A Development Agenda for the G-8 in 3 Ts

UK Prime Minister David Cameron announced in January that his priorities for the G-8 during Britain’s presidency center on three Ts: taxes, trade, and transparency.

Cameron has said that this summit is the opportunity for the G-8 to “get its own house in order.” This is a welcome focus on how the rules and systems of G-8 countries affect the rest of the world, and how they can be improved. Focusing on policies of G-8 countries themselves pressures them more than usual to reach an agreement: there is nobody else to blame if they do not deliver.

Here are a few of my colleague’s suggestions on how to make the most of Cameron’s agenda for developed—and developing—countries.

Alex Cobham on Taxes

The British have set out an ambitious agenda on tax and the related transparency of the ownership of companies and trusts (known as “beneficial ownership”). We set out our ideal draft declaration out of the G-8 on these issues. As these negotiations get close to the wire and compromises are made, it is too easy to ignore the interests of developing countries, as they are not at the table. Here is the bottom line:

• Create public registries of the beneficial ownership of companies, trusts, and foundations. This is critical for preventing both tax evasion and broader corruption. If the G-8 cannot reach unanimity on the need for public registries of beneficial ownership, the next best thing would be for all members to make a commitment to establish a private registry, and for those countries that can do so to make them public.

• Agree a multilateral framework for automatic exchange of tax information. The scheme for automatic exchange of tax information should be framed explicitly to include well-governed developing countries as recipients of information even before they are able to reciprocate (as well as support to enable them to share information themselves in the future). The United States tends to prefer bilateral agreements to multilateral deals because it can more easily swing its weight around; it will need convincing that it should combine its negotiations of around 70 different bilateral information sharing agreements into a multilateral framework which developing countries can access without having to reciprocate immediately. Without this information, developing countries have difficulty enforcing their own tax laws, undermining both revenues and the state-citizen relationship.

• Take on tax avoidance. There is optimism in some quarters that the G-8 will agree to require multinationals to publish combined global accounts, including country-by-country breakdowns of their economic activity. This would be ideal. However, if it is only possible to agree that this information be generated for private use by tax authorities, rather than for public disclosure, then once again it is important that the agreement is explicit that developing countries must have access to all this information from the outset.

Kim Elliott on Trade

Cameron’s statements focus on three ongoing or recently launched negotiations between the European Union and Canada, Japan, and the United States. He emphasizes the global growth benefits that could result from more open markets and increased trade, especially if the Transatlantic Trade and Investment Partnership (TTIP) with the United States succeeds. And, as a nod to developing countries and the multilateral trade system, he sometimes mentions the goal of reaching a trade facilitation agreement at the World Trade Organization (WTO) meeting in Bali in December.

For developing countries, the key question is whether TTIP and the other regional agreements will be complementary to or will compete with the multilateral, rules-based system.

An important element of making these plurilateral agreements complementary to the multilateral system is to use them to buttress the WTO. Trade facilitation alone, however, is not enough. I would love to see the G-8 endorse these steps, which would contribute to a strong outcome in Bali.

The United States and EU are the world’s two largest markets and have a special responsibility to ensure that any trade agreement they negotiate does not increase obstacles to trade with developing countries. One critical goal should be to minimize trade diversion, perhaps by improving and aligning US and EU preference programs for the poorest countries. Any agreement should also be as nondiscriminatory as possible, especially on issues like regulatory cooperation where many developing countries are already at a disadvantage. Commitments along these lines would contribute to Cameron’s goal of using trade to make “the cake bigger so everyone can benefit,” and reassure excluded countries that they won’t be left scrambling for the crumbs.

Owen Barder on Transparency and Open Data

The G-8 is considering a variety of efforts to increase transparency, including the transparency of foreign aid, the international leasing of land, the true owners of companies and the names of their directors, payments made to developing countries for oil and minerals, and the economic structure of global businesses. The power of these initiatives will be apparent if and when citizens can access the information and use it to hold people and organizations to account.

Transparency campaigners focus on the need for all this information to be published as open data—that is, in machine-readable, standardized data which can be reused, mashed up with other information, and presented in different ways.

Though it sounds geeky, open data is the difference between having your bus timetable as a PDF you can download and having an app on your smartphone which can tell you in real time when your bus is coming. For example, it is absurd that the United States and EU are both requiring companies to publish information about contracts for oil and minerals, but this information won’t be in a common format that developing country citizens can automatically compare to their government’s budget to see if some of those payments have gone astray.

Ted Moran on Transparency and the EITI

Thanks to the persistent efforts of UK Prime Minister David Cameron, this upcoming G-8 Summit promises to make strong moves to support greater transparency in the payments international extractive investors make to governments of the countries where they operate. Three and one-half billion people live in resource-rich countries, yet many of them still fail to benefit from resource extraction as company payments are siphoned off in corrupt and opaque ways. The G-8 offers the opportunity for the leaders of those countries to endorse the new publish-what-you-pay standard of the Extractive Industry Transparency Directive, and to promise concrete capacity-building support to help parliamentarians, civil society, and citizens to interpret and reconcile public payment data. 

What to watch for: 

On Saturday, June 15, government leaders, NGOs, and international companies are invited to make suggestions about how to “improve” transparency reporting, what cases and models have proven most successful, and which measures to build capacity should be funded.  Watch to see if the Final Communique as signed by all parties including companies contains the sentence that is being circulated in draft: “We will comply with Dodd-Frank Section 1504 and Chapter 9 of the EU Accounting Directive.” In the United States, business and financial lobbies have been trying to water down the specific regulations for implementing various parts of Dodd-Frank. There has been some pushback in the UK and EU countries on the Accounting Directive as well. The endorsement of G-8 leaders would provide some public counterweight.

Insider goings-on:

Outsiders will want to watch closely the maneuvering and commentary offered by international mining investors in contrast to international oil and gas companies. The international mining community – led by Rio Tinto, BHP Billiton, and the industry organization ICMM (International Council on Mining and Minerals – has been quite supportive of making all payments to governments public. The international oil and gas companies have been much more critical and oppositional. I have argued in work at CGD that the international oil and gas investors would benefit from the level playing field that near-universal reporting would require. It is in their own self-interest, I assert, to support ever greater transparency.