Financial Transaction Tax de facto in Pittsburgh Leaders’ Statement

France and Germany managed to get the financial transaction tax (FTT) proposal de facto into the Pittsburgh Declaration of the G20. The IMF is tasked to prepare for the next summit a report on instruments to make the financial industry "a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system" (point 16 of the Leaders’ Declaration).

“This is a positive step”, says WEED’s Peter Wahl. “As the head of the IMF, the French socialist Dominique Strauss Kahn, can be considered to be open to a Transaction Tax, we can expect that the proposal will be carried on. Not only Sarkozy but already Mitterand and Chirac were supporters of a similar tax, the Tobin Tax. The Tobin Tax, however, had only currency transactions as tax basis, whereas the Financial Transaction Tax (FTT) encompasses also bonds, equities, derivatives etc.

There is an extraordinary opportunity for civil society to make the FTT one of her prominent points to organize pressure from below in the time to come and to make the FTT not the solution for everything but a spearhead of campaigning.

The tax offers a lot of economic and politic leverage:
1. It has a regulatory potential. It contributes to curb speculation, will shrink the financial sector and thus contribute to breaking the dominance of finance over the whole economy and society.
2. It has a strong distributional or social equity dimension by making pay those, who were benefitting from the system and are responsible for the crash.
3. As the issue of public debt and who will pay for the bill off the crisis will be on top of the agenda in the coming years, with pressure to cut public expenditure and in particular social budgets, we have with the FTT a powerful tool to say "Let them pay for the crisis". The FTT is a powerful alternative in that respect.
4. There is a strong political momentum with Sarkozy, Merkel, Austria supporting the idea. Also the president of the EU Commission, Barroso, and commissioner Almunia are in favor, as well as the British foreign minister Miliband.
5. There are already a lot of allies in trade unions, churches and NGOs for a currency transaction tax and the media are acquainted with it.
6. There is already a lot of expertise, studies etc. on the issue on which we can build. So, we have not to start from scratch.

At the moment I see three main challenges:
a. All the new supporters of the FTT have an inbuilt self-destroying mechanism in the proposal: they all say that the proposal is only feasible on global level. This is wrong. Of course, it wold be nice to have the FTT globally, but it would already have a strong impact if it is implemented in one major currency zone, for instance the Euro zone. It is the same as with the Kyoto protocol, you can do something without the US having on board. We have to make this argument strong.
b. Civil society has to be flexible and to adjust its strategy to the new situation. This does not mean, that people give up their own agenda, but that we find ways to combine in an intelligent way with our usual work. We should not just do business as usual and try to reshuffle our agenda and resources.
c. Nobody of us loves the Merkels, Sarkozys e tutti quanti, and I know how difficult it is to admit that they could do something which is not per se an evil. But if there is such a clear split inside the elites we have to make those positions strong which have been ours since ten years, even if we Merkel and Sarkozy support it.”

Oxfam: G20 should protect poor countries from economic crisis

Developing countries across the globe are struggling to respond to the global recession that continues to slash incomes, destroy jobs and has helped push the total number of hungry people in the world above 1 billion. The economic crisis arrived as poor countries were already struggling to cope high food prices and floods, droughts and food shortages linked to climate change. Oxfam analysis of economic data has discovered that governments in Sub-Saharan Africa will be $70bn worse off this year as a result of the global slump and unlike rich countries they cannot borrow their way out of trouble. Without outside help governments will find it increasingly difficult to respond to the climate, food and economic crises and to avoid cutting spending on schools, clinics and other anti-poverty programs.

But despite feeding their own economies a much needed stimulus, the G20 has not yet provided even half the $50bn bailout it promised poor countries in April. Oxfam is calling for a $290bn package of measures to ease the burden on developing countries without hitting ordinary taxpayers. The package includes a Tobin tax on currency transactions, a debt moratorium and a crackdown on tax havens. Oxfam says: “Existing aid levels are not enough to protect the status quo let never mind reduce poverty in the face of the economic crisis, climate change and rising food prices. The G20 has the chance to change the bad habits of the past and come up with new solutions to the problems facing poor people. A currency transaction levy on the banks that helped cause the global slump could bring in $50bn to help those suffering in a crisis they did nothing to cause. It is time bankers paid a bonus to the world’s poor.”

Oxfam is also calling on G20 leaders to fulfil a promise made by President Obama in July to deliver new funds to help poor countries cope with climate change. This funding is vital to break the deadlock in climate change negotiations leading up to the make-or-break UN Summit in Copenhagen in December. Oxfam calculates that $50bn-a-year is needed to help poor countries cope with climate change and another $100bn is needed to help them control their emissions.

Trade Unions: Pittsburgh must be a jobs summit

The G20 meeting in Pittsburgh this week must tackle the growing global jobs crisis if real economic recovery is to take place, according to the world’s trade unions. With the global crisis set to cost 59 million jobs by the end of this year, and predictions that unemployment across the OECD countries could reach 10% in 2010 and increase into 2011, the ITUC, TUAC and the Global Union Federations are warning in their Pittsburgh Declaration that the chances of real economic recovery are under severe threat. A 50-strong delegation of top union leaders from every continent will hold a series of meetings with heads of government and global institutions at the Pittsburgh Summit to press the case for stronger and more coordinated action.

Last week’s gloomy predictions in the OECD’s annual Employment Outlook reinforce the union concerns. On top of an estimated 15 million jobs already lost in the richer countries, the OECD has warned that the worst is yet to come for labour markets in several countries. The OECD also confirms that young people, those with fewer skills, immigrants, ethnic minorities and those in temporary or untypical jobs are being worst hit. “The G20 must move on several fronts, quickly and with determination,” said John Evans, general secretary of the TUAC. “Jobs must be the first priority, but action on jobs will be undermined without reforms of the financial system, action for development in particular in the poorest countries, and concrete steps to create green jobs and ensure a just transition to a low-carbon future,” he added.

The unions’ Pittsburgh Declaration sets out detailed and workable plans to tackle bank insolvency, deal with excessive corporate pay and bonuses, reform taxation and ensure effective financial market regulation. A global tax on financial transactions is put forward as means both of reducing unproductive speculation and generating funds for development. Trade unions demand changes to the programmes of the International Financial Institutions, which are imposing job-destroying conditions on developing and transition countries with devastating consequences for health, education and social protection in the future, and insist that the G20 move forward on creating green jobs and ensuring proper protection for workers affected by urgently needed action on climate change.

Sign-on letter to G20 on an international capital transaction tax

Dozens of civil society organisations from across the world are urging the Heads of State and Government of the G20 meeting this week in Pittsburgh to take steps towards the implementation of an International Financial Transaction Tax. In an open letter the NGOs say:

“Such a tax would be levied on all cross border financial transactions including currencies, equities and all kinds of derivatives. Even with a low rate of 0.05% such a tax could generate an annual income of tens of billions dollars.
This revenue could be used to pay for the cost of the crisis in the North, in particular the heavy burden of public debt, which has been accumulated to rescue the financial system. As well, to assist countries in the South to meet their development objectives, which have been thrown off track by the crisis. We are sure you agree that it is unacceptable for citizens in both the North and South to pay for the damage caused by the finance industry. Those who have benefited so much from the way in which the system has worked ought to be obliged to take responsibility for their actions. This tax is a measure of political fairness and social justice.
Furthermore, such a tax would contribute to a reduction in speculation, which was at the heart of the collapse of the financial system. The tax would thus enhance financial stability and prevent the finance industry from continuing with a ‘business as usual’ approach.
Around the world national financial transaction taxes (FTTS) are commonplace on shares and bonds. Since these transactions are electronic, they are simple and inexpensive to implement. Payment of an International Financial Transaction Tax would thus be automatic with no scope for avoidance, even in off-shore centres. It could, in fact, be introduced unilaterally by those countries wishing to see it implemented; although it would be preferable that all major economies participate.”

A measure of this type has recently gained considerable support from the German finance Minister, Mr Steinbrück and his colleague in the Foreign Office, Mr Steinmeier. Two weeks ago the head of the British Financial Services Authority proposed a tax on financial transactions to prevent excessive profiteering by banks. Governments in Europe and South America already have experience of specific FTTs, and parliaments in France, Belgium, Canada and Finland have considered implementing a tax on foreign exchange transactions. In 2005, at the United Nations 115 countries voted to explore the potential of taxing cross-border currency transactions.

For further information on the initiative go to >>> http://www.stampoutpoverty.org/

Europe’s climate offer would rob tomorrow's hospitals and schools in poor countries

This week the European Commission published its paper on climate financing ahead of the Copenhagen summit in December. Even if Europe’s climate offer could divert money already promised for education and health in poor countries, Oxfam International welcomed the European Commission’s intentions to break the deadlock in global climate talks by moving first. Putting climate financing figures on the table was a necessary first step to open up meaningful negotiations.

"However, the European Commission proposes that rich countries should take money from existing promises to increase overseas aid spending to 0.7% of national incomes. This would rob tomorrow's hospitals and schools in developing countries to pay for them to tackle climate change today. This will undermine progress towards meeting the Millennium Development Goals”, Elise Ford, head of Oxfam International’s EU office, said. “This is scandalous, especially given Europe's responsibility as one of the world's biggest polluters who has caused the problem, and the onus on them to clean up.”

It’s now up to EU Member States to come up with a stronger proposal at the European Summit on 17 September, to get a good climate deal that does not come at the price of the future development of poorer countries, who are already being hurt by global warming. Funds to help developing countries to tackle climate change must be additional to aid – not instead of it. William Chadza, Executive Director for the Malawian Center for Environmental Policy and Advocacy (CEPA), said: “We must consider Europe's top-end offer of €50 billion to be an opening negotiation tactic, which might be a good start to kick-off the talks. However, the real need of developing countries to cope with the impacts of global warming and develop their own low carbon futures will go far higher than this. The rich world will need to do much more to make a real difference to poor people suffering climate change.”

* Read the media briefing >>> Paying the Climate Bill.

The Steinbrück tax proposal: No reason for too much optimism

Peer Steinbrück (see photo), Germany’s minister for finance, and Frank Steinmeier, his colleague in the foreign ministry, are in favour of a global financial transaction tax. They announced their proposal in a conversation with the national newspaper Süddeutsche Zeitung. "The costs for the crisis must not stay with the small and medium taxpayers", they said. "There must be a fair burden sharing." They suggest an international financial transaction tax, which is levied not only on currency transactions, like the Tobin Tax, but on all kinds of financial transactions, including equity, certificates and derivatives.

The idea had been initially suggested last year by the Vienna Institute for Economic Research WIFO (>>> Stephan Schulmeister, Margit Schratzenstaller, Oliver Picek, General Financial Transaction Tax Motives, Revenues, Feasibility and Effects). They propose a tax rate of 0.05%. Steinbrück also said, he would bring the issue on the agenda of the Pittsburgh G20 summit. The initiative comes two weeks after the head of the British supervisory authority, Lord Turner, had proposed to introduce a currency transaction tax.

Although the initiative gives a strong boost to civil society advocating the Tobin Tax or variants of it such as the Spahn Tax for decades “we should not be overoptimistic”, says Attac Germany’s Peter Wahl. According to him, the proposal has very much to be seen in the light of the German election campaign in the run-up to 27 September. “The Social Democratic Party (SPD) is, like all parties of New Labour, in a desperate situation. In recent regional and European elections the SPD was suffering the deepest decline in its 100 years of existence. At the same time the new left party DIE LINKE is getting stronger with the crisis and the issue of social justice becoming more and more to the forefront.”

Furthermore, Wahl explains, the Steinbrück proposal has not been agreed with the chancellor. Merkel has not yet reacted. But given her ideological and political dependence on the finance industry, it would be a miracle if she would accept to present the proposal in Pittsburgh. Last but not least, Steinbrück says that such a tax would have to be implemented at global level. This is a preventive explanation of failure, because he knows very well that Wall Street and the London City will not allow their governments to accept such a proposal. Nevertheless, civil society should use the opportunity and intervene strongly into the debate.

Doing Business 2010: World Bank discourages social protection

Even though the World Bank has endorsed improved social safety nets to protect the millions of workers who have lost their jobs due to the global economic crisis, the latest edition of the Bank’s highest circulation publication discourages countries from adopting social protection schemes by designating governments that do so as anti-business. Doing Business 2010 also recommends that countries should reduce severance pay for dismissed workers and reduce or eliminate requirements for prior notice about job cuts.

In April 2009, the Bank announced that the Doing Business labour market flexibility indicator, which encourages the reduction of workers’ protection, “does not constitute World Bank policy and should not be used as a basis for policy advice or in any country program documents”, and that the indicator would be removed from the Bank’s conditionality framework (known as CPIA: Country Policy and Institutional Assessment). The Bank also stated, “Doing Business 2010 will include a commentary explaining these steps”, but the new edition of the publication issued today ignores this commitment posted on the Bank’s web site in April.

“If the president of the World Bank truly believes that countries should improve social protection in order to mitigate the impact of the global recession, as he has said on numerous occasions, then it is high time for the Bank’s highest circulation publication to stop promoting the elimination of social and workers’ protection,” said Guy Ryder, general secretary of the International Trade Union Confederation. The ITUC called attention to the fact that Doing Business 2010 puts Cambodia in the category of countries that are “making it more difficult to do business” because it introduced a social security contribution. Conversely, Georgia is praised and given a better ranking by Doing Business because it abolished its social tax. Doing Business 2010 criticizes the democratic government of Honduras, whose president was expelled after a coup d’état in June, because it increased severance pay and advance notice requirements in response to the economic crisis (Honduras has no unemployment insurance). Similarly, Doing Business downgrades Portugal for increasing the dismissal notice period by two weeks.

On the other hand, the authoritarian regime of Belarus, which lost its preferential trade status with the European Union for violating fundamental conventions of the International Labour Organization (ILO), obtains high marks from Doing Business 2010 for making it easier to eliminate jobs. Rwanda wins this year’s Doing Business “top reformer” prize because “employers are no longer required to consult beforehand [about job cuts] with the employees’ representatives or notify the labor inspector”. The Bank’s publication also praises Macedonia for getting rid of measures to retrain redundant workers, and Mauritius for eliminating mandatory severance pay.

Three innovative proposals for G20 to help the poor

G20 finance ministers meeting in London this weekend should provide a $280 billion bailout for millions of poor people struggling to survive the economic crisis, Oxfam is proposing. A currency transaction tax is one of three measures that could raise much needed funds for developing countries without putting any extra burden on ordinary taxpayers. The proposals are set out in a new Oxfam briefing paper, Money for Nothing: Three ways the G20 could deliver up to $280 billion for poor countries. Reforming tax havens alone could release $160bn, reallocating an already agreed IMF bailout could free up another $89bn, and introducing a currency transaction tax could raise at least a further $30bn – each a significant sum to help poor people suffering in the crisis.

The money is desperately needed to prevent the crisis derailing efforts to reduce poverty as developing countries suffer job losses because of falling trade and capital flows. According World Bank and UN estimates, between 50-100 million more people will be trapped in poverty this year, forced to survive on less than $1.25 per day. Max Lawson, Oxfam senior policy adviser, said: “The beauty of these proposals is that they allow the G20 to bailout poor people without asking ordinary taxpayers at home to put their hands in their pockets. Rich countries that spent $18 trillion bailing out banks should not be allowed to plead tight budgets as an excuse for failing to help poor people – especially when there are alternative sources of funding available that would cost them little or nothing.”

The G20 in April promised to provide $240bn to help developing countries deal with the financial crisis – including $50bn for the poorest. But the World Bank estimates that developing countries will need up to $635bn in 2009 just to stand still. Much more is needed to reduce poverty, increase the number of children who attend school and tackle health problems such as HIV/AIDS and malaria.

How the three proposals would work:

* Implement a Currency Transaction Tax (CTT) of at least 0.005% on international currency transactions. It is estimated that such a tax could generate a minimum of $30bn per year if applied to the four major international reserve currencies (US Dollar, Yen, Euro and British Pound). If more currencies were included, this figure could increase as high as $50bn. A slightly higher rate could also provide more resources for government spending in rich countries facing cuts in services.

* Transfer half of rich countries’ new Special Drawing Rights allocations. Agree that at a minimum all the G8 and other major donor countries will transfer half of their allotted new allocations of IMF Special Drawing Rights (SDRs) to Low Income Countries. SDRs are a form of IMF quasi currency distributed to member countries. The April G20 agreed to create $285 billion worth of SDRs, and rich nations will receive $177 billion of this amount. Oxfam is calling for half of this, $89 billion, to be transferred to the poorest countries.

* Deal with tax havens. Put in place a multilateral agreement for the automatic exchange of full tax information and require country-by-country reporting of subsidiaries, sales and profits by multinational corporations, to help developing countries recoup lost tax revenue. This could result in a further US$160bn for poor countries, and at the same time would enable rich countries to recover their lost tax revenues. The current OECD initiative on tax havens, supported by the G20, relies on bilateral agreements between countries. To date no developing country has signed a bilateral agreement with a tax haven.

Oxfam reacts to WTO judgement on US cotton subsidies

The United States this week has lost a battle in its dispute over cotton subsidies with Brazil at the World Trade Organization (WTO), said international organization Oxfam. The WTO confirmed the injury caused by these subsidies and authorized Brazil to retaliate against the US. “American farm policy is broken and bloated, and now other sectors of the US economy may suffer as Brazil retaliates,” said Gawain Kripke, policy director for Oxfam America. Total direct support to cotton production hovered over $3bn in the 2008-2009 growing season, or an equivalent of 50 cents per pound of actual production, according to the International Cotton Advisory Committee.

“The global trading system depends on countries obeying rules and submitting to orderly dispute resolution,” said Kripke. “Thus far, the US has ignored the ruling of the WTO adjudication and continues large subsidies for cotton production. If the US continues this way, the integrity of the multilateral trade system is at stake.” An Oxfam study found that with a complete removal of US cotton subsidies, the world price of cotton would increase by 6-14%, resulting in additional income that could feed an additional million children for a year or pay school fees for at least two million children living in extremely poor West African cotton growing households.

The longstanding dispute started in 2002. In 2005, the WTO ruled that US cotton subsidies harmed Brazilian cotton farmers and violated WTO rules, but the US did little to abide by the ruling and reduce its trade distorting subsidies. In September 2006, Brazil asked for a WTO “compliance panel” to determine whether the US has done enough to comply with the ruling and the WTO confirmed that the US has failed to reform its agricultural subsidies enough to comply. The recent ruling confirms that Brazil is entitled to start retaliation procedures, and possibly cross-retaliate by lifting intellectual property protections.