Trade, Technology, Capacity-building Focus of FfD Prep Meeting
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UN Member States discussed ‘trade, technology and capacity building and other non-financial means of implementation' during the second round of substantive informal sessions of the preparatory process for the third International Conference on Financing for Development (FfD).

The remaining sessions in this round will take up 'Governance' and 'Learning from partnerships and follow-up process.'

FfD10 December 2014: UN Member States discussed ‘trade, technology and capacity building and other non-financial means of implementation’ during the second round of substantive informal sessions of the preparatory process for the third International Conference on Financing for Development (FfD). The remaining sessions in this round will take up ‘Governance’ and ‘Learning from partnerships and follow-up process.’The meeting took place at UN Headquarters in New York, US, on 10 December 2014, convened by the co-facilitators for the FfD preparatory process, Geir Pedersen of Norway and George Talbot of Guyana.

Moderating the panel discussion on fostering science, technology and innovation, David O’Connor, UN Department of Economic and Social Affairs (DESA), identified acceleration of technological innovation and the scale-up of technology diffusion as the two dimensions of the “technology problem.” He highlighted the important role of governments in that regard. Xiaolan Fu, Technology and Management Centre for Development, called for financing for innovation and capacity building globally and in countries. She also called for: cultural and institutional change at the national level; technology transfer at the international level; collaboration between the private and the public sectors on official development assistance (ODA); raising awareness; and countries’ collaboration for innovation.

William Lazonick, University of Massachusetts, said “innovative enterprises” are the foundation of any successful economy, and are characterized by a cumulative, collective learning process. He highlighted the strong developmental state pursued by the US, Japan and South Korea, urging financial commitments to sustain innovation until it generates competitive products. He said trade is driven by innovation, and not the driver of it. Lazonick added that technology transfer to developing countries can occur through, inter alia: employment with multi-national corporations (MNCs); joint ventures with MNCs; and upgrading along the global value chains.

Khalil Rahman, UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (OHRLLS), explained that the Technology Bank for LDCs will have an integrated structure, reflecting three inter-related functions: STI Supporting Mechanism, to build LDCs’ capacity in science, technology and innovation (STI); Patents Bank, to help LDCs secure relevant intellectual property (IP) at negotiated or concessionary rates, and to help protect IP rights derived by LDC inventors; and Science and Technology Depository Facility, to support LDCs’ access to scientific literature and help LDCs’ research collaboration through partnerships, etc. He further added that the incentive for technology might come in the form of ODA, and that south-south cooperation will play an important role.

In the interactive discussion, participants raised questions on: how indigenous capacity can be developed, as this is often neglected “at ground level;” how the FfD process could fulfill the Rio+20 mandate on finance development and technology facilitation; how to reconcile non-traditional models and new approaches to knowledge; how to promote innovation as a priority for international development banks; and how to better value innovation from the South. One speaker noted that ODA is not usually directed toward high-risk activities, but to poverty eradication. Member States stressed the need for: reducing costs of broadband connection; reducing costs in international transit; creating an enabling domestic environment, with transparency and accountability critical for attracting private investment and enabling sustainable development; and voluntary technology transfer on mutually agreed terms, to a national environment willing to absorb the new technologies. One delegate urged addressing gender equality within the Addis Ababa process.

Opening the session on investment regimes for sustainable development, Elizabeth Tuerk, UN Conference on Trade and Development (UNCTAD), stressed that the Sustainable Development Goals (SDGs) will need to bridge a large investment gap. She said UNCTAD has identified five paths to reform the Investor-State Dispute Settlement (ISDS) system: promoting alternative dispute resolution; tailoring the existing system through individual International Investment Agreements (IIAs); limiting investor access to the ISDS; introducing an appeals facility; and creating a standing international investment court. She also reminded participants of UNCTAD’s Investment Policy Framework for Sustainable Development, which contains six action packages.

Sarah Anderson, Institute for Policy Studies, urged further action to solve outstanding issues with the ISDS. She said the system is in a crisis of legitimacy and out of sync with the major global challenges, citing restrictions on capital control as outmoded. She called for “big policy changes” to meet sustainable development challenges, and explained that while many treaties aim to provide investors with the right to a stable, predictable regulatory and policy environment, perhaps that it is not what is needed, given the current challenges.

Jeswald Salacuse, Tufts University and President, International Arbitration Tribunal, ICSID, called for adjusting the investment treaty system to address sustainable development, which he said is “not historically an explicit goal.” Adjustments could include: expanding treaty exceptions to increase countries’ policy space; specifying the state’s right to regulate; making commitments not to reduce standards in heath, human rights and environment; referring to sustainable development in the treaty preamble; establishing commissions to manage treaties once launched; and seeking alternatives to arbitration. Salacuse also argued that the dispute process should be more transparent, including by publishing all arbitration decisions, making hearings public, and allowing civil society to contribute amicus curiae briefs prior to a tribunal.

Responding to the panel presentations, a delegate noted that an ambitious post-2015 development agenda will require tremendous changes in terms of mindset and behaviors, including advancing sustainable consumption and production (SCP) and environmental integration in the social and economic dimensions. Other participants called for: an accountability framework for the business sector in context of the post-2015 development agenda; considering an international investment treaty template to ensure minimum standards in terms of environmental protection; clarifications on how to attract foreign direct investment (FDI) where it is most needed; and development financing that is climate-proof and climate-sensitive.

Moderating the session on trade regimes for sustainable development, William Milberg, New School for Social Research, said the notion of international trade has been transformed, with increased linkages between trade and investments, “as never seen before in history.” Guillermo Valles, UNCTAD, said the report of the Open Working Group on SDGs had captured trade in an “isolated way,” mainly in connection with the conclusion of the Doha round and market access. He called for adopting the right legal frameworks and domestic policies to enable financing for development.

Discussing global value chains (GVCs), Jennifer Bair, University of Colorado, highlighted the unevenness of GVCs and the need to increase participation. She also called for the FfD Conference to renew commitments to the multilateral system so as to ‘reinvigorate the conversation about a broader set of commitments.’ Joaquim Tres, Inter-American Development Bank (IDB), outlined the need to, inter alia: facilitate trade and improve the trade architecture; increase public-private partnerships; invest in infrastructure (such as cross-border infrastructure); and strengthen the links between trade and inequality.

Paulo Correa, World Bank, said ‘a world with less trade is worse that a world with more trade.’ He called for attention to the access and impact of trade regimes, and said complementary policies can mitigate short-term impacts and maximize long-term impacts on growth. Deborah James, Center for Economic and Policy Research (CEPR), urged putting development first to ensure that trade policies enable development. She called for: more policy space for technology transfer; increased innovation to respond to the needs of developing countries; public oversight; and ensuring that global trade rules do not prevent countries from investing in their own development.

Delegates highlighted that trade should not be considered “in a vacuum” but as part of a broader macroeconomic structure. One called for promoting growth with social inclusion, and another one proposed to establish a free trade zone in Africa. Others asked for clarification about the integration of social and environmental standards in trade agreements, and about the consideration of social and environmental sustainability concerns in GVCs.

The second round of informal substantive sessions, which began on 9 December, will continue until 12 December 2014. [IISD RS Sources] [FfD Preparatory Process] [IISD RS Story on 9 December Meeting]