Part 4: MANAGING ECONOMIC INTERDEPENDENCE

Globalization is in danger of widening the gap between the rich and poor. A sophisticated, increasingly affluent world currently coexists with a marginalized global underclass.

The pace of the globalization of financial and other markets is outstripping the capacity of governments to provide the necessary framework of rules and co-operative arrangements. There are severe limits to national action to check such polarization within a globalized economy, yet the structure of global governance for pursuing international public policy objectives are underdeveloped.

The time is now ripe to build a global forum that can provide leadership in economic, social, and environmental fields. This should be more representative then the Group of Seven or the Bretton Woods institutions, and more effective then the present UN system. We propose the establishment of an Economy Security Council (ESC) that would meet at high political level. It would have deliberative functions only; its influence will derive from the relevance of equality of its work and the significance of its membership.

The ESC's tasks would be to:
- continuously asses the overall state of the world economy and the interaction between major policy areas;
- provide a long -term strategic policy framework in order to promote stable, balanced and sustainable development; and
- secure consistency between the policy goals of the major international organization, particularly the Bretton Woods bodies and the World Trade Organization (WTO).

The ESC should be established as a distinct body within the UN family, structured like the Security Council, though not with identical membership and independence of it.

With some 37000 transnational corporations world wide, foreign investment in growing faster than trade. The challenge is to provide a framework of rules and order for global competition in the widest sense. The WTO should adopt a strong set of competition rules and Global Competition Office should be set up to oversee national enforcement efforts and resole inconsistencies between them.

The decision making structure of the Bretton Woods institutions must be made more reflective; gross domestic product figures based on purchasing power parity should be used to establish national voting strength.

The role of the IMF should be enhanced by enabling it to:

- enlarge its capacity to provide balance-of-payment support through low-conditionality compensatory finance;
- have oversight of the international monetary system and a capacity to ensure that domestic economic policies in mayor countries are not mutually inconsistent or damaging to the rest of the international community;
- release a new issue of Special Drawing Rights; and - improve its capacity to support nominal exchange rates in the interest of exchange rate stability.

For some countries, aid is likely to be for many years one of the main ways to escape from a low-income, law-saving, law investment trap. There is no substitute for a politically realistic strategy to mobilize aid flows and to demonstrate values for money, including co-financing between officials aid donors, the private sectors, and NGOs with a view to widening the support base.

A false sense of complacency has enveloped the developing-country debt problem. Radical debt reduction is needed for heavily indebted, low-income countries, involving at least implementation of full 'Trinidad' terms, including the matter of multilateral debt.

In response to environmental concerns, governments should make maximum use of market instruments, including environmental taxes and traded permits, and adopt the 'polluter pays principle' of charging. We support the European Union's carbon tax proposal as the first step towards a system that taxes resource use rather than employment and saving, and urge its wide adoption.

It is time for a consensus on global taxation for servicing the needs of the global neighborhood. A start must be made in establishing schemes of global financing of global purpose, including charges on the use of global resources such as flight lanes, sea lanes, and ocean fishing areas and the collection of revenues agreed globally and implemented by treaty. An international tax on foreign currency transaction should be explored as one option, as should the creation of an international corporate tax base among multinational companies.

QUOTED FROM: A Call To Action, Summary of Our Global Neighbourhood, the report of the Comiision on Global Governance