PRESS RELEASE

Proposals by Zedillo panel to fight poverty
would alter international financial skyline

Eleven top financial leaders urge improved governance and economic management, more resources for the poor, creation of an International Tax Organization; consideration of an international tax on carbon emissions and of an Economic Security Council; new SDR allocations by the IMF; a consolidated Global Environmental Organization, “common pool” aid mechanisms and a more democratic WTO. 

(New York, 28 June) Far-reaching recommendations on financial mechanisms to ensure stable global development and to turn the tide against poverty were presented today to United Nations Secretary-General Kofi Annan. 

The proposals, authored by an international panel of 11 experts under the chairmanship of former Mexican President Ernesto Zedillo, are issued as the number of people living in extreme poverty remains high in a period of uncertainty regarding global economic growth and equity. 

“The world has changed considerably since the aftermath of World War II, when most of our international agencies and economic governance agreements were founded”, President Zedillo said today at an afternoon press conference, after meeting with the Secretary-General of the United Nations. “Unexpected dimensions of rapid globalization and factors such as the resurgence of international epidemics are undercutting the huge strides in better living conditions that were made in the postwar period. Our Panel carried out its deliberations on the supposition that it is time to give serious consideration to how the international community coordinates its financial affairs.” 

High-Level Panel

Secretary-General Kofi Annan appointed the High-level Panel late last year. He challenged panel members to identify practical means to fulfil international commitments to fight poverty, set out in September 2000 by world leaders at the Millennium Summit in New York; and to build political momentum for the upcoming International Conference on Financing for Development, to take place in Monterrey, Mexico, 18 – 22 March 2002. 

The Panel report says that primary responsibility for securing economic growth and equity lies with national governments.  The panel urges developing countries to undertake balanced fiscal policies, macroeconomic discipline, fair and effective governance, secure tax bases, support for human capital and installation or strengthening of pension plans. 

The Panel welcomes current mechanisms to reduce the debt burden of the poorest countries, but warns that debt relief by itself is not sufficient to move countries forward. They urge a renewed push toward the target of devoting 0.7 per cent of donor country GNP to official development assistance, and advocate various mechanisms by which resources can be targeted more effectively towards the poorest sectors of the population. 

More radically, proposals are made to place the aid process and relations between aid-giving and receiving countries on a new footing. The report urges that donor and domestic funds for development be placed in a common pool, thereby removing conditionalities that sap national initiative and responsibility and reducing the current blizzard of diverse and often- conflicting reporting mechanisms. 

The report expresses scepticism regarding the feasibility of placing a tax on international financial transactions, as is favoured by many civil society organizations. The Panel calls on the upcoming Financing for Development conference to consider the merits of an international levy on carbon dioxide emissions. Funds obtained would pay for “global public goods” -- such as services to combat global epidemics -- that cannot be administered effectively by any single country. 

The Panel looks to the World Trade Organization to launch a “development round” of trade negotiations at its November meeting in Qatar, with the objective of fully integrating developing countries into the global trading system. In general, the WTO should be better funded and its governance reformed to broaden the influence of small and poor countries, the report says. 

To shore up developing economies in a period of global financial uncertainty, the International Monetary Fund should recommence its allocations of Special Drawing Rights (SDRs), the Panel recommends. 

Other proposed renovations of international financial architecture include:

• Opening international negotiations with a view toward establishing an International Tax Organization, which would develop national tax-policy norms, negotiate with tax haven states, help countries tax flight capital and assist with cross-border tax issues;
• Consolidation of the various organizations that share responsibility for environmental issues into a Global Environmental Organization;
• Provision of stronger enforcement mechanisms for the International Labour Organization;
• Convening by the United Nations of a Global Economic Governance Summit to further assess the adequacy of existing multilateral institutions in the light of rapid globalization and to agree on reforms, such as the possibility of a UN Economic Security Council.

The Panel report will be available for the consideration of the resumed third session of the UN Financing for Development preparatory committee meeting in October.