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November, 2003

DOES GLOBALIZATION AFFECT NATIONAL POLITICAL DECISION-MAKING?

DELIVERED AT THE SOCIAL DEMOCRATIC FORUM AT FRIEDRICH EBERT FOUNDATION

BY EVELINE HERFKENS, EXECUTIVE COORDINATOR OF THE UNITED NATIONS MILLENNIUM CAMPAIGN

I. Does globalization erode national sovereignty? I want to answer that question with a no, not only for the sake of the debate, but also because I am concerned about how much needs to change to create a better world and how much needs to happen for globalization to truly benefit all (Millennium Declaration). The notion that there is nothing that governments can do anymore on globalization is not true and creates inertia two exactly to more of the people we need to galvanize the political will for government action. Indeed, globalization is partly driven by technology. That is something that we cannot stop and most of us do not want to stop. We want our e-mails and mobile phones, globalization is also driven by integration of the world economy and trade. These are the trade-policy decisions that governments make themselves. Globalization does not erode national sovereignty. Look at different regions and how the impact of globalization varies widely among countries in similar situations. In Africa, which is (more than any other region) the victim of globalization, progress on the Millennium Development Goals varies from country-to country. There are huge differences between Zimbabwe and Mozambique; and between Uganda and Kenya. If you look at Latin America (a region that is very vulnerable to external shocks), there are huge differences between Chile and Argentina; and between Brazil and Venezuela. In Europe, inequality has increased in some countries, but not in others (France and Netherlands). So with varying outcomes, national governance still matters tremendously and there is still a lot that governments can do. To make globalization work, what we need is stronger governments. We need the pendulum to swing back away from the neo-liberal ideologies towards the acknowledgment that, in a globalized world, we need strong and more effective States. We need democracy and the rule of law, participation, inclusive societies and also transparent public expenditures management so that people can see where their tax money goes. In many countries, both rich but particularly poor, there is a tremendous integrity dividend that still needs to be won by reducing corruption that can be used
Eveline Herfkens The UN Secretary Generals Executive Coordinator for the Millennium Development Goals Campaign November 2003

to finance the achievement of the Millennium Development Goals. It is a question of political will. Mobilizing more domestic resources is possible for all, including very poor, countries, as is more pro-poor spending. In Latin America, 10% of the regions richest people have 50% of the national income and hardly pay taxes; compared to OECD countries, in Latin America property taxes are 1/3 of the OECD, income taxes are 1/6. There is still a lot of room for more domestic resource mobilization to increase spending on fighting poverty and inequality. Two such areas are in education and employment: Education. Countries that benefit from globalization are those that have invested most in education. Investment in education is a very important role of government. Empower your own people and you empower your society as a whole. Employment. In too many countries, there are still too many policies on trade, taxes, creating incentives for capital-intensive growth instead of labor-intensive growth. This happens in Latin America and in many developing countries; and I am afraid that this is also the case in many European countries. Moreover, while 2/3 of the worlds poor live in the rural areas, many developing countries are still taxing their farmers in favor of their urban elites. So reversing these transfers and improving rural development policies can make a tremendous difference.

In the age of globalization, we need stronger and more effective states. Back to the original question, does globalization erode sovereignty? No! However, poor countries face a problem (as it is rich countries that dominate global money, financing and global trade), but that has more to do with the inequality in international decision making, rather than globalization. This issue has become much more relevant, given the integration of the world economy resulting from globalization. Trade rules set by rich countries destroy livelihoods in developing countries, while protecting special interests of rich countries. What happened in Cancun was a disaster because the Doha Development Round promised, for the first time in the international trading system, that poor countries would not be just beggars at the feast. Still nothing has been delivered on the development agenda because rich countries dominate the World Trade Organization (WTO), particularly the European Commission and the United States. Policies in rich countries have tremendous damaging impact on poor countries. Discussions about good governance should seriously take into account the responsibility of rich countries to make their policies more pro-development and they should consider the implications of their domestic and trade policies on poor countries, ensuring globalization benefits all, as they promised in the Millennium Declaration.

II. Do global and regional organizations erode national sovereignty? I wish they would. Exactly because of globalization there is an urgent need to strengthen global governance. I would love to have better global governance in which indeed sovereignty becomes less and less important. Presently, this is only a dream, because there are no regional or global organizations that set any rules to erode national sovereignty. Regional organizations are extremely weak. There is a lot of lip service in developing countries about the need for regional cooperation, but it never goes beyond

political declarations and meetings. The European Union is relatively the strongest regional organization, but even there is no common foreign or tax policy. We do, however, have a Common Agriculture Policy that we use to dump our problems on the rest of the world. Now, global institutions, such as the United Nations (UN), International Monetary Fund (IMF), World Bank and the WTO, are not independent institutions, they are tightly roped in by their members. The World Bank and the IMF, and particularly the WTO, are in fact more member-driven than the United Nations. The WTO is nothing more than a Secretariat where the papers and agendas are printed; and its policies are set by the U.S. Trade Representative and the European Trade Commissioner. The Bank and Fund have an in-house Board that meets three days a week acting on instructions from their capitals, e.g. the HIPC initiative. Management of these institutions favored action years before their membership, particularly at the G-7, allowed so thus there is no issue of losing sovereignty. It is the content of instructions that go to their board members, and the positions taken by governments twice a year when they meet in the Development Committee or the IMF committee define their policies. One of the problems is the serious democratic deficit. I think that the Netherlands is the only country where, for 20 years, parliament makes the government accountable for positions taken in the Development Committee. Very few parliaments are actually doing this. This is a democratic deficit that can only be tackled within the member states and not within the mandate of the institutions. I believe that multilateral institutions are not strong and independent enough, and are too dominated by rich countries. Moreover, I like to believe that the multilateral institutions we have now are sort of the embryonic beginning of an emerging global government. Even if the social side is still very weak, I would like to think of the International Labour Organization (ILO) as being the future Social Affairs Ministry for the world; the World Health Organization (WHO) as the future Health Ministry; the IMF would have the Central Bank function; and the World Bank would be the Finance Ministry. There is still a very long way to go before this could ever happen. There are three deficits that pose serious problems to global governance today and inhibit globalization benefiting the poor: (i) the coherence deficit; (ii) the democratic deficit; and (iii) the compliance deficit. Coherence deficit. Coherence starts at home. Too many people think that yet another UN Development Group meeting at the highest level would solve problems. It will not because all these agencies report to their own governing bodies and each of these governing bodies have different speak with different tongues. Let me give you some examples. I was in Geneva at the time that the WTO agreed on the TradeRelated International Property Rights Agreement. That was about the same time that WHO agreed on the need for affordable medicines for all. So you saw from country X (and I can name countries), trade ministers agreeing to something in the WTO that contradicted what their health colleagues agreed at the WHO that same month. Governments export their different positions in the international arena and Geneva becomes the battlefield.

At that same time, the link was discussed between labor and trade issues. Ministers from the same government took different positions; one at ILO and another position at the WTO. Another example, just when I left the Board of the World Jim Wolfensohn visited China and the Chinese Finance Ministry prepared a beautiful coffee table book with wonderful photographs of China; but the text credited the World Bank exclusively for Chinese achievements on reducing poverty, so I decided not to carry it to Geneva. Two days later, upon arrival in Geneva as the UN Ambassador, I was briefed by the Human Rights staff in my Mission about the agenda of the United Nations Commission on Human Rights, including the usual resolution about the World Bank and IMF violating human rights, apparently sponsored by China. I wished I brought the book to confront the Chinese colleague on this inconsistency. Similarly, this incoherence happens between the IFIs and at the UN. The same country (its Finance Ministers or Central Bank) would, at the IMF or the World Bank, blame the UN for being irrelevant or intellectually sloppy; and at the UN the Foreign Affairs Minister would blame the IFIs for being neo-liberal, arrogant, etc. Please, can the Central Bank governors, Finance Ministers, Foreign Affairs Ministers, Health Ministers, Social Affairs Ministers, talk at home with each other instead of exporting their different views into the international arena? That hampers global governance. So as long as the heads of international agencies hear something totally different from their governing bodies of these same member countries, there is a serious problem. Unless coherence starts at home, I do not think that more UN meetings can make meaningful improvements. Lack of political will among the UN leadership is not the problem. Democratic deficit. Parliamentarians need to discuss what their governments do in the international arenas. Instructions to international meetings are not sufficiently discussed by parliaments, and this is another a very serious problem. The most obvious example is France. The National Assembly is not supposed to make the government accountable for foreign policy, including foreign trade and financial policy because that is the responsibility of the President. ATTAC was created precisely because of this frustration. Having Members of Parliament discuss these issues could bridge a little bit of the gap of the democratic deficit. Second, I have always advocated for parliamentarians networks. The one area where parliamentary cooperation did work was NATO. The NATO Assembly is a fairly powerful network, but burden sharing in the 21st century is not about defense. It is about development and the issues surrounding the Millennium Development Goals. We need stronger parliamentary networks to combat this problem. Presently, there is a fairly effective parliamentary network at the World Bank, and the WTO has agreed that there is a need of a WTO Parliamentary Assembly. Something is starting, but not enough, and not soon enough.

Compliance deficit. Too many governments agree on the most wonderful promises at the UN (e.g. Millennium Declaration) and take the plane back home from NY to business as usual, not following through on their pledges. The most blatant example is of course the 0.7% OPA/GNI agreed and the UN 33 years ago. Since then, only 4 countries complied and the other OECD countries looked the other way perfectly complacent that the Dutch and Swedish taxpayers bailed out the rest of them. That has changed. By now, the majority of the EU member states (8 out of 15) have timebound commitments to achieve the 0.7%, well in advance of 2015. But still on many issues and for most international organizations, the compliance issue is a problem except for the WTO, which has a dispute settlement mechanism that indeed enabled Costa Rica to win a dispute against the United States. For the rest, there is no compliance mechanism and the only way to get compliance is by creating political will, country by country, to live up to what governments promised at international meetings and that is exactly what the Millennium Development Goals Campaign is doing. The first 7 goals are the primary responsibility of the poor countries and whenever I make speeches to audiences with people from developing countries, I would explain to them what they should be doing to hold their governments accountable to fight poverty, getting all kids to school, etc. Whenever I address audiences in rich countries, I underline the fact that this is a packaged global deal, re-confirmed at Monterrey. But poor countries cannot achieve the goals unless rich countries do a much better job on the global partnership for development. Goal 8 calls on rich countries to deliver more and more effective aid, more trade opportunities by eliminating agricultural subsidies, more sustainable debt relief and more transfer of technology. The problem however, with Goal 8 (and this shows that also in the UN system certain countries are more equal than others), is that it is the only goal with no deadlines and no monitoring mechanisms. The Millennium Campaign is advocating that rich countries adopt specific deadlines and monitor progress. We believe this is possible. According to public opinion polls, in all OECD countries, including the United States, there is a huge disparity between what governments actually do in terms of poverty (fighting child mortality in Africa), and what people want their governments to do. The campaign tries to help create a transmission belt to make these issues a vote-getter, where political leadership on these issues is lacking. Using as a logo No excuse 2015 and as a slogan We are part of the first generation that can put an end to poverty and we refuse to miss this opportunity, the objective of the Millennium Campaign is to spur action on Goal 8, i.e. in Europe to achieve the 0.7% by 2010, and eliminate trade-distorting agricultural subsidies by 2010.

Eveline Herfkens is the Executive Coordinator for the United Nations Millennium Campaign. She is the former Minister of International Development for the Netherlands, former Dutch Ambassador to the United Nations in Geneva including the World Trade Organisation, and the former Dutch Representative to the World Bank.