those in need — and the U.S. government encourages private charity through tax breaks. During 2003, U.S. nongovernmental organisations (NGOs) gave at least US$6.3 billion to developing countries. This amount represents 62 percent of all private institutional grants by member countries of the Organisation for Economic Co-operation and Development (OECD). Clearly Americans do not want their government to be the sole provider of funds. They want to have direct control over the use of their monies. Remittances to developing countries from U.S. residents and temporary workers residing in the U.S. totalled US$28 billion in 2003. This important resource flow dwarfs ODA. It represents America’s open employment market for foreign residents.

The U.S. Approach to Development Early in 2002, President Bush announced a revolutionary new means of granting ODA — the Millennium Challenge Account (MCA). This plan built on the idea that foreign aid yields better results in countries that adopt sound policies, promote good governance, and provide a sound investment climate. Eligible countries design their own development programmes and set their own benchmarks and targets for meeting their goals. They, in essence, ‘buy into’ the programme of development and have a clear stake in its outcome. The MCA would reward good performers with the capacity to absorb aid. Sudden sharply increased flows of assistance to developing countries that have neither the absorptive capacity nor the accountability systems in place to handle the flow can disrupt fledgling markets and induce corruption. In the spring of 2004, the Commission on the Private Sector and Development (2003) released a report entitled Unleashing Entrepreneurship: Making Business Work for the Poor on the critical role that the private sector plays in promoting economic growth and development. The report concluded that trade, good governance, sound economic policies, and an excellent business climate are the real keys to unlocking the power of the private sector to produce growth and development. Trade On the trade front, nothing can stimulate development as much as participation in the global trading system. Despite heavy resistance by other major industrial countries, the U.S. has pushed hard to include real agricultural trade reforms in the Doha Development Agenda of the World Trade Organization (WTO). The framework specifies that there will be substantial improvement in market access by subjecting high tariffs to the deepest cuts, elimination of export subsidies, and substantial reductions in trade-distorting domestic support policies. It included cotton, which is of special interest to African nations.

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The World Bank has shown that developing countries that lowered their trade barriers the most in the 1990s had three times the per capita income growth of the other developing countries. Interestingly, the biggest trade barriers faced by developing countries are those that are erected by other developing countries. Some 70 percent of the tariffs that poor countries pay are to one another. The U.S. government, recognising the role of trade in development, has committed to providing significant resources to trade capacity-building assistance. In 2004, the U.S. was the largest single provider of this trade-capacity assistance, valued at more than US$900 million for developing countries. Aid The MCA received US$1 billion in 2004 and an additional US$1.5 billion in 2005 to reward developing countries that rule justly, foster economic freedom, and invest in their people. In 2004, 17 countries were invited to submit proposals for MCA assistance. More generally, the Bush administration has nearly doubled assistance since it came into office. ODA was U$10 billion in 2000. In 2004, it rose to US$19 billion (US$15.2 excluding Iraq). Within those flows, assistance to Africa tripled to US$3.2 billion. Debt Debt relief can provide additional assistance to developing nations. The U.S. has forgiven 100 percent of the bilateral debt owed to the U.S. government by heavily indebted poor countries (HIPCs). In 2005, the U.S. proposed a 100 percent writeoff of HIPC debt owed to the World Bank and the African Development Bank (AfDB). At the time, it was not clear if other G8 members would be willing to go this far. Historical evidence suggested that they tended to resist large-scale debt forgiveness.

Conclusion: The Priority for Partnership A development strategy that works in partnership with developing countries has the potential to improve the fate of many countries. Commitment by the developing countries will be rewarded with access to assistance flows. The U.S. approach is calibrated to the capacity of recipient countries to absorb assistance efficiently based on their policies and institutions and on their financial management systems. Of course, humanitarian assistance will continue to be a part of the overall U.S. approach to developing countries. Health programmes — especially regarding malaria, clean water, and water resources management — and Bush’s historic creation of the President’s Emergency Plan for AIDS Relief will continue to receive high

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priority within the new system. But increasingly the focus will be on a partnership concept set forth in the MCA. In many respects, the results of the 2005 Gleneagles Summit ratified the overall approach of the Bush administration regarding the most effective approach to providing financial assistance to developing countries, especially those in Africa. African leaders recognised the need of their governments to take responsibility for global governance and for eliminating corruption; this was a major commitment that was acknowledged by the G8 summit participants. The leaders pledged to support renewed efforts in Africa to increase transparency in government. They pledged to support ratification of the UN Convention against Corruption and to help implement it. They pledged their help to build the physical, human, and institutional capacity to trade, including measures to facilitate trade. In discussing the financing side of development, the leaders referred to the important role for FDI, other private flows, and increased trade. The leaders noted their commitment to increasing aid for Africa by US$25 billion by 2010, a doubling of aid flows from the level of 2004. They further noted that total assistance to developing nations would increase by US$50 billion over the 2004 level in the same period. Leaders also committed to forgive 100 percent of debt owed by the HIPCs to the IMF, the AfDB, and the International Development Association (IDA). All of these commitments are consistent with the philosophy of the Bush administration approach to foreign assistance embedded in the MCA.

References Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007). Commission on the Private Sector and Development (2003). ‘Unleashing Entrepreneurship: Making Business Work for the Poor’. Report by Paul Martin and Ernesto Zedillo to the United Nations Secretary General. United Nations Development Programme, New York. (June 2007).

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Chapter 15

Global Development and the Dollar: A Conflict to Be Solved Paolo Savona

Under the flexible exchange rates regime and the entrance of about three billion new potential consumers and a growing number of potential new producers into the market, the expansionary policies of the United States are structurally weakening the U.S. dollar. The result is incoherence between the ‘U.S. locomotive’ model and the ‘emerging economies autopoietic’ model. The U.S. gross domestic product (GDP) still dominates the gross world product (GWP). Moreover, the U.S. dollar is the international currency. These dominant factors act as an engine or locomotive for world growth. This well-known mechanism needs a permanent deficit in the U.S. foreign current account and a transitory public (federal) budget deficit — that is, an exogenous impulse to U.S. domestic demand and from there to world demand. A new pattern of growth has started to emerge with the associated wave of liberalisation and integration of national economies and the connected growth in foreign direct investment (FDI). This new mechanism, which can be called autopoietic, does not require foreign or public deficits because it is based on endogenous demand, which renders unnecessary the exogenous pushes coming from the twin deficits. Before 1971, when the Bretton Woods agreement was still in operation, the rest of the world had the possibility of controlling America’s excessive foreign deficits by converting U.S. dollars into gold at a fixed rate. There was, therefore, an instrument that allowed a certain degree of control of the dollar-denominated money supply for international use by countries other than the United States. In August 1971, the U.S. unilaterally decided to break this monetary bind to its real growth. This change forced other countries to take autonomous decisions whether to react to the floating of the external value of the U.S. dollar. This is why former U.S. Treasury secretaries John Connolly and John Snow have said that the U.S. dollar is ‘our’ currency, but ‘your’ problem. However cynical, this statement correctly recognises that the U.S. dollar is a problem for the rest of the world — transferring its impact from economic policy to foreign policy. There is no doubt that the dollar is the world’s fiat money. But it is not a monetary standard. The absence of a standard transfers the burden of adjustment of the disequilibria from the U.S. to other countries. The presence of floating exchange rates shifts the responsibility of monetary management from authorities to the

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market. Both of these effects have very serious consequences for economic and political relations. If the current international monetary order (or disorder) were functional to the working of the locomotive model for world growth, it could be still accepted, even if it would require some institutional changes, such as permanent monitoring of the creation of domestic and international money at the level of the International Monetary Fund (IMF) followed by political pressure on the countries involved. If, instead, the autopoietic model were to become both relevant in dimension and dominant in its impact on world growth, the current monetary order would no longer be acceptable. If the currency regime remains unchanged, then the burden of the floating dollar could be reduced by accumulating dollar-denominated reserves and disturbing domestic money management or by accepting the dollar floating and paying a price in terms of real growth. The first goal of this chapter is to evaluate whether the U.S. locomotive model of global growth is being replaced by the emerging economies autopoietic model. The second is to understand whether the current coexistence of the two models could cause problems for the working of the U.S. dollar–centred international monetary system and, through this, to the world development process. The third goal is to verify the relationship between the current floating U.S. dollar–based international monetary order and the degree of free (or fair) competition in the global market. If the cost of U.S. dollar devaluations has a different impact on traded (competitive) and non-traded (protected) sectors, the result would be that rents are reinforced and profits penalised, worsening the trend of real growth and the quality of social organisation.

The Two Models of World Economic Development and the International Monetary Regime There is widespread consensus on the interpretation of the U.S. locomotive model. Keynes was correct in seeing a close relationship between fixed exchange rates (but multilaterally adjustable after consultation at the IMF) and economic development, at least in the western world. However, for this scheme to work properly, he added some limitations in short-term capital movements, logically and practically as a substitute for adequate supernational control in domestic monetary creation. This means that domestic monetary disequilibria should have been contained within national boundaries and, should structural differences in inflation rates arise (whatever their cause), they should have been solved by international cooperation or exchange rate adjustment, or both. The other precondition proposed by Keynes, which was not accepted either in the 1944 Bretton Woods agreement or in the 1967 Rio agreement, was the creation of an international monetary standard to which every national currency — including the U.S. dollar — should refer. Keynes called this ‘bancor’ (to indicate that it should be

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managed so as to be ‘as good as gold’). Those proposing the term ‘special drawing rights’ (SDR) surely were less imaginative and efficient in communication than Keynes. Under the pressure of American interests, effectively supported by liberal economists, the Bretton Woods international monetary regime was abandoned by a unilateral decision by the United States. The international monetary system switched to a regime of flexible exchange rates regime and subsequently encouraged and supported the growing liberalisation of short-term international capital flows. In the currency confusion that followed, and under the pressure of the market’s initiative, a number of financial innovations emerged, generally known as ‘derivatives’. With their introduction, the fundamental rule of monetary sovereignty and creation — that is, that the market is unable to determine the optimal quantity of money so this task had to be allocated to an independent authority — was twisted in favour of the market (Savona, Maccario, and Oldani 2000). This has been implemented by different measures country by country. In South America in the 1970s there was a series of failed trials of dirty or managed floating, and a particular case of fixed exchange in Argentina. Its dollarization ended in the country’s default on loans to the IMF and heavy losses to bondholders throughout the world. Dollarization experiments also leave open the question of the political legitimacy of assigning domestic monetary sovereignty to another government, which in turn is neither interested nor disposed to discuss its monetary policy. Dirty floating was also adopted in Japan, sometimes coming very close to a fixed exchange rate regime following the well-known mercantilist approach to the Japanese economy (and society). In the European Union, a system with the maximum possible rigidity of exchange rates, corresponding to a common currency, was established. Of the 15 original members of the EU, eleven entered at the beginning of the monetary union in 1999, later followed by Greece and then, in 2007, Slovenia. Eleven additional entrants irrevocably committed to do the same within a relatively short period of time. The external value of the euro was left to float. It had a huge devaluation at first and has had an equally huge revaluation since 2002. Given the perverse effects on European exports due to their high price elasticity, the result of the floating regime of the euro with respect to the dollar is that monetary and financial foreign disequilibria have been transferred to the domestic real sector. This is the main reason why China and other Asian countries with exportoriented economies adopted a peg on the dollar. The economic history of the post– World War II period shows that fixed exchange rates can be a useful instrument for developing exports as a push to the domestic growth rate. The catch here, of course, is that the real sector is isolated from external monetary shocks; there remains the risk of them being transferred, sooner or later, to the domestic monetary sector. This policy has been successful only for China thus far. For other countries such as Indonesia and Thailand, the mismanagement of short-term credit and derivative contracts generated perverse and disastrous effects, resulting in the 1997 Asian financial crisis.

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The theoretical expectation of the stabilising virtues of floating exchange rates was not fulfilled. U.S. foreign deficits have grown to a disturbingly large share of American GDP. The public budget deficit in the U.S. had been the preferred cyclical instrument to support domestic demand, with the U.S. being short of domestic savings and already depending heavily on foreign savings. This confirms the close relationship between the characteristics of the current international monetary regime and the American policy of leaving American citizens to live above their domestic real supply and their low propensity to save. On the other hand, the process of globalisation, pushed by several tendencies synthesised in the ‘LISCA effect’ (the effect of liberalisation, internationalisation, securitisation, computerization, and apoliticisation), has the merit of exploiting in economic terms the end of the political blocs following the fall of the ‘Iron Curtain’. Globalisation also has the merit of starting a new development model, which substitutes foreign demand with domestic demand. This happens through the impulse of foreign direct investment (FDI), which provides the least developed countries (LDCs) with an initial endowment of advanced technology and a growing autonomous purchasing power. This kind of model, of course, does not need the American locomotive anymore. One member of the U.S. Federal Reserve Board, Ben Bernanke (2005), when he was chair of President George W. Bush’s Council of Economic Advisers, expressed a different view. It started from the existence of a world ‘savings glut’ that the non-U.S. countries are not able to absorb and that the U.S. is able to. According to this interpretation, the U.S. provides a precious service to the rest of the world by investing its unused savings. This version of the U.S. locomotive model — because such it remains — still poses the problem that this capacity to invest relies on periodic fiscal stimulus and permanent foreign deficits, that is, more on politics than the market. Bernanke’s view is a modern interpretation of the U.S. foreign deficit advanced in the past, which is characterised by a better consideration of the IS-LM schemes.1 In their interpretation, Emile Despres, Charles Kindleberger, and Walter Salant (1966) assume a different liquidity preference between the U.S. and the rest of the world, the second being higher, which justifies dollar creation for international use. An article entitled ‘Why We Disagree’ published in the Economist (1966) commented on the view of Despres, Kindleberger, and Salant. It concluded: ‘Certainly America’s deficit represents above all a provision of banking services to other financially less mature countries. Certainly the current attempts to dam up the provision of these banking services threaten constriction of world trade and investment. Certainly one can see no quick replacement for those services, least of all through new official forms of international reserves (from Triffin to Cru). But that was never their intended function.’ The Despres, Kindleberger, and Salant interpretation of the U.S. foreign deficit convinced John F. Kennedy to try ‘Operation Twist’ (increasing short-term interest rates and lowering the long-term ones), which failed to prevent the 1971 dollar crisis.

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Does the U.S. want to follow these views and repeat this experience? The global economic environment has changed dramatically since then, but the world still faces the same international monetary problem with a new growth model at work and fewer arguments in favour of the U.S. locomotive.

The Future of the U.S. Dollar in the Two Conflicting Growth Models Given the current status of global economic relations, the exchange rate of the U.S. dollar will remain weak. In the best-case scenario, it will remain around the current levels, waiting for the effects on the current account of the balance of payments of the restrictive monetary and fiscal policies taken by the U.S. authorities. In the worst-case scenario, the U.S. dollar will continue to weaken because other factors are in motion. The first factor is the policy of the European Central Bank (ECB). If it were to adopt a more restrictive monetary policy stance, given the relaxation in European fiscal policy rules (the so-called Stability and Growth Pact), the effect could be a neutralisation of American decisions, strengthening the external value of the euro and keeping the U.S. dollar weak or driving it even weaker. The difficulties of eurozone real ƒ are preventing but not excluding this decision, given the ECB’s unique mission of preventing inflation, as specified by the Maastricht Treaty. The second factor is Chinese economic policy. If the soft landing of domestic demand pursued by Chinese authorities should evolve into a search for higher exports — namely, a traditional response known in the profession as the absorption or Alexander effect — then there would be an increase in foreign surplus and in the probability of further currency disturbances. This could lead to a change in the yuan’s exchange rate regime or, more simply, to a negotiated change in the pegged value of the yuan toward the U.S. dollar, creating a vicious circle. The third factor is the behaviour of oil-producing countries. These countries are becoming nervous about the external value of their U.S. dollar reserves. They are thus considering diversifying by buying euros or other strong currencies (if any). This diversification could possibly strengthen the vicious circle in the international monetary system and bring a weaker U.S. dollar. The U.S. foreign deficit will probably remain close to the current high levels, because it depends on an U.S. domestic demand that no government, be it Republican or Democratic, can afford to curb beyond a given limit. American citizens are highly sensitive to real GDP growth and the linked level of employment and they are less sensitive (indeed indifferent) to the external value of the U.S. dollar, as the low value of their import elasticity to the exchange rate shows. However, they should not be indifferent to their foreign debt, which grows by as much as US$1.9 billion a day — the same level of the daily increase of their public debt.2 The well-known twin deficits are largely in motion (‘Trade, Exchange Rates, and Budgets’ 2005). American citizens should also consider that the U.S. public debt is largely — more than 40 percent according to estimates of the U.S. Treasury, the Federal Reserve

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Bank of New York, and the Board of Governors of the Federal Reserve System (2004) — in the hands of the central banks of China and Japan, which could change their preferred schedules on exchange rate and foreign reserves. In the long term, therefore, independent of national monetary and fiscal policies, the U.S. dollar will remain structurally weak. And even if this weakness is technically manageable, the risk of a dollar crisis will remain high, either for market reactions or political reasons. It would be advisable to treat it, or much better to anticipate it, by activating some foreign policy instruments, such as an international agreement involving the G8 and China to establish an international monetary standard or to fix new rules to avoid or manage international currency crises. The agreement proposed herein has two components. The first is that the countries participating in the process of globalisation under the rules of the World Trade Organization (WTO) recover their monetary sovereignty, wrongly left in the hands of the market, which today fixes both the quantity of money and interest rates. The second is to state the costs and benefits of cooperation in economic policy as much as in foreign policy. Any state has its own set of preferences. Its behaviour is guided by them. It would be therefore misleading to think that any state should cooperate on exchange rates — or on any foreign policy issue — purely on the basis of a superior and abstract common interest. But it would be equally misleading to ignore the benefits that can arise from cooperative behaviour, as game theory teaches. As the history of European integration shows, cooperation can be successful if it is based on a common interest, and not successful when it proves to be too strong a limit for the preferences and interests of the governments (as in the case of the Stability and Growth Pact). Until now the behaviour and the exchange rate strategy of successive U.S. governments have been guided purely by a narrowly defined national interest. But a major international currency crisis would also damage American interests. Therefore, it should be in America’s interest to cooperate in order to anticipate and avoid it.

The Effects of the Current International Monetary Order on Global Competition and Social Organisation Monetary and currency disturbances can hamper fair competition inside countries and among them. A stable monetary standard is a necessary requirement for any market to work satisfactorily. Therefore any policy that curbs inflation and stabilises exchange rates helps to establish fair competition. While interpretations may differ on the causes of inflation and the instruments to prevent or reduce it, there is complete agreement on the fact that money supply must be managed by an independent public authority. This agreement has solid economic foundations, but also political ones. The principle of no taxation without representation involves inflation as much as it does any traditional fiscal instruments, because inflation is a hidden tax and therefore an

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instrument of income redistribution. If not controlled, inflation violates one of the fundamentals of democracy: no income redistribution without representation. However, the same agreement reached on the necessity of fighting inflation has not been reached in the case of inflation derived from exchange rate depreciation (the case of a floating regime) or devaluation (the case of a fixed regime). The idea expressed by Piero Sraffa (1920) that internal monetary stability cannot be achieved without external monetary stability has never been logically developed or empirically tested. This dispute has been solved in the European Monetary Union, however, with its intention to promote a common market with fair competition: it adopted one currency. The same applies to the global market if one really wants one fair competitive market: it needs one currency. Any consideration of the U.S. dollar with floating exchange rates as the global currency implicitly denies a global market with fair competition, but does allow a process of economic integration among countries called globalisation, which benefits only those most able to speculate on its imperfections. Without a proper monetary standard and without an independent institution that manages the international money supply or, as a second-best solution, a fixed exchange rate regime under the control of an international organisation like the IMF, the world will never have a truly global market with fair competition. Even in the European Monetary Union, the problem of responsibility for the foreign value of the euro has not been solved. The EU treaties correctly say that responsibility belongs to the Council of the European Union (formerly the Council of Ministers), which has the political responsibility and power to sign international agreements on the external value of the euro. Apart from this institutional framework, however, the managing of the exchange rate lies de facto in the hands of the ECB, because the EU Council has never shown any will to do. This means that the external value of the euro is not managed at all. The only currency policy of the ECB is to control inflation through the base creation of European money. It took a very long time for the ECB to admit that the falling external value of the euro would have an impact on eurozone inflation and real growth. If one assumes that the only thing that matters for foreign currency markets is purchasing power parity, then one renders empty the frequent invocations of the rules of the market by governments to enforce the acceptance of reforms regarding the welfare state or competition. The alternative to European exchange rate policy is to stabilise more or less rigidly the external value of the euro, accepting the need to accumulate both U.S. dollar–denominated reserves and tensions of the kind already described in the case of China. The change in the foreign currency regime also helps to mitigate the impact of the different behaviour of traded and non-traded sectors. Be it for any reason, ranging from historical tradition to political influence, any economy has traded and non-traded sectors. Roughly speaking, primary and tertiary sectors are on average price makers, shielded from external competition and with limits to internal competition, too; the secondary industrial sector generally is a price taker, exposed to domestic and international competition. The weight of traded

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and non-traded sectors is difficult to estimate precisely for each country, but it usually ranges between 40 percent and 30 percent for the former and 60 percent and 70 percent for the latter. Given their competitive nature, traded sectors are greatly influenced by exchange rates: in the case of a depreciation, they cannot transfer to the consumer the inflation due to the higher cost of imports. The protected non-traded sectors can. On the other hand, in case of appreciation, non-traded sectors cannot recover the lost margins, because they do not make the price. If exchange rate variations depend upon differences in inflation rates, and these differences depend in turn upon the different relative weights of traded and non-traded sectors, the logical consequence is that price maker or non-traded sectors determine inflation while traded sectors endure it, perpetuating the vicious circle of inflation and depreciation. Traded sectors can adjust prices only if and to the extent that their foreign competitors do. The case of Italy before the euro is a clear textbook example of the damage done to the traded sectors by the dominance of non-traded sectors in the vicious circle created by the links between inflations and devaluation of the lira (Savona 1993). The logical conclusion is that — independent of the cause — variations in exchange rates harm traded sectors and benefit non-traded ones. The consequences are market failures and poor performance of the economy. Furthermore, social organisation itself is harmed due to the strengthening of rents and the weakening of profits: that is, the protected sectors will prevail over the innovative ones.

Conclusion: The Dollar is the American Currency, but a Problem for All Countries, Including America A U.S. dollar that reflects American policy choices harms the economies of the rest of the world, especially those where growth is led by exports. The eurozone is one of these economies. The countries with an autopoietic-led growth model are also hurt by a floating dollar, in their economies and social organisations, because growth, employment, and competitive sectors are harmed and rent sectors benefited. This double impact directly and indirectly produces a worse social order. It does so directly because less growth and employment mean less welfare; it does so indirectly because reinforcing non-traded sectors means discouraging the emergence of the benefits of free and fair competition. Societies become less meritocratic and more parasitic. If China were forced to adopt flexible exchange rates, accepting the outcome of the market on the value of the yuan and the renminbi, or accept a negotiated revaluation of its currency, its growth rate would go down, adding new unemployment to its set of unresolved problems. Even in the case of a successful soft landing, the tendency to appreciate the yuan will be strengthened by the substitution of domestic demand with exports. The system would thus strengthen its vicious circle. This could lead to a deterioration in political relations with the U.S., in an area where international relations are exposed to the unresolved problems in Taiwan, North Korea, and other ‘non-integrated’ countries.

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The market cannot be expected to manage the potential policy effects of the conflict between the two different models of world growth and the floating U.S. dollar, just as it cannot pursue political or social goals but only goals related to the rational use of scarce resources. Laissez-faire has definitely come to an end, eight decades after Keynes (1926) declared it dead. ‘Market capitalism’ today needs more politics — or, more to the point, more geopolitics — than it needed before the modern process of globalisation started. There remains the possibility, which cannot be overlooked either logically or practically, that the U.S. dollar–denominated official reserves owned by the Chinese authorities will be sold on the market to gain an advantage in foreign policy or to regain internal political control if it is lost by the Chinese Communist Party. At the height of the oil crisis in the 1970s, Saudi Arabia defined its U.S. dollar reserves as ‘monetary weapons’ (instruments of war), which could have put the U.S. and other governments in serious difficulties. The effects of oil-exporting countries on the U.S. dollar must also be considered. These countries have announced that they are considering a diversification of their reserves, pushing an appreciation of the euro and strengthening the vicious circle in the international money system. While all countries look at economic variables on a global basis, they pay less attention to the relationship among economic, social, and foreign policies. The U.S. appears moderately interested in this perspective, while European governments are concentrated on internal stability and intra-European cooperation. It is highly probable, instead, that the Chinese government is interested, given its traditional long-term view of their culture. They could be forced to react quickly to real and currency disequilibria coming from outside or to political problems coming from inside. The leaders of the world do not, at the moment, show the vision needed by the very delicate monetary and economic situation. The time has come to pass from pure domestic and international economic policies to a geopolitical approach to the effects of the modifications in the global development model and the increasing demand for democracy and social welfare. Popular wisdom says one cannot passively let the two models of development coexist without a cooperative effort to minimise the potential dangers. If one lets this happen, it could be the model pegged by the stronger country (or countries) that will prevail, and not necessarily the better one. In this case, one should continue to face, as happened many times in the past, an international monetary regime deeply inadequate to the needs of world development and peace. In various public speeches, Kenneth Rogoff has defined the state of the U.S. dollar by referring to a well-known cartoon where Wile E. Coyote stalks Road Runner and leaps up into the air, hangs there a minute and then takes off as fast he can, before dropping dramatically on the ground. Empirical research by Rogoff and his colleague Maurice Obstfield (2005) estimates a necessary drop of the U.S. dollar of 33 percent to get a significant result on the U.S. trade balance. There are many reasons to believe that this will be the end of the external value of the dollar; if so,

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the euro would appreciate of a quite similar dimension and this export-led growth model would create a severe crisis for the European economy. The Wil E. Coyote effect on the U.S. dollar could also be the result of a change in the currency regime of the yuan (as required by the United States), not with the intention of adjusting the U.S. balance-of-payments deficit but for internal or international reasons of the Chinese government. This chapter, based on technical arguments, predicts, first, the change in the global growth model followed by the enlargement of the (quasi) free market area under the WTO rules and, second, the (perhaps consequent) growing loss of interest among developed countries (including the U.S.) in pegging the previous U.S.-led model, in acceptance of the implications in terms of financing the U.S. balance-ofpayments deficit. The relevance of this analysis for international relations lies in the observation that the problem arises as a central topic in the world economy and ends as one of the primary current political risks to world stability: the accumulation of U.S. dollar reserves by China implies the switching of international monetary sovereignty is in their hands — that is, the possibility of China deciding the external value of the dollar, the euro, and other world currencies. If the U.S. dollar drops and the euro goes up, the reaction of European public opinion against U.S. leadership would probably be severe, with political implications in many sectors of international relations; it could perhaps block the agreements that keep breathing life into the WTO system of free trade and cooperation essential to financial development and linked to world growth. In short, the problem of the U.S. dollar should not be kept in the hands of finance ministers alone, but should also be in the care of foreign ministers and, above all, heads of government and state.

Notes 1

2

The Keynesian IS-LM model explains that national income and interest rates can be determined by the intersection of national income and interest rate on one curve and the liquidity preference and money supply on the other. Where the two curves meet, the market for goods and the market for money balances are in equilibrium. On 31 March 2005, according to the data published by the U.S. Bureau of the Public Debt, the total public debt of the United States was US$7.78 trillion including intragovernmental holdings, or US$4.57 trillion only considering the debt held by the public. Between 31 March 2004 and 31 March 2005 the growth of the total public debt was 9.06 percent, or US$1.8 billion a day.

References Bernanke, Ben. S. (2005). ‘The Global Saving Glut and the U.S. Current Account Deficit’. Sandrine Lecture, Virginia Association of Economics, 10 March, United

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States Federal Reserve Board, Washington DC. (June 2007). Despres, Emile, Charles P. Kindleberger, and Walter Salant (1966). ‘The Dollar and World Liquidity: A Minority View’. Economist no. 218, 5 February. Keynes, John Maynard (1926). The End of Laissez-Faire (London: Hogart Press). Obstfeld, Maurice and Kenneth Rogoff (2005). ‘Global Current Account Imbalances and Exchange Rate Adjustments’. Brookings Papers on Economic Activity, vol. 1, pp. 64–146. Savona, Paolo (1993). ‘Sviluppo, profitti e finanza in Italia’ [Growth, Profits, and Finance in Italy’], Sviluppa Economico, vol. 1, pp. 29–58. Savona, Paolo, Aurelio Maccario, and Chiara Oldani (2000). ‘On Monetary Analysis of Derivatives’. In P. Savona, ed., The New Architecture of the International Monetary System, pp. 149–175 (Boston: Kluwer Academic Publishers). Sraffa, Piero (1920). L’inflazione monetaria in Italia durante e dopo la guerra [Monetary Inflation in Italy Before and During the War], (Torino: Università di Torino). ‘Trade, Exchange Rates, and Budgets’ (2005). Economist, 14 April, p. 89. United States Department of the Treasury, Federal Reserve Bank of New York, and Board of Governors of the Federal Reserve System (2004). ‘Report on Foreign Portfolio Holdings of U.S. Securities as of June 30, 2003’. Washington DC. (June 2007). ‘Why We Disagree’ (1966). Economist, 5 February.

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Chapter 16

Controlling Climate Change Beyond Kyoto: The American Contribution Frank E. Loy

If the American contribution to moving beyond Kyoto is judged by the Washington meeting between British prime minister Tony Blair and U.S. president George W. Bush just prior to the Gleneagles Summit in July 2005, then it could be determined that the American contribution is grudging, minimal, and deferred. But it is more productive to go beyond that perception and examine three central points about the American situation. First, the United States does not have a meaningful domestic regime to reduce greenhouse gases. Crafting one needs be the first order of business. Some important political developments occurred at the Blair-Bush bilateral meeting. They somewhat changed the landscape for the better. Second, notwithstanding inadequate actions at the federal level, some important and useful state-level developments are occurring. Third, there must be further exploration of a way to permit the U.S. to participate in an international regime. That step is not just around the corner, but it will happen. It is therefore useful to lay out a few elements of such a regime.

The Absence of an American Domestic Greenhouse Gas Reduction Regime The lack of a U.S. regime to reduce greenhouse gases is important, because the U.S. cannot play a meaningful role in crafting an international climate regime until it has adopted effective domestic measures. Without that, no international commitment will be credible. More importantly, American politics and treaty ratification processes assure that until the U.S. has a domestic programme, no international agreement has a chance of being ratified. President Bush, starting in March 2001, laid out a programme. It has three elements. First, the president set a national goal for greenhouse gas reduction, which is to reduce carbon emissions per unit of gross domestic output by 18 percent by 2012. This measure is a carbon-intensity goal. Unlike Kyoto-style targets, which are designed to reduce emissions absolutely, carbon-intensity targets are generally adopted — and were adopted by the U.S. — to achieve something less: a growth rate of emissions that is slower than the growth rate of the economy. The president’s target is very soft. Its rate of reduction is just what the U.S. experienced in the decade

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between 1992 and 2002. The U.S. has been getting more energy efficient, principally because of its shift from a manufacturing economy to a service one. Unfortunately, the president’s goal is thus not much more than business as usual. It requires the nation to do nothing special. Second, the Bush administration seeks to achieve its goals entirely through voluntary programmes. It has no regulatory programme to induce industry and consumers to reduce emissions. The U.S. has now had more than ten years of voluntary programmes. Therefore this experience can lead to some conclusions. On the positive side, voluntary programmes raise the general level of awareness about greenhouse gas emissions and their relationship to global climate change; they demonstrate that generally the programmes will have modest negative and often positive cost consequences; and they result in real reductions in greenhouse gases. However, when measured by the scale of the national effort needed, voluntary measures are totally inadequate. The U.S. results demonstrate this. Since 1990 greenhouse gas emissions in the U.S. have risen by 13.3 percent. To get a sense of proportion, under the United Nations Framework Convention on Climate Change (UNFCCC), which was ratified with the unanimous consent of the U.S. Senate, the U.S. adopted a voluntary ‘aim’ of returning emissions to the 1990 levels by 2000. So, as of 2005, the U.S. was woefully behind the UNFCCC target. Had Kyoto been ratified in the U.S., it would have required the U.S. to reduce emissions further, by 7 percent from the 1990 levels by 2012. The forecast is that between 2005 and 2025, without real action to cut emissions, U.S. emissions will increase 40 percent over 1990 levels. The comparison is that without Kyoto, the United Kingdom, Germany, and Japan could be expected to increase emissions by about 20 percent and France by about 5 percent. What are the chances that the U.S. will come forth with a regulatory scheme that improves on this sorry state? They are not too bright in the near term. The principal bill seeking an economy-wide mandatory cap on greenhouse gas emissions, called the McCain/Lieberman bill, has twice been defeated, including in June 2005. But there was a concurrent, significant shift in the Congress. The Senate adopted a resolution endorsing a ‘mandatory, market-based’ domestic programme to ‘slow, stop, and reverse’ the growth of greenhouse gas emissions. However, this resolution is not law. It is a ‘sense of the Senate’ resolution. But it is nonetheless significant. It passed with twelve Republican votes over vigorous administration opposition. One can say that the question for the U.S. is no longer whether to adopt meaningful legislation, but rather what and when. The third element of President Bush’s plan is a programme of research and development (R&D) in climate science and emission reduction technology. The Clinton administration launched such a programme, which, in its final year, was funded at a level of about US$4.3 billion. The Bush administration increased that to about US$5.2 billion. This is not a huge increase considering that the initiative is the centrepiece of the federal programme, but it is a significant increase nevertheless. The R&D programme has merits. All of the world — not just the U.S. — is its beneficiary.

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There are, however, three things wrong with the R&D programme. First, a disproportionate fraction supports work that will yield measurable results at best in two or three decades, such as work on the hydrogen car and geologic sequestration. Technologies that promise near-term improvements, such as energy conservation and the development of commercial renewable energy sources, get a modest share of the pie. This reflects the views of Vice President Dick Cheney (2001), who said that ‘conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy’. Second, there is a reluctance to pull together the results of scientific inquiry and relate them to policy. The strategic plan of the Climate Science Program promised that by 2005 nine synthesis and assessment reports would have been published. None were. And when any document is published, it is frequently edited by non-science members of the administration in a quite unprofessional way. The common theme running through this editing process is to emphasise the uncertainties surrounding the science of global warming. Third, and by far the most serious problem with America’s R&D effort, is that the administration, by failing to regulate, has given American industry no incentive to innovate in the area of emission reductions, or to speed the adoption of extant technologies. There is, today, almost a total disconnect between America’s hunger for new technologies and the incentives to employ them.

America’s Real Actions Beyond the Bush Administration Much is happening at the U.S. state level — mostly on the two coasts. Interestingly, much of it is led by Republican governors. In the northeast, a group of nine states led by New York is designing a regional reduction programme. Its focal point is a regional emission cap and trade programme based on absolute targets. The goals, still being negotiated, are ambitious, such as New York’s stated goal of reducing 2020 emission to 10 percent below 1990 levels. California has a law, supported by Governor Arnold Schwarzenegger, requiring cars sold in California to cut tailpipe carbon dioxide emissions by almost 30 percent by 2015. Some 10 percent of all cars sold in the U.S. go to California. The northeast states plus California make up a virtual economic unit that is the sixth largest in the world. It is larger than Germany. Electric power companies are also feeling pressure — and in some measure responding. Thirteen states have adopted renewable portfolio standards, committing to meet a fixed percentage of their power generation from renewable sources. Americans also use litigation to make power plants cleaner. The biggest of these is a lawsuit by eight states and the city of New York against a group of power companies that generate some 10 percent of U.S. electricity. The suit charges, essentially, that the emissions are nuisances that cause significant damage. There are also the activities of the U.S. business community. Their record is mixed. Many companies, however, are ahead of the U.S. government, and waiting

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for a law that would permit them to fashion a forward-looking business plan. As Jeffrey Immelt (2005), the chief executive officer of GE, said, ‘There’s no time to wait, because tomorrow is now. We are living in a carbon-constrained world where the amount of CO2 must be reduced.’

America’s Way Ahead The way toward U.S. participation in an international regime is difficult to see. It will never be easy. But the U.S. cannot and will not remain on the sidelines forever. It is crucial to figure out some of the elements that would make a regime with U.S. participation more plausible. In doing so, two cautionary notes are important. First, when President Bush (2001) pulled the U.S. out of the Kyoto negotiations, in March of 2001, he described the protocol as ‘fatally flawed in fundamental ways’. He described several of these flaws: the potential economic cost of Kyoto, the absence of targets for developing countries, Kyoto’s limited environmental benefits, and the absence of a clear longterm goal. These flaws were, of course, all subject to further negotiation. And there was none. So one can conclude that President Bush and his vice president simply did not want the agreement and felt no particular need to seek accommodation on the issue with the rest of the world. It would be a mistake, however, to think that this is just a George Bush issue. A Democratic president would also have had a hard time shepherding a Kyoto-like agreement through the U.S. Senate. Bill Clinton’s administration understood that very well. That is why it pushed so hard in 1999 and 2000 for treaty characteristics that it thought crucial to a sound and ratifiable agreement, such as emission trading, crediting for forest and agriculture carbon sequestration, and meaningful participation by at least the major developing countries in the actual task of lowering emissions. These are the key treaty elements needed to reduce the cost of compliance without compromising environmental efficacy. On none of these crucial issues did the Clinton administration get negotiating help from the European Union members. The exception was the UK. Ironically it was only when the U.S. dropped out of the negotiations that the rest of the world, led by the EU nations, agreed to include emission trading and some measure of sequestration in Kyoto. The second note of caution concerns membership. Kyoto is a huge step forward, and those countries that made it happen — seven of the eight G8 members — ought to be proud of their accomplishment. But it must be open to a fundamental rethinking of the agreement and the way it was negotiated, as the world seeks to broaden its membership and become more effective. The G8 also needs to be prepared to seek an agreement that may not mirror Kyoto. There are three central issues that would benefit from a fresh examination. The first is developing country participation and the equitable sharing of the international

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effort, the second is the nature and level of commitments, and the third is the proper forum for negotiation.

Developing Country Participation The first issue is developing country participation and the equitable sharing of the international effort. In past negotiations, developing countries have charged that it was unfair to require them to undertake efforts similar to those of the industrialised countries, because it was the latter group that caused — and got rich on — the current levels of greenhouse gas emissions, and that still produces the bulk of such emissions. Their participation would certainly be unfair while the biggest emitter — the U.S. — stood on the sidelines. So they too stood on the sidelines. The world now needs to bring at least the major developing country emitters — such as China, India, Brazil, South Korea, Mexico — to accept some binding commitments. This is in part because their growing emissions, unchecked, could offset all the progress made by the industrialised countries. And it is in part because the largest emitter — the U.S. — will not move forward if developing countries are not also engaged. The president’s complaint that Kyoto placed no obligations on developing countries was a convenient excuse to justify America’s refusal to continue the negotiations. But his point had merit. The arithmetic of climate change is clear: without the participation of all major emitters, no international system will be effective in limiting climate change. How can the world overcome this stand-off? One way is to negotiate a two-step negotiation process. In step one, the U.S. would accept the current ‘industrialised countries go first’ doctrine, and agree to take some modest targets. Major developing countries would not match this. But they would provide assurances that they would join in step two. Step two would then involve much more serious commitments by the U.S. and the beginning of quantified commitments by developing countries.

The Nature and Level of Commitments The second issue concerns the nature and level of commitments. Requiring nations to take on some quantified commitment is crucial — otherwise one has not moved the UNFCCC forward at all. Without such commitments, the emission trading systems that so effectively lowers the costs of emission reductions will not work. Kyoto’s binding commitments, while quite inadequately tough when measured by the gravity of the problem, triggered opposition. Developing countries objected that the commitments could and probably would throttle their growth. And in the U.S., critics complained that the obligations would seriously damage the U.S. economy.

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In fact, Kyoto targets turned out to be probably harder on the U.S. than on other industrialised countries. The base line of 1990 worked against the U.S. because of its strong economy in the 1990s, compared to Europe’s and Japan’s. Despite this reality, Bush’s statement that Kyoto would wreck the U.S. economy is untenable. As the authoritative 2003 study published by the Massachusetts Institute of Technology (MIT) shows, reducing U.S. emissions to 2000 levels by 2020 should cost less than US$113 per household and the median annual household income in 2020 will be about US$61,000. This does not account for any offsetting benefits. Going forward, negotiators need to figure out how to preserve the fundamental market-based architecture of Kyoto — which does dramatically lower the costs of emission reductions — while being open to new concepts that could attract both U.S. and major developing country emitters to a new agreement. There are a few concepts to consider here: expanding the ways in which developing countries can participate in the trading market by avoiding deforestation; introducing new, less carbon-emitting agricultural methods; and revisiting the issue of targets for developing countries by, for example, giving premiums for those that adopt targets early and by exploring more flexible forms of targets, such as intensity targets. The key is to permit developing countries to grow at whatever rate they can, but increasingly in a less carbon-intensive way. While the mechanisms need to become more flexible, the level of effort required cannot be too modest. The current forecast is that, without new action, emissions in all G8 countries will grow — not diminish — over the next 20 years. The growth varies widely, from France’s +5 percent, to the UK’s, Germany’s, and Japan’s +20 percent, to the U.S.’s and Canada’s +40 percent. Behind these strikingly differing emission growth projections lie two principal factors: differing lifestyle choices and differing levels of political courage. But there are also historical and technical factors such as the different shares of power generation that come from nuclear (the French share goes from 35 percent to 43 percent, whereas the German goes from 10 percent to zero), and population growth (ranging from Japan’s –0.01 percent to the U.S.’s +0.08 percent annually).

The Path Forward: The Proper Forum for Negotiations The third and surely the most delicate issue is the proper forum for negotiations. The present United Nations forum presents several problems. First, in the UN all countries are eligible to participate — and 180 of them do. A few of these really would rather have no agreement at all. The problem of negotiating a complex agreement, with serious economic consequences, in such a forum is self-evident. Furthermore, the U.S. Congress does not have a good record of ratifying UN agreements, particularly UN environmental agreements. There are many universally accepted agreements to which the U.S. is not a party. The 1992 Convention on

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Biological Diversity is just one. U.S. ratification of the UNFCCC is something of an aberration. This UN process did produce Kyoto, a minor miracle. Building on that is clearly the first choice. One way to do so is to create opportunities for other nations and small sub-groups of nations to dock into this market model. But the climate regime cannot afford a leisurely timetable. If an expanded Kyoto, including the U.S., cannot be brought forth soon, realistically, the world needs to consider alternate ways to go. One alternative way to go would be to copy the model of the World Trade Organization (WTO). It started with a quite small group of countries with more or less similar economies, and it produced a relatively simple set of rules followed — considerably later — by strengthened institutions and compliance procedures. If designed correctly, there could be incentives for others to join this desirable ‘club’, and disincentives for getting in the way of its expanding and increasingly effective system. The carrots could include participation in the trading system, investment in infrastructure by industrialised countries, and more direct financial assistance. There will be massive objection to starting from scratch in a forum that is not universal. But as Nigel Purvis has noted (revising somewhat Mies van der Rohe) ‘form follows forum’. And the form of agreement that could emerge from this process might well be ratifiable: an expanding climate regime that includes all — not just some — that need take part in this critical battle for the planet.

References Bush, George W. (2001). ‘President Bush Discusses Global Climate Change’. 11 June. (June 2007). Cheney, Dick (2001). ‘Vice President Cheney’s Remarks Regarding Energy Policy at the Annual Meeting of the Associated Press’. 30 April, Toronto. (June 2007). Immelt, Jeff (2005). ‘Global Environmental Challenges’. (June 2007).

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Appendix

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Appendix

Overcoming Evil with Good: Impressions of the Gleneagles Summit, 6–8 July 2005 Nicholas Bayne

Civil Society and Outreach Outreach to non-G8 countries at Gleneagles took two forms. On the first day the G8 met the leaders of five major developing countries — Luiz Inácio Lula da Silva (Brazil), Hu Jintao (China), Manmohan Singh (India), Vicente Fox (Mexico), and Thabo Mbeki (South Africa) — with the specific aim of associating them with the exchanges on climate change. The heads of the International Energy Agency (IEA), the International Monetary Fund (IMF), the United Nations, the World Bank, and the World Trade Organization (WTO) also took part. No document issued from this meeting, but the Gleneagles chair’s summary welcomed the involvement of the five non-G8 leaders in climate change; they also put out a collective statement in advance (Lula da Silva 2005). On the second day the G8 met seven African heads of government: Abdelaziz Bouteflika (Algeria), Olusegun Obasanjo (Nigeria), Abdoulaye Wade (Senegal), and Thabo Mbeki (South Africa), who were regular summit participants; Meles Zenawi (Ethiopia) and Benjamin Mkapa (Tanzania), members of the Commission for Africa (CfA); and John Kufuor (Ghana).1 The heads of the IMF, the UN, and the World Bank and the chair of the African Union (AU) were also present. In addition to a general discussion of Africa, where the Africans’ contribution was again recognised in the chair’s summary, this group issued a joint G8/AU statement on Sudan, the first time the G8 summit had produced a statement in association with others (G8 2005o). Civil society activity reached high intensity in the days before the summit, all aimed at getting radical decisions at Gleneagles on Africa. The Make Poverty History (MPH) campaign organised a peaceful march of 225,000 people in Edinburgh on 2 July. Bob Geldof drew on his links with the world of popular music to organise a series of Live Eight concerts in cities around the globe. Geldof, Bono, and a group of other celebrities came to Gleneagles with a petition bearing 38 million signatures and were able to brief U.S. president George Bush, French president Jacques Chirac, and German chancellor Gerhard Schroeder. However, the million-strong ‘March for Justice’ to the gates of Gleneagles that Geldof had called for never materialised. Instead, groups of obstructive, anti-G8 protestors became active. They blocked

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roads across central Scotland on 6 July, the day the heads arrived in Gleneagles, and briefly penetrated the security fence. But the police, who were present in force, soon regained control and the numbers of hostile protestors were never large.

The Gleneagles Summit, 6–8 July 2005 There was exceptional continuity among the G8 heads at Gleneagles. Except for Paul Martin (Canada) — new in 2004 — and José Manuel Barroso (European Commission) — new in 2005 — all the leaders had been meeting at the summit since 2001 or earlier. But their domestic political standing varied widely. U.S. president George W. Bush and British prime minister Tony Blair were electorally secure, having recently been voted back into office, while Junichiro Koizumi (Japan) and Vladimir Putin (Russia) were not under threat.2 But Martin was leading a minority government and had barely survived a vote of confidence. The position in continental Europe was even less stable. Gerhard Schroeder (Germany) would face elections in September 2005 and Silvio Berlusconi (Italy) before June 2006, which neither of them was expected to survive. Jacques Chirac (France) was secure electorally until 2007, but had met a severe setback when the French electorate rejected the new European constitution in a referendum. The resulting confusion in the European Union (which also weakened Barroso) led Blair into a bad-tempered dispute with Chirac and Schroeder over the EU budget at the European Council of 16–17 June. Chirac suffered a further blow on the day the heads gathered at Gleneagles, when London was chosen to host the 2012 Olympic Games, instead of Paris, the favourite. Chirac, however, rose above these misfortunes to be the most visible and constructive of the leaders at Gleneagles after Blair, stressing his full support for the summit themes. Bush did his best to be flexible, while maintaining (for his domestic audience) that he was defending existing U.S. positions. Both Koizumi and Schroeder intervened personally to achieve consensus on raising total aid by US$50 billion. Gleneagles was conspicuous, however, not so much for the performance of individual leaders as for the way they all rallied behind Blair in confronting the terrorist attacks of 7 July. The summit began on the evening of 6 July with a dinner with Her Majesty the Queen. (Bush had earlier had a fall from his mountain bike, injuring a police officer.) The proceedings on 7 July were due to begin with the world economy and climate change, with the major developing countries joining the G8 shortly before lunch. The G8 would discuss foreign policy issues later on 7 July and devote 8 July to Africa, including a session and lunch with African leaders before winding up in mid afternoon. However, after a bilateral breakfast meeting with Bush and before the main G8 session opened, Blair received the first imprecise reports of the terrorist attacks in London. The session began as planned, but Blair was often interrupted as more news came in. By the time the non-G8 leaders had arrived, Blair had decided that he had to leave the summit to fly to London. The G8 heads, vigorously led by Bush and

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Chirac, all urged him to do so. They undertook to carry on with the summit agenda in his absence and proposed that Michael Jay, the UK sherpa, assume the chair. Before leaving, Blair, backed by all the G8 and non-G8 participants, read out an eloquent collective statement on camera, condemning the terrorists and expressing determination to resist them (Blair 2005a). Jay then chaired the discussion of climate change and other issues with non-G8 leaders over a working lunch. Jack Straw, the British foreign secretary, arrived in time to chair the afternoon session on the Middle East and the ensuing dinner, which covered other foreign policy issues. Blair returned to Gleneagles later that night; in his absence, no summit documents were issued. On 8 July the Africa sessions were held as planned, but were shortened to enable the summit to complete its work by 1300. It concluded with an impromptu ceremony without precedent in summit history. With the G8 and African leaders behind him, Blair made another eloquent statement contrasting the positive results of the summit, on climate change, Africa and the Middle East peace process, with the negativism of the terrorists (Blair 2005a). Then each of the G8 heads signed the summit documents on climate change and Africa, in a symbolic commitment to implement them fully. The summit documents were then issued. These were as prolific as at Evian in 2003 or Sea Island in 2004 — a total of 14 in all, in addition to the chair’s summary and the terrorism statement of the day before (see Annex). The analysis that follows does not go through the summit discussions chronologically, but takes the two main items first — climate change and Africa — followed by the remainder.

Climate Change In a speech in September 2004, Blair had set out three aims for a G8 agreement at Gleneagles: consensus on the science of climate change and the threat it poses, a process to speed up technological and other measures to meet the threat, and engaging with other non-G8 countries with growing energy needs — the emitters of the future (Blair 2004). The Americans would be required to sign up to this approach, although no one expected them to accept the Kyoto protocol or introduce mandatory provisions on reducing greenhouse gas emissions. The rest of the G8, including the U.S., were prepared to endorse this three-part strategy. Good progress was made on technological issues, especially by combining measures to improve energy efficiency with climate change. But the negotiation of commitments on the other two elements was arduous. The UK G8 presidency launched in May the idea of a new dialogue embracing the G8 and leading developing countries, after checking that this would be acceptable to the non-G8 countries concerned. But this was initially opposed by all the rest of the G8, for different reasons: the U.S. and Russia because they feared pressure for new limits on emissions, Japan and Canada because it could undermine the Kyoto process, and the Europeans because it could institutionalise the G8. It took several rounds of sherpa discussions to win everyone over.

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Science proved even more difficult. For a long time the Americans had refused to admit the scientific evidence of human-made global warning, which provided the rationale for further urgent action. Leaked versions of draft summit documents made this all too plain, while Bush made sceptical statements in public, saying ‘we need to know more’. The other G8 members had hitherto gone along with the UK strategy of engaging the Americans, but did not exert themselves to put pressure on the United States. Late in the preparations, however, after the European Council of 16–17 June, the French sharpened their position and laid down five minimum conditions for a summit statement: it must say climate change was caused by humans and required urgent action to reduce emissions, and it must refer to the Kyoto protocol, to longterm action post-Kyoto, and to the use of market mechanisms. Without these elements there would be open disagreement at the summit between the U.S. and the others, all of which subscribed to the Kyoto protocol. It was not clear whether the French would be satisfied if the Americans moved or were determined to isolate them. Under this pressure Bush signalled some flexibility in public. A marathon sherpa meeting on 1–2 July completed work on a short statement and a longer action plan (G8 2005g, 2005c). Both the Americans and the French initially reserved their positions, but gave their assent before Gleneagles. The documents were successfully endorsed by the G8 and led to a constructive discussion with the five non-G8 leaders, despite Blair’s absence in London. The key provisions were: • Science and Reducing Emissions On the science, the short climate change statement made clear at the outset that ‘human activities contribute to … the warming of our Earth’s surface’ (G8 2005c). On reducing emissions, an early ambiguous sentence said ‘we know enough to act now … to slow and, as the science justifies, stop and then reverse the growth of greenhouse gases’. But later passages committed the G8 to ‘act with resolve and urgency’ in ‘reducing greenhouse gas emissions’ and ‘to work together … with major emerging economies … to achieve substantial reductions’ in emissions. The statement confirmed the UN Framework Climate Change Convention (UNFCCC) as the forum for future action, calling for ‘a global concerted effort over a sustained period’. The Kyoto Protocol was explicitly endorsed by its members among the G8. • Developing New Technology This was the objective of the longer action plan, which linked climate change with energy policy. The action plan committed the G8 to work together on energy efficiency, ‘clean energy’, including carbon capture and renewable energy, research and development (R&D), and financing the transition to cleaner energy, including the use of market mechanisms (G8 2005g). • Associating Developing Countries The shorter document launched the new Dialogue on Climate Change, Clean Energy, and Sustainable Development among the G8, the non-G8 powers present at the Gleneagles meeting, and others that wished to join to carry forward the issues identified at the summit (G8 2005c). The first meeting would be in the UK in November; further meetings would be organised by Russia during its summit presidency in 2006, when energy would be a major topic for the G8; and Japan undertook to have the subject on the agenda

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of the summit it would host in 2008.3 The non-G8 leaders made clear their strong readiness to take part in the dialogue, as was reflected in the chair’s summary, although they made no public comments on the rest of the G8 agreements. The document they issued in advance recognised their responsibilities under the Kyoto protocol but avoided any commitment to reducing emissions. These commitments met all Blair’s objectives, as originally set out. They suggested that the Bush administration was becoming aware of growing domestic support for stricter policies to limit climate change. Mandatory targets to limit and reduce greenhouse gas emissions were favoured by major U.S. states, such as California, and companies, such as GE; they only narrowly failed to command a majority in the Senate. The Gleneagles agreements, as Blair said in his press conference, brought both the U.S. and the major future emitters such as China and India into an exchange on reducing emissions from which they had been absent before (Blair 2005a). As such, they proved acceptable to the rest of the G8 — Chirac called them an important advance. They were criticised by mainstream nongovernmental organisations (NGOs) such as Friends of the Earth, but the NGOs would only have been satisfied with ostracising the U.S. until it signed up to Kyoto — not a realistic summit strategy.

Africa At Gleneagles the G8 addressed Africa for the fifth consecutive year, with African leaders also present. The aim was to review progress under the Africa Action Plan launched at Kananaskis in 2002 and give it further impetus, looking ahead to the UN summit in September on the Millennium Development Goals (MDGs) and the Hong Kong ministerial of the WTO in December 2005. Although African peace and security and political governance were discussed, the main focus was on economic issues, specifically the triad of debt relief, trade access, and aid volume identified by the MPH campaign (G8 2005a). These are treated separately below. Africa’s economic picture offered both good and bad news. The African Economic Outlook produced by the Organisation for Economic Co-operation and Development (OECD) and African Development Bank (AfDB) showed improving economic performance, with growth at nearly 4 percent in 2003, 5 percent in 2004, and even stronger prospects for 2005 (OECD 2004, 2005).4 This was the best sustained record for many years, due in large part to more stable political conditions, better economic policies, and higher aid flows. It provided evidence already of the joint impact of the G8 Africa Action Plan and the New Partnership for Africa’s Development (NEPAD). But most sub-Saharan African countries were still set to miss the MDGs on poverty, hunger, education, and health. The increased aid promised by the G8 in 2002 at Kananaskis (an extra US$6 billion per year) had been inadequate to reverse this trend. As required by the 2003 Evian Summit, the G8 Africa personal representatives (APRs) submitted a well-written progress report to Gleneagles (G8 2005l). This

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confessed frankly that ‘progress in implementing the Action Plan has been mixed’ and admitted criticism from NEPAD of slow disbursement, poor coordination, and inadequate support for infrastructure and agriculture. Debt Relief The G8’s last major decisions on debt relief had been taken at Cologne in 1999, although Kananaskis (2002) and Sea Island (2004) had acted to maintain the financing. Cologne had provided for up to 100 percent relief on debt owed to governments by poor countries, mainly in Africa, that were following a poverty reduction strategy agreed to with the IMF and World Bank. But debt owed to international institutions — the IMF, the World Bank, and the regional development banks — only attracted partial relief, linked to expected export earnings. This proved inadequate to provide a lasting exit from their debt problems for many poor countries dependent on commodity exports, even when they pursued sound policies. Since before Sea Island, the UK, with support from France and Canada, had been arguing in the G7 finance ministers forum for 100 percent relief to be extended also to institutional debt. Agreement proved elusive for a long time: Germany and Japan were doubtful about the principle and wanted to ration such relief very narrowly; the U.S. endorsed the principle, but contested the need for extra funds to pay for it. But eventually Gordon Brown, the British finance minister, was able to announce that agreement had been reached at the pre-summit G8 finance ministers meeting in June. Full relief on debts to the IMF, the World Bank, and the AfDB would be available to 18 poor countries (14 in Africa) already receiving partial relief, while 9 more countries could become eligible later. The stock of debt to be forgiven immediately totalled over US$40 billion, worth about US$1.5 billion per year in debt service saved. The World Bank and the AfDB, but not the IMF, would be compensated. The agreement needed to be endorsed by the full IMF/World Bank membership at their annual meeting later in 2005. This agreement largely disposed of one element demands of the MPH campaign. The main criticism was of its limited coverage. The summit of the AU, meeting in Sirte, Libya, just before Gleneagles, called for debt relief to be extended more widely in Africa. In the event, the G8 heads added nothing to what the finance ministers had done. But without the pressure exerted by the impending summit, the finance ministers would never have reached such a good result. Trade The G8 heads discussed international trade and the prospects for the WTO negotiations in their first morning session and agreed on a separate document (G8 2005p). One paragraph of the Africa document (paragraph 22) covers trade as well (G8 2005a). As confirmed publicly by Fox (Mexico) and Panitchpakdi (WTO director general), the trade negotiations were also a major topic in the exchanges between the G8 and major developing countries on 7 July, with everyone insistent on reaching a good result.

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The trade document is full of ambitious objectives for the WTO Hong Kong ministerial in December 2005 and for concluding the Doha Development Agenda by the end of 2006. But on the record of past summits such general exhortations are not worth much, while all attempts to insert more specific commitments proved fruitless. With the Hong Kong meeting still six months away, none of the G8 members was prepared to anticipate their negotiating positions, even for the benefit of Africa. Gleneagles had no effect on the current blockages in Geneva. During the preparations, the UK tried to get agreement on helping African countries meet health and safety standards and on easing rules of origin, while there was debate at Gleneagles itself on a precise date for ending agricultural export subsidies. In the end all points were covered in the summit documents, but only in general terms. There were also some useful national and EU pledges to help in trade capacity building. At first sight, therefore, the results from Gleneagles on trade were disappointing, as they have been from almost all recent summits. But the G8 heads could redeem their reputation if they intervene later in the year to improve the prospects for the WTO Hong Kong meeting.5 Aid The outstanding achievement from Gleneagles was the agreement to double aid to Africa between 2004 and 2010, an extra US$25 billion a year, within a total increase in aid of US$50 billion. This result could only have been agreed to at the summit, requiring late commitments from Bush, Koizumi, and Schroeder. The commitments on aid to Africa formed part of a substantial document setting out G8 intentions and covering peace and stability, good governance, investing in people (education and health), promoting growth, financing, and follow-up (G8 2005a). The preparations on Africa were laborious. The UK’s preferred instrument for increasing aid flows was the International Finance Facility (IFF), which Brown had been promoting for several years. Its purpose was to accelerate aid disbursement by raising funds now on the bond market against repayment out of aid resources from later years. But while European G8 countries were prepared to endorse this concept, with some conditions, the U.S., Japan, and Canada refused to entertain it, so that it could not be used as the main vehicle for new aid. It survived only as a minority project, to be used initially to raise funds for an immunisation programme, possibly in association with international taxation of air travel. Similarly, the UK had hoped to read across from the CfA report into the document prepared for the summit (see CfA 2005). But other G8 members resisted this, notably Japan and Germany, which had not been represented on the commission. They, with Canada, disapproved of this departure from the established procedure based on the G8 APRs. Despite these setbacks, G8 countries came to realise that major increases in aid would be necessary if poor countries in Africa and elsewhere were to have any hope of meeting the MDGs. The approach of the Gleneagles Summit concentrated their minds. The real breakthrough came when the EU decided on 24 May to set a collective target of 0.56 percent of national income in aid by 2010, on the way to reaching the

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long-established 0.7 percent target by 2015. This amounted to doubling EU aid between 2004 and 2010, with at least half going to Africa. National targets by the UK and France promised better performance than this, although Germany and Italy were less secure. Koizumi first announced in April a doubling of aid to Africa over three years and reinforced this at Gleneagles itself by a commitment to increase total Japanese aid by US$10 billion over five years, a welcome reversal of the decline going on since 2000. Canada made no new commitment, but maintained its original targets set for the UN International Conference on Financing for Development at Monterrey in 2002, which included doubling its aid to Africa between 2004 and 2009 and total aid between 2001 and 2010. The U.S. was the last to respond. Bush announced on 30 June that the U.S. would double aid to Africa between 2004 and 2010. This enabled the G8 to announce that aid to Africa would double by 2010, by at least US$25 billion per year, as part of an expected increase of nearly US$50 billion per year in aid to all countries. The US$25 billion increase for Africa, which was close to the recommendation of the CfA, was secure by the time of Gleneagles. But the overall increase of US$50 billion, which was equally important in the context of the forthcoming UN World Summit to review the MDGs, was resisted by the U.S., Japan, and Germany during the preparations and could only be settled at the summit itself. The Americans gave their consent as Bush flew in from Copenhagen; Koizumi decided to announce his US$10 billion aid increase while at Gleneagles, so that Japan could contribute its share of the US$50 billion total, and Schroeder joined the consensus on the final day, despite his officials’ resistance. This was an impressive commitment, both as regards Africa and total aid volume, well in excess of anything the G8 members had promised before. However, the figures need some critical scrutiny. The U.S., Japan, Germany, and Italy all had wide budget deficits and could find it hard to meet their commitments for this reason. American difficulties with Congress were notorious, while the Japanese finance ministry had earlier said there was no money to pay for additional aid. With some countries the gap between committing aid and disbursing it was very wide. The U.S. launched its Millennium Challenge Account (MCA) in 2002 but had only managed two firm commitments by June 2005 (to Madagascar and Honduras); the European Commission’s record for slow spending was no better. Finally, not all aid to Africa went to support economic development there. For example, total U.S. aid looked substantial, at about US$5 billion. But almost all was spent on emergency assistance and food aid, on debt relief, and on the salaries of American technical assistance consultants — very little on in-country development. It was important that the new aid was better focussed on Africa’s needs than the old. In this respect, the detailed provisions of the Africa document should have provided indications of G8 intentions. These, however, were often imprecise, uncoordinated, and lacking in figures. There was a sharp contrast with the CfA’s crisp recommendations of US$7–$8 billion per year for education, at all levels, US$10 billion for health care, and US$10 billion for infrastructure (CfA 2005). Analysis of the G8 document revealed:

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• Peace and Stability This reaffirmed and updated the commitment to train, equip, and transport African peacekeepers made at Sea Island. This was being met quite impressively, despite some tension between the North Atlantic Treaty Organization (NATO) and the EU — the separate G8/AU statement on Sudan notes US$460 million committed to the AU mission there (G8 2005o). From the outset this had been the strongest element of the G8 Action Africa Plan. • Governance There were some useful offers of help, but the main responsibility lay with the Africans themselves. Where the G8 could contribute, on returning looted assets or penalising corruption, the commitments were heavily qualified. • Investing in People — Education and Health There were no costed commitments on education, even though the APR report admitted a shortfall in the US$6 billion per year required in aid for primary education (G8 2005l). On health, there were welcome promises of universal access to AIDS treatment by 2010 and action to reach 85 percent of those vulnerable to malaria. But there was no indication of how these programmes would be funded — not even a figure for the promised replenishment of the Global Fund to Fight AIDS, Tuberculosis, and Malaria. • Promoting Growth Both NEPAD and the CfA gave high priority to agriculture and infrastructure, especially roads and ports, with detailed recommendations. The G8 document had three scattered and uncoordinated paragraphs on agriculture. On infrastructure the document revealed new and welcome support from the G8 and commended the idea of an international infrastructure consortium. But this only dated from May 2005 (as the APR report revealed) and there was no sign of how much G8 countries would contribute. • Coordination and Follow-up An effective follow-up mechanism was important to ensure that the new momentum imparted at the Gleneagles Summit was maintained at lower levels, especially as Russia would have other priorities for the St. Petersburg Summit in 2006. The G8 had decided to strengthen the Africa Partnership Forum (APF), which brought together the APRs with representatives from Africa, other aid donors, and international institutions. Although cumbersome, this has the right composition, but it depends critically on the authority exercised by the APRs and on getting more transparency into the process. Their report did not reveal who the APRs were, but hitherto only the UK had had an APR of ministerial rank (G8 2005l). The G8 document also gave little response to NEPAD criticism of poor coordination and divergent conditionality among the G8 — it still read like the juxtaposition of nine separate aid polices, not a collective strategy. The African leaders did not give a joint press conference at Gleneagles, as they have done at previous summits. But Obasanjo (Nigeria) said it was ‘a great success’ and Mbeki (South Africa) also said he was pleased with it. The increase in aid volume was a tremendous encouragement to them (Blair 2005b). It provided an assurance of adequate funds to finance NEPAD-related activities that had been lacking before. With this assurance, they were better able to overlook the shortcomings in debt

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relief, trade, and detailed development measures. The G8 document said: ‘It is up to developing countries themselves and their governments to take the lead on development’. If the increased aid flows made that possible, the imprecision of the G8’s detailed promises might not matter so much. In presenting the Africa results publicly, Blair (2005a) said they were ‘beginning, not an end’. They were certainly not the end, but they were not the beginning either; rather, they moved the G8’s existing Africa project, in operation since 2001, to a new and more ambitious level. Blair said that they would not make poverty history but showed how this could be done. He stressed the importance of full implementation of the commitments made and suggested — in answer to a journalist — that if fully implemented, they would make poverty history. This was an ambitious claim: even if completely met, many of the undertakings only ran until 2010, while further aid increases would certainly be needed before the 2015 deadline for the MDGs.6 Blair publicly praised the MPH campaign for its dignity, decency, and determination, but warned that the Gleneagles results did not give everything they wanted. The campaign members gave a mixed reaction to the results. The celebrities were delighted that the headline aim of doubling aid for Africa had been achieved — Geldof gave the summit ‘ten out of ten for aid and eight out of ten for debt’. The participating NGOs were initially disappointed and lamented a lost opportunity. This divergence of view was picked up by the media, which generally gave a favourable reaction to the summit outcome. Leading charities, such as Oxfam and Christian Aid, soon recognised that Gleneagles had made progress, if not enough in their eyes, and redirected their efforts to the UN Millennium Review Summit.

Other Political and Economic Issues Middle East Peace Process, Broader Middle East Initiative, and Iraq After Africa and climate change, the most important decision taken by the G8 at Gleneagles was to endorse the strategy set out by James Wolfensohn, the special envoy of the ‘Quartet’ (U.S., EU, Russia, and UN) for advancing the peace process between Israel and Palestine. In their statement on the Middle East peace process, the G8 members specifically gave their support to his financial plan for economic reconstruction in Palestine, costed at US$3 billion per year over three years, although they did not offer precise pledges (G8 2005j). Blair publicly singled out this agreement as a positive example of action to reconcile two peoples and two religions, contrasting it with the destructive purposes of terrorism. The G8 (2005k, 2005i) also issued a progress report on the broader Middle East initiative launched the year before at Sea Island and a review of the situation in Iraq. These contained no new initiatives. But the broad consensus reflected in the three Middle East documents from Gleneagles showed a much easier atmosphere among the G8, as compared with the tensions prevailing at Evian and Sea Island.

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Other Regional Issues The chair’s summary noted discussions on Afghanistan, Lebanon, Zimbabwe and Haiti, as well as UN reform, reinforcing points made at the G8 foreign ministers meeting (G8 2005b). World Economy, Oil, and Intellectual Property The customary statement on the global economy reflected the debate on the first morning (G8 2005h). It expressed predictable concern with high oil prices, but had no operational force. However, it satisfied Schroeder’s strong wish for the summit to address this original economic theme and endorse the Joint Oil Data Initiative (JODI) promoted by Germany. A separate statement on countering piracy and counterfeiting of intellectual property was a joint initiative from the U.S. and France, but simply reported action in hand and did not warrant treatment at the summit (G8 2005m). Response to the Indian Ocean Tsunami A G8 statement reviewed measures to give better early warning of disasters like the tsunami of 26 December 2004, reduce the impact of such disasters, and improve humanitarian responses (G8 2005d). The G8 promised support for action in hand in existing international bodies, such as the UN and its agencies, rather than proposing measures of its own. Nonproliferation The last three summits, since Kananaskis in 2002, had been the occasion for G8 initiatives in nonproliferation. There were no such initiatives at Gleneagles; the G8 statement, which was especially sought by the U.S., reviewed and consolidated action taken earlier (G8 2005f). In particular, the moratorium on transfers of enrichment or reprocessing technology to states that did not have it already, introduced at Sea Island, was renewed for another year, but there was no agreement on a permanent regime. As at previous summits, there were nicely graded messages addressed to Libya, North Korea, and Iran. Counterterrorism and Transport Security The G8 (2005e, 2005n) issued a statement on counterterrorism, to which was attached a progress report on the Secure and Facilitated Travel Initiative (SAFTI) launched at Sea Island. The SAFTI document was prepared well in advance and continued the tradition of issuing documents on transport security at every summit since Kananaskis 2002. It remained doubtful whether this topic, which concentrated on international air and sea travel, deserved the attention of G8 heads.

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The main counterterrorism statement was something of a mystery. A document reviewing existing action had been drafted for issue at the summit; this had to be reworked in the light of the attacks in London. But this statement was the only G8 document not specifically mentioned in the chair’s summary, although this did say ‘we resolved to intensify our work on counter terrorism’. Blair did not refer to this statement in his final press conference, despite having the chance to do so, and Chirac seemed unaware of its existence. Indeed, Blair and the other G8 heads were at pains to stress that they did not allow the terrorist attacks to distract them from their main agenda, which embodied the best way of fighting back against terrorism.

Assessment of the Gleneagles Summit The London terrorist attacks provided one defining feature of the Gleneagles Summit. The G8 heads rose to the challenge thrown down by the terrorists and closed ranks impressively. They insisted on maintaining their existing positive agenda as the best way of countering the negative ethos of terrorism and showing their determination to defend their values of openness and cooperation. If the terrorists hoped to disrupt the summit, they failed totally, although it might have been different had they struck a day earlier. Thanks to the thorough preparations, especially on climate change, the G8 was able to complete its work, despite Blair’s absence for several hours and some sessions being cut short. The closing of ranks in response to the terrorist threat probably helped to resolve some outstanding issues in a positive direction. More generally, the episode demonstrated the depth of solidarity uniting the G8 members, in which the non-G8 participants fully shared. The tensions among the G8 leaders generated by the invasion of Iraq, already fading before Gleneagles, were thoroughly exorcised at the summit. Another defining feature was the widespread positive involvement of civil society. This harked back to the peaceful marches of Jubilee 2000 supporters at Birmingham and Cologne in 1998 and 1999, campaigning for debt relief. But since the Seattle WTO meeting in late 1999 the demonstrations at the summits had turned predominantly negative and hostile, forcing the G8 to meet in secluded, easily protected locations. The MPH movement marked a welcome return to positive campaigning, with the aim of getting the G8 to make generous decisions on Africa and to live up to them. The campaign attracted the favourable attention of the media and served to generate very wide public interest in Africa and concern with African issues. The campaign’s ambitious slogan and its insistence that the G8 leaders themselves had the power to end poverty showed a good understanding of the personal quality of the summit. But this carried the risk of oversimplifying Africa’s problems and raising expectations that could never be satisfied. In the event, even though the Gleneagles results were disappointing to many, they went far enough to avoid a backlash of anger and disillusionment. It was hard to judge how far the civil society pressure influenced the outcome, but its influence was clearly positive. It certainly encouraged the British presidency to aim high on Africa and to negotiate with persistence, as the

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other sherpa teams could not ignore the exceptional public interest in the summit. Early in the preparatory process the sherpas collectively, for the first time, met with a group of NGO representatives lobbying on Africa and climate change. The civil society campaign also had an impact on the other heads as they prepared to come to the summit. This helped to bring positive results at Gleneagles on Africa, as no G8 leader wanted to appear as opposing generous decisions. In chairing his second summit, Blair tried to bring the G8 back to the austere format he had introduced at Birmingham seven years before. He succeeded in sticking to a concise two-part agenda. But in other respects he did not roll back the growing complication of the summit process. The Americans in 2004 had held only one G8 ministerial meeting before Sea Island, apart from the normal pre-summit sessions of foreign and finance ministers. But the UK had four in 2005, reverting to the frequency before Kananaskis and Evian. A fifth, of health ministers, was planned for later in the year, in addition to the inaugural meeting of the new climate change dialogue. The inflation of summit documentation continued unabated. With 14 documents supporting the chair’s summary, Gleneagles compared with Evian and Sea Island in verbosity. Only the climate change, Africa, and Middle East peace process documents deserved direct summit authority. The rest could have been compressed into the chair’s summary or issued at lower levels. But after pressing so hard on its own chosen themes, the UK presidency felt it wise to accommodate other G8 members when they wanted summit statements on additional subjects. Gleneagles marked the third successive summit to hold two outreach meetings with non-G8 countries. It was the first to issue a joint G8/non-G8 document (with the Africans on Sudan), while the UK presidency conducted preparatory negotiations with the so-called Plus Five on climate change. On the original timetable the G8 leaders would have spent as much time on outreach meetings as in sessions among themselves. As Gleneagles showed, this combination was compatible with effective results and helped to give greater legitimacy to the summit’s decisions. But the pressure to expand outreach activities, involve non-G8 countries in the preparations, and issue joint documents was bound to grow, independent of the movement promoted by Martin for a separate ‘L20’ summit roughly based on the G20 finance ministers. The G8 heads needed to make sure that they were in control of their relations with non-G8 powers, rather than allowing salami-like erosion of the intimacy of their meeting. But the legacy of Gleneagles would be judged not on these issues of format but on the results produced by its decisions on climate change and Africa. The two issues were very different. Climate change had been off the summit agenda for years because the G8 members could not agree. (The last serious exchange was at Denver in 1997, where they differed over their approach to the Kyoto protocol.) Making climate change a major topic was a gamble that could have ended in disaster, with agreement further off than ever. In the event, the Americans moved just far enough to allow a new dialogue to begin in which they were fully engaged, together with the major developing countries. The new dialogue started from a modest position, compared to the efforts that would be needed in future to bring down greenhouse gas emissions worldwide. But it gained by being linked to measures to use energy

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more efficiently and develop new energy sources, under the pressure of mounting oil prices. It responded to growing pressure from international business for more predictability in policy. The dialogue should find encouragement from the growing domestic support for stricter measures in the U.S. and it fit in well with the priorities set for the Russian G8 presidency in 2006. The omens for building up a successful momentum looked promising, which could eventually lead the U.S. (and China and India) to accept the same disciplines as the rest of the G8. Making Africa a major item in 2005 was not a gamble but a necessity, if the G8 was to preserve its reputation. The Africa Action Plan launched in 2002 was running out of steam, undermining the Africans’ efforts in NEPAD and the AU. But Blair had foreseen the need for a major push during the UK presidency at least two years before, anticipating that Africa would get low priority from the Americans in 2004 and Russians in 2006. Preparatory action began with Brown’s campaign for an IFF, his parallel advocacy of 100 percent relief on institutional debt, and the creation of the CfA. However, these efforts attracted some resistance by being so clearly labelled as British initiatives, rather than policies developed together with other G8 partners. The U.S. was long reluctant to commit any new funds for Africa, even for debt relief. The EU said the right things on trade and development, but negotiated very toughly in the WTO. Even Canada, normally an ally of the UK in G8 contexts, attacked the IFF and criticised the CfA. This resistance was overcome only slowly and incompletely, so that the IFF fell away, little could be agreed on trade and the Africa document lacked precision. But Gleneagles achievement on aid was outstanding: doubling aid for Africa to US$25 billion per year by 2010, within a total increase of US$50 billion per year to help meet the MDGs. The agreement on debt was also a major advance. Together these commitments gave real hope that African countries could get most of the resources they needed to underpin rates of growth that would bring them out of poverty and to start catching up to more successful areas of the world. The African leaders were left in no doubt that they must fulfil their side of the G8/NEPAD bargain, by providing dynamic and accountable leadership. But those present accepted this responsibility and there was growing evidence of progress, despite some persistent black spots such as Zimbabwe. Unlike the climate change agreement, the results on Africa were not really innovative, since they built on existing foundations, but they were ambitious. The G8/NEPAD partnership achieved liftoff at Kananaskis, but Gleneagles put it into a secure orbit. The climate change and Africa agreements from Gleneagles demonstrated fully the strengths of the 21st-century summit process: the G8’s capacity to strike deals and resolve differences that had persisted at lower levels, as in climate change; its competence in combining political and economic programmes, as in Africa; its ability to take innovative and far-reaching decisions, for which only heads of government had the authority, in both subjects. These virtues were mainly visible in the decisions taken at the summit itself and in the influence it exerted on the preparatory process. Gleneagles reinforced these achievements with powerful evidence of the solidarity of the G8 members and their readiness to conduct collective management. This

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was combined with innovative forms of outreach to non-G8 countries that gave the summit greater legitimacy. But Gleneagles was also intended to address the main weakness of 21st-century summitry. This was the recurrent failure of the G8 to implement summit commitments fully, which reflected reluctance by the G8 heads to overcome domestic resistance to the decisions they had taken internationally. This weakness only became visible in the months and years after the summit, so that the impact of Gleneagles could not be tested immediately. The failure to make much progress in improving trade access, which involved adjustments in domestic policy, was a negative sign in this respect. The commitments on climate change and aid to Africa were also vulnerable to backsliding. But Blair showed himself fully aware of the G8’s summit’s weakness and sought to take precautions against it. He not only insisted publicly on full implementation but also took the unprecedented step of getting all the G8 leaders to sign the climate change and Africa documents as a symbol of their commitment to them. The summit’s most effective weapon against this weakness had been iteration — ensuring that issues can come back to the summit if the momentum of implementation flags or new decisions are needed. Iteration was clearly built into the climate change decisions: there were strong links to the Russian G8 agenda in 2006, while a report would be required for the 2008 summit hosted by Japan. African issues — trade, aid, and debt relief — would be lead items at the meetings of the UN World Summit, the IMF/World Bank, and the WTO later in 2005. But thereafter the prospects for iteration were less clear. The APF had been charged with monitoring implementation, but was not required to report back to the summit again. Africa would clearly not be a high priority for the Russian G8 presidency in 2006. But while Africa need not be on the G8 agenda every year and effective follow-up was necessary at below-summit level, further intervention at summit level would inevitably be required. It might therefore be necessary to make use of two outside sources of pressure on the G8 to live up to their commitments of Africa. The first would come from the Africans, who could insist that the G8 kept up its side of the partnership. Such pressure could clearly be effective — the head of the U.S. Millennium Challenge Corporation was removed after four African presidents complained to Bush. The second came from civil society. The results from the Gleneagles Summit gave development NGOs opportunities to maintain the pressure they had built up during 2005 and to leave all G8 members in no doubt of what is required of them. The German G8 presidency in 2007 would offer a favourable occasion to exploit the strength of civil society in that country, while Japan, as host in 2008, would wish to show that it was as generous as its partners.

Conclusion Blair set ambitious objectives for the 2005 summit. He achieved most of them at Gleneagles, thanks to purposeful preparation and a propitious atmosphere at the summit itself. On climate change the summit started a new dialogue from the

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beginning; on Africa it accelerated a process that is still far from completion. The stimuli imparted at Gleneagles may yet run into the sand, as has happened after other G8 summits. But if the commitments are met and Gleneagles proves a positive turning point in international treatment of Africa and climate change, it should rank among the most fruitful of all the summits since their creation in 1975.

Notes 1 2 3

4 5

6

Kufuor also attended the 2004 Sea Island Summit, and Ghana was the first country to submit to the scrutiny of the African Peer Review Mechanism (APRM). Koizumi had, however, threatened to call new elections if his legislation on privatising the Japanese Post Office failed to pass the Upper House of Parliament later in the year. Germany made no commitments to cover climate change during its G8 presidency in 2007, despite strong popular interest in the subject. This was essentially because of disagreements between the SPD and the Green Party in the current government coalition on how to handle the subject. The IMF forecasted average growth for Africa of more than 5.3 percent in 2005. After a commitment at the third London summit in 1991 to conclude the Uruguay Round of trade negotiations by the end of that year, prime ministers John Major (UK G7 presidency) and Ruud Lubbers (Netherlands EU presidency) tried to get the rest of the G7 to live up to this pledge (Bayne 2005). Although their effort ultimately failed, Blair, holding both the G8 and EU presidencies, decided to do the same. The total aid figure that emerged from the G8 commitments was about US$130 billion by 2010. The report of the UN Millennium Project (2005) estimated worldwide requirements for aid just to meet the MDGs as US$195 billion by 2015, 0.54 percent of total donor national income. Taking this together with other aid requirements, the report calls for all donors to meet the longstanding target of 0.7 percent of gross national income (GNI).

References Bayne, Nicholas (2005). Staying Together: The G8 Summit Confronts the 21st Century (Aldershot: Ashgate). Blair, Tony (2004). ‘PM Speech on Climate Change’. 14 September. (June 2007). Blair, Tony (2005a). ‘British Prime Minister Tony Blair Reflects on “Significant Progress” of G8 Summit’. 8 July, Gleneagles. (June 2007). Blair, Tony (2005b). ‘Statement on the Final Day of the Summit’. 8 July, Gleneagles. (June 2007). Commission for Africa (2005). ‘Our Common Interest’. Report of the Commission for Africa, London. (June 2007). G8 (2005a). ‘Africa’. 8 July, Gleneagles. (June 2007).

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G8 (2005b). ‘Chair’s Summary’. 8 July, Gleneagles. (June 2007). G8 (2005c). ‘Climate Change, Clean Energy, and Sustainable Development’. 8 July, Gleneagles. (June 2007). G8 (2005d). ‘G8 Response to the Indian Ocean Disaster and Future Action on Disaster Risk Reduction’. 8 July, Gleneagles. (June 2007). G8 (2005e). ‘G8 Statement on Counter-Terrorism’. 8 July, Gleneagles. (June 2007). G8 (2005f). ‘G8 Statement on Nonproliferation’. 8 July, Gleneagles. (June 2007). G8 (2005g). ‘Gleneagles Plan of Action: Climate Change, Clean Energy, and Sustainable Development’. 8 July, Gleneagles. (June 2007). G8 (2005h). ‘Global Economy and Oil’. 8 July, Gleneagles. (June 2007). G8 (2005i). ‘Iraq’. 8 July, Gleneagles. (June 2007). G8 (2005j). ‘Middle East Peace Process’. 8 July, Gleneagles. (June 2007). G8 (2005k). ‘Partnership for Progress and a Common Future with the Broader Middle East and North Africa Region’. 8 July, Gleneagles. (June 2007). G8 (2005l). ‘Progress Report by the G8 Africa Personal Representatives on Implementation of the Africa Action Plan’. 8 July, Gleneagles. (June 2007). G8 (2005m). ‘Reducing IPR Piracy and Counterfeiting Through More Effective Enforcement’. 8 July, Gleneagles. (June 2007). G8 (2005n). ‘Secure and Facilitated International Travel Initiative Summit Progress Report’. 8 July, Gleneagles. (June 2007). G8 (2005o). ‘Statement by the G8 and African Union: Sudan’. 8 July, Gleneagles. (June 2007). G8 (2005p). ‘Trade’. 8 July, Gleneagles. (June 2007). Lula da Silva, Luiz Inácio, Jintao Hu, Manmohan Singh, et al. (2005). ‘Joint Declaration of the Heads of State and/or Government of Brazil, China, India, Mexico, and South Africa Participating in the G8 Gleneagles Summit Introduction’. 7 July, Gleneagles. (June 2007). Organisation for Economic Co-operation and Development (2004). ‘African Economic Outlook 2003/2004’. Paris. (June 2007). Organisation for Economic Co-operation and Development (2005). ‘African Economic Outlook 2004/2005’. Paris. (June 2007). United Nations Millennium Project (2005). ‘Investing in Development: A Practical Plan to Achieve the Millennium Development Goals’. United Nations Development Programme, New York. (June 2007).

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Annex: Documents Issued by the G8 at Gleneagles on 8 July 2005 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Chair’s Summary Global Economy and Oil Trade Reducing IPR [Intellectual Property Rights] Piracy and Counterfeiting Through More Effective Enforcement Climate Change, Clean Energy, and Sustainable Development Gleneagles Plan of Action: Climate Change, Clean Energy, and Sustainable Development Middle East Peace Process Partnership for Progress and a Common Future with the Broader Middle East and North Africa Region Iraq Gleneagles Statement on Non-Proliferation G8 Statement on Counter-Terrorism Secure and Facilitated International Travel Initiative: Summit Progress Report G8 Response to the Indian Ocean Disaster and Future Action on Disaster Risk Reduction Africa Statement by the G8 and AU [African Union]: Sudan

These documents are listed roughly in the order in which their subjects were discussed. Other relevant documents are: • Terrorist Attacks in London: Statement by the G8, the Leaders of Brazil, China, India, Mexico, and South Africa and the Heads of International Organisations • Joint Declaration of the Heads of State and/or Government of Brazil, China, India, Mexico, and South Africa participating in the G8 Gleneagles Summit • Progress Report by the G8 Africa Personal Representatives on Implementation of the Africa Action Plan

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(June 2007). World Trade Organization (2006). ‘Recommendations of the Task Force on Aid for Trade’. WT/AFT/1. 27 July. Geneva. (June 2007). World Trade Organization (2007). ‘Disputes by Country’. Geneva. (June 2007). Zarrilli, Simonetta (1999). ‘WTO Sanitary and Phytosanitary Agreement: Issues for Developing Countries’. Trade-Related Agenda, Development and Equity Working Paper 3, South Centre, Geneva. (June 2007).

Index 0.7 percent of gross national income 17, 27, 32, 58, 62, 71, 87–88, 122, 138, 190, 278 Abacha, Sani 150 Abe, Shinzo 39 Action Africa Plan 271 Action Aid 45 Adams, Christopher 40 Adeniyi, Olusegun 175 Advisory Centre on WTO Law 224 Afghanistan 60, 61, 63, 64, 69, 116, 187, 273 Africa 4, 6, 8, 10, 12, 14, 16, 18, 26, 27, 29, 30, 33, 34–35, 39, 49, 50, 55, 58, 64, 66, 77, 79, 93, 104, 110, 115, 126, 136, 143–154, 155, 188, 192, 208, 219, 221, 224, 226, 229, 239, 275, 277. See also East Africa, sub-Saharan Africa, West Africa aid 46, 71, 81, 87, 105, 105–106, 138, 144, 188, 189, 193, 197, 269–272 Gleneagles Summit See Gleneagles Summit: Africa gross domestic product 155 Heiligendamm Summit 29, 39 St. Petersburg Summit 38, 50, 111 terrorism 39, 61 trade 90, 205, 237 World Trade Organization 209, 211 Africa (Gleneagles statement) 48, 69, 77, 106, 280 Africa Action Plan 3–4, 5, 6, 10, 15, 16, 34, 40, 45, 66, 69, 121–130, 188, 267, 268, 276

Africa Monitor 141 African, Caribbean, and Pacific countries 90, 205, 210 African Development Bank 50, 59, 82, 88, 151, 238, 239, 267, 268 African Dialogue Follow-Up Mechanism 70 African Economic Outlook 267 African Growth and Opportunity Act (United States) 128 African leaders at G8 summit 3, 8, 9, 14, 38, 55–56, 67, 124, 126, 127, 263. See also Gleneagles Summit: African leaders African Peer Review Mechanism 10, 125, 135, 145, 147–148, 150, 151, 152, 191, 278 African personal representatives 57, 62, 70 African Union 18, 38, 103, 106, 115, 125, 125–126, 129, 134, 135, 145, 147, 148, 149, 151, 152, 190, 209, 263, 268, 271, 276 Africa Partnership Forum 18, 37, 48, 125, 141, 271, 277 Africa personal representatives 40, 44–45, 106, 124–125, 267, 269, 271 Africa Progress Panel 141 Agrawal, Nisha 159 Agreement on Agriculture 207, 208 agricultural subsidies 46, 57, 61, 62, 70, 83, 90, 102, 114, 127–128, 136–137, 138, 140, 153, 191, 206–207, 220, 237, 269 agriculture 17, 34, 125, 126, 157, 160, 203, 205, 208, 210, 215, 223, 237, 256, 258, 271

304

Financing Development

Ahmed, Zafar 159 aid 4, 5, 6–7, 11, 16, 26, 27, 29, 35, 36, 40, 41, 46, 55, 66, 77, 81, 83, 86, 87, 105, 122, 123, 126, 127–129, 138, 144, 147, 151, 162, 170, 174, 177, 188, 211, 213, 226, 236, 238, 239, 267, 269–272, 276, 277, 278. See also official development assistance aid for trade 91, 128, 140, 201, 215 AIDS. See HIV/AIDS airline tax 58, 62, 71, 81, 123, 165, 191 Akkerman, Age 95 Alexander effect 245 Algeria 28, 40, 55, 81, 106, 115, 263 al Qaeda 63 Amorim, Celso 95 Angola 66, 135, 149, 174, 194, 222 Annan, Kofi 141, 151 Anti-Terrorism Centre 106 Antigua and Barbuda 225, 226 Arab League 109 Archbishop of Cape Town 141 Argentina 65, 161, 171, 186, 209, 215, 225, 226 arms control 10, 16, 149 Asia 18, 64, 93, 111, 116, 127, 139, 206, 209, 212, 243. See also East Asia Asia-Pacific Economic Cooperation 109 Asian financial crisis 186, 189, 197, 243 Atwood, Brian 130 Australia 91, 209, 225, 226 avian influenza 64 Bailin, Alison 16 Baker, Andrew 95 Bamako Declaration 146, 147 Bangladesh 203, 209, 210, 225, 226 Bank for International Settlements 164 Barroso, José Manuel 30, 31, 264 Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal 109

BASF 115 Bayne, Nicholas 188, 198 BBC 174 Beattie, Alan 40 Belgium 67, 116, 225, 226 Bello, Walden 83 Bemba, Pierre 152 Benin 207, 222 Benn, Hilary 44 Berlusconi, Silvio 31–32, 38, 61, 62, 66, 67, 264 Bernanke, Ben 244 biodiversity 77, 185 Birmingham Summit 4, 8, 25, 26, 27, 29, 31, 34, 37, 40, 54, 55, 56, 64, 68, 88, 99, 106, 189, 274, 275 Blair, Tony 4, 5, 6, 8, 8–9, 9, 14, 15, 25, 26, 28, 30, 36, 39, 45, 46, 47, 54, 56, 60, 64, 66, 67, 69, 79, 82, 82–83, 84, 86, 87, 89, 94, 95, 99–100, 103, 104, 106, 114, 122, 127, 140, 143, 145, 151, 172, 197, 253, 272, 274 Africa 32, 121, 126, 144 as G8 host 31, 33, 38, 43, 44, 54, 55–57, 59, 66, 67, 71, 81, 105, 133, 144, 189, 264, 264–265, 267, 272, 274, 275, 276, 277–278, 278 climate change 32, 47, 92, 93 European Union presidency 32, 57, 62, 67, 144, 278 Blanke, Jennifer 165 BMENA 57, 60, 61, 62, 63, 66, 68, 103, 106 Bolivia 215 Bolton, John 87 Bonn Summit 1978 14, 31, 33, 39 Bono 79, 80, 122, 231, 263 Boote, Anthony 95 Botswana 176, 187, 215, 222 Bout, Victor 149 Bouteflika, Abdelaziz 40, 55, 115, 263 BP 47

Index

Brady, Courtney 71 Bratislava Nuclear Security Initiative 111 Brazil 28, 36, 47, 53, 54, 56, 63, 81, 90, 91, 92, 93, 100, 109, 186, 205, 209, 210, 212, 215, 225, 226, 257, 263 Bretton Woods 228, 241, 242–243 Broader Middle East and North Africa. See BMENA Brown, Gordon 9, 35, 36, 39, 56, 57, 58, 68, 79, 80, 81, 83, 86, 88, 89, 94, 123, 145, 268, 269, 276 Brown, Robert 130 Bu, Yisheng 159 Buchanan, Mike 155 Bulgaria 216 Burkina Faso 195, 196, 207, 222 Burnside, Craig 86, 192 Burundi 125, 148, 222 Bush, George 27, 32, 39, 54, 56, 61, 64, 65, 66, 67, 69, 101, 104, 111, 127, 227, 236, 237, 244, 253, 254, 263, 264, 269, 277 aid 46, 87, 126, 270 as G8 host 31, 54, 55 climate change 32, 36, 39, 53, 93, 245, 258, 266 Bush administration 12, 238, 239, 254, 267 CAFOD 45, 79, 83 Cairns alliance 210 California 36, 255, 267 Cameroon 222 Canada 27, 31, 32, 35, 38, 39, 40, 46, 54, 56, 58, 60, 61, 62, 64, 65, 66, 67, 70, 88, 91, 92, 93, 108, 110, 146, 147, 223, 224, 225, 226, 258, 264, 265, 268, 269, 276 aid 40, 87, 191 gross domestic product 62 capital 3, 16, 157, 159, 160, 163, 169, 180–181, 186, 194, 242, 243

305

Cap Verde 163 carbon emissions 14, 53, 101, 111, 191, 253, 255, 256, 258. See also greenhouse gases carbon energy 49, 101, 109 carbon trading 38, 41 Caribbean Development Bank 89 Carter, Jimmy 31 Catholic Agency for Overseas Development. See CAFOD Central African Republic 222 Central Emergency Response Fund 50 Centrica 112 Chad 196, 207, 222 Chair’s Summary (Gleneagles statement) 28, 81, 82, 95, 263, 265, 267, 273, 274, 275, 280 Chauvet, Lisa 177 Chechnya 63, 64, 103–104 chemical weapons 26, 113, 116 Cheney, Dick 255 Chernobyl 108 Chile 191, 215, 225, 226 Chiluba, Frederick 150 China 11, 18, 27, 28, 36, 47, 53, 56, 58, 61, 63, 65, 66, 81, 83, 90, 92, 93, 100, 101, 109, 110, 124, 136, 139, 149, 153, 155, 173, 205, 206, 210, 215, 221, 225, 226, 243, 245, 246, 247, 248, 249, 250, 257, 263, 267, 276 Chirac, Jacques 27, 28, 31–32, 32, 38, 66, 67, 100, 108, 114, 263, 264, 265, 267, 274 as G8 host 188 Chrétien, Jean 67 Christian Aid 45 Civil G8 71 civil society 5, 6, 7, 9, 10, 11, 13, 14, 19, 35, 36, 45, 47, 56, 57, 67–68, 71, 74, 134, 137, 145, 187, 189, 191, 195, 198, 277 Clark, Charles 59 Clean Development Mechanism 92

306

Financing Development

clean energy 37, 48, 49, 64, 82, 100, 266 Clemens, Michael 195 climate change 4, 7, 8, 9, 12, 26, 26–27, 27, 30, 32, 34, 35, 36, 37, 38, 39, 48, 49, 50, 53, 60, 61, 63, 68, 71, 77, 79–80, 83, 91–93, 94, 100, 109, 110, 140, 185, 253–259, 264, 275, 276, 277, 278. See also Kyoto protocol; Gleneagles Summit: climate change Exeter conference 36, 47 Climate Change, Clean Energy, and Sustainable Development 45, 48, 69, 82, 92, 100, 265, 266, 280 Climate Science Program 255 Clinton, Bill 31, 34, 93, 99, 188, 256 Clinton administration 254, 256 Codex Alimentarius 223 Cold War 25, 33, 86, 99, 149, 187, 188, 189, 192, 220 Collier, Paul 177, 187 Cologne Summit 27, 29, 31, 34, 35, 161, 268, 274 Colombia 215, 225, 226 Comic Relief 45 Commission for Africa 4, 6, 10, 14, 15, 16, 18, 36, 40, 45, 54, 55, 57, 79, 105, 122, 124, 127, 133–141, 143, 144–145, 149, 151, 163, 173, 197, 236, 263, 270, 271, 276 Commission on the Private Sector and Development 237 Committee of Twenty 228 Common Agricultural Policy 203, 220 Common Market for Eastern and Southern Africa 205 Commonwealth 10, 62, 145–146, 147, 148, 150, 151–152 heads of government 145, 146 Commonwealth Expert Group on Development and Democracy 145, 150

Commonwealth Ministerial Action Group 147 Commonwealth of Independent States 113, 116 Commonwealth Working Group on Asset Repatriation 153 Comprehensive Nuclear Test Ban Treaty 108 concert equality model 8, 15, 73 Conference of the Parties. See also United Nations Framework Convention on Climate Change: Montreal meeting conflict prevention 10, 16, 46, 53, 122, 123, 135, 148–149, 152, 186–187 Congo 64, 66, 125, 149, 222 Connolly, John 241 Consultative Group of Eighteen 228, 229 Convention on Biological Diversity 34, 258 Convention on Combating Bribery of Foreign Public Officials in International Business Transactions 151 Corbridge, Stuart 85 corruption 10, 16, 46, 59, 66, 69, 123, 124, 126, 143, 149–151, 152, 153, 156, 159, 160, 163, 173, 176, 237, 239, 271 Costa Rica 93, 225, 226 Côte d’Ivoire 177, 191, 222 cotton 90, 91, 128, 207, 237 Council of Economic Advisers 244 Council on Foreign Relations 114, 130 counterterrorism 59, 71, 103, 105, 273–274 crime 29, 59, 70, 150 Croatia 225, 226 Cuba 215 cybercrime 59 Czech Republic 225, 226

Index

Darfur 61, 64, 65, 66, 106, 125, 135, 152 Debt AIDS Trade Africa (DATA) 45 debt relief 3, 4, 5, 6–7, 9, 11, 16, 17, 26, 27, 29, 30, 32, 34, 35, 35–36, 36, 37, 38, 39, 41, 46, 50, 53, 55, 58, 59, 60, 65, 66, 69, 70, 79, 81, 83, 87, 88, 89, 105, 123, 127, 129, 138, 139–140, 145, 147, 151, 153, 161–162, 163, 172, 174, 175, 190, 235, 238, 267, 268, 270, 271, 274, 276, 277 decommissioning submarines 111, 113, 116 deforestation 159, 186, 258 Degnbol-Martinussen, John 187 de la Torre, Augusto 176 democracy 5, 16, 46, 54, 60, 65, 66, 71, 81, 104, 114, 145–148, 152, 173, 174 Democratic Republic of Congo 152, 155, 156, 174, 175, 222 demonstrations 68, 74, 83, 263–264 Denmark 116, 225, 226, 270 Denver Summit 31, 99, 108, 188, 275 Department for International Development (United Kingdom) 188, 230 derivatives 243 desertification 58, 159, 186 Despres, Emile 244 Detroit 108 Deutsche Bank 47 developed countries 7, 45, 61, 84, 86, 92, 110, 112, 126, 143, 150, 151, 176, 186, 202, 206, 208, 210, 211, 212, 214, 228, 231, 236, 250, 257, 258, 259 developing countries 6, 7, 8, 11–12, 14, 17, 18, 25, 27, 28, 35, 48, 50, 53, 77, 79, 81, 82, 84, 85, 86, 92, 105, 106, 107, 109, 113, 127, 153, 176, 185–186, 191, 194, 197, 201, 204, 205–211, 211, 212, 213, 215,

307

220, 221, 227, 229, 235, 236, 237, 238, 239, 256, 258, 263, 264, 265, 266, 268, 272, 275. See also emerging economies Development Assistance Committee 50, 86, 115, 164, 193 development ministers 77 Dialogue on Climate Change, Clean Energy, and Sustainable Development 82, 92, 266, 277 Dialogue on Sustainable Energy 70 Dion, Stéphane 92 Djibouti 222 Dobson, Hugo 95 Doctrine of Odious Debts 162 Doha Development Agenda 6, 11, 12, 14, 18, 19, 35, 36, 38, 46, 65, 79, 89, 90, 102, 127, 140, 201–216, 219, 220, 223, 227, 229, 237, 269 dollar 12, 165, 166–169, 241–242, 244 Dollar, David 86, 192 dollarization 171, 243 Dominican Republic 215, 225, 226 Donnelly, Martin 56 drugs. See medicines; narcotics East–West relations 33 East Africa 174 East Asia 186, 189, 229 Easterly, William 177, 193 Eastern and Southern Africa AntiMoney Laundering Group 151 Economic and Financial Crimes Commission 150 Economic Community of West African States 210 Economic Freedom of the World 165–166, 167, 169, 170 economic growth 7, 12, 18, 19, 46, 47, 50, 61, 62, 63, 65, 86, 88, 101, 102, 103, 136, 171, 177, 180–181, 186, 192, 206, 211, 212, 219, 223, 236, 237, 238, 241, 242, 243, 245–246, 247, 248–250

308

Financing Development

Africa 45, 126, 127, 128, 136, 137, 145, 153, 164, 193, 267, 269, 271, 276, 278 Tanzania 11, 157, 158, 159, 160, 161, 166, 174 economy 12, 14, 31, 68, 101–102, 107, 136, 145, 258, 264, 273 ECOWAS 210 Ecuador 171, 215, 225, 226 Edinburgh 56, 68, 80, 83, 263 education 10, 29, 30, 36, 46, 49, 50, 82, 103, 107, 122, 124, 126, 127, 135–136, 138, 140, 143, 153, 158, 161, 171, 172, 175, 176, 189, 191, 195, 196, 198, 267, 269, 270, 271 Education for All Fast Track Initiative 50 education ministers 81 Egypt 56, 103, 115, 210, 225, 226 El Salvador 215 emerging economies 48, 68, 81, 82, 83, 186, 188, 221, 241, 242. See also developing countries emission trading 255, 256, 257 employment ministers 81 energy 9, 29, 31, 37, 47, 48, 48–49, 50, 53, 58, 60, 61, 62, 63, 64, 65, 66, 101–102, 107, 107–112, 191, 198, 228, 265, 266, 275–277 energy crisis 63, 101, 107 Energy Investment Framework 50 energy ministers 47, 70, 81, 108, 109 Engberg-Pedersen, Poul 187 Enhanced HIPC Initiative 34, 163. See also HIPC Initiative ENI 112 environment 30, 34, 47, 49, 51, 63, 65, 91–93, 160, 187–188, 225, 228, 258 environment ministers 47, 70, 77, 81, 92, 109 E.ON 115 Equatorial Guinea 115

Ethiopia 28, 40, 56, 81, 89, 105, 115, 128, 176, 196, 263 euro 243, 245, 247, 248, 249, 250 Europe 25, 100, 127, 150, 258 European Bank for Reconstruction and Development 116 European Central Bank 245, 247 European Commission 30, 48, 264, 270 European Community 220, 225, 226 European Monetary Union 165, 247 European Union 27, 29, 31, 32, 41, 57, 60–61, 62, 65, 66, 70, 77, 87, 90, 91, 101, 104, 114, 116, 134, 151, 152, 209, 224 243, 264, 256, 271, 272, 278 Africa 27, 106, 122, 144, 151 agriculture 128, 137, 206 aid 46, 71, 87, 138, 144, 188, 190, 269–270 climate change 38, 93 Council 57, 247, 264, 266 gross domestic product 62 presidency 67, 100, 133, 144, 278 trade 36, 127, 128, 203, 204, 206, 219, 269, 276 Evian Summit 3, 27–28, 28, 40, 44, 47, 55, 57, 67, 110, 188, 265, 267, 272, 275 exchange rates 165, 168, 240, 241–250 Exeter conference on climate change 36, 47 Experts on IPR Piracy and Counterfeiting 70 Extractive Industries Transparency Initiative 50, 125 famine 53, 58, 155, 267. See also food security fast track authority. See trade promotion authority Federal Reserve Bank of New York 245 Federal Reserve System 246

Index

finance ministers 36, 46, 53, 59, 67, 70, 81, 88, 105, 115, 235, 268, 275 finance sous-sherpas 43 Financial Action Task Force 151 financial crisis 246 1971 244 1997. See Asian financial crisis Finland 113, 116 Focus on the Global South 83 food security 122, 123, 127. See also famine Ford 47 foreign affairs ministers 59, 60, 70, 81, 273, 275 foreign affairs sous-sherpas 43–44, 45, 49 foreign development investment 236, 237, 239 foreign direct investment 3, 12, 16, 144, 160, 194, 241, 244 Forum for the Future 106 Fowler, Robert 57 Fox, Vicente 56, 263, 268 France 27, 31, 32, 35, 39, 40, 57, 60, 62, 66, 67, 70, 88, 99, 104, 114, 116, 123, 147, 151, 170, 174, 185, 190, 224, 225, 226, 254, 258, 263, 264, 266, 268, 270, 273 as G8 host 55 Francophonie 10, 62, 146–147 Fraser Institute 165, 167 Freedom, Prosperity, and Security: The G8 Partnership with Africa, Sea Island 2004 and Beyond 130 Friends of the Earth 267 G7 25, 29, 30, 31, 33, 39, 40, 65, 67, 100, 107, 109, 110, 114, 188, 189, 190 G8 3, 5, 7, 10, 12, 13, 18, 19, 26, 91, 150–151, 172, 176, 185, 194, 201, 215, 228, 230, 246. See also specific summit

309

commitments 8, 9, 10, 14, 15, 18, 19, 25–26, 29–30, 50, 71, 75–76, 121, 277. See also Gleneagles Summit: commitments compliance 19, 31, 70, 75–76 performance 5, 8–9, 14, 54, 63–68 Russia 9, 99 G8 Plays 56 G8 Research Group 71, 125, 172, 189, 192 G8 Response to the Indian Ocean Disaster and Future Action on Disaster Risk Reduction 44, 69, 103, 273, 280 G8 Statement on Counter-Terrorism 105, 273, 274, 280 G10 210, 216 G20 developing countries 90–91, 203, 205, 210, 215 G20 finance ministers and central bank governors 57, 275 G33 90 G77 205 G90 90, 210 G110 90, 91 Gabon 191, 215, 222 Galbis, Vicente 156 The Gambia 148, 152, 153, 222 gas 101, 102, 107, 110, 111, 115 Gaza 60, 103 Gazprom 112, 115 GE 256, 267 Geldof, Bob 45, 56, 80, 83, 122, 219, 231, 263, 272 gender equality 16, 176 General Agreement on Tariffs and Trade 205, 208, 213, 214, 220, 221, 224, 228, 229 Genoa Summit 26, 34, 40, 55, 57, 122, 188, 192 genocide 61, 65, 172 Georgia 115

310

Financing Development

Germany 9, 31, 34, 35, 38, 39, 40, 60, 62, 66, 67, 77, 87, 101, 102, 104, 110, 111, 115, 116, 140, 147, 190, 254, 255, 258, 263, 264, 268, 269, 270, 273, 278 as G8 host 26, 39, 50, 71, 99, 113, 153, 189, 191, 277 Ghana 28, 40, 55, 81, 115, 124, 135, 147, 176, 196, 210, 222, 263, 278 The Girl in the Café 56 Gleneagles Plan of Action: Climate Change, Clean Energy, and Sustainable Development 48, 49, 69, 280 Gleneagles Statement on NonProliferation 103, 104, 273, 280 Gleneagles Summit 3–5, 6, 8, 7–9, 13–17, 25–41, 43–51, 53–71, 74, 79–95, 99–107, 102, 114, 122, 133, 134, 135, 137, 139, 141, 143, 152, 165, 191, 193, 197, 219, 230, 236, 239, 253, 263–278 Africa 3, 4, 8, 9, 18, 25, 28, 32, 35, 35–36, 36, 37, 38, 39, 40, 43, 44–46, 48, 53–54, 55, 58, 68, 70, 81, 121, 123, 125, 127, 130, 151, 153, 172, 174, 189, 263, 265, 267–272, 274–275, 278 African leaders 8, 28, 55–56, 67, 68, 104, 263, 264, 271 agenda 9, 25–26, 28, 30, 38, 44–48, 55, 68–69, 79, 94 aid 35, 77, 81, 269–272, 276 climate change 8, 9, 28, 36, 37, 38, 39, 43, 46–48, 53, 55, 56, 58, 70, 81, 82, 100–101, 263, 265–267, 275, 277 commitments 5, 25, 37, 39, 50, 70, 71, 139, 277. See also G8: commitments debt relief 35–36, 81, 268 outreach 28, 113, 263–264, 275 performance 63–68

trade 36, 89, 127, 268–269 Global Bioenergy Partnership 70 Global Call to Action against Poverty 45 Global Campaign Against Poverty 80 Global Economy and Oil 69, 101, 273, 280 Global Fund to Fight AIDS, Tuberculosis, and Malaria 50, 88, 128, 271 global governance 5, 8, 11, 14, 19, 43, 51, 53, 70, 73, 81, 107, 113, 185, 187–192, 192, 239 Global HIV Vaccine Enterprise 69 globalisation 11, 14, 25, 28, 40, 84–93, 187, 188, 192, 198, 244, 249 Global Monitoring Report 143, 219 Global Nuclear Energy Partnership 113 Global Partnership against the Spread of Weapons and Materials of Mass Destruction 26, 29, 62, 104, 113, 116 Global Polio Eradication Initiative 123 Global Trade and Financial Architecture Project 230 Global Watch 45 Gnassingbé, Faure 146 gold 241 Gorbachev, Mikhail 99, 106 Gorny 116 governance 3, 11, 16, 29, 36, 46, 49, 53, 66, 121, 123, 124, 126, 135, 136, 143, 147, 151, 172, 176, 177, 187, 196, 197, 230, 237, 267, 269, 271 Gramsci, Antonio 219 Greece 225, 226, 243 greenhouse gases 12, 27, 36, 39, 47, 82, 91, 93, 100, 110, 113, 253, 253–255, 257, 265, 266, 267, 275. See also carbon emissions Green Room 210, 211, 216 gross domestic product 62, 63, 65, 155, 171, 180, 186, 187, 191, 196, 207, 241, 244

Index

gross national income 236. See also 0.7 percent of gross national income Growth Competitiveness Index 165, 166 Guatemala 215, 225, 226 Guinea 222 Guinea-Bissau 148, 222 Gulf of Mexico 63 Haiti 60, 62, 273 Hanke, Steve 156, 171 Harare Declaration 146 Harder, Peter 57 Harper, Stephen 38 health 36, 46, 48, 62, 82, 83, 103, 121, 122, 124, 125, 126, 127, 135–136, 138, 143, 153, 155–156, 158, 161, 175, 176, 187, 196, 198, 221, 238, 267, 269, 270, 271. See also infectious diseases health ministers 275 heavily indebted poor countries. See HIPCs hedge funds 62, 65, 66 Heidelberg University 187 Heiligendamm Summit 8, 9, 26, 29, 38, 39, 49, 50, 71, 113, 125, 139, 140, 141, 189, 191, 278 Heller, Peter 129 Hernández-Catá, Ernesto 156 Hettne, Björn 85 High Representative for Common Foreign and Security Policy (European Union) 104 HIPC Initiative 88, 105, 123, 140, 162, 190. See also Enhanced HIPC Initiative HIPCs 35–36, 46, 59, 77, 81–82, 89, 95, 144, 151, 161–162, 175, 176, 238, 239 HIV/AIDS 46, 50, 82, 122, 123, 126, 128, 143, 155, 159, 176, 187, 191, 271 HM Treasury 164 Hoeffler, Anke 187

311

Hokkaido Toyako Summit 39, 48, 50, 140, 189 home affairs ministers 59, 70, 81 Honduras 196, 215, 225, 226, 270 Hong Kong 225, 226 Hong Kong ministerial. See World Trade Organization: Hong Kong ministerial Hotel Rwanda 165 Hu Jintao 56, 263 Human Development Index 155, 161 humanitarian aid 17, 44, 86, 106, 126, 129, 236–237, 238, 273 human rights 60, 124, 146, 147, 152, 153 Hungary 225, 226 hydrocarbons 64–77, 109, 110–118 Iceland 216 ILEAP 231 Immelt, Jeffrey 256 immigration 59, 151 immunisation 35, 53, 88 Index of Economic Freedom 165 India 27, 28, 36, 38, 41, 47, 53, 54, 56, 63, 65, 81, 83, 90, 91, 92, 93, 100, 136, 139, 205, 206, 209, 210, 215, 225, 226, 257, 263, 267, 276 Indonesia 63, 66, 109, 110, 225, 226, 243 industrialised countries. See developed countries infectious diseases 26, 30, 38, 39, 49, 64, 155–156, 169, 185, 189, 191. See also health inflation 62, 101, 107, 165, 166, 167, 171, 188, 242, 245, 246–248 information and communication technologies 26, 160–161 Infrastructure Consortium for Africa 140 Integrated Framework for TradeRelated Technical Assistance 214, 230

312

Financing Development

intellectual property rights 103, 112, 209, 220, 221, 273 Inter-American Development Bank 89 Intergovernmental Panel on Climate Change 47 International Atomic Energy Agency 65, 104, 113 International Conference on Financing for Development 14, 16, 34, 40, 87, 164, 235–236, 270 International Development Association 50, 81–82, 89, 105, 151, 161, 239 International Development Committee (United Kingdom) 202 International Energy Agency 48, 49, 65, 100, 102, 110, 263 International Energy Forum 102 International Finance Facility 17, 32, 35, 39, 53, 58, 62, 70, 81, 88, 123, 145, 163, 164–165, 191, 269, 276 International Finance Facility for Immunisation 40, 58, 88, 140 international financial institutions 48, 105, 149, 156, 161, 163, 170, 174, 175, 204 International Lawyers and Economists Against Poverty 231 International Monetary and Financial Committee 57, 89 International Monetary Fund 27, 37, 50, 56, 57, 59, 65, 82, 88, 88–89, 100, 105, 115, 123, 133, 137, 138, 139, 144, 151, 156, 159, 160, 161, 219, 228, 229, 230, 235, 239, 242, 243, 263, 268, 277, 278 International Trade Commission 230 Interpol 59 Investing in Development: A Practical Plan to Achieve the Millennium Development Goals 197 Investment Climate Facility 140, 197 Iran 60, 61, 62, 63, 64, 65, 104, 273

Iraq 5, 8, 25, 27, 37, 41, 57, 61, 62, 63, 64, 66, 87, 104, 110, 115, 129, 187, 188, 189, 238, 272, 274 Iraq (Gleneagles statement) 103, 280 Ireland 225, 226 IS-LM model 244, 250 Israel 112, 216 Italy 31, 35, 38, 39, 40, 60, 61, 66, 70, 87, 88, 113, 116, 190, 248, 264, 270 Jamaica 210 Jammeh, Yahya 152 Japan 25, 31, 32, 35, 39, 40, 46, 60, 61, 63, 65, 66, 70, 77, 80, 87, 88, 91, 92, 93, 100, 101, 110, 111, 122, 123, 127, 140, 185, 191, 212, 216, 225, 226, 243, 246, 254, 258, 264, 265, 268, 269, 270, 278 as G8 host 37, 39, 48, 50, 82, 140, 153, 189, 266, 277 Jay, Michael 28, 43, 56, 57, 59, 68, 100, 265 JODI. See Joint Oil Data Initiative Joint Declaration of the Heads of State and/or Government of Brazil, China, India, Mexico, and South Africa participating in the G8 Gleneagles Summit 28, 263, 265, 280 Joint Oil Data Initiative 102, 110, 273 Jubilee 2000 56, 68, 175, 274 Jubilee Debt Campaign 45 July 7, 2005 8, 25, 28, 36, 37, 53, 68, 69, 70, 81, 83, 100, 104, 105, 106, 114, 121, 264–265, 274 justice ministers 59, 81 Kabila, Joseph 152, 156, 170, 174 Kabila, Laurent Desiré 170 Kananaskis Summit 3, 10, 17, 19, 26, 27, 28, 34, 40, 44, 55, 69, 99, 107, 113, 121, 122, 138, 267, 268, 273, 275, 276

Index

Kazakhstan 116 Kenny, Charles 195 Kenya 147, 151, 152, 160, 176, 222 Keynes, John Maynard 242–243, 249 Killick, Tony 95 Kindleberger, Charles 244 Kirton, John 81 Kohl, Helmut 31, 67 Koizumi, Junichiro 27, 31, 32, 38, 54, 61, 66, 87, 101, 264, 269, 270, 278 Korea 225, 226 Kosovo 26, 27, 29 Kufuor, John 40, 55, 115, 263, 278 Kweka, Josaphat 158 Kyoto protocol 12, 14, 18, 26–27, 35, 39, 49, 53, 54, 55, 61, 82, 83, 91–92, 92, 253, 265, 266, 267, 275. See also climate change L20 275 labour 29, 157, 159, 180, 208, 220, 228, 237 Labour Party 59, 66, 79 Lall, Sanjaya 213 Lamy, Pascal 91, 227, 231 Latin America 93, 206, 207, 209, 229 League of Nations 157 least developed countries 84, 90–91, 112, 115, 140, 202, 203, 205, 206, 207, 208, 209, 210, 211, 213, 215, 227, 230, 231, 244 Lebanon 103, 104, 112, 273 Lesotho 187, 222 Levine, Ross 193 Lewis, Arthur 212 Lewis, Stephen 6 Liberia 125, 148, 149, 171 Libya 268, 273 Liechtenstein 216 liquefied natural gas 63, 110, 115 LISCA effect 244 Live Aid 45, 56 Live Eight 54, 56, 68, 80, 122, 126, 143, 219, 263

313

London Summit 1977 33 London Summit 1984 188 London Summit 1991 99, 188, 278 London terrorist attacks. See July 7, 2005 Lord Resistance Army 152 Louvre Accord 33 Lubbers, Ruud 278 Lula da Silva, Luiz Inácio 56, 95, 263 Lyon-Roma Group 59 Lyon Summit 108, 188 Maastricht Treaty 62, 245 Machimura, Nobutaka 60 MacNamara, Robert 219 Madagascar 89, 222, 270 Maddison, Angus 155 Major, John 278 Make Poverty History 6, 9, 36, 45, 54, 56, 80, 83, 84, 137, 143, 263, 267, 268, 272, 274 malaria 46, 82, 123, 155–156, 176, 238, 271 Malawi 77, 152, 222 Malaysia 109, 215, 225, 226 Mali 124, 207, 222 Mandela, Nelson 126 Manuel, Trevor 40 March for Justice 263 market access 17, 36, 79, 90–91, 112, 127–129, 137, 140, 202, 203, 208, 237, 267 Marshall Plan 145, 163, 176, 236 Martin, Paul 30, 31, 38, 40, 57, 62, 66, 67, 264, 275 Massachusetts Institute of Technology 258 Mauritania 89, 222 Mauritius 191, 210, 216, 222 Mbeki, Thabo 40, 55, 56, 67, 115, 129, 150, 263, 271 McCain/Lieberman bill 254 McMichael, Philip 85

314

Financing Development

Mechanism for Conflict Prevention, Management, and Resolution 148–149 medicines 191, 207, 227 Meeting of the Parties to the Kyoto protocol. See United Nations Framework Convention on Climate Change: Montreal meeting Mercosur 210 Mered, Michael 159 Merkel, Angela 26, 29, 38, 39 as G8 host 140 Mexico 28, 47, 49, 53, 54, 56, 61, 63, 81, 92, 93, 100, 109, 160, 169, 215, 225, 226, 227, 257, 263, 268 micro-credit 6, 13 Middle East 4, 8, 25, 26, 28, 29, 33, 37, 40, 53, 60, 61, 62, 64, 68, 70, 71, 103, 109, 112, 188, 189, 265, 272, 275 Middle East Peace Process (Gleneagles statement) 77, 103, 272, 280 Millennium Challenge Account 12, 123–124, 127, 129, 188, 237, 238, 239, 270 Millennium Challenge Corporation 277 Millennium Development Goals 3–4, 6, 15, 17, 19, 40, 45, 50, 54, 64–65, 79, 80, 86, 87–88, 104, 122, 136, 139, 141, 143, 145, 151, 163, 164, 172, 175, 176, 189, 192, 193, 194–196, 203–204, 204, 211, 215, 219, 267, 269, 270, 272, 276, 278 Millennium Review Summit. See United Nations: Millennium Review Summit Millhouse Capital 115 Mitterrand, François 31, 67 Mkapa, Benjamin 40, 56, 115, 263 Mobutu Sese Seko 150, 170 money laundering 165, 171

Monterrey. See International Conference on Financing for Development Morocco 215 Morrissey, Oliver 158 Moss, Todd 195 most-favoured nation 213 Mozambique 135, 147, 176, 196, 222 Mubarak, Hosni 56, 115 Mugabe, Robert 66 Multi-Fibre Arrangement 203 Multi-National Force 104 multifactor productivity growth 157, 159–161, 180 Multilateral Agreement on Investment 224 Multilateral Debt Relief Initiative 89, 174 Multilateral Investment Guarantee Agency 197 Multilateral Nuclear Environmental Programme 116 multinational corporations 13, 47, 160, 170, 173, 174 Muluzi, Bakili 152 Museveni, Yoweri 56, 152 Namibia 147, 222 Naples Summit 99 narcotics 59, 60, 116 Narlikar, Amrita 95 National Academies of Science 47 National Strategy for Growth and Poverty Reduction (Tanzania) 176 Nazarbayev, Nursultan 116 NEPAD 3, 5, 18, 28, 44, 66, 122, 124, 125, 126, 129, 134, 144, 145, 148, 151, 188, 197, 267, 268, 271, 276 Netherlands 57, 113, 114, 116, 225, 226, 278 New International Economic Order 229

Index

New Partnership for Africa’s Development. See NEPAD New York Mercantile Exchange 63 New Zealand 225, 226 Nicaragua 89, 196, 215, 225, 226 Niger 222 Nigeria 28, 40, 44, 46, 55, 61, 63, 66, 77, 81, 110, 115, 123, 129, 150, 151, 152, 176, 194, 210, 222, 263, 271 Noble, Ron 59 nongovernmental organisations 13, 36, 45–46, 56, 80, 83, 93, 95, 109, 126, 137, 147, 170, 175, 193, 194, 198, 231, 237, 267, 272, 275, 277 nonproliferation 26, 27, 29, 34, 68, 69, 70, 103, 104, 108, 113, 273 Nord, Roger 159 North 9, 18, 70, 84, 86, 94, 107, 192 North-South 93, 187, 198 North America 25, 127, 137 North Atlantic Treaty Organization 106, 271 North European Gas Pipeline Company 115 North Korea 60, 61, 62, 63, 64, 65, 104, 248, 273 Norway 63, 113, 116, 191, 216, 225, 226 Novorossiysk 102 nuclear energy 63, 65, 102, 108, 109–110, 111, 112, 113, 258 nuclear explosion 64 Nuclear Material Accounting and Control and Physical Protection 115 nuclear safety 111 Nuclear Safety (Nuclear Safety and Security Summit document) 115 Nuclear Safety and Security Summit 99, 108, 111 nuclear weapons 26, 60, 62, 64, 68, 104, 108, 116 Nyerere, Julius 157

315

Obasanjo, Olusegun 40, 55, 115, 129, 151, 263, 271 Obstfield, Maurice 249 Odell, John 31 official development assistance 3, 6, 11, 12, 14, 16, 17, 50, 53, 55, 58, 60, 62, 65, 69–70, 71, 77, 86–88, 89, 105–106, 122, 140, 163, 169, 175–176, 185–199, 235–239. See also 0.7 percent of gross national income; aid oil 61, 62, 63, 65, 68, 101–102, 107, 108, 110, 115, 123, 125, 143, 206, 245, 249, 273 Okinawa Summit 40, 122 Olympics 32, 69, 114, 264 Organisation for Economic Co-operation and Development 50, 61, 86, 109, 115, 116, 151, 188, 193, 207, 220, 224, 226, 228, 231, 237, 267 Organization of African Unity 135, 145, 148 Organization of Petroleum Exporting Countries 110 Our Common Interest 45, 55, 122, 124, 134–135, 137, 137–138, 139, 144–145, 151, 173, 197, 269 outreach 5, 8, 25, 28, 67, 74, 81, 100, 101, 113, 263–264, 275. See also Outreach Five; Plus Five Outreach Five 9, 29, 82 Oxfam 40, 41, 86–87, 175 Pakistan 64, 146, 215, 225, 226 Palestine 29, 103, 112, 272 Palestinian Authority 70, 112 Pan-African Parliament 135 Panama 225, 226 Panitchpakdi, Supachai 102, 268 Papua New Guinea 93 Paraguay 215 Paris Club 44, 77, 151, 161 Paris Summit 34, 99, 188

316

Financing Development

Partnership for Progress and a Common Future with the Broader Middle East and North Africa Region 280 Paua, Fiona 165 peace 16, 29, 49, 50, 71, 135, 137, 152, 153, 186, 267, 269, 271 Peace and Security Initiative 148 peacekeeping 29, 46, 106, 123, 125, 271 peace support 69, 123, 190 Perkins, John 175 Persian Gulf 101 Peru 215, 225, 226 philanthropy 6, 13, 17 Philippines 109, 225, 226 piracy 103, 273 Plaza Accord 33 Plus Five 14, 47–48, 56, 68, 70, 92, 93, 100, 101, 102, 105, 113, 275. See also outreach; Outreach Five Poland 113, 225, 226 polio 62, 69 political directors 43, 103 Porter, Michael 166 Portugal 225, 226 poverty reduction 45, 46, 47, 51, 82, 94, 111, 121, 122, 127, 135, 143, 145, 160, 170, 176, 186, 192, 193, 195, 202, 203–204, 219, 236, 267 Poverty Reduction Strategy Papers 174, 195–196 Prebisch, Raúl 212 President’s Emergency Plan for AIDS Relief 238 private sector 16, 39, 47, 53, 103, 111, 122, 123, 125, 126, 134, 136, 137, 147, 155, 167, 168, 170, 197, 198, 212, 237 Prodi, Romano 38 Programme for Preventing and Combating Illicit Trafficking in Nuclear Material 108

Progressive Governance Network 95 Progress Report by the G8 Africa Personal Representatives on Implementation of the Africa Action Plan 280 Proliferation Security Initiative 104 protectionism 136, 206, 207, 207–208 protests. See demonstrations Purushothaman, Roopa 155 Purvis, Nigel 259 Putin, Vladimir 27, 29, 48, 54, 60, 62, 66, 102, 103, 105, 106, 111, 115, 264 as G8 host 62, 107 Putnam, Robert 31 Quarmby, Katharine 95 Quartet 29, 60, 103, 272 Quebec 62 Queen Elizabeth II 68, 264 Rajan, Raghuram 193 Rambouillet Summit 33, 80, 107 Rato, Rodrigo 115 Reagan, Ronald 31, 33 reconstruction 187 Reducing IPR Piracy and Counterfeiting Through More Effective Enforcement 103, 273, 280 Reinhart, Carmen 162 remittances 6, 13, 17, 194, 237 renewable energy 30, 49, 70, 111, 255, 266 renminbi 248 research and development 110, 157, 254–255, 266 Rogoff, Kenneth 162, 249 Romania 225, 226 Roodman, David 193 Roosevelt, F.D. 176 Royal Institute of International Affairs 56 rule of law 66, 238

Index

Russia 9, 26, 29, 32, 34, 37, 38, 46, 48–49, 54, 60, 61, 62, 64, 65, 66, 70, 71, 77, 92, 99–116, 116, 151, 186, 188, 190, 264, 265, 272 as G8 host 26, 39, 40, 49, 54, 57, 60, 71, 82, 99, 112–113, 124, 153, 189, 266, 271, 276, 277 as G8 member 25, 67, 99 World Trade Organization 112, 115 Russian Academy of Sciences 105 Rwanda 89, 135, 147, 163, 165, 175, 222, 227 Sachs, Jeffrey 6, 40, 137, 155, 159, 160, 163, 176, 197 Safe and Effective Management of Weapons Fissile Material Designated As No Longer Required for Defence Purposes 115 Sala-i-Martin, Xavier 165 Salant, Walter 244 Sanitary and Phytosanitary Agreement 223, 231 Sarkozy, Nicolas 39 Saudi Arabia 62, 63, 93, 110, 115, 249 Scandinavia 115 Schiavo, Terri 227, 231 Schmidt, Helmut 31 Schmukler, Sergio L. 176 Schroeder, Gerhard 27–28, 31, 32, 34, 38, 62, 66, 66–67, 101, 115, 263, 264, 269, 270, 273 as G8 host 31 Schwarzenegger, Arnold 255 science 109, 128, 254, 266 Sea Island Summit 3, 25, 28, 37, 40, 54, 55, 55–56, 61, 67, 103, 109, 113, 123, 124, 130, 188, 265, 268, 271, 272, 273, 275

317

Secure and Facilitated International Travel Initiative: Summit Progress Report 280 Secure and Facilitated Travel Initiative 106, 273–274 security 16, 27, 29, 49, 50, 103, 106, 121, 135, 137, 185, 267 Senegal 28, 40, 55, 81, 89, 115, 163, 176, 222, 263 September 11, 2001 27, 29 Sestanovich, Stephen 114 severe acute respiratory syndrome 64 sherpas 27, 28, 43, 45, 48, 55, 56–57, 57–58, 59, 63, 73, 80, 92, 100, 103, 114, 265, 265–266 Shuvalov, Igor 57 Siberia 102 Sibneft 115 Sidley Austin LLP 225 Sierra Leone 125, 144, 148, 222 Singapore 109, 225, 226 Singapore issues 204, 210 Singer, Hans 212 Singh, Manmohan 56, 263 Six-Party Talks 104 Slovakia 225, 226 Slovak Republic 225, 226 Slovenia 243 Smith, Adam 175, 214 Smith, Carl 108 Smith, Janel 71 Snow, John 241 Somalia 125 South 9, 11, 70, 84, 86, 94, 107, 192 South Africa 28, 38, 40, 47, 54, 55, 67, 81, 92, 93, 95, 100, 109, 115, 126, 129, 146, 147, 150, 156, 163, 174, 187, 194, 205, 210, 222, 225, 226, 263, 271 South America 243 South Asian Association for Regional Cooperation 210 Southern African Development Community 205, 210

318

Financing Development

South Korea 109, 216, 257 sovereignty 147, 195, 196, 243, 246, 250 Soviet Union 99, 102, 108, 114, 116, 188, 189, 244 Spain 40, 88, 165 special and differential treatment 11, 17, 18, 201, 205, 210, 211–212, 213, 214, 229, 235 special drawing rights 165 Sraffa, Piero 247 Sri Lanka 225, 226 St. Petersburg Plan of Action on Global Energy Security 38 St. Petersburg Summit 8, 26, 29, 38, 38–39, 48–49, 49, 50, 62–63, 64, 103, 107, 111–113, 114, 115, 124, 139, 140, 191, 271 Africa 38, 50, 111, 125 Stability and Growth Pact 245, 246 Statement by the G8 and African Union: Sudan 28, 103, 263, 271, 280 Statement on the Comprehensive Nuclear Test Ban Treaty 108 Statement on Ukraine 108 Stern, Nicholas 38, 41, 49 Stern Report 38, 39, 49, 50 Stiglitz, Joseph 94 Stop AIDS 45 Straw, Jack 40, 68, 100, 265 Strengthening the Global Trade Architecture for Economic Development: An Agenda for Action 230 sub-Saharan Africa 11, 12, 122, 155–157, 158, 163, 169–170, 171, 172, 173, 176, 186, 189, 194, 206–207, 219, 220, 231, 236, 267 Subramanian, Arvind 193 Sudan 28, 60, 66, 103, 106, 125, 135, 153, 155, 263, 271, 275 sugar 203, 204, 206, 211 Sunderland, Laura 71

sustainable development 7, 9, 37, 47, 48, 61, 66, 111, 145, 185, 186, 203 Sutherland, Peter 227, 229 Swaziland 148, 222 Sweden 40, 88, 113, 116, 225, 226 Switzerland 113, 150, 210, 216, 225, 226 Syria 103, 104 Taiwan 216, 225, 226, 248 Tanganyika 157 Tanzania 10, 28, 40, 56, 81, 115, 156–177, 180–181, 196, 222, 263 gross domestic product 157–159, 162, 167, 168, 171, 174, 181 Taylor, Charles 149 Technical Barriers to Trade Agreement 223 technology transfer 49, 53, 66, 157, 160 Teixeira, Carlos 155 Temu, Anna 176 terrorism 4, 8, 25, 27, 28, 29, 36, 39, 53, 60, 61, 63, 66, 68, 69, 70, 81, 83, 103–104, 104, 106, 143, 188, 265, 274 Terrorist Attacks in London (Gleneagles statement) 28, 81, 265, 280 Teunissen, Jan Joost 95 textiles 208, 220 Thailand 109, 215, 225, 226, 243 Thatcher, Margaret 31 The Other Economic Summit 74 3 by 5 initiative 65 Three Mile Island 63 3Rs 109 Thugge, Kamau 95 Tobin tax 165 Togo 135, 146, 147, 148, 222 Tokyo 109 Tokyo Round 209, 224 Tokyo Summit 1979 33 Toronto Summit 188 Toronto terms 34

Index

total factor productivity 159–160 trade 4, 6–7, 11, 14, 16, 17, 18–19, 30, 31, 34, 35, 36, 46, 48, 55, 65, 66, 68, 77, 79, 89–91, 94, 95, 100, 102, 122, 123, 127, 136–137, 138, 139, 153, 191, 201–216, 219–231, 235, 237–238, 239, 242, 247–248, 267, 272, 276, 277, 278 Africa 90 European Union 269 Gleneagles Summit 36, 268–269 Trade (Gleneagles statement) 48, 280 Trade-Related Aspects of Intellectual Property Rights. See TRIPS Agreement trade liberalisation 3, 5, 6, 12, 17, 18, 19, 53, 90, 201, 202, 203, 204, 207, 208, 210, 211, 219, 229, 241, 243, 244 trade ministers 81 trade promotion authority 90, 127 trade unions 45 Transneft 115 transparency 46, 62, 66, 69, 102, 123, 126, 163, 164, 165, 171, 187, 192, 239 transport 198 transport security 34, 110, 273, 273–274 Trinidad and Tobago 225, 226 TRIPS Agreement 214, 227 TRIPS Agreement and Public Health 227 tsunami 44, 64, 69, 70, 103, 273 tuberculosis 46, 82, 155–156 Turkey 186, 225, 226 Uganda 56, 127, 128, 135, 149, 152, 163, 175, 196, 222 Ukraine 108, 149 UNITAID 191 United Arab Emirates 110 United Kingdom 17, 18, 37, 40, 43–51, 57, 65, 70, 77, 88, 104, 112, 114,

319

115, 116, 129, 146, 147, 151, 170, 185, 191, 202, 212, 225, 226, 230, 258 aid 140, 163, 270 as G8 host 8, 25, 43–44, 55–57, 59, 69, 99, 105, 106, 110, 133, 153, 265, 269, 274, 276, 278 debt relief 27, 268 European Union presidency 70, 79, 100, 133 Kyoto protocol 254, 256 official development assistance 188, 190 United Nations 3, 4, 6, 7, 10, 13, 14, 15, 18, 18–19, 19, 27, 29, 39, 50, 53, 54, 55, 56, 62, 64, 93, 100, 103, 121, 127, 151, 175, 189, 195, 215, 221, 222, 235, 258, 259, 263, 272, 273 United Nations Conference on Environment and Development 34 United Nations Conference on Trade and Development 230 United Nations Convention against Corruption 7, 50, 140, 151, 153, 239 United Nations Development Programme 161, 175, 230 United Nations Environment Programme 109 United Nations Framework Convention on Climate Change 12, 47, 49, 82, 92, 95, 254, 257, 259, 266 Montreal meeting 48, 80, 92, 92–93 Nairobi meeting 49, 93 United Nations General Assembly 11, 198, 219 United Nations Millennium Project 16, 40, 137, 143, 278

320

Financing Development

United Nations Millennium Review Summit 37, 48, 79, 122, 127, 133, 137, 139, 189, 272 United Nations Security Council 11, 61, 62, 64–65, 104, 198 Resolution 1546 104 United Nations World Summit 3, 4, 5, 10, 64, 70, 80, 87–88, 121, 219, 267, 270, 277 United States 5, 12, 13, 27, 27–28, 30, 31, 32, 34, 39, 40, 63, 64, 65, 69, 70, 77, 83, 101, 104, 108, 110, 111, 112, 113, 114, 115, 116, 123, 126, 127, 128, 129, 130, 143, 147, 150, 151, 170, 174, 185, 188, 189, 207, 212, 224, 225, 226, 231, 235–239, 241, 258, 263, 264, 273, 276 aid 60, 87, 122, 140, 163, 191 as G8 host 124, 275, 276 climate change 12, 26–27, 32, 34, 35, 36, 38, 39, 53, 54, 58, 91, 93, 100, 253–259, 265–266, 275, 276 debt relief 26, 35, 105, 268 gross domestic product 65, 241, 245 International Finance Facility 35, 58, 88, 269 Kyoto protocol 61, 92 Middle East 29, 60, 272 trade 36, 128, 203, 219 World Trade Organization 115, 209, 224 United States Bureau of the Public Debt 250 United States Congress 36, 54, 64, 87, 127, 129, 231, 258, 270 United States Federal Reserve Board 244 United States Senate 254, 256, 267 United States Treasury 241, 245 University of Glasgow 56, 175 University of Toronto 125

Unleashing Entrepreneurship: Making Business Work for the Poor 237 Update on Africa 50, 125 Uruguay 215, 225, 226 Uruguay Round 12, 18, 34, 90, 207, 209, 210, 220–221, 223, 227, 228, 229, 278 USSR. See Soviet Union vaccination. See immunisation Venezuela 66, 101, 110, 215, 225, 226 Venice Summit 33 Verhofstadt, Guy 67 Vietnam 109 Vietnam War 64 Wade, Abdoulaye 40, 55, 115, 263 war 3, 126, 187, 249 water 198, 238 weapons of mass destruction 26, 34, 57, 104, 113 Weiler, Joseph 224 West Africa 171, 207 Wilkinson, Rorden 95 Winter-Nelson, Alex 176 Wolfensohn, James 29, 60, 103, 272 Wolfowitz, Paul 65, 115 Woll, Bettina 195 Working Group on Innovative Financing Mechanisms 70 World Bank 26, 27, 37, 48, 49, 50, 56, 59, 65, 77, 82, 88, 88–89, 94, 100, 105, 115, 123, 125, 126, 127, 128, 133, 137, 138, 139, 143, 144, 187, 196, 207, 213, 215, 219, 221, 224, 228, 230, 235, 238, 263, 268, 277 World Development Indicators 176 World Economic Forum 47, 55, 79, 165 World Health Organization 65 World Trade Organization 6, 12, 17, 19, 56, 65, 79, 89–91, 95, 100, 102, 126, 127, 128, 137, 201, 202, 204, 205, 208, 210, 213,

Index

214, 216, 219–231, 237, 246, 250, 259, 263, 268, 276, 277. See also Doha Development Agenda; Uruguay Round; Tokyo Round Cancun ministerial 102, 153, 207, 209, 210–211, 215 Doha ministerial 205, 207, 209, 219 Hong Kong ministerial 10, 37, 46, 65, 80, 82, 90–91, 102, 133, 137, 138, 140, 153, 209, 215, 219, 230, 267, 269 Russia 112, 115 Seattle ministerial 153, 207, 209, 210, 216, 274 World War II 163, 212, 219, 243

321

Yalá, Kumba 148 Yeltsin, Boris 99, 106, 108 Yeyati, Eduardo Levy 176 yuan 65, 248, 250 Zambia 150, 152, 210, 222 Zanzibar 157 Zedillo, Ernesto 215 Zenawi, Meles 40, 56, 115, 263 Zimbabwe 66, 124, 153, 177, 215, 222, 273, 276 Zuma, Jacob 150