Richard Melson

February 2006

South Bulletin 118

www.southcentre.org

last update: 17 February 2006

South Centre Workshop on Trade in Services,
20-24 March 2006, Geneva, Switzerland

South Bulletin 118

15 February 2006

The focus of this issue of the South Bulletin is on the need for the international

community to work harder to lift the burden of foreign debt on developing countries.

In this Issue:

President Chavez Receives UNESCO’s ‘Jose Marti’ Award.

Hugo Chavez Frias, President of the Bolivarian Republic of Venezuela, received UNESCO’s International ‘Jose Marti’ Award on 3rd February to honour his contribution to the unity and integration of Latin American and the Caribbean countries and to the preservation of their identities, cultural traditions and historical values. Comments by President Fidel Castro Ruz, assessing the new wave of people-friendly governments on the continent.

Shifting the Doha Burden on to Advanced Developing Countries

Unless significant political pressure is brought to bear on the EU member states in the next few months, the WTO is set to miss its next deadline of achieving full modalities by April 2006 and will certainly not conclude the Round by the end of 2006. That is the view expressed by Faizel Ismail, Head of the South African Delegation to the WTO.

Will the Human Rights Council Do Better Than the Commission?

Even before the new design of the United Nations human rights apparatus takes final shape, there appears to be continuing debate on a number of contentious issues. The negotiations, taking place in New York, have reached a critical stage, with the likelihood of a draft soon emerging. An interview with Amb. Boniface Chidyausiku, the Permanent Representative of Zimbabwe to the United Nations in New York.

Green Intellectual Property – A Novel Finance for Development

It is estimated that the net solar power falling to the earth is more than 10,000 times humanity’s current rate of the total use of fossil, nuclear and hydro fuels. In addition, the most prevailing photovoltaic cells consist essentially of silicon, the second most abundant element in the earth’s crust. Through the Green Intellectual Property (GIP) system, a novel financial mechanism is proposed, with particular relevance to the needs of the South.

Africa A Leaking Ship: The Role of Debt, Aid & Trade

Africa is not as poor or as helpless as is often presented. Instead, it is a continent that leaks heavily - losses from tax competition and competition to attract investments, unfair trade practices and debt all helping to fuel a net outflow of resources estimated in billions of dollars. The task is to plug these leaks, says Charles Abugre, currently the head of policy and advocacy at Christian Aid.

More in this issue

Justice for Latin America on IDB Debts

South-North Resource Transfers Near $500 billion in 2005

South Centre News

Editorial page

President Chavez Receives UNESCO’s ‘Jose Marti’ Award (Part I)

Hugo Chavez Frias, President of the Bolivarian Republic of Venezuela, received UNESCO’s International ‘Jose Marti’ Award on 3 rd February, 2006. The award honours an individual or institution that has contributed to the unity and integration of Latin American and the Caribbean countries and to the preservation of their identities, cultural traditions and historical values. Created in 1994 by UNESCO´s Executive Board on Cuba’s initiative, the award ceremony was held this year in Havana’s Revolution Square. Following is the first part of a statement given by Fidel Castro Ruz, President of the Republic of Cuba, to honour President Chavez.

"This is a historic day, one of great significance: the bestowing of the International "Jose Marti" Award by the United Nations Organization, to the President of Venezuela.

What comes to mind at this emotional moment?  Seven years and one day ago, exactly, on February 2nd, 1999, I had the privilege of attending the inauguration ceremony of Hugo Chavez Frias, as the new President of Venezuela.  I had first met him about five years earlier, when he was here on a visit after his release from prison, in December 1994.  We got to know each other a lot and discussed subjects that we had very much in common and which impassioned us.  We spoke of the future, but it was difficult to imagine that in such a brief historical time Hugo Chavez would be assuming the presidency of the glorious Venezuela of Simon Bolivar.

At that time, he audaciously stated: "I swear before this dying Constitution", a phrase that would make history.

His actual words that day were:

"We have unemployment figures that reach 20%.  Under-employment of the economically active sector that hovers around the 50% level, almost a million children barely surviving, children just like my daughter Rosines, who is one year and four months old, and they are just barely surviving.  Venezuela’s infant mortality rate is twenty-seven, almost twenty-eight per one thousand live births, one of the highest rates on the continent.  Malnutrition is taking a toll on the lives of children; fifteen per cent of them die from malnutrition.  We cannot wait until the Constituent Assembly session to amend that."

"(…) It is outrageous that only one out of every five children entering pre-school, only one out of every five, will complete basic schooling; it is outrageous because this is the future of our country."

"(…) Forty-five percent of teenagers do not attend high-school; they are out there, just surviving, and many of them are delinquents for that reason, because man is not evil  by nature, we are children of God, we are not children of evil.  I have inherited this situation right now, I have it right here in my hands, and it is the accumulation of all of those crises that I just mentioned a few minutes ago."

His words on that February 2nd deeply impressed me.  Forty-eight hours later I was attending an event at the Central University of Venezuela where I had spoken to the students 40 years and 10 days earlier, on January 24th, 1959.

Figures and facts that this visitor was aware of at that moment when we met again, had led him to the conclusion that the people of Venezuela, at the moment of this new dawn, had to bravely and intelligently face up to a series of difficulties that were the result of an economic and social situation besetting that heroic people.

I mentioned paragraphs and figures which today I literally copy from that speech which he gave on that February 3rd, seven years ago.

"Exports of goods, according to the report of the Venezuelan Central Bank:

"In 1997: 23.4 billion dollars", those were the exports.

"In 1998: 17.32 billion.  The value of exports in just one year decreased by 6.08 billion dollars.

"Oil (the principal export). Prices:  1996: 20 dollars a barrel; 1997: 16.50 dollars; 1998: 9 dollars", that was on the eve of his inauguration.

The basic minerals: iron, aluminum, gold and derivatives such as steel, all to a lesser or greater degree, had substantially decreased in price.  Both items make up 77% of exports, that is, oil and minerals.

"Commercial balance:

"1996 – 13.6 billion dollars.

"1998- 3.4 billion. That’s what had been received in one year and what they were receiving in the other year, almost a third.

"Difference: 10.2 billion in just two years.

"Balance of payments", another chapter:

"1996- 7 billion in Venezuela’s favor.

"1998 - 3 418 billion not in the country’s favor.

"Available international reserves:

"In 1997- 17 818 billion.

"In 1998- 14 385 billion dollars."

The reserves were plummeting, just as they were perilously about to, after the oil coup and even later at the time of the military coup on April 11, 2002.  Yes, because this huge decrease happened in the following year, in 2003. In other words, the reserve rapidly dropped, I think it had reached 13 billion in the first semester of that year and without a doubt, in a few more months, it would have dropped to zero.  Some had already taken 300 billion dollars out of Venezuela, at today’s value that would be equivalent to 2 trillion dollars, more than enough for an accelerated development in the entire hemisphere, especially if it were a rational development and not a consumer oriented, wasteful development.

"Net losses: approximately 3.5 billion in one year.

"Foreign debt:

"Almost 40% of the nation’s budget is spent servicing the foreign debt", we used to say.  Those were international figures.

"The social situation according to various national and international sources.

"Unemployment:  Official figures speak of 11 to 12 %.  Other figures indicate 20%.  And after the coup d’etat and the oil coup, this figure rose to more than 20%, when these unemployment figures had been dropping to 10 or 9%.

"Under-employment hovered at the 50% mark.

"Almost a million children in a state of bare survival", in the words of the President.  All of this appeared in the statistics of the period.

"Infant mortality at almost 28 per 1000 live births.  Fifteen per cent of those children die because of malnutrition".  They really died from malnutrition.

"Only one out of every five children finished basic schooling"; another true fact, expressed on that inauguration day; "Forty five per cent of all teenagers do not attend high-school."  By that time, we were talking here in Cuba about having reached a schooling rate of more than 90%.  Who was going to talk to us about these problems?  How could we ignore them when we had spent so many years trying to reduce them, as from the very first days after the triumph of the Revolution until today, when it is almost 100%, just as it’s beginning to be, or as it is about to be in Venezuela.

"The fact that forty five per cent of children do not attend school is truly impressive", we said then.

We added:

"More than a million children are incorporated into the labor market; more than 2.3 million are excluded from the educational system, without any trade.

"In the last ten years –we said we had read that before the trip to Venezuela-, "more than a million middle class Venezuelans, category "C", became part of the poor and destitute class, who account for 77% of the population today, due to salary reductions, unemployment and the effects of inflation.

"All of this was happening in the homeland of Bolivar, the nation with the greatest mineral wealth in Latin America, with almost a million square kilometers and no more than 22 million inhabitants."  It wasn’t as large or as populated as Brazil.

"I am reflecting on this –I finally said, very carefully, so that it I didn’t appear to be meddling in internal affairs- "totally and absolutely responsible for my own comments in the hope that they will be useful."

How could we imagine that on one day, here, seven years later, we would be repeating these same facts as an inescapable demonstration of all that had been happening there and all that had come to pass during seven years in Venezuela.

The tremendous emphasis that the Bolivarian process placed upon schooling, in the first instance, is perfectly explicable. The Bolivarian schools are well equipped, lacking in nothing, attended by all those children that had been excluded from the educational system, and these schools are now still being quickly constructed and perfected.  This movement is also reaching the Bolivarian high schools -what we here in Cuba call the middle education schools- and there are other additional and very important projects for them.  I have heard of figures that speak of the creation of around 1000 high schools, also beautifully equipped, something which is truly admirable.

So, that all happened at the beginning, but those days were followed by events that don’t happen in other areas, events that culminated in the bestowing of the "Jose Marti" Award, an unquestionably just act.

Ÿ On October 28th, 2005, the Literacy Campaign was concluded and Venezuela was declared a territory free of illiteracy, after a tough struggle since mid-2003, a year and three months after the coup d’etat on April 11th, eight months after the oil coup, the Literacy Campaign had begun; the Bolivarian process had only been in power for three years, since that day when the president took his oath on the dying Constitution.

Ÿ The number of people who became literate until that day: 1 482 533.  Only a few thousands more were about to finish the course.

Ÿ On Friday, January 27th, 2006, the first 423 people reached sixth grade education under the auspices of Mission Robinson 2.

Ÿ Incorporated in this Mission –in a nation where there is no longer illiteracy thanks to a serious, systematic campaign, which included tests and examinations- are 1 449 292 students; of them, 616 833 come from Mission Robinson 1.

Ÿ During this year, 2006, one million students will graduate from this level – those were people who used to be illiterate or semi-illiterate; people who were not students and had been converted into students.

Ÿ Another 500 000 graduates from this level will be added to these numbers by the end of 2007.

Ÿ Thanks to Mission Ribas, 162 543 adult citizens have graduated from high-school.  We all know that more than 3 400 Venezuelan students coming out of that Mission Ribas are here with us, studying medicine or getting ready to start doing so. Let them raise their flags!

Ÿ According to figures, right now there are 602 502 students attending classes as a result of Mission Ribas; this year approximately 500 000 will graduate from senior-high school.

Ÿ Mission Sucre, for higher education, has welcome 513 568 Venezuelan students from Mission Ribas; 416 769 of them have just finished their University preparation course.

Ÿ Of these, 310 192 are already following their university programs.

Ÿ It is worth noting that among these Venezuelans who are already enrolled in higher education courses, 15 392 are studying community comprehensive medicine in Mission Barrio Adentro.

I have already mentioned that more than 3 400 are studying medicine in Cuba, and before the end of this year there will be 10 000 Venezuelan students in Cuba, who would come under a new program which has very positive perspectives thanks to the methods used, the experience, the work of the professors, something which is absolutely new. An example of this is that Barrio Adentro has already become a gigantic university for the whole Venezuela.  This is absolutely a new phenomenon in the history of humankind and it is the only way to train the doctors which are needed by the Third World, which is made up of thousands of millions of people, from a world population that is reaching the impressive figure of 6.5 billion inhabitants, who are members of our human species, whose misfortunes and problems have accumulated and multiplied.

If a better world were not possible, then we must bid farewell to any hope that the human species could survive.

Ÿ 132 014 Venezuelans are already enrolled in higher education, as we have already indicated, and they are already part of the national teacher’s training program in all the municipalities of Venezuela (Applause and cheers).

Ÿ A total of 74 677 are presently enrolled in four municipal program offered by the Bolivarian University of Venezuela (UBV), in 308 municipalities throughout all states, in the specialties of Social Management, Local Development, Social Communication and Legal Studies.

Ÿ A group of 84 892 are enrolled in technical, scientific, and management specialties which are taught at the municipal university chapters.

Ÿ Three thousand, two hundred and seventeen are studying law at the "Romulo Gallegos" National Experimental University.

One could get exhausted by reading the whole list of all the activities that have been carried out in education –and in other areas too, but here we are speaking about education- by Venezuela in just half of these past seven years, while struggling against imperialist conspiracies, coups of every kind, malignant attacks on the economy, all of then in the attempt to quash this process.

Has any other country in the world ever attained such progress in fighting against total or functional illiteracy?

What kind of a person is he or she who can not read or write? What is a functional illiterate, a person who can hardly sign his or her own name?  And in this so complex world, which is getting ever more complex, in this so globalized world, which is getting ever more globalized, what will it mean not to have reached sixth grade of education? What is the difference between the living non-thinking beings and the living beings with a brain that thinks or is able to think, who have not been educated, not even to read and write; those who have not been taught into thinking, as Jose de la Luz y Caballero insisted almost two hundred years ago during the Spanish colonial era in Cuba.

But, who, in the eyes of the empire, is this man of humble origin, who followed the ideas of Bolivar and Marti and opened up a new chapter in the history of Latin American peoples?

The answer is right here:

"Rumsfeld, United States Secretary of Defense and Pentagon chief, compares Chavez to Hitler.  Listen to me well: he compares him to Hitler!

"WASHINGTON (AP) – "The Secretary of Defense, Donald H. Rumsfeld, compared the Venezuelan president Hugo Chavez to Adolph Hitler.

The comparison came up during a lecture given on Thursday night at the National Press Club, when he was asked about the general state of deterioration in Washington’s relations with some of the Latin American countries.

"We saw dictatorships over there", he said.  "And we saw that the majority of those countries, with the exception of Cuba", of course, "are advancing towards democracy", he stated.  (It appears that we are advancing towards hell, towards total and absolute ignorance here, where no form of democracy is possible.)

The Secretary of Defense admitted that "we have seen some populist leaders"- this is a little word that he puts in; those who look after the people, those who are concerned for their people, those who care about their health, education, employment, those who think about the people are "populist leaders"- attracting the masses in those countries".  As if those people were stupid, when in fact they are cleverer, and they listen more and see more. Truths so evident that they can no longer be covered up so easily.  "And there are elections like those won by Evo Morales in Bolivia, which are truly worrisome".

And of course it is truly worrisome for the leaders of the empire to see that a humble Indian has become the president of Bolivia, elected by the overwhelming majority of his people, in spite of the fact that a million Bolivians, most of them Evo supporters, were deprived of the right to vote.  It was almost impossible to imagine Evo winning with an absolute majority, when everyone knew that a million humble Bolivians could not cast their ballot that day.  What is going to happen when Evo calls the next Constituent Assembly?  No doubt he is going to emulate the feat of the Bolivarians.

Yes, I prove them right; they have well founded reasons to worry.  This is something new and unexpected for those who dreamed, as Hitler did, of an empire that would last a thousand years.

Then he went on to say:

"We have Chavez in Venezuela" – and he is here too, being honored with this award.  "He is someone who was legally elected" –well, at least they don’t doubt that fact- "just like Adolph Hitler was legally elected"- if they only knew a little history they would know why Hitler was once elected and what were the consequences, who supported him and why –"and then he consolidated his authority and now he is, obviously, working closely with Fidel Castro"- that ‘perverse’ character-, and Mr. Morales."  What could they say about Morales!

That’s great. We feel happy that we have served as a steel armor.  I don’t say this out of conceit, it is just the way I see it.  They are talking about Fidel Castro, and for the past 47 years they have been trying to destroy this Revolution. Who knows how many of them have tried to assassinate me, and the fact is that it is not only me they have tried to assassinate, but this people, a small portion of which is standing here in this Square tonight only because there is no room for more of them, rejoicing in this unitary Bolivarian dawn for the nations which Marti called "our America".

Individuals may indulge in a certain kind of privilege, and this is what we were talking about as I presented this award to our dear brother Hugo Chavez.  We were happy in that moment, thinking about the effort that was made on behalf of human beings.  We should have done much more, but we were not wise enough to know how to do it, nor had we matured far enough in our consciousness of duty and necessity to have been able to do it - I am speaking for myself, I am not speaking for him, I am speaking for myself because I have had just such privilege. And we were saying:  we have no merits in doing so, we are privileged to have been born in this exceptional time when changes are not only possible but indispensable, and they are a basic condition for survival.

Having lived through the experience of witnessing the presence of the millions who voted in the referendum in Venezuela, of those who voted for Evo, of those who in ever growing numbers reject the ones that are lackeys to an empire that intends to destroy us and exploit us even more, is a singular privilege.

(See Part II in the next issue.)

Shifting the Doha Burden on to Advanced Developing Countries

Unless significant political pressure is brought to bear on the EU member states in the next few months, the WTO is set to miss its next deadline of achieving full modalities by April 2006 and will certainly not conclude the Round by the end of 2006. That is the view expressed by Faizel Ismail, Head of the South African Delegation to the WTO. The following article, presenting his assessment of the 6th WTO Ministerial Conference and what lies ahead, was just published by SEATINI (Southern and Eastern African Trade, Information and Negotiations Institute.) The paper is an abridged version of the full paper he presented at the Manchester University on the 26th January 2006.

In the early hours of Sunday morning, the 18th of December, as the negotiations amongst about 30 Ministers began to conclude, the "grand bargain" that was needed for the WTO Hong Kong Ministerial Meeting to succeed was clearly in sight. However, there were significant differences in the perspectives of these Ministers, on the composition of the key elements of the bargain and the timing of the Doha deal. In this assessment we provide a perspective on the recent Hong Kong Ministerial Meeting and outline the central fault lines of this "grand bargain". Some suggestions will be made to advance the negotiations towards a successful achievement of this "grand bargain".

The central fault line or principle in the current Doha talks was clearly articulated by the Commissioner of the EU, Peter Mandelson, in his statement after the Hong Kong Meeting. In this statement Mandelson agues that the EU was unlikely to make further concessions in the current Doha negotiations given the paucity of concessions, in his view, that are on offer from the EU’s trading partners. He goes on to state that there was no possibility of him using the WTO to push through, further, or early, reforms of the EU Common Agricultural Policy (CAP). Although the EU at its recent summit had decided to review the EU CAP budget in 2008/2009, Mandelson warns that there would be no links between this and the efforts to conclude the Doha negotiations early in 2007.

He argues further that given real incentives in the Doha industrial goods and services negotiations, the EU could provide "more predictability and transparency for agricultural exporters" (referring to the demands of the CAIRNS Group, G-20 and the US) and show more flexibility in the range of products that the EU has demanded should be deemed "sensitive". Mandelson also questioned "Lamys’ view" that further progress could be made by April 2006 ie, the achievement of full modalities in the agriculture and industrial products (NAMA) negotiations. In this regard Mandelson states rather ominously in the same article that "the EU cannot be pushed into an agreement that simply is not there".

Mandelson’s assessment above sets the stage for the complex post-Hong Kong Doha negotiations. There are three key issues, that he has raised, which need to be challenged. Firstly, the argument that the EU has done enough in making concessions in the agriculture negotiations is simply not true, as the current EU offer on Market Access made by Mandelson on the 28th of October, will result in no further real market opening or acceleration of CAP reforms. He has argued that the only possible concessions the EU could make, notwithstanding any possible changes in the EU budget, is some additional flexibility in its demand to continue to maintain the current high levels of protection for its sensitive sectors.

Secondly, his view that other WTO members (especially the so-called "advanced developing countries") need to make real concessions in industrial goods and services for the EU to make the above additional concessions is an attempt to raise the bar above the heads of the majority of the major developing countries, and thus shift the burden of adjustment in this Round from the major agricultural subsidizers to the major developing countries. Mandelson’s argument that the EU needs the major developing countries to make these concessions before the EU can make even some incremental concessions is spurious. There is no discernable major drive by the EUs industrial producers or service providers for additional market access into developing country markets. On the contrary, these interests have voiced their concern with regard to the disproportionate political influence of the EUs agricultural lobbies. There is legitimate suspicion that Mandelson’s argument is an attempt to shift the blame for lack of movement in the Doha Round to the major developing countries.

In addition, a group of some developing countries have argued that the real danger of a joint push by the EU and other developed countries (notably the US) to seek additional extensive concessions from developing countries in the NAMA and Services negotiations is that the development content of the Round will be turned on its head, with the developed countries making more inroads into developing country markets and with developing countries still facing high levels of protection and distortions in global markets for products of export interest to them. In a paper submitted to the Committee on Trade and Development and the Trade Negotiating Committee of the WTO, developing countries have argued that the strategic objective for this round of negotiations should be for industrial countries to reduce the protection they grant to inefficient sectors that frustrate the growth potential of developing countries. Reflecting on the recent proposals of developed countries they have stated that these demands in NAMA and Services will create enormous and disproportionate burdens of adjustment that developing countries would have to bear in their industrial and service sectors. In sharp contrast the EU has made insignificant offers to open its markets in the agriculture negotiations, and both the EU and US have proposed a co-efficient for developed countries in the NAMA negotiations that will require them to make no real adjustment in their industrial sectors. They have thus argued that the EU and the US are seeking a round for free!

Thirdly, Mandelson’s assertion that the EU would not be prepared to make any significant move in offering even the minimal additional concessions that he referred to above, by April 2006, will make the possibility of concluding the Doha Round by the end of 2006, or early 2007, even less likely. In addition, developing countries will be reluctant to make significant concessions early in the post - Hong Kong period, unless the EU reflects the political will to make real concessions in the agriculture negotiations that are in line with the Doha Mandate.

There is a second fault line or a secondary set of issues which are of great importance to the majority of the poorer and smaller members of the WTO, and that are a crucial component of the Doha grand bargain. Without a successful resolution of these issues, a Doha deal or grand bargain will simply not be struck. These issues relate to addressing the trade related development challenges faced by Least Developed Countries, and the so-called "small, weak and vulnerable developing countries". The specific development issues raised by these countries include, the need to provide duty free quota free market access to LDCs, cotton, preference erosion, special flexibilities for small, weak and vulnerable economies and development aid.

There was a great deal of posturing on these issues before the Hong Kong Ministerial Meeting. The EU trade Commissioner Peter Mandelson, in a letter to WTO members written in October 2005, challenged Ministers to provide a development package on these issues in Hong Kong. There was great suspicion amongst developing countries that the EU was again trying to divert attention from the core issues of development in the Round, which related to developing country demands for developed countries to remove their trade distorting subsidies and protection of agricultural products. In addition, the US delegation was suspicious that in focussing on these development specific issues, the EU was attempting to divert attention to the US inability to deliver concrete results on the cotton issue and on the issue of duty free, quota free market access for LDCs.

What happened in Hong Kong?

After 6 days of intense negotiations in Hong Kong (13th to the 18th of December), Ministers managed to cobble together an agreement late on Sunday night, the 18th of December, several hours past the agreed deadline. For the major developing countries in the G-20 the agreement was no major breakthrough, but a small and significant step forward in the Doha Round. For LDCs and other small, weak and vulnerable developing countries, there were some incremental gains made in the Hong Kong Declaration, but no breakthrough emerged on their major demands. We briefly evaluate the results of the negotiations in Hong Kong below.

Agriculture

In Agriculture, the EU had reluctantly agreed to table an offer to eliminate its export subsidies by 2013. After much difficult negotiations in the chairman’s consultative group in the final hours of the negotiations, the G-20 members in the meeting agreed to this offer provided that "the substantial part is realized by the end of the first half of the implementation period". Before the Hong Kong Ministerial Meeting there was great pressure on the EU to decide on this issue in Hong Kong, as the G-20, CAIRNS Group, the Africa Group, the ACP, LDC Group and the US, all called for export subsidies to be eliminated by 2010.

There was no substantial advance in the Agriculture negotiations in Hong Kong since the July 2004 Framework Agreement. In addition to re-stating the decisions already reached in the July Framework agreement, the final draft of the Hong Kong Declaration reflected some significant movements by WTO members in the technical work undertaken in Geneva, since then. These issues related to the conversion of specific tariffs to their ad valorem tariff equivalents and some convergences reached to use three bands for cuts in domestic support subsidies and four bands for the tariff cuts envisaged in the market access negotiations.

There was some improvement in the final text on the language on Special Products (SP) and the Special Safeguard Mechanism (SSM) demanded by less competitive developing countries (G33). Agreement was reached that developing countries can self-designate a still to be determined percentage of tariff lines as Special Products to be "guided by indicators based on the criteria of food security, livelihood security and rural development". There was also agreement that developing countries will "have recourse to a SSM based on import quantity and price triggers". The addition of a price trigger was fought for vigorously during the Ministerial Meeting and was a victory for the G33.

NAMA

In the NAMA negotiations, several of the major developing countries including South Africa, India and Brazil were of the view that the decisions reached on NAMA at the Hong Kong Ministerial Conference did not represent a roll back of gains made in Doha or in the July 2004 Framework agreement. Indeed some of these gains made in the NAMA negotiations, for example, on flexibilities agreed to in the July 2004 Framework, were under threat in the past few months in Geneva. Whilst the final draft of the Hong Kong Declaration reflected members agreement to adopt a Swiss Formula, the option to use different types of Swiss formulae still remain to be decided and are not foreclosed. The major advance for developing countries in this text was the decision to link the ambition in the market access negotiations in Agriculture with NAMA. This allows developing countries to argue that WTO members would need to produce a formula in the market access negotiations in agriculture that is "balanced and proportionate" to that in the NAMA negotiations. In addition WTO members agreed that the level of ambition in market access for Agriculture and NAMA should be "comparably high".

Whilst there was some fragmentation in developing country positions on the formula to be adopted by the WTO on NAMA in the period before Hong Kong, the approach taken by the EU in its October 28th submission caused these countries to create a united front on the need to defend the flexibilities that developing countries had succeeded in obtaining in the July 2004 Framework Agreement. This united front was further consolidated in Hong Kong where Ministers of the so-called NAMA 11 presented joint proposals in the negotiations on NAMA. This group were able to also establish a strong link between the level of ambition in NAMA with that in Agriculture in the final text of the Hong Kong Ministerial Declaration.

Services

On Services, the existing GATS development friendly methodology in the services negotiations were under threat of being fundamentally altered by proposals made in the first draft of the Hong Kong Ministerial text. Developed countries, and a few developing countries were attempting to substantially change the methodology of the services negotiations in an attempt to raise the ambition of the negotiations, in a manner that would increase the pressure on less competitive developing countries. There was widespread opposition to these attempts by the African Group, the ACP and several ASEAN countries.

In the draft Ministerial text that was forwarded to the Ministers, the quantitative targets insisted on by the EU was deleted. There were a number of remaining concerns that these countries, including South Africa, had with this text. Their initial concern was that the chapeau of the Ministerial draft text did not state that the new methodology proposed in the annex (Annex C) was not agreed. Thus, at the insistence of those countries that had substantive objections to some elements of Annex C, the chapeau of the Ministerial text that referred to Annex C was bracketed.

Negotiations in Hong Kong focussed on the changes needed by these countries before they agreed to remove the brackets. In the course of the negotiations in Hong Kong these members succeeded in making two significant changes to Annex C. Firstly in the section on Objectives the words "strive to achieve the following objectives" was replaced with "should be guided, to the maximum extent possible, by the following objectives". Most developing countries viewed these objectives as being too ambitious and prescriptive. Secondly, these countries also objected to the prescriptive language of the proposed methodology for plurilateral negotiations in services. The compromise struck in the final text underlined the fact that the existing flexibilities provided for in the GATS and the Negotiating Guidelines would still remain the bases for the negotiations in services.

The "Development Package"

There were 5 key development specific issues identified by the EU and other members in the period before Hong Kong: a development package for LDCs, Cotton, preference erosion, the specific concerns of small, weak and vulnerable countries and the question of an "Aid for Trade" envelope to support the needs of developing countries. Despite intense negotiations on both the LDC duty free, quota free issue and the need for an early harvest on cotton, the so-called "Development Package" proposed by the EU failed to materialize in Hong Kong.

LDCs

The compromise offered by the US after 6 days of intense negotiations, to provide duty free, quota free market access for up to 97 percent of tariff lines and to progressively increase this, with no obligation to reach 100 percent, was not acceptable to LDCs. The US argued that it could not offer to extend full product coverage to countries such as Bangladesh and Cambodia which were competitive in some products, such as Textiles, as this would displace African countries existing preferential market access provided under the US AGOA preferential scheme. Pakistan surprised most members by arguing that it would not accept a deal for LDCs which did not provide some comfort for its fear that preferential textile exports from Bangladesh, in terms of the proposed deal, could displace a significant part of its exports into the US market.

LDCs were reluctant to accept the US offer as they argued that the 3 percent exemption would allow the US to exclude almost all the products of export interest to them. In the statement made to WTO members at the final plenary on Sunday evening (18th December 2005) the co-ordinator of the LDCs, Minister Patel of Zambia, thus called for the Annex on LDCs to be part of the ongoing negotiations in Geneva and to be used as a bases to develop modalities to conclude the negotiations on LDCs. In a letter sent to the DG and several WTO Ministers subsequent to the Hong Kong Ministerial Meeting, Minister Patel, as co-ordinator of the LDCs in a reconciliatory tone called for the offer of the US and other developed members on duty free, quota free market access referred to above (in Annex F) to be built upon in the Post- Hong Kong Geneva process. In the statement made by the Chair of the conference, Secretary Tsang of Hong Kong, China referred to the section on duty free quota free treatment in Annex F as a "framework" and urged developed and developing country members in a position to do so, "to set out by the end of 2006, the means by which they will implement this decision".

There were four other Special and Differential Treatment, LDC Agreement Specific proposals that were agreed to in Annex F. These included an agreement to give "positive consideration" to requests for waivers by LDCs, and when requested to provide waivers exclusively in favour of LDCs by other members, to decide such a matter expeditiously and "without prejudice to the rights of other members". Costa Rica and Paraguay had finally agreed to this compromise. A second agreement called for donors, multilateral agencies and international financial institutions to ensure greater policy coherence with WTO agreements in the conditionalities that they often impose on developing country members. A third agreement re-affirmed that LDCs will only be required to undertake commitments and concessions to the extent consistent with their development needs and capabilities and directed the WTO to co-ordinate its efforts with donors to "significantly increase aid for trade related technical assistance and capacity building". Finally, the most significant agreement for LDCs, of these four, was the decision to provide new flexibilities for LDCs not to comply with the TRIMS agreement until 2020. These flexibilities include a transition period of 7 years for existing measures and an agreement to give positive consideration to allow any new TRIMS for a period of 5 years.

Cotton

The four West African cotton producing countries pleaded passionately for an early harvest in the cotton negotiations. In response, the US delegation, insisted that they did not foresee any negotiations outside the context of the Agriculture negotiations. However, there was some movement by the USTR Robert Portman, when he agreed to eliminate the US cotton export subsidies in 2006. Brazil had argued that this was required anyway by the recent WTO Appellate Division decision in the case brought to the WTO by Brazil, on the US trade distorting cotton subsidies. In addition, the US agreed to support a decision to provide duty free, quota free market access for cotton exports from LDCs from the date of implementation of the Doha deal. These were two incremental advances made on the cotton issue in Hong Kong.

However, on the most significant demand of the C4 countries and other members, ie the need to reduce trade distorting cotton subsidies, the US did not agree to an early harvest. As part of the final agreement, both the USTR and the four West African cotton producers (C4 countries) agreed to continue the negotiations in Geneva, in the post Hong Kong period, with the C4 countries still maintaining their demand for an early harvest not linked to the Doha agriculture negotiations.

Erosion of Preferences and the needs of small, weak and vulnerable countries

On the issue of erosion of preferences and the special needs of small, vulnerable economies, the ACP group succeeded in gaining some further recognition of these concerns in the NAMA negotiations and a commitment to address these issues in the ongoing Doha negotiations.

Aid for Trade

Finally, on the issue of "Aid for Trade", the final text called on the Director General of the WTO to create a Task Force to be created and to provide the General Council with recommendations by July 2006.

There was no major breakthrough or early harvest on the 5 identified development specific issues in Hong Kong. For LDCs, there was some significant advances made on the 5 Agreement Specific Proposals that LDCs had prioritized, in the negotiations on Special and Differential Treatment. The agreements reached on duty free, quota free market access, and increased flexibilities in WTO rules and capacity building, are significant gains to build on in the ongoing Doha negotiations. Thus, whilst some incremental advances were made on the so-called development package, greater political will is required to advance these issues in the Post – Hong Kong period.

In most cases it has become clear that there will, or can, be no major breakthrough or early harvest on these issues as the political will and capacity of the major countries to deliver on these issues will depend on the ambition to be agreed on the core issues in the Doha negotiations viz, Agriculture, NAMA, Services and the related disciplines. Thus for these countries to make some gains from the Doha Round and advance their issues, there will need to be an early conclusion to the Doha Round as a whole, with a high level of ambition on the core issues.

The Way Forward

The post-Hong Kong work programme and the timing for the conclusion of the Doha Round did not obtain much consideration by Ministers in Hong Kong. Ministers simply assumed that the Round should be concluded by the end of 2006. Thus the timetable for the achievement of full modalities in Agriculture and NAMA was decided to be 30 April 2006 and the completion of schedules based on these modalities was set for 31st July 2006.

There was no discussion of how the political will to complete the task of achieving full modalities on Agriculture and NAMA by the end of April 2006, could be developed within the next four months. Already the EU Commissioner, Peter Mandelson, has signalled that the EU does not have the will to finalize full modalities in a manner that will require them to make significantly new concessions in the agriculture negotiations (discussed above).

Notwithstanding this, the EU will continue to pressure others, particularly, the major developing countries to make additional onerous concessions in the NAMA and Services negotiations. A failure to achieve any real movement on these core issues of the negotiations and resolve the fundamental fault line in the Doha Round is also likely to have a detrimental effect on any possible resolution of the specific development issues of interest to the majority of least developed and small, weak and vulnerable developing countries.

Advancing the Doha negotiations in the post-Hong Kong period will require renewed political commitment and political will by the major developed and developing countries. The US will need to play its part in making more significant offers to reduce its trade distorting subsidies and discipline its farm support in line with new WTO rules. The US will also need to display greater political will to address the needs of the Least Developed Countries and small, weak and vulnerable members of the WTO. Without an ambitious effort by all WTO members to address these specific issues of interest to these members of the WTO, a grand bargain is unlikely to emerge.

The major developing countries represented in the G-20 and the "NAMA 11" have displayed a firm resolve to maintain the high level of ambition of the Round and defend the development content of the Doha Round thus far. They have called for more open and undistorted trade and have signalled their willingness to make a contribution in this regard provided this is proportionate to their level of development and the contribution of the developed countries. In their recent paper they have committed themselves to also making a contribution towards addressing the development challenges of the Least Developed Countries and the small, weak and vulnerable countries. Their leadership in advancing these objectives and engaging effectively with developed and other developing countries to build the consensus needed for the round to succeed will be crucial in the year ahead.

There was renewed optimism that developing countries will be able to manage and resolve their differences whilst keeping the pressure on developed countries to deliver on the development content of the round in Hong Kong when the major developing country groupings including the G-20, the G33, the ACP, the LDCs, the African Group and the Small Economies met at Ministerial level. This meeting was called "historic" by Minister Amorim as it was the first such meeting of Ministers in the WTO and was referred to as the "G110" (G90+G-20). These groups agreed that agriculture is central to the round and to development and were united in calling for export subsidies to be eliminated by 2010. They all agreed to address the specific development challenges facing developing countries in the Doha Round. The Doha Round "grand bargain" will also require that in exchange for the strong support of the G-20 countries for their concerns in the Round, including that of preference erosion, the least developed countries and the small, weak and vulnerable countries should not obstruct or delay the market access needs of the G-20 and other more competitive developing countries.

At this stage, however, the EU stands to be the main obstacle to progress in the Doha Round. Unless significant political pressure is brought to bear on the EU member states in the next few months the WTO is set to miss its next deadline of achieving full modalities, by April 2006 and will certainly not conclude the Round by the end of 2006. The EU will hope that the resolve of the demandeurs (in the G-20, Cairns Group and the US) for further agricultural reform in the EU will wane and that they will settle for a lower ambition from the Doha Round. For the G-20 and other developing countries accepting such a reduced ambition will mean that the development content of the Doha Round will have little, if any, meaning and the WTO will continue to be seen to be unfair and imbalanced and having failed to address the needs of developing countries yet again.

Will the Human Rights Council Do Better Than the Commission?

Even before the new design of the United Nations human rights apparatus takes final shape, there appears to be continuing debate on a number of contentious issues. The negotiations, taking place in New York, have reached a critical stage, with the likelihood of a draft soon emerging for further consideration towards a consensus. In the following interview with the South Bulletin, Amb. Boniface Chidyausiku, the Permanent Representative of Zimbabwe to the United Nations in New York, amplifies on some of the sticking points holding up the creation of the new Human Rights body. The interview was done on 14 February, 2006.

Someshwar Singh

SB: Ambassador, where are we in terms of progress with the creation of the new Human Rights Council?

Amb. Chidyausiku: We received the draft beginning of February from the co-chairs - who are the Ambassadors of South Africa and Panama. In that draft, we discussed the mandate of the Council, where developing countries have insisted that HRC should look at all human rights as indivisible. This is because there has been a tendency by some members of the UN to put more emphasis on civil and political rights. But the developing countries have stuck together and said we want to include the Right to Development which should be given equal emphasis in the mandate of the Council. We have succeeded on that in the current draft. The inclusion of the Right to Development is a key element for developing countries because you cannot talk about civil and political rights while people are refused the right to development.

SB: What are the sticking points in the current discussions that you are having in New York?

Amb. Chidyausiku: It is a whole gamut of issues being looked into. We have to look into the mandate, where the Council would be located, how often it would meet, who will be the members, the size and all that. So the resolution that is going to come out will include all these aspects – of the mandate, the size, and perhaps there will be no debate on the location as it would be Geneva.

The issue of size has been a sticking point. Developing countries, particularly the Africa Group, have insisted that we are happy with a standstill on the present number of 53 members who make up the current Human Rights Commission. But other countries want to cut down on that and make it smaller. We, for our part, have been advocating the democratization of international governance and that it should be more representational. What then is the rationale of cutting it down to 30 or 40? In the current draft, they are proposing a number of 45 (members) to which we are opposing.

Another is the issue of criteria. In fact, the US State Department is openly saying that countries like Zimbabwe, Cuba, Syria, Iran and Myanmar should not participate. But the developing countries have said that the Human Rights Council is a body of the United Nations and all 191 members of the UN have a right to serve on that body. You cannot make qualifications for the membership of that body. When you do come up with qualifications and conditionalities for membership, who would determine the qualifications? Which standards are you going to use? That is a problem which has not yet been resolved.

Then there is the issue of election methodology. The Western Group and the Americans are saying that geographic regions should not present clean-slates, and that to be elected, a country must obtain a two-thirds majority vote in the General Assembly. On the other hand, the developing countries maintain that the Human Rights Council is a subsidiary (body) of the (UN) General Assembly. There is no other body of similar nature where you require a two-thirds majority, then, why the Human Rights Council? We prefer that members should be elected by a simple majority.

SB: Are there any other issues where you do not have convergence among the members?

Amb. Chidyausiku: There is the issue of the frequency of the meetings. Some have proposed that we should meet more often than the meetings of the current Human Rights Commission. As developing countries we have maintained that we should meet as often as necessary. There is no point just meeting without knowing what is to be discussed? If, for instance, our partners could agree on giving more time to the meetings of the UN Economic and Social Council, that would be great. The Human Rights Council cannot be more important than the ECOSOC, a principle organ of the United Nations. We have resisted suggestions to make the Human Rights Council a main body of the United Nations. For now at least, the Council will be a subsidiary of the General Assembly.

SB: Who exactly wanted to get that higher status for the Human Rights Council?

Amb. Chidyausiku: The Western Group initially had proposed that the Human Rights Council become a main body of the United Nations, like the ECOSOC. But they have also realized that if they go that route, it would take longer to create such a body as that would require a charter amendment which is quite a process. Now, as a result, they have agreed that we have it as a subsidiary body of the General Assembly so that five years down the line, the issue may surface again and we could be discussing the elevation of the status again.

SB: Are there any other riders being attached to being eligible to be members of the Council?

Amb. Chidyausiku: Yes, there is the problem of eligibility for re-elections after having served two consecutive terms. The current draft does not allow an immediate re-election for a third term. Of course, there are some who say that if your region is happy with a country remaining on the Council, whose business is it then to interfere and say it should not be so? In this kind of a situation, we have quite a number of countries who feel strongly that there should be no term limits on membership of the Human Rights Council. So this arrangement would give them a problem.

SB: So who is championing this new dispensation and why?

Amb. Chidyausiku: It is in the current draft. And it is the stand of the Africa Group that there should be no third consecutive term. It was done with the aim of providing wider participation through rotation but we are open to negotiations on this to accommodate other member’s concerns.

SB: What kind of support have you got on this from other Groups?

Amb. Chidyausiku: The fact that this issue is on the agenda in the current draft means that there is some support. It is a reflection of the views collated by the co-chairs and the contributions of members in the informal consultations.

SB: Are there any other facets to the eligibility question?

Amb. Chidyausiku: There is another sticking point here. Some would like to see election done with a two-thirds majority. We are maintaining that the election of members to the Human Rights Council should be done by a simple majority. But the Western Group and some others are saying that we should come up with a body that makes a difference between the Commission and the Council so that we can have credibility and that election of members must be done by two-thirds majority. One wonders how many members can get a two-thirds majority. Even the United States may not get it unless they bribe and buy and intimidate people to vote for them. Given a fair campaign, without using muscle, they may not get the two-thirds. This is why US Ambassador Bolton was saying at some stage that the Permanent Members of the Security Council must have an automatic seat on the Human Rights Council.

SB: When are these consultations supposed to end?

Amb. Chidyausiku: We are told that the co-chairs have been working on a draft and today the President of the General Assembly is meeting with the co-Chairs. They are going to discuss the draft that could be issued by the President of the Assembly to the membership upon which then there will have to be a compromise, as happened in the case of the Peace Building Commission. The idea generally is that the upcoming meeting of the Human Rights Commission in March-April this year would be the last one. Then it should be taken over by the Human Rights Council. The current members of the Commission have argued that they should be allowed to be the founding members of the Council until the end of their current mandate (of three years). That would have made for a smooth transition. Whether that succeeds remains to be seen.

SB: Why should there be such a fuss over this?

Amb. Chidyausiku: The people who have really pushed for the creation of the Human Rights Council have a specific target in mind - to keep certain countries, like Zimbabwe, Cuba and Libya away from the Council so that current members like Sudan and Zimbabwe are not given that choice.

SB: Is there unanimity amongst the developing countries on most of the contentious issues?

Amb. Chidyausiku: On major issues the developing countries are together. For instance, on including the Right to Development; from informal consultations we have had, most of us are for a bigger size of the Council (53 as is now) taking into consideration the geographical representation. Asia, for instance, has more members in the United Nations, so they should have more members in the Council, followed by Africa, then Latin America, Western European Group and then Eastern European Group. But one thing is sure. We are going to fight and are not just going to give in. If they do not pay attention to our views, this thing is not going to fly. And they are in a hurry to get the Council in place by March.

SB: But even if it is so, it should not obstruct the last regular session of the Commission?

Amb. Chidyausiku: What we are saying is let us negotiate and put into effect a good body. We do not have to rush it. But they are in a hurry to get rid of the Human Rights Commission and put in the Human Rights Council.

SB: Could you give us some background as to the initial impulses for reforming this human rights body?

Amb. Chidyausiku: It was the high level panel of experts on the UN Reforms that gave their recommendations also on the Human Rights Council. The biggest hurdle has been this: developing countries have argued that there has been so much politicization of issues in the Human Rights Commission, especially when it comes to country-specific resolutions. It is only the developing countries who are targeted by those resolutions. More than the size or the body, it is the mindset where people use double standards - where countries that have abused human rights in Iraq, Guantanamo Bay and other places have gone scot-free before the Human Rights Commission. So when Libya became Chairman of the Human Rights Commission, the United States had problems with that, just as they had objections to Zimbabwe being a member of the Commission in the light of their human rights accusations against Zimbabwe.

Because they have failed to make the Human Rights Commission an instrument of their foreign policy, they had to create a new body, which they are trying to make sure they are in control of. We have argued that the problem with the Commission was the politicization and double standards and we want a new body that will not follow the same route. If you follow the same route, you will not go anywhere. If countries manage to do cherry-picking: posing qualifications for certain countries for certain aspects while maintaining a high record of human rights abuses themselves - that does not bode well for the universality of human rights which touches on every country.

So the need for reform is part and parcel of the UN Reforms Agenda but what sparked it is the frustration faced by the Western Group over their failure to punish countries like Zimbabwe and other developing countries who have refused to play ball; and with the behaviour of developing countries generally who refused to be used to punish fellow developing countries for unsubstantiated and politicized issues of human rights. That is why they decided to change the body.

SB: So where is the guarantee that it could be simpler for the Western Group with the Council?

Amb. Chidyausiku: Exactly. This is why there is even a provision with respect to country-specific resolutions in the new Council. We have argued that for this mechanism to be used, you would need two-thirds of the membership to decide. As of now, people were coming up with country-specific resolutions as the order of the day. This should be vetted and scrutinized to make sure that the aim of such a move is not to just to punish a country because of a bilateral dispute that has nothing to do with the issue of human rights at all. Rather, such a move should be based on facts that bear out gross violation of human rights.

Green Intellectual Property – A Novel Finance for Development (Part I)

It is estimated that the net solar power falling to the earth is more than 10,000 times humanity’s current rate of the total use of fossil, nuclear and hydro fuels. In addition, the most prevailing photovoltaic cells consist essentially of silicon, the second most abundant element in the earth’s crust. This implies that solar photovoltaics can provide a virtually indefinite source for energy needs of humanity – particular in the countries of the South, blessed as they are with abundant sunshine most of the year round. "Intellectual Properties and Photovoltaics: Light from the Green Intellectual Property Rights, " a new paper by Itaru Nitta, proposes a novel financial mechanism, the Green Intellectual Property (GIP) system. It could provide sufficient financial assistance, including subsidies and royalty assumptions for introducing a variety of photovoltaic installations. This is the frist part.

In terms of source abundance, few people could conceive of an energy conversion procedure better than solar photovoltaics. Solar photovoltaics harnesses sunlight that is the most abundant energy source on the earth. Several estimates concluded that the net solar power falling to the earth is more than 10,000 times humanity’s current rate of the total use of fossil, nuclear and white (hydro) fuels (e.g., see Boyle, 2004a). In addition, the most prevailing photovoltaic cells consist essentially of silicon, the second most abundant element in the earth’s crust. These facts mean that solar photovoltaics is available for a virtually indefinite period to directly generate electricity, probably the most useful form of energy.

Theoretically, this source abundance renders photovoltaics as the leading technology to eliminate several major barriers against the sustainability of humanity’s future. In particular, the potential vast capacity of photovoltaics would curb the resource consumption in developed countries and alleviate poverty in developing countries. This situation would occur if the photovoltaic industry produced enough photovoltaic systems at affordable prices and such systems were installed in a considerable amount throughout the world. However, the current photovoltaic market is extremely small (it has negligible share in the entire electricity market, e.g., see ABI Research, 2004), and its contribution to energy supply is very limited (less than 0.04% in the primary energy consumption, e.g., see Boyle, 2004b).

To stimulate the photovoltaic market, a novel financial mechanism is needed. Among a number of proposals for such a mechanism, one of the most recent ideas is the "Green Intellectual Property (GIP)" system, which the author has recently proposed as a reformed intellectual property system (Nitta, 2005a - c and others at www.greenip.org). This system would divert a part of the patent-related monetary flow toward a monetary pool for financial aid to promote eco- and socio-friendly technologies. This article starts with a review of the GIP system, and subsequently argues in depth various scenarios about the possible contributions of the GIP system in expanding the distribution of photovoltaic installations.

Green Intellectual Property System

Photovoltaics is one of the most realistic targets of the GIP system. The GIP system would impose a levy on patent applicants and holders in the form of the GIP Reserve, GIP Tax and GIP Premium, which would establish the GIP Trust Fund (Nitta, 2005c). From this Fund, the GIP system would provide financial assistance to technology users who seek an essential product such as medicine and ecological apparatuses if those users were unable to access such a technology due to capital shortage (Nitta, 2005a). This financial aid would include a soft loan, grant and royalty assumption for purchasing and developing a necessary technology.

The first element of the GIP Trust Fund, the GIP Reserve, would be a special budget to which revenues of the patent office are allocated (Nitta, 2005c). The GIP Tax would be a kind of "green tax," which is collected from successful patentees when they earn license royalties and patent infringement compensations through the enforcement of their patent rights. The GIP Premium would be a payment by patent applicants and holders as an insurance fee to guarantee royalties and financial rewards from their innovations. This guarantee would occur when the patent system assumed the royalty payment on behalf of patent users if they have no financial power to pay the royalty. The patent system would also subsidize the purchase of patent-protected technologies for their users.

Based on these new financial resources, the GIP system is designed to facilitate the effective development and efficient prevalence of essential technologies in accordance with two basic principles: the Balance shift and the Patent insurance (Nitta, 2005b).

Balance shift

Patent rights are exclusive legal rights with a time limit, and these rights are granted for an innovation as a reward for the full disclosure of that innovation. In other words, the current patent system achieves a balance between a patent monopoly and the information discloser of invented technology. The patent monopoly is a benefit weight for patentees, and the information discloser is a benefit weight for the public. However, the present system overlooks another important weight for the public: the compensation for the negative impacts or "external costs" that the patent system has generated in society.

Patent monopoly increases capital intensity for a patentee by blocking unauthorized access to a patented technology. This heightened capital intensity is the financial driving force for technological progress, because such capital resource enables a patentee to invest in further research and development. However, while patent-driven technological progress has improved our living standards, this progress has induced various environmental and social degradations. For example, haphazard technological progress results in too much consumption of natural resources. In addition, patent monopolies have enhanced poverty by preventing the indigent from obtaining essential products such as medicines. These environmental and social degradations have generated enormous negative costs in our society.

To reflect these negative external costs, the GIP system would establish a new balance of benefits between patentees and the public -- the system would put a new benefit weight on the public side by forcing patent applicants and owners to pay for the GIP Trust Fund (Nitta, 2005b, c). Namely, patent applicants and holders must contribute to the elimination of the environmental and social degradations that the current patent system produces. In accordance with this balance shift, the GIP system would allocate its revenue to the GIP Revenue and collect the GIP Tax and Premium from patent applicants and owners. Through this mechanism, the GIP system would function as the wealth re-distributor from patentees to the public (Nitta, 2005a).

Patent insurance

While the GIP system would enable impoverished people to access necessary technologies, the system would guarantee that patentees can collect their early investments for developing new technologies even when technology users cannot afford to pay a royalty or a price for that technology. Moreover, the GIP system would ensure that patentees can earn reasonable rewards for their efforts on research and development. These financial assistances would assure the benefits of patentees by preventing the erosion of patent rights, including compulsory licenses as well as generic copy productions and associated price collapses of brand products. These patent erosions are stipulated as the safeguard measures or flexibilities of the patent system, which have caused controversial disputes. These disputes would recede by virtue of the patent insurance principle in the GIP system (Nitta, 2005c).

This circumstance would achieve mutual benefits for both patent users and owners. This two-sided benefit of the GIP system would convince patent applicants and owners to contribute to the GIP Trust Fund. Moreover, the GIP system would inspire inventors’ incentives for essential technologies even when those technologies are not profitable but essential for society like many ecological technologies. Actually, the markets of most ecological technologies are still immature and many ecological technology users do not have the sufficient financial capacity to introduce such technologies. In this situation, the GIP system would serve as a catalyst for the expansion of ecological industries.

GIP TRUST FUND

These two principles would allow the GIP system to establish the GIP Trust Fund. Each element of the Fund, i.e., the GIP Reserve, Tax and Premium, has individual national and international phases (see Table 1). At the national phase, the Fund is raised within the patent office of each country or state. At the international phase, a part or the entire of the GIP Trust Fund during each national phase would be summated to the global total. Moreover, other funds from international patent organizations, including the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO), would be added to the global total. As shown in Table 1, the GIP Trust Fund would create financial resources in a significant amount at the national and international phases (Nitta, 2005c). These phases of the Fund would accommodate domestic and international affairs.

GIP Reserve

In each country, patent applicants and holders pay various official fees to their patent office, and these fees provide a large amount of revenue to the office. Each patent office spends this revenue for operational and non-operational expenditures. The operational expenditures mainly include salaries for examiners and the non-operational costs typically comprise renovation costs of buildings. For example, the United States Patent and Trademark Office (USPTO) in the fiscal year 2003 produced revenue at $1.2 billion (see Table 2, USPTO, 2004a, b) and they spent $804 and $402 million for operational and non-operational costs, respectively. Table 2 also shows the revenues and expenditures of the European Patent Office (EPO), Japan Patent Office (JPO) and WIPO. If these patent offices allocated even a small portion of their non-operational costs to the GIP Reserve at the national phase, such allocation would establish the GIP Reserve at a considerable amount. For instance, even 1% of non-operational costs would create the GIP Reserve of $1 million or more at each national phase and $10 million at the international phase (see Table 1, Nitta, 2005c).

GIP Tax

In addition to the revenues and expenditures in the patent offices, there are other patent-related monetary flows from which the patent system could potentially create the GIP Tax. When a successful patentee earns incomes from the patent market through royalties and compensations by patent infringements, this patentee would pay the GIP Tax from these patent incomes. Several surveys reported that the size of the global patent market hit $100 billion in 2002 (e.g., Chesbrough, 2003), and they also predicted that the size would expand to $5 trillion until 2010, with $4 trillion in the US (Nikkei, 2002). If the US patent system collected a small portion, for example, even 1%, of this vast monetary flow from the patent market, the system would annually obtain $40 billion in the form of the GIP Tax during the US phase (see Table 1, Nitta, 2005c). This example means that the GIP Tax would potentially provide the largest amount of a revenue among the elements of the GIP Trust Fund. However, the Tax bears uncertainty of its creation because of patentee’s objections to creating the new tax. Due to this uncertainty, we often argue the GIP Tax separately from other two elements of the GIP Trust Fund in the next sections.

GIP Premium

In addition to the GIP Reserve and Tax, the third potential financial resource for the GIP Trust Fund is the GIP Premium. The GIP Premium could be regarded as the payment for a contract of "GIP insurance." When patent applicants and owners pay official fees for their applications and patents, they would additionally pay the GIP Premium. In return for this premium, the GIP system would guarantee the benefits from a insured patent right and protect the right from the safeguard measures of the patent system (Nitta, 2005c).

A reasonable price for the GIP premium would sufficiently contribute to the establishment of the GIP Trust Fund. If, for example, the GIP Premium was set at only 3% of the total cost to obtain a patent right, the Premium would create a revenue of around $100 million at each national phase (Table 1, for details see Nitta, 2005c). These newly-created financial resources would assist in efficient distribution of the essential technologies.

(See Part II in the next issue.)

Table 1. National and international phases of the GIP Trust Fund (US dollars)

 

GIP Reserve

GIP Tax

GIP Premium

 

Source

 

Ration for GIP

Non-operational

official costs

1 %

Patent market

 

1 %

Additional payments by applicants and patentees

3 % of total cost to

Obtain a patent right (4)

 

National (1, 2)

US

EU

Japan

 

 

$4 million

$5 million

$1 million

 

$40 billion (3)

$5 billion

$5 billion

 

$100 million

$122 million

$98 million

International

$10 million

$50 billion

$238 million

Sources and Notes

1. Annual reports of the year 2004 or fiscal year 2003 from WIPO, EPO, USPTO and JPO.

2. Nikkei, 2002. Nihon Keizai Shimbun (Japanese economic newspaper), May 31, 2002,

news source: QED Intellectual Property, London, UK.

3. Calculation based on the author’s experiences.

4. Calculation based on a 10% of official fees.

Table 2. Income/cost of major patent offices (US dollars in millions)

 

Year

USPTO

FY 2003

EPO (3)

2004

JPO (4)

FY 2004

WIPO

2004

 

Revenue

Patent Fee

Others

1,162 (1)

1,005

157

1,398

1,215

183

1,268

983

285

226 (5)

176

50

 

Expenditure

Operation

Non-operation

1,206 (1)

804 (2)

402

1,398

914

484

1,287

1,181

106

252 (6)

207

45

Sources and notes

1. "United States Patent and Trademark Office performance and accountability report, Fiscal year 2003," USPTO, 2004, Alexandria, Virginia, pp. 54-57.

2. Id., p. 56, the third paragraph. This paragraph reports that USPTO’s non-operation costs account for approximately one-third of the total expenditure. Based on this fact, the amount in the table was calculated by the author.

3. "Annual report 2004," EPO, 2005, Munich, Germany, p.66, the author converted the original value in euro to US dollar.

4. "Patent administration annual report (Japanese)," JPO, 2005, Tokyo, Japan, the author converted the original value in yen to US dollar.

5. "Revised proposal for program and budget 2004-2005," WO/PBC/7/2. WIPO, 2005, Geneva, Switzerland, Table 20, the author converted the original value in Swiss franc to US dollar.

6. Id., Table 19.

Africa A Leaking Ship: The Role of Debt, Aid & Trade

Africa is not as poor or as helpless as is often presented. Instead, it is a continent that leaks heavily - losses from tax competition and competition to attract investments, unfair trade practices and debt all helping to fuel a net outflow of resources estimated in billions of dollars. The task is to plug these leaks, says Charles Abugre, currently the head of policy and advocacy at Christian Aid. He has been a development activist in Ghana and many parts of Africa and Asia. In the following shortened version of a paper presented to an Africa consultation of the Global Call to Action Against Poverty, held in Harare, Zimbabwe from 7-10 November, 2005, he suggests better ways to deal effectively with debt, aid and trade. The piece has been taken from the electronic network of Pambazuka News.

The rationale behind the "more and better aid, debt cancellation and more just trade policies" is that these will create the conditions to ensure adequate resources to finance Africa’s development. Undoubtedly, if fully addressed, these will put more money in the hands of governments and people and ease the resource constraint. We will argue however that on their own – never mind the quality of aid, the speed of debt cancellation, the degree of market opening in the North and the end of export subsidies - these demands will not provide the resources adequate for Africa’s development.

These demands, though relevant, are slightly misplaced in their singular focus on sources of "inflows" to the total denial of the mechanisms of "outflows". It is the balance of inflows and outflows that create the net resources for development. We will also argue that the singular focus on "inflows" entrenches the sense of Africa’s dependence and perpetuates the myth of Africa’s resource poverty and powerlessness. In addition, in focussing on trade policy per se at the exclusion of what underlies trade, we miss a fundamental explanation for government’s persistence on liberalisation – beyond the view that they are reckless, ignorant, powerless or uncaring.

More and Better Aid

Our demand that governments in the North fulfil their obligation to deliver 0.7% of the gross national products for international development is right. It is indeed a right of African countries in particular, to demand it in view of the fact this promise has been used repeatedly in the past as a bait to secure economic and social reforms in Africa. But realistically, we know it won’t be delivered. The slow pace and low volume of aid increases committed at the 2005 G8 meeting in spite of all the noise, and the subsequent threat by the US to undermine the 0.7% target itself, shows how difficult and risky it is to rely on increasing volumes of aid for Africa’s development. The explanation is simple, to the extent that traditional aid continues to depend on taxpayers in the North, its ebbs and flows will depend on the political temperature and economic performance in the North, especially Europe.

But the key problems of aid are its purpose, its governance and its impact on the psychology and accountability of our governments and elite. Official development aid is hardly ever completely altruistic or single-purpose or hardly ever completely divorced from foreign policy. Consequently, we are constantly going from opposition to one thing or the other associated with the provision of aid, e.g. tied aid, policy conditioning; human rights conditioning, policy leveraging and more recently the increasing link with the war on terror.

Regardless of the rhetoric, aid cannot be separated from foreign policy objectives and to the extent that these shift, the purpose of aid will shift. In any case why not? Why shouldn’t taxpayers in the North demand that their taxes serve values and goals they hold as dear to them? Why shouldn’t they expect their governments to account for the impact of aid, therefore put in place measures to ensure that their money delivers the purpose for which it is given.

Conditionality is an important issue for Africa largely because aid forms too large a share of budgets, therefore risks associated with aid policy are more significant for African than other continents where aid forms a minuscule proportion. Whilst it is proper to keep ensuring that the conditions associated with the provision and management of aid do not exacerbate Africa’s development problems, the real challenge is to reduce its importance to Africa’s development.

The more debilitating impact of development aid is what it does to the mentality of the African elite and to the democratisation and accountable governance process. Governments have developed the myth that their economies cannot survive without aid. In reality it is their governments and the patronage systems that maintain them which are under threat without the aid machinery.

The competition among African governments for inclusion in the club of favoured nations leads to wilful abandonment, to donors, of sovereignty won at the cost of lives in the anti-colonial struggle. The multi-donor budget support arrangement is one manifestation of this loss of sovereignty. Without a break in the aid dependency mentality Africa stands no chance of building democracy based on accountability to citizens. Worst still, the imagery that aid agencies – private and official – find necessary to deploy in order

to sustain domestic political interest for aid is often an affront to the African personality and spirit, diminishes the African self-worth and perpetuates negative stereotypes. Whilst we cannot ignore aid, we should not be glorifying it.

Sometimes we in civil society contribute unconsciously to the erosion of sovereignty and the loss of self-worth. We are sometimes quick to demand or endorse "governance conditionality" where aid and debt relief is made conditional to progress in these areas. To monitor compliance often requires even greater involvement and power of donors in domestic governance. It is like saying that new forms of colonisation are acceptable on human rights grounds. This is dangerous. Yet, there are cases where human rights abuses, dictatorship and corruption are at such a level that the impact of debt relief and aid will be to strengthen repression and enrich a few than promote development. What do we do under this situation?

A solution could be based on the principle that regional political bodies are better placed to manage political problems in member states. This is the principle applied by ECOWAS, SADC and the AU in conflict resolution and peace building/keeping. This is also the principle underlying the Africa Peer Review Mechanism (APRM). We propose a Peer Trust Fund to be managed by the AU and used as the financial muscle behind the APRM. Debt relief and humanitarian funds meant for countries abusing the citizens will be paid into this Fund, to be held in trust for the country and be released by the AU as the

country makes progress in the governance areas of concern. Such a mechanism will:

Ÿ Strengthen and give teeth to the AU’s desire and capacity to promote accountable and democratic governance in the region;

Ÿ Act as a muscle and an incentive for the APRM;

Ÿ Take away the excuse of creditors not to write off debts owed to Africa or withhold aid needed for humanitarian purposes but which, for reasons outlined above, cannot be channelled directly to an abusing country or to NGOs;

Ÿ Allow Africans and their political institutions to drive their own political reforms;

Ÿ End the arbitrary and selective means by which donors apply governance conditionality.

So what we should do about aid:

Ÿ Support our Northern partners’ efforts to make their governments fulfil their part of the global compact but scale down its importance in Africa’s plan of action;

Ÿ Support the establishment of a Peer Trust Fund to assist the AU to deal with the governance issue;

Ÿ Increase domestic CSO interests and involvement in budget processes so as reduce the influence of donors on budget governance and steer budgets to deliver public services and fight corruption;

Ÿ Oppose donor-driven budget management arrangements that undermine parliamentary oversight and propose parliamentary oversight procedures that are transparent and inclusive of civil society.

Whilst these actions are necessary to improve the quality of aid and reduce its damage, they do not address the resource deficit problem per se.

Debt

The issue of debt is not so much what we demand but whom we address with what messages. First the message of ending the debt burden has been directed largely at one direction – the creditors. The message itself has been one of appealing for understanding whether based on justice or empathy. There is nothing wrong with this in as far as this appeal is coming from our Northern partners directed at their publics and governments. Whatever strategies they find as feasible to exert pressure for action should be welcomed by us as long us these strategies neither diminish the African dignity nor undermines the messages coming from Africans.

But directing our energies at appealing to Northern creditors suggests our lack of belief in the power of the debtor. However, the Nigerian debt relief effort, no matter how unsatisfactory, and the Argentinean debt restructuring initiative suggest that debtors do have power and can force change. In the Nigerian case, it was the threat by Parliament to withhold appropriation for debt servicing and the subsequent road show that the joint committees of parliament undertook in Europe and America to drum home their threat that forced the Paris Club to rush through a debt relief package. In Argentina’s case, an economic and political meltdown resulting from years of faithful compliance with the IMF’s conditions and faithful debt servicing, forced Argentina to impose a unilateral moratorium on debt servicing and then subsequently unilaterally discounted its debt instruments by 75%. After heaving and puffing both the IMF and the private creditors accepted their lot and Argentina’s economy rebounded.

Africa’s debt overhang of over $200bn provides the muscle for a successful collective African threat. This is the task for the African Union and we should make that forcefully clear. The cancellation of $200bn poses no threat to the global financial system but can save millions of lives. Even a threat of a collective moratorium will send the message clear and loud, especially if this threat were accompanied by an enforceable commitment to transparency and anti-corruption and the channelling of the money so saved into revamping public services. We should not celebrate divisive debt relief initiatives like the one delivered at Gleneagles although we can celebrate the victory in terms of the comprehensive principle, i.e. that all debts, including the debt stock owed to the IFIs must be cancelled.

So where do we go from here in relation to debt:

Ÿ Welcome the principle of debt stock cancellation agreed at Gleneagles and at the annual meeting of the IMF/Bank but condemn the selectivity and divisive approach;

Ÿ Develop a strategy to pressurise the AU and its member states to adopt a debtor-led strategy;

Ÿ Campaign for an International Law to regulate international debt.

Trade

The trade policy focus has been in four areas:

Ÿ Defending our domestic markets from further harmful liberalisation;

Ÿ Defending our producers – especially our farmers – from demise resulting from "dumping" of subsidised imports;

Ÿ Seeking market access without reciprocal market opening obligations;

Ÿ Promoting regional integration.

These demands are relevant and we should continue to maintain a focus on them. We should prioritise, in particular:

o The defensive interests of our people: For example, our focus on agriculture should be driven by food security and rural development objectives rather than export promotion. Not only is the latter not realistically attainable in a significant way (except traditional commodities) but detracts from what Africa’s needs are at this moment. In this sense, the key policy focus is to prevent any further market opening (liberalisation) whether this is through aid and debt deals or through multilateral negotiations. Better still, the goal should be to protect the space for flexible policy whereby countries can vary tariff policy to meet development goals, starting with consumer goods and shifting to intermediary inputs of capital goods – whilst relaxing consumer good imports – as the economy develops. It is this flexible and progressive use of tariffs that is essential as an industrialisation strategy.

o Conditions for industrialisation: This intersects with the defensive interest. The key constraining factor for industrialisation is demand - the competition from foreign consumer goods which makes it impossible for local produce to carry on producing let alone innovate. Investing in infrastructure including roads and energy will contribute to reducing transaction cost but are not, at the most constraining to industrialisation. We should not be detracted by the so-called supply-side argument that suggests that investments in infrastructure will correct for competitive pressures. The policy demand is to not give any more market access through the Non Agricultural Market Access (NAMA) negotiations and others whilst securing the policy space necessary to allow for flexible use of trade policy.

o Defend public services: The aggressive push embarked on by the EU and the US at the on-going talks to open up the services sector reflects the shift in the structure of these economies into services. It also reflects the increasing importance of services for profits and services as a means of gaining control of scarce natural resources such as water. Without the universal provisions of public services by the public sector, Africa stands no chance of reducing poverty, managing inequality and conflict and growing the labour force of the future. We should put in all the energy we can marshal to campaign for the universal provision of public services by the public sector, the minimisation of commercial ethos in basic services and the avoidance of market opening commitments.

o Regional markets: The key issue here is to support the AU and sub-regional trading blocks to resist the pressure to make market opening and third-party tariff concessions before the dynamics of intra-regional trade are worked out, not least in the Singapore issues. This suggests the need to postpone the market access aspects of the Economic Partnership Agreements (EPAs) with the EU and to shift energy into campaigning for a reform of Article 24 of the Regional Trade Agreements component of the WTO in order to protect the principle of less than full-reciprocity. In the interim we should back the Stop EPAs campaign’s call for a reform of the rules of origin aspects of the Everything But Arms (EBA) to make it meaningful for African LDCs.

o The Mandate of the WTO and dispute settlement: Developing countries, and Africa in particular, stand to lose with a WTO saddled with a broad rather than a narrow agenda. This is because Africa has the least capacity to defend, let alone promote their interest in multiple negotiating forums. The continent’s heavy dependency on the IFIs for resources exposes it to unilateral liberalisation pressures. Once unilateral liberalisation has been embarked upon, there is always the risk of easily committing liberalised sectors to the lock-in mechanism of the WTO. In addition, making commitments at several fronts imposes an implementation burden, the cost of which is relatively higher for poorer countries than richer ones. It is therefore in the interest of Africa to see a slimmer WTO.

However, the decision to focus on trade to the exclusion of investments is a serious limitation. In the first place, the Services Agreement and the Singapore agenda are essentially about investment. It is important to note also that underlying the market access concessions that African governments give to the North, especially in services, is an expectation of foreign direct investments and its mythical value as the solution to underdevelopment. Similarly, FDI expectations underlie the anti-inflationary macroeconomic policies of governments and debt servicing compliance.

The belief in FDI is so strong that governments have happily adopted negative taxation policies to attract foreign companies. To have a chance of developing trade and macroeconomic policies that promote development, restrain our governments from giving away market access concessions recklessly and channel attention towards domestic resources for investments, we must first effectively champion a more realistic and less jingoistic expectations associated with FDI.

So what do we do in relation to trade and investment?

Ÿ Encourage national governments to be more proactive in protecting their markets especially in the area of consumer goods, agriculture and essential public services. They will not necessarily suffer punitive action. Even if they did, their economies may still come out better-off.

Ÿ Drum home to national governments that opening markets will not necessarily bring FDI and even if it did, FDI will not necessarily bring about development. Encourage the AU to promote a critical debate on the role of FDI in Africa’s development.

Ÿ Continue the campaign for policy flexibility and an end to coerced liberalisation. This is crucial for defending Africa’s producers.

Ÿ Scale down the export focus of agriculture (market access in the North) and emphasise its food security and rural development objectives.

Ÿ Support the Stop EPAs campaign

Financing Development: Beyond aid debt relief and trade

What matters for ensuring that governments have adequate resources to finance development are net flows. This means factoring in not just inflows such as earnings from trade, or aid or remittances but also what is lost to the rest of the world. Debt servicing is one outflow. But there are several other ways in which resources are lost to the continent. Indeed, the reality of Africa is that the resources that leak out far exceed those that flow in. This is why Africa is a net exporter of capital.

And the sums are staggering. Njukumana et al estimate that between 1970 and 2000, whereas Africa received about $100bn id aid (including loans) it lost $274bn in capital flight induced by debt, trade mis-invoicing and imputed interests. Add cumulative losses due to terms of trade of non-oil producing Sub-Saharan African countries, estimated by the World Bank to be in the area of $400bn or 120% of combined GDP. Add also losses that African countries have incurred simply by opening up their markets.

Africa was made to reduce their rates of protection at a pace three times as fast the countries of the OECD. This has left the continent ridiculously open, relative to its stage of development. Christian Aid recently calculated that over the past two decades, Africa lost in income terms the equivalent of over $270bn from the negative growth effects alone of trade liberalization. This amount alone more than matches the accumulated value of grants, loans and net FDI channelled into the continent.

Add losses due to tax competition, tax evasion and tax avoidance. Taxation which has served developed countries well as a means of redistribution and source of investment capital but which has been undermined through the enforced deregulation which has promoted tax competition, tax avoidance and tax havens. As a result, whereas government revenue from taxation in developed countries average 30% of GDP between 1990 and 2000, in sub-Saharan Africa this has declined over the years to an average of 17.9% of GDP.

Losses from tax competition have largely benefited multinational corporations whilst the tax burden has been transferred to wage earners and small businesses. Some analysts suggest that African oil producers command less than 20% of the profits. The rest are lost to a complicated network of unfair trade practices. The transfer of revenues to tax havens by these corporations and rich individuals further exacerbates the revenue loss. It is estimated that at least $11.5 trillion is currently held in about 74 tax heavens – lost to tax authorities – by wealthy individuals. This does not include laundered profits of businesses which operate through tax havens to avoid tax, nor does it include money illicitly transferred abroad through corruption, drugs and money laundering. These latter elements in any case comprise a much smaller share of resources losses than is generally believed.

As is obvious from above, Africa is not as poor or as helpless as is often presented. Instead, it is a continent that leaks heavily. The task is to plug these leaks. To do so, African civil society must turn attention to addressing:

Ÿ Support for campaigns aimed at corporate transparency;

Ÿ Campaigns against tax concessions and for progressive tax policies;

Ÿ Work with relevant networks to campaign for the end to banking secrecy and tax havens;

Ÿ Follow-up on the recommendation of Africa Commission report to pursue and return stolen wealth from Africa and to put in place measures to discourage illicit transfers abroad.

Incidentally, taxation and reliance on domestic sources for financing development also provide a more conducive environment for promoting democratic accountability than the dependence on aid. We have an obligation to plug the leaks.

Justice for Latin America on IDB Debts

In a joint Eurodad paper, several civil society groups have made the case for cancelling debts owed to the Inter-American Development Bank by impoverished HIPC and non-HIPC Latin American countries. "It is inequitable and illogical that some countries should benefit more than others within the same official initiative," according to the paper published 30 January 2006, referring to the multilateral debt deal done last year. It is also argued that under the auspices of the United Nations, a fair and independent process to identify and cancel odious and illegitimate debts could be convened.

In 2005, following significant public pressure, the G8 announced a plan to cancel US$40bn in debt of 18 of some of the world’s most impoverished nations. 14 African nations and 4 Latin American nations will, in 2006, benefit from the cancellation of debts owed to the World Bank, IMF and African Development Fund (AfDF). While the deal does not go nearly far enough it is significant that for the first time the international community has acknowledged that 100% cancellation of some multilateral debts is urgently needed and can be accomplished.

While several African countries included in this initiative will receive a major debt cancellation, no country will receive the claimed full 100% debt cancellation. In Africa, the picture is mixed: Burkina Faso and Uganda will have the biggest proportion of their debt cancelled with up to 90%. Mozambique on the other hand will receive around a 40% debt cancellation. In Latin America however, the picture is gloomier.

For the four Latin American countries considered heavily indebted the amount written down will be 30% on average, meaning that there are several important gaps in official plans. Among these gaps are that impoverished Latin American countries will continue to pay hundreds of millions of dollars in debt service to the Inter American Development Bank. It is inequitable and illogical that some countries should benefit more than others within the same official initiative, and we are European network on debt and development calling for the initiative to be extended to the Inter-American Development Bank by the time of its annual meeting in April 2006.

In 2005, eyes were turned towards Africa as the continent most blighted by unacceptably high levels of poverty and underdevelopment. It is true that overall, Sub-Saharan Africa is the region furthest off-track towards meeting the internationally agreed Millennium Development Goals. The UK’s 2005 Africa Commission report describes how, on current trajectories, the goals for halving poverty, universal primary education and the elimination of avoidable infant deaths will not be delivered in Sub-Saharan Africa in 2015 but between 100 and 150 years late.

Nevertheless, many Latin American nations also face similar, huge challenges. Only 4 countries on the continent have been formally classified as HIPCs but Latin American HIPC and non-HIPC countries alike are struggling with very high levels of poverty, gross income inequalities and unsustainable debt ratios. Debts owed by Latin American nations to the Inter-American Development Bank, among other regional multilateral creditors such as the Central American Bank for Economic Integration and the Caribbean Development Bank were not however included in 2005’s multilateral debt deal.

This short paper sets out why debt campaigners across Latin America, North America and Europe believe that the G8 multilateral debt deal should – and can easily and immediately – be extended to debts owed by the 4 Latin American HIPCs to the Inter-American Development Bank (IDB). As this paper shows, debts owed to the IDB represent a significant share of Latin American HIPC and non-HIPCs’ external debt burden and the debt service a huge drain on scarce government resources.

As civil society campaigners, we believe very strongly that IDB debt cancellation should be extended to all those Latin American nations that need it in order to reach the MDGs by the internationally agreed target-date of 2015. IDB debt cancellation for the 4 Latin American HIPCs should therefore only be seen as the first step in the right direction. But we believe the international community cannot justify denying immediate IDB relief to the 4 Latin American HIPCs. These countries have been acknowledged by the international community to have similar levels of unpayable debts as the African countries. The IDB also participated in the HIPC Initiative delivering US$439mn in debt relief to the 4 Latin American HIPCs that have passed through the process. It is inconsistent, unfair and wrong for the 2005 multilateral debt deal to have included the African Development Fund but excluded the IDB.

We therefore call on donors to extend the multilateral debt relief initiative to the IDB without delay and at the same time urge them, in equal partnership with civil society and the governments concerned, to open dialogue and start the planning process NOW on IDB debt cancellation for all those Latin American nations that desperately need it to reach the MDGs. But as this paper also reveals, much of this debt is in fact odious or illegitimate in nature and should not be repaid on the grounds of fundamental justice.

Inter-American Bank Debt Cancellation: Why It Matters for the 4 HIPCs

For the 4 Latin American HIPCs, the net gain from the G8 multilateral debt deal is much lower than the 14 African HIPCs because the Inter-American Development Bank was excluded where the African Development Fund was included. As an example, in Ghana, debts owed to IDA, IMF and AfDF represent around 90% of the country’s external debt burden. For them, this deal is therefore significant. But in the case of the Latin American HIPCs, the G8 debt deal will mean an average external debt reduction of less than 30%. The external debt burden of the 4 Latin American HIPCs stands at about US$15bn. The G8 debt deal will cancel about US$4.5bn of this.

So what do the 4 Latin American HIPCs owe the IDB and what is the impact of this debt burden on these countries? A quick look at the facts reveals the urgency of IDB debt cancellation.

Bolivia owes US$1.6bn to the Inter-American Development Bank. This represents approximately 32% of the country’s public and publicly guaranteed external debt burden. Average annual debt service to the IDB over the last five years amountedto US$97mn, which represents almost 37% of debt service payments. In 2004, Bolivia paid a total of US$44mn in debt service to the World Bank (IDA) and IMF combined, whereas debt service to IDB amounted to a staggering US$108mn. IDB debt cancellation for Bolivia would reduce the country’s external debt burden by one third. This combined with the G8 multilateral debt deal would reduce the burden by approximately 70%. The combined impact on debt service would come close to 60%. Bolivia is South America’s poorest nation. 63% of Bolivia’s population lives below the poverty line. In 2004 the country paid out over US$800mn in debt service payments – on both domestic and external debt – while during the same year it was able to invest only US$750mn on the pro-poor expenditures of health and education combined. Overall, public debt service represents a massive 35% of government revenue.

At end-2005, Guyana had a total outstanding debt stock of US$521.3mn to the IDB out of a total public and publicly guaranteed external debt stock of US$1.22bn at end-2003 xii. The Inter-American Development Bank is in fact Guyana’s largest creditor and, according to our calculations, debt service to the institution will represent a massive 64.6% of total external debt service obligations this year (see figure below). In 2005, Guyana spent US$25.1mn on debt service payments and will, on average, every year spend this same amount on debt service to the IDB over the next ten years. According to the World Bank, while poverty levels stand at around 35% country-wide, an alarming 92 percent of the population in rural areas - including many indigenous populations - continue to live in poverty. This US$25mn could clearly have been much better spent.

For Honduras, the G8 multilateral debt deal means that the country will see US$1.34bn in IDA debt and US$190mn in IMF debt wiped-off the books in 2006. But Honduras owes 27% of its external debt burden to the IDB. This amounts to over US$1.41bn at end-2004xiv. In 2006 alone, debt service payments to the IDB will amount to over US$80mn xv. Total debt service in 2003 amounted to US$363mn so clearly IDB debt-service is a significant part. Meanwhile, over 70% of Hondurans live below the poverty line and a staggering 81% do not have access to clean drinking water.

At end-2005, Nicaragua owed US$1.4bn to the Inter-American Development Bank out of an overall public and publicly guaranteed debt stocks of US$5.4bn at end-2004. According to our calculations, debt service to the IDB as a percentage of total external debt service in 2006 will amount to an amazing 59.5% (see figure below). In 2006, Nicaragua will pay over US$60.1mn in debt service to the IDB climbing to over US$76.1mn by 2010. According to the World Bank, 46% of Nicaraguans live in poverty and 25% in extreme poverty.

The IDB is a significant creditor in all four cases and IDB debt cancellation would clearly make a huge difference to scarce government budgets. Given these stark facts, we believe immediate IDB debt cancellation for these four countries is both essential and ethical. It is also achievable – both politically and financially. Over the next ten years, the 4 Latin American HIPCs are collectively scheduled to reimburse the IDB around US$2.75bn. This money would mean an awful lot to the countries concerned – and a significant amount of new investments – but not an awful lot to IDB donors or the IDB which could easily and collectively find this sum (below we outline how).

The HIPC/non-HIPC Divide in Latin America: Where’s the Sense?

Overall Latin American economies have become increasingly vulnerable to macroeconomic instability and shocks following the imposition of policies of capital account liberalisation by the IMF and the World Bank. Between 1990 and 2003, economic instability increased dramatically: Argentina, Bolivia, Ecuador, Guatemala, Peru and Venezuela all had lower per capita GDP in 2003 than they had in 1980. Against this background of generalised economic vulnerability and lower incomes per capita, four countries have been classified as "HIPC" in Latin America. But as the following country cases indicate the HIPC/non-HIPC divide in Latin America is highly arbitrary and misleading. Indeed, the case of Haiti shows very clearly how one minute a country can be OUT of the HIPC Initiative then IN, depending on shifting debt ratios and the mood of the international community.

Haiti was not included in the original list of HIPCs drawn up by creditors in 1996. This is despite the fact that Haiti is severely indebted and is by far the poorest country in the Western Hemisphere. According to the World Bank, an estimated 76% of Haiti’s 8 million people live in poverty and income inequality is among the highest in the world. Half the population live on less than 1US$ per day and half is illiterate. Added to these critical concerns are rapid economic decline, shortage of water, electricity, employment, access to primary health care and education and deforestation. In 2005, the World Bank decided that Haiti was indeed a HIPC with debt-to-export ratios in the region of 194%. But probably the international community also recognised that Haiti’s multilateral debts were also fundamentally uncollectible. Haiti could enter the HIPC Initiative process as soon as 2007 (which ultimately would lead to cancellation of Haiti’s debts to the World Bank and IMF), but this brings with it a fresh set of concerns. Much of Haiti’s debt to IDA could easily be classified as illegitimate. In March 2002, the World Bank in an independent evaluation of Bank assistance to Haiti from 1986 to 2001 concluded that "the development impact of IDA lending had been negligible". The Bank should take co-responsibility for these clear failures in development lending, not attempt to legitimise these debts via the HIPC Initiative. Haiti will also have to comply with the deeply damaging (not to mention unpopular) economic reform programme associated with the initiative. Moreover HIPC countries have taken on average seven years to reach completion point. Haiti needs immediate debt cancellation. And this debt cancellation must include the IDB. Haiti is expected to pay the IDB US$28.6mn in 2006 climbing to almost US$40mn by 2010. Meanwhile, neither Ecuador nor Peru have been classified as HIPCs. This is despite severe (and increasing) levels of debt, high levels of poverty, and extreme vulnerability to external shocks. Both countries are heavily indebted to the IDB, and both countries will require significant debt cancellation in order to reach the MDGs.

Ecuador has total debt stocks amounting to US$16.8bn. The country’s heavy dependence on commodity exports (oil, banana, cocoa, coffee and shrimp), its high level of public debt, combined with the occurrence of natural disasters and frequent changes of government are all elements that make Ecuador extremely vulnerable to internal and external shocks. They also help to explain the country’s poor levels of economic growth and the deterioration of social indicators experienced in the country over the last two decades. In the late 1990’s levels of poverty actually increased from 34% to 56% of the population. Currently, 50% of children suffer from malnutrition (rising to 70% in the rural, predominantly indigenous "sierra") and 7 out of every 10 Ecuadorians do not have access to basic health-care. Against this background, Ecuador paid-out a massive 47% of the government’s budget on debt-service payments in 2003 (US$2.16bn). In contrast, social investments amounted to just 9%. The Inter-American Development Bank is the country’s largest creditor (18% of total foreign debt). Outstanding debt to the IDB amounts to over US$2bn at end-2004. Ecuador will pay over US$213mn in debt service to the IDB in 2006.

In Peru, poverty levels hover at around 48-49% of the population. Total debt stocks amounted to a staggering US$29.8bn at end-2003xxix. Over the past decade, amongst multilateral institutions, the IDB has been the leading source of external financing for Peru. By the end of 2001, the country’s debt to the IDB stood at over US$2.8bn, or 43% of its overall indebtedness to multilateral institutions and 14% of the country’s public external debt. In 2006, debt service to the IDB is projected to be over US$381mn rising to US$430mn by 2010. Peru suffered extreme weather unbalances with El Ni.o just a few years ago and remains vulnerable to similar future shocks. Peru’s goal is to reduce extreme poverty from 24% in 2002 to 18% in 2006: IDB debt cancellation would clearly help in these efforts.

Because of these clear inconsistencies coupled with an overwhelming need to invest in the social and physical infrastructure, we as debt campaigners believe a much fairer approach is debt cancellation for all those countries that need it to reach the MDGs by 2015. This would do away with the highly subjective HIPC/non-HIPC divide. We therefore call on the international community to open immediate dialogue on broader IDB debt cancellation as an integral part of any reasonable strategy that aims to help Latin American nations meet the MDGs by 2015.

At Least Some IDB Debt is Odious

At the same time, at least some IDB debt in the region is in fact odious in nature. According to international legal precedent, debts are considered "odious" when they are contracted without the consent of the people and not spent in their interests and when the creditor is aware of this.

In Nicaragua for example, the IDB lent US$321.6mn to the Somoza family’s military regimes between 1961 and 1979. The most notorious dictator was Anastasio Somoza Debayle whose regime between 1967 and 1979 was marked by political repression of media and opposition voices, deteriorating economic conditions and embezzlement of international aid funds. Haiti is another case in point. The IDB lent US$290mn to the two repressive "Papa Doc" and "Baby Doc" Duvalier regimes. Meanwhile, in Argentina, the IDB lent US$1.6bn to the military junta responsible for the death or disappearance of over 30,000 innocent people between 1976 and 1983. Yet all three countries have been compelled through the IDB and other international financial institutions to continue servicing this odious debt.

What we are calling for

As this paper shows very clearly, the debt crisis is far from over and has certainly not been solved with the G8 multilateral debt deal, despite official rhetoric to the contrary. Latin American nations will continue to fork-out vast (and increasing) sums of money to the IDB to the detriment of their populations. In some cases, this debt is also odious in nature. IDB debt cancellation is therefore the only right thing to do - from both a justice and ethics standpoint.

In this context, we call for:

1. The immediate cancellation of debts owed to the IDB of Latin American HIPCs (currently Bolivia, Guyana, Honduras and Nicaragua). We believe the international community cannot justify denying this cancellation to these countries: they have all passed through the HIPC Initiative (the initiative agreed at multilateral level – with all its damaging economic conditionalities) plus the G8 multilateral debt deal included the African Development Fund but excluded the IDB. This amounts to unfair treatment.

2. There should be no further conditions attached to this cancellation and it must respect the principle of additionality. This debt cancellation must not be accompanied by a dollar for dollar reduction in fresh disbursements: this will amount to giving with one hand while taking away with the other.

According to our calculations, over the next ten years, the 4 Latin American HIPCs are collectively scheduled to reimburse the IDB around US$2.75bn. This money would mean an awful lot to the countries concerned – and a significant amount of new investments – but not an awful lot to IDB donors or the IDB which could easily and collectively find this sum.

i. Donors should find their contributions to the cost over and above their aid budgets.

ii. The IDB also has its own internal resources which could be drawn on without taking away future concessional resources from the poorest countries. The Bank generated an operating income of US$862mn in 2004 and US$1.1bn in 2003. In addition, the Bank basically holds a fully performing sovereign-guaranteed loan portfolio plus loan loss reserves of US$199mn in 2004. The Bank could therefore also contribute to the financing of this cancellation.

3. IDB debt cancellation for the 4 Latin American HIPCs should only be seen as the first step in the right direction. We call on donors, in equal partnership with civil society and the governments concerned, to open dialogue and start the planning process on IDB debt cancellation for all those Latin American nations that need it to reach the MDGs. We also support the establishment of a fair and independent process to identify and cancel odious and illegitimate debts. Such a process could be convened under the auspices of the United Nations.

 

Country

Total

debt

stock

US$ (1)

IDB

debt in

US$

(2)

IDB debt

as a %

external

debt

Projected

total external

debt service

(US$ 2006)

(3)

Projected debt

service to IDB

in 2006 in US$ (4)

Debt service

to IDB as a

% of overall

debt service

in 2006

Bolivia

4.93bn

1.6bn

32%

344.6mn

127.1mn

36.9%

Guyana

1.22bn

521mn

42%

34.7mn

22.4mn

64.6%

Honduras

5.08bn

1.4bn

27%

144.5mn

80.1mn

55.4%

Nicaragua

5.4bn

1.4bn

26%

101mn

60.1mn

59.5%

Sources:

1. Public and publicly guaranteed debt stock at end-2004. Sources: Banco Central de Bolivia, Banco Central de Honduras and Banco Central de Nicaragua. In the case of Guyana, figures have been taken from GDF 2005 and represent end-2003 data.

2. Inter-American Development Bank

3. World Bank, HIPC Initiative "Status of Implementation", September 13 2005

4. Inter-American Development Bank debt service projections

South-North Resource Transfers Near $500 billion in 2005

According to the latest ‘World Economic Situation and Prospects 2006’ report by the United Nations, the net transfers of financial resources from developing to developed countries has climbed steadily from an estimated $8.1 billion in 1997 to $483.4 billion in 2005. And the most important destination of the net outward transfer of financial resources from developing countries taken as a whole has been to the United States of America. Presented below are extracts from the above report, also highlighting the growing South-South initiatives and the progress and shortcomings of the HIPC initiative to alleviate debt burdens.

Over an extended period of nearly ten years, the international financial system has seen net transfers of financial resources from developing to developed countries. Net transfers are the net flow of financial resources less net interest and investment income payments. The mag­nitude of these transfers has risen steadily from an estimated $8.1 billion in 1997 to $483.4 billion in 2005. The net transfer of resources from economies in transition has also followed a similar pattern since 1999, reaching an estimated $95.5 billion in 2005.

The most important destination of the net outward transfer of financial resources from developing countries taken as a whole has been to the United States of America, and has more than offset the net outward transfer from other major developed countries, namely the European Union (EU) countries and Japan, to developing countries.

The counterpart of the net outward transfer of financial resources from developing countries and transition economies is reflected in the growing net export surpluses of an increasing number of developing countries, caused by rapidly rising export volumes and higher prices for oil and non-oil commodities. The major increases in net export surpluses in 2005 continued to be in Western Asia, while the surpluses in East and South-East Asia and Latin America increased at a slower pace. Net transfers to sub-Saharan Africa (excluding Nigeria and South Africa) are still positive but have declined to a meagre $2 billion in 2005.

South-South Cooperation is increasing

There has been growing political commitment in recent years towards stronger and wider­ranging cooperation among developing countries in trade, finance, technical cooperation and humanitarian assistance. The 2005 World Summit agreed to encourage South-South coopera­tion to complement North-South cooperation as an effective contribution to development.16 Notable efforts on the part of developing countries to this end include the adoption of the Doha Plan of Action at the Second South Summit. The South Summit established the New Asian-African Strategic Partnership and other regional cooperation mechanisms and encour­aged support from the international community through triangular cooperation. The Summit also created "the South Fund for Development and Humanitarian Assistance" to support economic and social development and address problems of hunger, poverty and human ca­tastrophes in developing countries.

The major form of South-South development cooperation is technical coopera­tion. A recent multilateral initiative in this regard is the India-Brazil-South Africa (IBSA) Dialogue Forum. The IBSA Dialogue Forum serves as a mechanism among other things, for strengthening cooperation in specific economic and sectoral areas, and for improving economic relations between the three participating countries. China has given strong sup­port to South-South cooperation with its Technical Cooperation and Development Network, comprising 26 centres of excellence. At the 2005 World Summit it announced that it will expand its existing training and technical assistance to developing countries over the next three years. India, under the India Development Initiative founded in March 2003, plans to provide financial and technical support to other developing countries. Brazil and Morocco underwrite scholarships to their universities and support technical and professional training for students of developing countries. Singapore offers training programmes in various disci­plines, and Sri Lanka offers training in indigenously developed technology (crab breeding, uses of banana fibre, etc). Cuba has provided medical training as well as experts and support for health-care systems in and outside the Latin American and Caribbean region.

South-South cooperation in the monetary and financial areas is flourishing. The Asian financial crisis in 1997 led to the creation by the 10 members of the Association of South­east Asian Nations (ASEAN) and China, Japan and the Republic of Korea, collectively known as "ASEAN+3" of regional institutions to harmonize financial policies and standards, regula­tory systems and tax treatments. ASEAN+3 have also launched Asian Bond Funds and are cur­rently studying the feasibility of a Pan-Asian bond index fund and a fund of bond funds.

Development cooperation among developing countries also takes the form of the provisioning of debt relief to debt-distressed developing countries. In 2000, China provided $1.27 billion (l0.5 billion renminbi) in debt relief to 31 African countries. More recently, China announced that it is expanding its aid programme to the HIPC countries and LDCs. It will write off or forgive within the next two years all the overdue parts as of end-2004 of the interest-free and low-interest governmental loans owed by HIPCs that have diplomatic relations with China. Mexico and Costa Rica have also offered major debt relief to the HIPC countries in Central America. India has forgiven some $500 million in debt owed by develop­ing countries.

Several developing countries have also been providing grant assistance. For in­stance, assistance flows from the financing facility of the IBSA Dialogue Forum will be in the form of non-reimbursable grants. Morocco has also provided assistance in grant form to Cotonou for the construction of a university dormitory.

HIPC Initiative and other debt-relief measures

Under the Heavily Indebted Poor Country (HIPC) Initiative, three countries (Honduras, Rwanda and Zambia) reached completion point in April 2005. At the end of 2005, 18 coun­tries had reached completion point under the HIPC Initiative and 10 countries had reached decision point, making them eligible to receive interim debt relief. The implementation of the HIPC Initiative thus continues to progress slowly, owing mainly to the difficulty that eli­gible countries have in complying with the conditions required to receive full and unequivo­cal debt relief. To many of these countries in the interim phase of the Initiative, maintaining macroeconomic stability remains a major challenge. It is anticipated that Chad and Malawi could arrive at completion point by the first half of 2006, and the Democratic Republic of the Congo could arrive at decision point by the end of 2006. Of the countries that have reached decision point, six are moving closer to reaching completion point with the implementation of their Fund-and IDA-supported reform programmes.

The total cost to creditors of the HIPC Initiative for the 28 countries in decision point and completion point is estimated to equal $38.2 billion in 2004 net present value (NPV) terms, slightly higher than the $35.7 billion estimated in 2003. The costs are about equally divided between multilateral and bilateral creditors, with the World Bank, IMF, the African Development Bank and the Inter-American Development Bank accounting for 44 per cent, and the Paris Club group of creditors accounting for 36 per cent.

As a result of debt relief extended under the HIPC Initiative, most debt indicators of developing countries have improved. The debt stocks of the 18 HIPC completion point countries have fallen from $59 billion to $21 billion, or an average of 64 per cent (in NPV terms), with an additional reduction of $1 billion owing to topping up. Debt-service costs for most of the 28 decision point countries are projected to be reduced sharply to less than 10 per cent of their exports. The debt service-to-exports ratio of this group fell from an average of 15.7 per cent in 1998-1999 to 7.3 per cent in 2004; as a result, debt service as a share of revenue has declined by almost half, or about $2.3 billion a year.

By linking the HIPC Initiative to the poverty reduction strategy (PRS) approach, more debt relief has probably led to increased poverty-reducing expenditures in the benefi­ciary countries. According to IMF estimates, such expenditures have risen on average by 12 per cent in 2004. However, it is hard to obtain a precise estimate for the increase in pro-poor spending because of the lack of comparability of the budget accounting of such expenditures across countries. The other side of the coin is, however, that these countries continue to face difficulties in reconciling the objectives of achieving and maintaining debt sustainability, promoting long-term growth and reducing poverty. Since the implementation of poverty reduction strategies prioritizes spending in the social sectors, especially on health and education, there have been cases where some countries have had to engage in borrowing to meet deficits created by these new expenditure commitments. Sustained poverty reduction and debt sustainability also require increased domestic investment in infrastructure and in production capacity in order to raise economic growth and accelerate development.

Debt sustainability is also affected by vulnerability to external shocks. For a num­ber of HIPCs, shocks from collapses in principal exports, droughts and other natural disasters, as well as civil unrest, have led to unsustainable debt levels. Moreover, eight of the 10 coun­tries that have yet to reach decision point are in conflict or post-conflict situations, as well as having accumulated large protracted arrears with the international financial institutions.

Other problems continue to affect, in varying degrees, the implementation of the HIPC Initiative. For instance, the number of non-Paris Club creditors that have provided or committed to deliver their share of debt relief on all claims to the HIPCs has declined. As at August 2005, eight out of the 51 non-Paris Club official bilateral donors remained fully committed themselves to delivering their share of debt relief to the HIPCs. As a result, the share of estimated HIPC Initiative debt relief that these creditors have delivered or promised to deliver had declined in 2004 from 13.6 per cent to 6.4 per cent of the estimated $3.6 billion (in 2004 NPV terms). Some of the reasons why non-Paris Club creditors have thus far not participated in the HIPC Initiative include a lack of understanding of the HIPC methodology and the fact that some HIPC countries have not contacted them to actively seek debt relief. Commercial creditors, which account for a small share of total debt relief under the Initiative, have not provided their share. Moreover, several commercial creditors have instituted litiga­tion proceedings and other unilateral actions to pressure HIPCs to settle claims.

The Paris Club group of creditor countries has continued to play an active role in the HIPC process. In 2005, the Paris Club also concluded several debt-cancellation agree­ments, most notably with Nigeria in October. The debt-relief agreement has to be imple­mented in two stages after IMF approval of the Policy Support Instrument (PSI).

The agreement includes the reduction of eligible debt under Naples terms and a buy-back at a market-related discount on the remaining debt after the reduction. The first phase of the agreement requires Nigeria to pay arrears due on all categories of debt and Paris Club credi­tors to grant a 33 per cent cancellation of eligible debts. In the second phase, and after IMF approval of the first review of the PSI, planned for March 2006, Nigeria will pay the amounts due under post-cut-off date debt, accompanied by a cancellation by Paris Club creditors of 34 per cent on eligible debt, and a buy-back by Nigeria of the remaining eligible debt. These provisions amount to a total debt cancellation of $18 billion, representing a 60 per cent re­duction of the debt of Nigeria, or $30 billion, owed to the Paris Club. The Paris Club also agreed on a debt-consolidation arrangement with the Dominican Republic, resulting in a sig­nificant reduction in debt service. The Paris Club also met several times during 2005 to agree to reduce debt of $124 million owed by Kyrgyzstan and to recommend to their Governments the cancellation of debts owed by Honduras, Rwanda and Zambia.

The Paris Club has also actively supported post-conflict countries. In November 2004, it reached agreement on a debt reduction of $38.9 billion out of a total foreign debt of $120 billion owed by Iraq to Paris Club creditors. The arrangement featured an initial can­cellation of interest arrears ($11.6 billion) in January 2005, with the balance to be deferred, pending IMF approval of its economic reform programme. Further debt reduction will reduce the debt of Iraq to the Paris Club to $7.8 billion; the rest of the debt will be payable over 23 years, with a grace period of six years. The agreement is expected to serve as a benchmark for other creditors, including Saudi Arabia and Kuwait, which hold the bulk of the debt of Iraq.

At the Gleneagles meeting of the G-8 in July 2005, Heads of State and Government proposed the cancellation of all debts owed by countries to the International Develop­ment Association (IDA), the IMF and the African Development Fund (AfDF) of the African Development Bank (AfDB) by HIPC countries reaching completion point. The proposal was endorsed by the International Monetary and Financial Committee (IMFC) at the Annual Meeting of the World Bank and the IMF in September 2005 as the Multilateral Debt Relief Initiative (MDRI). It would cancel an estimated $55 billion in debt owed to these institutions by developing countries.

The relief provided to these countries was to be in addition to official assistance available to other low-income countries and should not impair the lending capacity of the multilateral financial institutions. For IDA and AfDF these conditions were met by a G-8 pledge and laid down in a letter to the President of the World Bank, stating the commitment "to cover the full cost to offset dollar for dollar the foregone principal and interest repay­ments of the debt cancelled for the duration of the cancelled loans". Compensation from donors for costs of providing this relief will take place via an additional contribution to the current replenishment. The IMF, on the other hand, will meet the costs of debt relief from its own resources. To meet a requirement, specific to the IMF, that the use of its resources be consistent with the principle of uniformity of treatment it was agreed that all countries with per capita income of $380 a year or less (HIPCs as well as non-HIPCs) would receive debt relief from IMF resources in the Poverty Reduction Growth Facility (PRGF) Trust. HIPCs with per capita income above that level will receive the Multilateral Debt Relief Initiative (MDRI) relief from existing and, if necessary, additional, bilateral contributions to the PRGF Trust. A call for bilateral contributions will be issued if additional funding is necessary.

While it was agreed that there would be no new conditions applied to countries benefiting from relief, countries would be expected to maintain their existing commitments. For HIPC completion point countries, IDA relief is expected to become effective on 1 July 2006 for debts in existence at end 2003. For the IMF and the AfDF, this should occur on 1 January 2006 for debt in existence at the end of 2004, subject to approval by the bilateral contributors to the Trust.

While the proposal seeks to resolve known difficulties in ensuring debt sustain­ability for countries emerging from the HIPC process, it leaves unresolved the debt difficul­ties of other low and middle-income countries facing severe debt-service burdens not eligible for HIPC relief. Although initial discussions suggested that relief might be extended to non­HI PC low-income developing countries, no action was taken.

In addition, the proposal only provides 100 per cent relief for debt from the three above-mentioned lenders. It provides no relief for debt to other institutional lenders such as the Inter-American Development Bank, the Caribbean Development Bank, the Asian Devel­opment Bank, or for as well as debt to bilateral official creditors who have not participated in the Paris Club, debts to commercial creditors and debts under the equal treatment clauses of the Paris Club that were incurred after the cut-off date. This means that the proposal has a differential impact across countries with similar debt burdens and in different regions.

The proposal also has implications for the approach of the participating institu­tional lenders to debt sustainability, since preliminary analysis suggests that countries emerg­ing from the HIPC process and receiving full relief would have values of the relevant ratios far below the new threshold ratios proposed by the World Bank-IMF forward-looking ap­proach to debt sustainability to allow them to qualify for grant-based aid. In the absence of providing additional grant financing for these countries, they would thus have to rely on new market borrowing to fund their MDG expenditures, creating the possibility of a new cycle of excessive borrowing and unsustainable debt.

Making Right to Water a Binding Human Right

Geneva, 6 Feb -- Former Soviet President Mikhail Gorbachev, founder and chairman of Green Cross International, has sent personal letters to more than forty heads of state and government inviting them to collaborate in the creation of a Global Convention on the Right to Water to help overcome the devastating water crisis.

The letter has been addressed to all countries where the human right to water is already recognized under national legislation, as well as to those where legal and other water-related issues are being actively debated.

Mr. Gorbachev is calling for strong political commitment to end the "totally unacceptable" situation whereby 1.1 billion people today cannot access or afford safe drinking water, and 2.4 billion are deprived of basic sanitation.

The Millennium Development Goals set the target to halve the proportion of people lacking these vital services by 2015. However, the 2005 UN Report stated, "Significant improvements have been made in rural access in all regions, but only a few countries have achieved improvement at a sufficient rate to meet the goal." At this rate, Mr Gorbachev warns, ‘there is a grave danger that this critical target will not be met.’

The Green Cross chairman will further elaborate his position and recommendations regarding the water crisis at the High Level panel on Empowerment and Democratisation at the 4th World Water Forum, Mexico City, on March 20, 2006.

While the human right to water is mentioned in a number of international documents, a binding law embracing all areas of water supply and management, including the rights and responsibilities of all actors and stakeholders, is essential to clarify and ensure full recognition of this right. Green Cross International announced its commitment to working for the development of a Global Convention on the Right to Water on World Water Day, 22 March 2005. According to Green Cross, "the ratification of such a Convention by the UN Member States would provide a legal instrument through which all people could defend their human right to clean water and sanitation, and would oblige governments to prioritize their provision."

South Centre News

Meeting of the South Centre Board The 16th regular meeting of the South Centre Board will take place in Geneva 26-27 February 2006. All members of the Board including the Chairman are expected to be present. The Convenor and the Vice-Convenor of the Council of Representatives (in their ex-oficio capacity) will also attend.

Executive Director On the 7th of February the Executive Director Prof. Yash Tandon participated in the Panel on commodity problems and expectations from the International Task Force on Commodities in the context of the Tenth Session of the Commission on Trade in Goods and Services and Commodities of UNCTAD. He underscored the importance of this Task Force from the perspective of developing countries and also referred to several trade-related aspects of the commodities problematique and their relation with the Millenium Development Goals.

Prof. Tandon is also participating in the World Social Forum (14-18 February) in Porto Alegre, including the Ninth Assembly of the World Council of Churches.

Trade & Development Programme

The South Centre launched a new series of publications entitled TRADE Research Papers. Research Papers will present new and original research and will analyze policy proposals, options and issues that are relevant from the perspective of developing countries:

· Overview of the Sanitary and Phytosanitary Measures in Quad Countries on Tropical Fruits and Vegetables Imported from Developing Countries, (T.R.A.D.E. Research Paper 1, November 2005)

· Remunerating Commodity Producers in Developing Countries: Regulating Concentration in Commodity Markets (T.R.A.D.E. Research Paper 2, November 2005).

· Supply-side Measures for Raising Low Farm-Gate Prices of Tropical Beverage Commodities (T.R.A.D.E. Research Paper 3, November 2005)

· The Potential Impacts of Nano-Scale Technologies on Commodity Markets: the Implications for Commodity-Dependent Developing Countries, (T.R.A.D.E. Research Paper 4, November 2005)

- Recent research and publications

· South Centre Analysis on the Hong Kong Ministerial Declaration (SC/TADP/TA/CC/1, February 2006). This Analysis examines developments in the Doha Work Programme and analyses the implication of the Hong Kong Ministerial Declaration and strategic direction for negotiation (It provides detailed analysis under Part II- for Agriculture, Part III- for NAMA, Part IV- for Services, Part V- for Rules, Part VI- for Trade Facilitation).

· Comments on the NAMA Section of the Hong Kong Ministerial (SC/TADP/AN/MA/4, January 2006). This note presents a brief assessment of individual elements of the NAMA section of the Hong Kong Ministerial Declaration and highlights possible strategies available to developing country negotiators in the aftermath of Hong Kong

· Problems and Policy Challenges faced by Commodity-Dependent Developing Countries (CDDCs) (SC/TADP/TA/COM/1, November 2005). The objective of the paper is to provide an overview of the problems and implications of heavy dependence on primary commodities. This note (i) presents the commodity problems and their implications for Commodity Dependent Developing Countries (CDDCs); (ii) identifies the underlying causes of these problems and (iii) examines some of the major policy approaches used in the past to deal with them, their merits and limitations.

- Program of work with delegations in Geneva

· On 9 February 2006, the South Centre held a working lunch with developing country delegations to discuss issues related to the WTO agriculture negotiations. The South Centre made available its analysis on the implications of the Honk Kong Ministerial Declaration on agriculture and made a short presentation identifying main issues of interest to developing countries as well as the areas for future work. Delegations exchanged views regarding expectations on progress in the negotiations and commented on areas in which the assistance by the South Centre would be more useful in the coming months.

- Meetings in the Centre

· South Centre Staff met with 2 representatives of UNCTAD (the Head of the Commodities Branch, Mr Mehmet Arda and the Chief of the Diversification Section, Mr. Olle Ostenson) on the 1st February to exchange information and views in connection with the implementation of the Task Force on Commodities, adopted during UNCTAD XI.

· South Centre Staff met with Laura Kelly from the UK Department for International Development (DFID) on the 14 February to discuss ongoing projects on agriculture and commodities and exchange views on the state of play of negotiations in the WTO in these areas.

Shut Down Guantanamo Prison – Human Rights Experts

The United Nations Human RIghts Commission has just issued a report urging the United States government to close the detention centre in Guantanamo Bay . The call for the trial of prisoners in accordance with international law has also been supported by Secretary-General Kofi Annan. The US government however, in its initial reaction, has not responded favourably. The following statement has been issued by the Chairman Rapporteur of the Working Group on Arbitrary Detention, Leila Zerrougui; Special Rapporteur on the independence of judges and lawyers, Leandro Despouy; the Special Rapporteur on torture and other cruel, inhuman or degrading treatment or punishment, Manfred Nowak; the Special Rapporteur on freedom of religion or belief, Asma Jahangir, and the Special Rapporteur on the right of everyone to the enjoyment of the highest attainable standard of physical and mental health, Paul Hunt:

Five independent investigators of the United Nations Commission on Human Rights are calling on the United States to close immediately the detention centre in Guantánamo Bay and bring all detainees before an independent and competent tribunal or release them.

The call comes in a report just published following an 18-month joint study by the experts into the situation of detainees at that United States Naval Base. The report’s findings are based on information from the United States Government, interviews conducted by the experts with former Guantánamo Bay detainees currently residing or detained in France, Spain and the United Kingdom and responses from lawyers acting on behalf of some current detainees. It also relies on information available in the public domain, including reports prepared by non-governmental organizations (NGOs), information contained in declassified official United States documents and media reports. The experts expressed regret that the Government did not allow them the opportunity to have free access to detainees in Guantanamo Bay and carry out private interviews, as provided by the terms of reference accepted by all countries they visit.

The five experts – specializing in issues related to arbitrary detention, freedom of religion, the right to health, torture and the independence of judges and lawyers – conclude that the persons held at Guantánamo Bay are entitled to challenge the legality of their detention before a judicial body and to obtain release if detention is found to lack a proper legal basis. The continuing detention of all persons held at Guantánamo Bay amounts to arbitrary detention, they state, adding that – where criminal proceedings are initiated against a detainee – the executive branch of the United States Government operates as judge, prosecutor and defence counsel in violation of various guarantees of the right to a fair trial

According to the experts, attempts by the United States Administration to redefine "torture" in the framework of the struggle against terrorism in order to allow certain interrogation techniques that would not be permitted under the internationally accepted definition of torture are of utmost concern. The confusion with regard to authorized and unauthorized interrogation techniques over the last years is particularly alarming. The interrogation techniques authorized by the Department of Defense, particularly if used simultaneously, amount to degrading treatment. If in individual cases, which were described in interviews, the victim experienced severe pain or suffering, these acts amounted to torture as defined in article 1 of the Convention against Torture. Furthermore, the general conditions of detention, in particular the uncertainty about the length of detention and prolonged solitary confinement, amount to inhuman treatment and to a violation of the right to health as well as a violation of the right of detainees to be treated with humanity and with respect for the inherent dignity of the human person. They add that force-feeding of competent detainees violates the right to health as well as the ethical duties of any health professionals who may be involved.

Among their recommendations, the experts say terrorism suspects should be detained in accordance with criminal procedure that respects the safeguards enshrined in relevant international law. Accordingly, the United States Government should either expeditiously bring all Guantánamo Bay detainees to trial or release them without further delay.

They also call on the Government to close down the Guantánamo Bay detention centre and to refrain from any practice amounting to torture or cruel, inhuman or degrading treatment, discrimination on the basis of religion, and violations of the rights to health and freedom of religion. The investigators also request full and unrestricted access to the Guantánamo Bay facilities, including private interviews with detainees. Consideration should also be given to trying suspected terrorists before a competent international tribunal.

Attached please find the latest issue of the South Bulletin in pdf and word
formats. Focus on easing the burden of foreign debt on developing
countries.

With best regards.

(See attached file: bulletin118.pdf)
(See attached file: South Bulletin 118
Word.doc)

Someshwar Singh
Senior Editor
South Centre
Ch. du Champ d'Anier 17
1211 Geneva 19
Switzerland

Tel-(4122)7918044
Fax-(4122)7988531

singh@southcentre.org
web site: www.southcentre.org

Latest issue of the South Bulletin no.118

Attachment:

bulletin118.pdf (0.17 MB), SouthBulletin118Word.doc (0.26 MB)

singh@southcentre.org

Friday, February 17, 2006