In Brief

EU AGREES ON ENERGY TAX FRAMEWORK

The EU Council on Economic and Financial Affairs, meeting on 19 March in Brussels, agreed on an EU-wide energy tax framework. The decision comes six years after the idea was first introduced, and aims at implementing EU commitments to address climate change. The framework covers coal, natural gas and electricity, and increases existing minimum tax rates for oil products, including petrol, and will harmonise the current patchwork of European national taxation schemes. The framework as aimed as a first step, containing some exceptions for energy intensive industries, but will allow the EU to increase tax rates over time. The framework is expected to be formally adopted at the next meeting of the European Parliament.

In related news, the Global Governance Project (a joint research programme comprising three German academic institutions), released a report examining the possibility to use energy border-tax adjustments in countries that have enacted ambitious energy tax schemes to implement the Kyoto Protocol. Entitled "Implementing the Kyoto Protocol Without the United States: The Strategic Role of Energy Tax Adjustments at the Border," the working paper -- written by Frank Biermann and Rainer Brohm -- argues that the EU could make use of comprehensive border tax adjustments on US products, as US energy prices are much lower. The report also outlines ideas for special rebates on energy- intensive products exported from the EU to the US. The authors examine whether such tax adjustments would be permissible under the WTO General Agreement on Tariffs and Trade and the Agreement on Subsidies and Countervailing Measures. The paper concludes that under certain circumstances the adjustments would be permitted, however they would likely be challenged before the WTO dispute settlement mechanism. To access the paper, visit http://www.glogov.org/workingpapers/index.html.

"EU signs up to energy tax plan to help environment," REUTERS, 24 March 2003;" Europe Reaches Agreement on Energy Tax Framework," ENS, 21 March 2003.

ALTERNATIVE WORLD WATER FORUM OPPOSES WATER PRIVATISATION

The first People's World Water Forum gathered from 21-22 March in Florence, Italy to push for the establishment of a World Water Parliament and provide an alternative to the Third World Water Forum held in Japan. The meeting stressed the importance of water in international trade, and examined requests made under the WTO General Agreement on Trade and Services (GATS) negotiations for countries to open their water markets to private service providers. Meeting participants criticised the ongoing GATS negotiations as a first step toward privatising global water supplies, making water another resource to be "bought, sold and monopolised by wealthy nations and corporations". In a move to reverse this trend, trade campaigning groups promised to escalate their 'take services out of the WTO' campaign before and after the September 2003 WTO ministerial meeting in Cancun, Mexico. The First People's World Water Forum served as a follow- up to January’s Porte Alegre World Social Forum and coincides with the UN International Year of Freshwater.

The Third World Water Forum, held in Kyoto, Osaka and Shiga, Japan -- attended by ten thousand government officials, representatives of civil society and intergovernmental organisations, industry and water experts -- closed on 23 March with the adoption of a Ministerial Declaration declaring water a driving force of sustainable development (see BRIDGES Trade BioRes, 21 March 2003). However, the Forum was criticised for failing to achieve its stated goal of delivering concrete plans to tackle water-related problems.

For further information about the World Water Forum, visit: http://www.world.water-forum3.com/. Visit the 1st People's World Water Forum at: http://www.contrattoacqua.it. "World Water Forum Views Water as a Life and Death Issue," ENS, 17 March 2003; "People's Water Forum Urges World Water Parliament," ENS, 24 March 2003.

A new study by the International Monetary Fund (IMF), entitled "Effects of Financial Globalisation on Developing Countries: Some Empirical Evidence," was released on 17 March. The report explores the relationship between the liberalisation of financial markets in developing countries and the results that liberalisation has had on the economic development of these countries. The authors note that, during the past two decades, the amount of capital flows from developed to developing countries has increased dramatically. Economic theory would suggest that factors such as increased specialisation, lower cost of capital, and the development of the financial sectors of poor countries would make financial integration beneficial for developing countries. However, contrary to theory, the report finds that very few developing countries have shown significant growth from investment. The report reveals that liberalisation will not necessarily increase output, and can in fact harm poor countries, as it makes them more susceptible to fluctuations in the global financial market, which in most cases they are not equipped to handle. Although recent research has found no direct connection between a country's degree of financial openness and the volatility of its output, a link has been established between higher levels of development within a country's financial sector and lower volatility.

The report does not claim to provide the solution for improving the effects of financial integration on developing countries, but it does contend that factors such as transparency, reduced corruption, and government involvement are essential in improving domestic financial institutions. Such improvements will help boost the positive effect of financial integration on these countries. It strongly recommends that stakeholders consider developing countries on a case-specific basis before determining what practices are best for its growth. A copy of this report can be accessed at: http://www.imf.org/external/np/res/docs/2003/031703.pdf.