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Impact of 2010 IMF Quota Reform: Winners, Losers and Realignments

Once implemented, the 2010 reform will give the BRIC counties a 20 percent average increase in IMF voting shares, but progress in IMF governance reform has been slow. The agreed 2008 reforms took three years to go into force. Given that 75 countries, including the US, will be adversely affected by the 2010 reforms, it might take even longer for the 2010 reforms to become effective. It is anticipated that the US will ratify the reforms, but not until 2013. However, despite the slow pace of implementing the new IMF reforms, other shifts in governance are beginning to take shape. Perhaps in anticipation of the implementation of the 2010 reforms, two European IMF constituencies are realigning. To read more about this realignment and the impact of the 2010 Reforms on IMF governance please see the document below. 

Impact of 2010 IMF Quota Reform: Winners, Losers and Realignments

 

   

IEO releases 2012 Annual Report

The Independent Evaluation Office (IEO) of the IMF released its 2012 Annual Report. The IEO was established in 2001 to conduct independent and objective evaluations IMF policies and activities. Under its Terms of Reference, it is fully independent from the Management of the IMF and operates at arm's length from the Board of Executive Directors.

To read the full report, click here

   

Proposed New Constituency led by Belgium and Netherlands

Following the 2010 IMF Reform Agreement that is intended to increase the voting shares of developing and emerging economies; Belgium, the Netherlands and Luxembourg are now considering forming a a new constituency group with several emerging economies. If the new constituency were to be formed, its overall percent of IMF votes would be 6.39, surpassing Japan and making it second to the United States. Ofcourse, if the 2010 Reform Agreement becomes effective (approval and ratification by all members), many of the countries in the "New Group" will see a reduction in their relative votes.                

Group (Led by Belgium) Votes by country % of Fund total New Group Votes by country % of Fund total
Austria 21,876 Belgium 46,789  
Belarus 4,601 Netherlands 52,361  
Belgium 46,789 Luxembourg 4,924  
Czech Republic 10,759 Ukraine 14,457  
Hungary 11,121 Israel 11,348  
Kosovo 1,327 Romania 11,039  
Luxembourg 4,924 Bulgaria 7,139  
Slovak Republic 5,012 Bosnia and Herzegovina 2,428  
Slovenia 3,487 Cyprus 2,319  
Turkey 15,295 Georgia 2,240  
Total Votes 125,191 4.97 Moldova 1,969  
  Armenia 1,657  
Group (Led by Netherlands)     Macedonia 1,426  
Armenia 1,657 Montenegro 1,012  
Bosnia and Herzegovina 2,428 Total Votes 161,108 6.39
Bulgaria 7,139    
Croatia 4,388 Not in New Group  
Cyprus 2,319 Austria 21,876  
Georgia 2,240 Belarus 4,601  
Israel 11,348 Czech Republic 10,759  
Macedonia 1,426 Hungary 11,121  
Moldova 1,969 Kosovo 1,327  
Montenegro 1,012 Slovak Republic 5,012  
Netherlands 52,361 Slovenia 3,487  
Romania 11,039 Turkey 15,295  
Ukraine 14,457 Croatia 4,388  
Total Votes 113,783 4.52 Total Votes 77,866 3.09
Total of eligible votes (Includes the other groups) 2,512,807 99.73  
           
 
   

Tackling Offshore Tax Evasion

Secretary-General Gurria of the OECD released a report in June 2012 about reining in tax evasion.

   
   

Increasing the Impact of the FSB

Domenico Lombardi of Brookings presented the Recommendations of High-Level Panel on the Governance of the Financial Stability Board at the G20/FSB Conference in April, 2012. Below is his full presentation, including the recommendations developed at last year's event co-organized by New Rules for Global Finance and Brookings.

 

   

Obama Trade Document Leaked

This article below can be found at Huffington Post.

June 13, 2012

WASHINGTON -- A critical document from President Barack Obama's free trade negotiations with eight Pacific nations was leaked online early Wednesday morning, revealing that the administration intends to bestow radical new political powers upon multinational corporations, contradicting prior promises.

The leaked document has been posted on the website of Public Citizen, a long-time critic of the administration's trade objectives. The new leak follows substantial controversy surrounding the secrecy of the talks, in which some members of Congresshave complained they are not being given the same access to trade documents that corporate officials receive.

"The outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of [trade] negotiations," said Lori Wallach, director of Public Citizen's Global Trade Watch in a written statement.

Sen. Ron Wyden (D-Ore.) has been so incensed by the lack of access as to introduce legislation requiring further disclosure. House Oversight Committee Chairman Darrell Issa (R-Calif.) has gone so far as to leak a separate document from the talkson his website. Other Senators are considering writing a letter to Ron Kirk, the top trade negotiator under Obama, demanding more disclosure.

The newly leaked document is one of the most controversial of the Trans-Pacific Partnership trade pact. It addresses a broad sweep of regulations governing international investment and reveals the Obama administration's advocacy for policies that environmental activists, financial reform advocates and labor unions have long rejected for eroding key protections currently in domestic laws.

Under the agreement currently being advocated by the Obama administration, American corporations would continue to be subject to domestic laws and regulations on the environment, banking and other issues. But foreign corporations operating within the U.S. would be permitted to appeal key American legal or regulatory rulings to an international tribunal. That international tribunal would be granted the power to overrule American law and impose trade sanctions on the United States for failing to abide by its rulings.

The terms run contrary to campaign promises issued by Obama and the Democratic Party during the 2008 campaign.

"We will not negotiate bilateral trade agreements that stop the government from protecting the environment, food safety, or the health of its citizens; give greater rights to foreign investors than to U.S. investors; require the privatization of our vital public services; or prevent developing country governments from adopting humanitarian licensing policies to improve access to life-saving medications," reads the campaign document.Yet nearly all of those vows are violated by the leaked Trans-Pacific document. The one that is not contravened in the present document -- regarding access to life-saving medication -- is in conflict with a previously leaked document on intellectual property (IP) standards.

"Bush was better than Obama on this," said Judit Rius, U.S. manager of Doctors Without Borders Access to Medicines Campaign, referring to the medication rules. "It's pathetic, but it is what it is. The world's upside-down."

The Office of the U.S. Trade Representative insists that while broad standards require many medical patents and IP rules that would increase the price of medications, the U.S. intends to work with countries involved in the Trans-Pacific talks to ensure that the agreement does not restrict access to life-saving drugs.

USTR was not immediately available to comment on the newly leaked investment chapter of the Trans-Pacific deal, and has previously stated that it cannot comment on the terms of an allegedly leaked document. That statement is belied somewhat by recent American efforts in other international negotiations to establish controversial medical patents that grant companies long-term monopolies on life-saving medications. Those monopolies increase drug prices, which impede access to medications, particularly in developing nations. The World Health Organization and dozens of nonprofit public health groups have objected to the standards sought by the Obama administration. Two United Nations groups recently urged global governments not to agree to trade terms currently being advocated by the Obama administration, on the grounds that such rules would hurt public health.Such foreign investment standards have also come under fire at home, from both conservative sovereignty purists and progressive activists for the potential to hamper domestic priorities implemented by democratically elected leaders. The North American Free Trade Agreement, passed by Congress in 1993, and a host of subsequent trade pacts granted corporations new powers that had previously been reserved for sovereign nations and that have allowed companies to sue nations directly over issues.

But while the current trade deal could pose a challenge to American sovereignty, large corporations headquartered in the U.S. could potentially benefit from it by using the same terms to oppose the laws of foreign governments. If one of the eight Pacific nations involved in the talks passes a new rule to which an American firm objects, that U.S. company could take the country to court directly in international tribunals.

Public Citizen challenged the independence of these international tribunals, noting that "The tribunals would be staffed by private sector lawyers that rotate between acting as 'judges' and as advocates for the investors suing the governments," according to the text of the agreement.

In early June, a tribunal at the World Bank agreed to hear a case involving similar foreign investment standards, in which El Salvador banned cyanide-based gold mining on the basis of objections from the Catholic Church and environmental activists. If the World Bank rules against El Salvador, it could overturn the nation's domestic laws at the behest of a foreign corporation.

Basic public health and land-use rules would be subject to challenge before an international tribunal, as would bank regulations at capital levels that might be used to stymie bank runs or financial crises. The IMF has advocated the use of such capital controls, which would be prohibited under the current version of the leaked trade pact. Although several countries have proposed exceptions that would allow them to regulate speculative financial bets, the U.S. has resisted those proposals, according to Public Citizen.

Trans-Pacific negotiations have been taking place throughout the Obama presidency. The deal is strongly supported by the U.S. Chamber of Commerce, the top lobbying group for American corporations. Obama's Republican opponent in the 2012 presidential elections, Mitt Romney, has urged the U.S. to finalize the deal as soon as possible.

   

EBRD Chooses U.K.'s Chakrabarti as President

On Friday, the European Bank for Reconstruction and Development (EBRD) chose its new president, the United Kingdom’s Suma Chakrabarti. Chakrabarti’s selection process was unique, in part, because past EBRD presidents have always been either French or German. Friday’s decision was additionally noteworthy because it was made via vote, rather than through the typical closed-door discussions. Some see Chakrabarti’s election as heralding in a new era of open merit-based processes for the election of leaders to the world’s major financial institutions. 

 

To read more, visit the Wall Street Journal's EBRD Chooses U.K.'s Chakrabarti as President.

   

Don't Gamble with Food - How the German financial industry is making a business out of hunger

Summary

Banks and financial advisors in Germany have been promoting agricultural crops as an attractive investment category for the past few years: rising food prices promise high returns that no one should miss, so they argue. The higher the price of basic food commodities, the higher the profits for investors — a bittersweet formula indeed.

In Germany, we spend an average 10 per cent of our income on food. Families in poor countries, by contrast, must invest up to 80 percent. As prices rise, hunger grows. This occurred in 2008: the global food crisis caused the number of hungry people worldwide to rise to over one billion and triggered hunger protests in 61 countries. “Everyone is eating less food. The women make the ultimate sacrifice. They take their food after everyone is done,” explained one agricultural worker during an interview with Oxfam.

In 2010/2011, food prices skyrocketed once again. Forty-four million people living in poor countries—a number equal to more than half of the German population—were driven into hunger because they could no longer afford to buy food. Speculation with food is one of the key factors responsible for this extreme price volatility

 

To read the full report click: Don't Gamble with Food - How the German financial industry is making a business out of hunger

   

Will JP Morgan's recent loss catalyze deeper financial reform?

JP Morgan's recent loss and its media attention has given advocates for the Volcker rule and Glass-Steagall new ammunition. 

There are many articles addressing the JP Morgan debacle. A recent NY Times article titled "Dancing with Derivatives"  quoted a New Rules Board Member, Seamus Finn. In the article, he asks an important question: "Do you still believe a company can self-regulate when trading on their own accounts? 

If the answer is "No", then regulations are appropriate. But regulations, like Dodd-Frank, have been undermined with different exemptions and loopholes. 

Will JP Morgan's recent loss catalyze deeper financial reform in the US? 

Are their implications for global financial regulations?

New Rules is interested in your opinions and any information you would like to share with others on this topic.

   

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