Leading Group Task Force Proposes a CTT-based Global Solidarity Fund

There are roughly four options in considering the establishment of a Global Solidarity Fund, as described in the interim report of the Japanese Commission for the Promotion of International Solidarity (the Terashima Commission). The first option is to establish it within existing organisations such as the World Bank (WB) and the IMF. The second is to establish a new body based on the governance of recently created bodies such as the Global Fund to Fight AIDS, Tuberculosis and Malaria, and UNITAID. The third option is to create it in accordance with proposals by Heikki Patomäki (Currency Transaction Tax Organisation & the Council of Ministers and the House of Democracy) and Bruno Jetin (Fonds de solidarité pour le développement durable & the Council of States and the General Democratic Assembly). The final option is to combine elements of each of these.

The World Bank and the IMF are often criticised for their decision-making manner, i.e. “one dollar, one vote” system, which is regarded as undemocratic. On the other hand, a proposed Fund would benefit from administrative support from an established international capacity building architecture. In particular, the Bank has a good track-record of creating Trust Funds with good management.

This first option could be a relevant choice, if and when the following conditions are to be met. The first is that democratic decision-making by various stakeholders is assured. Secondly, the access to the Fund must be easy in terms of procedure. Finally, the proceeds of the Fund should be used to leverage private finance by allowing the WB administrated Trust Fund to obtain more capital in the market.

Both the Global Fund and UNITAID have a unique governing body (...). Both organisations include representatives from civil society and the business sector from both developed and developing countries on the Executive Board, guaranteeing their voices are heard at the core of decision-making. UNITAID has also created the Consultative Forum so that voices of countries, NGOs, companies and other stakeholders outside the Executive Board can be considered in the Board. These features should be incorporated into the governance of a Global Solidarity Fund; whichever of the options described above is chosen.

The proposals of Patomäki and Jetin also warrant examination. Although they would require a long time horizon to realise, over the longer term this option has a potential to build transparent, democratic and accountable global governance in a comprehensive manner.

Given this, the Committee recommends adopting pertinent elements of the option 1 and 2 in the short term, but considering the third option in the long term. In other words, a Global Solidarity Fund could be created as a clearly identifiable trust fund with its own decision-making board comprising a range of stakeholders including civil society and business sector together with its Consultative Forum.

"The turnover in foreign exchange markets has reached four trillion dollars a day, more than the total output of the U.S. economy in three months and more than a threefold increase from 2001", notes the Editor of AfricaFocus. "More than 80% of these transactions are speculative, as financial institutions trade currencies to profit from changes in rates. Yet, unlike almost all retail transactions, currency transactions deliver no revenues to public coffers. Now a group of 60 countries is proposing a new fee on currency transactions, which they call a "Global Solidarity Levy." At the proposed rate of only 5/1000 of one percent, such a "currency transaction levy" could bring in more than $30 billion a year, and perhaps much more."

From AfricaFocus we also borrow the following related links:

Leading Group on Innovative Financing for Development
http://www.leadinggroup.org

"How Speculators Could Help Pakistan"
Newsweek, Aug 27, 2010 - http://tinyurl.com/2exmam8

"60 States to Lobby U.N. for Currency Transaction Tax" Reuters, Sep 1, 2010
http://www.alertnet.org/thenews/newsdesk/LDE68021J.htm

"Small global taxes would make a big difference for world's 'bottom billion'"
Bernard Kouchner, Katsuya Okada, Charles Michel Christian Science Monitor, Aug 31, 2010
http://news.yahoo.com/s/csm/20100831/cm_csm/323062

"The Currency Transaction Tax"
North-South Institute, October 2008
http://www.nsi-ins.ca/english/pdf/CTT.pdf

"Currency tax: A way to invest in our future"
Rep. Pete Stark, The Hill, July 20, 2010
http://tinyurl.com/27s54co

Bank for International Settlements
Triennial Report, September 2010
http://www.bis.org/publ/rpfx10.htm