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European Union members are collectively the largest aid donor in the world and give over half of global aid, and the EU’s policies have a major bearing on global development—from migration, to trade, agriculture and security. CGD is bringing its innovative thinking and evidence-based, practical propositions to the unique European context.
This report examines the impact of the REDD+ agreement between Guyana and Norway on indigenous communities in the country. It aims to understand the concerns, hopes, and fears of indigenous communities at the start of the agreement, and the effects, if any, that communities have faced from REDD+.
As waves of migrants have crossed the Mediterranean and the US Southwest border, development agencies have received a de facto mandate: to deter migration from poor countries. Will it work? Here we review the evidence on whether foreign aid has been directed toward these “root causes” in the past, whether it has deterred migration from poor countries, and whether it can do so.
Yesterday, the German Social Democrats (SPD) voted in favour of pursuing in-depth coalition talks with Angela Merkel’s Conservatives (CDU). Although the chancellor’s battle for political survival is far from over (as the final coalition agreement will have to be backed by the majority of SPD’s 443,000 party members), it is likely that we will see a remaking of a grand coalition. Here we look what that would mean for Germany’s leadership on development.
After coalition talks for a “Jamaica-coalition” with the Greens and the Liberals failed in mid-November, nearly four months after the elections, Angela Merkel’s CDU hadn’t formed a new government. Having turned to the SPD since, with which she governed twice already, and which initially rejected another term of a grand coalition, it appears as if they’ve now reached a preliminary coalition agreement for another grand coalition which does look promising for development. However, for the actual in-depth negotiations, we have four policy recommendations which should find their way into the final coalition contract:
Continue to welcome migrants and improve integration—this will be a win-win for both migrants and Germany
Use increased defense spending for German support for UN peacekeeping
Continue to invest in global public goods for the environment through subsidies for renewables and energy R&D
Use the billions of freed up ODA due to decreasing refugee hosting cost to increase funding for multilaterals
Is Germany’s leadership on migration under threat?
Germany is a development leader, mainly due to its migration policy and its openness to refugees and asylum seekers, as this year’s Commitment to Development Index (CDI) has demonstrated. Migration and integration are dominant themes in Germany’s political discourse, which is not highly surprising after Germany’s intake of a very high number of refugees and asylum seekers in 2015. As a consequence of this and the concomitant success of the right wing populist party AfD entering parliament for the first time, the CDU has now taken less liberal positions on migration. The main battleground during coalition talks was how many additional refugees Germany should accept in the coming years. The final preliminary coalition agreement states that the number of refugees should not exceed 220,000 annually (this excludes labor migrants and the potential additional people seeking asylum from persecution, which cannot be capped for constitutional reasons). Even adding labor market migrants on top, this would be a massive decrease from the record 2 million immigrants that came to Germany in 2015 (we calculate this to be equivalent to “880,000 poverty weighted migrants” from the extremely poor countries, because of the many refugees coming from poor Syria).
In order to limit the numbers to this cap, several measures are listed. These include:
Better international development cooperation
Increased humanitarian commitment
Bigger commitment to international peacekeeping (incl. international police missions)
Fair trade and agricultural policy (fair trade deals)
Intensified contributions to the protection of the climate
Restrictive arms exports
We welcome all these commitments and measures, which are in itself are all part of our Commitment to Development Index (CDI). However, the fact that these policies are linked to the reduction in the numbers of migrants is problematic:
The preliminary coalition agreement aims to set up a commission to address the refugee crisis “root causes.” A recent paper by CGD’s Michael Clemens finds that aid spending is not generally in line with the root causes rhetoric and that the sectoral split of aid to migrant-origin countries is no different to that of aid spending other countries. Also, they find aid can only deter migration, and improve growth, employment, and security to a limited degree. As research suggests, people are more likely to migrate when their country of origin gets richer, contrary to the belief of many donors that using Official Development Assistance (ODA) to improve living conditions in sending countries will deter people from migrating. Donors should use aid not to deter migration but make it better for both host country and migrants.
The coalition agreement leaves the backdoor open for welcoming labor migrants (as they are not included in the suggested cap of 220,000 migrants annually) which an aging society like Germany could benefit from. While the preliminary coalition agreement presents several additional measures to support economic performance in Germany, research suggests that using the potential of its refugees and migrants can be beneficiary to the economy. Therefore, the artificial distinction between labor migrants, which according to the preliminary coalition agreement should be attracted to the German labor market, and asylum seekers and refugees is contradictory. Unlocking the potential of refugees to contribute to the labor market and the host state through tax and social security contributions will be beneficial to the host nation, the migrant and the country of origin (via remittances. etc.). We therefore encourage the grand coalition to keep its openness towards migrants, not only to live up to its humanitarian obligations but also to support its labor market with both low- and high-skilled workers.
One group of skilled workers desperately in demand are nurses and caregivers, which is reflected in the fact that the care sector is discussed with a whole paragraph in the preliminary agreement. By 2030, the German health industry is estimated to lack around 3 million skilled workers. One step towards a long-term, better balanced and sustainable health sector would be the introduction of a Global Skills Partnership. Pilot projects could combines training for nurses or caregivers funded by a donor country (Germany) with the permit to work temporarily in this country. Such mechanisms benefits both Germany and the chosen country of origin, decrease pressure on health systems in aging societies and equip migrants with skills and experience.
Further, the coalition aims to reduce and limit arms exports. As the CDI 2017 demonstrates, this is an important step as Germany has room for improvement in restricting arms exports to poor and undemocratic countries. In the past, it has sold arms to countries which are supporting sides in the Yemeni Civil war. Its proposed export ban to participants in this conflict is a step into the right direction. Also encouraging are the commitment of both the CDU and SPD to work towards a joint European strategy on arms exports.
Germany should step up its commitment to the environment
Experts predict that it is unlikely that Germany will meet the 2020 Paris agreement of reducing emissions by 40 percent. The new coalition is committed to close the gap between current emissions and their 2020 pledge as quickly as possible. But, even though it is shameful that a rich country like Germany will not meet its pledge and expects developing countries to meet theirs, Germany only emits 2 percent of greenhouse gases globally and might be in a better position to provide global public goods to lower greenhouse gases. The coalition wants 65 percent of energy to come from renewables until 2030, mostly through photovoltaics and offshore wind energy. We hope that this will be achieved through renewable energy subsidies, which are a global public good, and many economists agree that high solar energy subsidies in Germany have produced net social benefits for the world. A recent study estimated these benefits to be around $18.8 billion. The same study quantified the effect of Germany’s national subsidies for solar adoption globally and found that roughly a third of solar adoption due to technical improvement result from German subsidies. Most of the solar adoption occurs outside of Germany—those spillovers are classic global public goods and beneficial to developing countries.
Better international development cooperation is welcome, but what does it mean?
Germany will have to massively ramp up overseas development spending, and fast, as the Coalition aims to continue to meet its 0.7 percent commitment, the absolute value of which will only increase due to robust GDP growth at 2 percent. But more importantly, the 0.7 percent target was only met for the first time in 2016, because of a rapid increase in refugees hosting costs; Germany spent $6.2 billion (or 25 percent) of all their ODA in 2016 on refugee hosting costs. In order to maintain the 0.7 target when only 220,000 refugees arrive, overseas development assistance would have to increase rapidly. There is a unique opportunity to redirect this $5 billion or so to multilaterals: the preliminary coalition talks frequently mention better aid, more international cooperation and so on. Yet, Germany only spends about $5 billion (or 20 percent) of all ODA on multilaterals (international average: 29 percent of all ODA is multilateral). Germany’s own development agency will likely be overwhelmed by such a rapid increase in funding. All else being equal spending through multilaterals has advantages: one can piggyback on the existing infrastructure of multilaterals, that have the economies of scale. And a recent review paper on multilateral vs. bilateral aid found that multilateral spending is less politicised, more demand-driven, more selective in terms of poverty criteria, much less fragmented and is better in terms of global public goods provision. Germany should live up to its repeated calls for international cooperation that can be found in both party manifestos and the coalition agreement, and channel the freed up budget for refugee costs to multilaterals.
What’s next for the coalition agreement?
After last night’s SPD party congress, the conservatives and social democrats will now start negotiating on the final coalition deal that has the potential to have a big impact on development. Still, a final agreement and ultimately a new government could be in jeopardy as the leader of the SPD initiated a game of chicken: the party’s president decided that its members should have the final say about whether or not to accept the coalition agreement, and if the conservatives do not make sufficient concessions in the negotiations ahead, and the party members reject the coalition agreements, there will likely be re-elections. However, experts believe the party base will agree to the coalition agreement given that in 2013, 78 percent of party members voted for a renewal of the grand coalition. If Germany indeed has a new government by Easter, it should ensure to continue its path towards being a global leader on development and the provision of global public goods, as outlined in the preliminary coalition agreement.
In a world with the 2030 Agenda for Sustainable Development, the international investment policy system stands as an obsolete regime in urgent need of revision and reform. This is the main conclusion of the analysis that the think tank CIECODE conducted for CGD’s 2017 Commitment to Development Index (CDI). The analysis measures the amount of “sustainable development content” included in International Investment Agreements (IIAs) signed between developing and developed countries. Here, we look at best practices, main issues and which countries could do better.
But, first, what do IIAs have to do with sustainable development? By balancing foreign investor’s protection on one hand and States’ right to pursue public policy interests on the other, IIAs have the capacity to influence the type of foreign investments and the conditions under which they are made. Foreign investments have been developing countries’ main source of external finance for the last two decades (beyond remittances, external debt, or ODA) and that they have concrete implications in host countries’ day-to-day realities (job creation, environmental impact, fiscal revenues generation, or the promotion of vulnerable social groups).
Worldwide, the investment regime is a complex spaghetti bowl made up of more than 3300 IIAs (mainly, Bilateral Investment Treaties and Free Trade Agreements), which has been expanding relentlessly since the early 80’s.
Figure 1: Trends in Number of IIAs Signed, 1980-2017
Note: Preliminary data for 2017. 3,323 is the cumulative number of all signed IIAs, independently of their entry into force. Terminated IIAs, for which termination has entered into effect, are not included.
CIECODE has analyzed over 300 IIAs signed by developing countries with the 27 CDI countries, and has observed that sustainable development is often poorly secured in these agreements. When IIAs include social or environmental safeguards, they are so weak and full of caveats that their impact is highly diminished. They are focused on protecting foreign investors’ rights and interests leaving aside their obligations. Finally, they have failed in finding equilibrium between protecting foreign investors from unjustified discrimination measures by the host states and ensuring that these retain their right to regulate for pursuing public policy interests. This bias has prevented IIAs from becoming a useful tool to boost and promote sustainable investments at the global and domestic level.
CIECODE’s analysis also shows that IIAs signed with those developed countries most in need are the ones presenting the scarcest development content.
Figure 2: Development Content of IIAs Related to Human Development of Partner Country
Source: CIECODE’s analysis for 2017’ Commitment to Development Index. Data available.
Leaders and laggards
These general conclusions hide many interesting facts and variance at country level. For instance:
Four EU countries (Denmark, Germany, Portugal, and Spain) have obtained the minimum score on all the analyzed issues, meaning that in their treaties there is no disposition in place promoting sustainable development through foreign investment. This is a surprising result as both Denmark and Germany are leaders on the CDI overall—ranked first and fifth in the 2017 edition.
At the upper end of the scoreboard, Canada stands alone as the best student of the class, with the United States and New Zealand in second and third, respectively. In their treaties, they explicitly recognize the right of the Parties to regulate in pursuit of their legitimate public policy objectives. Further, detailed provisions to ensure the independence and transparency of the dispute resolution system are in place.
Although none of the existing IIAs are yet perfect instruments to promote sustainable development, the results of the analysis indicate that some countries are aware of the links between foreign investment and sustainable development when drafting and negotiating their agreements. There is a huge opportunity for countries to learn from each other’s policy design and make their investment agreements more development-friendly.
There is some good news
In terms of the inclusion of sustainable development and human rights content in investment treaties, the overall situation is still unsatisfactory (the average score of the 300 IIAs analyzed by CIECODE is below 2 out of 10). But, it’s at the same time true that almost all the improvements have taken place in the last 5 to 10 years (see Figure 3). The Investor-State Dispute Settlement system (ISDS) is a relevant area in which some advances have been observed.
Figure 3: The Evolution of Development Content on IIAs (2017-2000)
Originally, the ISDS was designed as a tool to protect foreign investors against undoubtedly discriminatory measures by host states. It grants foreign investors the possibility to take their disputes with host states to private international arbitration courts and seek for economic compensation if they believe any law or measure by the host state has damaged its investments and reduced its expected profit.
Today, with more than 60 new ISDS cases presented to tribunals each year, the system has mutated into something vastly different from its original expectations—at times with grave consequences. It gives foreign investors the power to challenge democratic choices by host states, elevates property rights over any other consideration (incl. human rights) and allows for fully confidential procedures. In recent decades, it has allowed investors to oppose health legislations against tobacco and environmental laws against industrial discharges' contamination, and even to challenge the end-of-apartheid laws in South Africa. States, exposed to unforeseen legal and financial risks, may decide to freeze legitimate government policymaking or even withdraw existing regulations. Many actors—from the UN and the EU to academia—agree on the main strands of this verdict.
CIECODE’s analysis shows that the ISDS dispositions are the ones in which few improvements have been made. Around 70 percent of the analyzed agreements do not include any meaningful content to improve the ISDS’ transparency, impartiality, or due process standards.
But there is a new and promising trend. More than 20 States have signed the UN’s Convention on Transparency in ISDS since 2014. This Convention, once in force, will oblige States (and their investors) to comply with a set of stringent transparency standards such as the publication of all relevant documents by the ISDS tribunal or the admittance of any “third persons” affected by the dispute to the process. While these might seem as minor improvements, they are almost disruptive innovations in a system that has remained untouched for almost three decades.
Sustainability and public pressure
One of the most unexpected conclusions of the analysis comes from applying CIECODE’s methodology to the investment chapter of the draft version of the EU-US Transatlantic Trade and Investment Partnership (TTIP). Despite the concerns with loss of democracy and the power of big corporations that the TTIP provoked in European and North American societies, none of the 300 IIAs analyzed in CIECODE’s study have shown a more development-friendly approach than the TTIP’s draft. This draft safeguarded states’ policy space to “achieve legitimate policy objectives, such as the protection of public health, safety, environment or consumer protection” and granted that the ISDS would operate under adequate independence, fairness, and openness.
The fact that the TTIP’s draft—being produced under high levels of social awareness and public scrutiny—is the IIA with the most advanced provisions in terms of development-content and transparency highlights the importance of public scrutiny to achieve sustainability outcomes in policymaking.
Meeting the 2030 Agenda
Today, it is no longer enough for investments to create jobs, contribute to economic growth, or generate foreign exchange. The development challenges that lie ahead demand investments that, on top of everything else, are not harmful for the environment, bring social benefits, promote gender equality, and help local companies to move up the global value chain.
If the 2030 Agenda for Sustainable Development is to be taken seriously, the international community must rise to the occasion and fast track the reform of the global investment policy regime in a coherent and ambitious manner. There are evidences, experiences, and best practices ready to be exploited.
Javier Perez is the director of CIECODE, a Spanish research institute working in development and specialized in the analysis of public policies with an impact on sustainable development, social justice and human rights. Economist and jurist, his main area of expertise is international trade policies and its implications for development and human rights. Lately he has lead two innovative projects to monitor and evaluate the Spanish parliamentarian activity from a PCD perspective. Javier worked until 2011 at Oxfam International as Economic Justice Research Coordinator.
Maria Vega is a researcher at CIECODE. She holds a BA in Journalism from Universidad Complutense de Madrid and a MA in International Public Administrations and Politics from Roskilde University. Her main area of expertise is the analysis of migration public policies from a PCD perspective.