UPDATE ON DOHA FINANCING FOR DEVELOPMENT (FFD)

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E.O. 12958: DECL: 10/30/2013
TAGS: EAID EFIN ECON ETRD UN
SUBJECT: UPDATE ON DOHA FINANCING FOR DEVELOPMENT (FFD)
NEGOTIATIONS

Classified By: WILLIAM HEIDT FOR REASONS 1.4 (d) and (e)


1. (U) Summary. Delegations in New York have completed the
first reading of the "zero draft" of the outcome document for
the November 29 - December 3 Financing for Development Review
Conference in Doha. The Egyptian and Norwegian
co-facilitators for the FfD process hope to finalize the
outcome document by November 26, although there is a
significant chance negotiations will need to be finalized at
the conference itself. The 2002 Monterrey Consensus was a
breakthrough for the UN system on development issues because
of its first-time emphasis on good governance and private
sector growth, and stands as one of President Bush's legacies
on development. We have accordingly staked out a number of
strong positions in the FfD negotiations, most based on
long-standing policy concerns but some for tactical reasons.
An update on key issues in the negotiations follows in
paragraphs 3-14. End Summary.


2. (C) The Conference takes place at a difficult time for
the U.S. (during a transition while we are on a continuing
resolution),and we have indicated that major new U.S.
announcements are unlikely. The financial crisis and the
emerging G-20 summit process also limit our flexibility on
many of the systemic issues under consideration.
Nonetheless, we believe the conference should provide a
valuable high-level forum for a discussion of the impact of
the financial crisis, and other current development
challenges, on developing countries. The conference also
offers a chance to reiterate the importance of strong,
private sector led growth and maximizing all sources of
development financing. These messages were noticeably
missing from the September 25 MDG High-Level Event, which
overwhelmingly focused on foreign aid.


3. (U) The Doha outcome document will follow the same basic
structure as the Monterrey Consensus, with an introduction
followed by substantive chapters on domestic resource
mobilization, foreign direct investment (FDI) and other
private flows, trade, debt, official development assistance
(ODA),systemic issues, and "staying engaged". The latter
chapter deals with the FfD follow-up process. There is also
a new section entitled "other new challenges and emerging
issues" that covers FfD-related topics that have arisen since
Monterrey.

Foreign Direct Investment and Trade
--------------


4. (C) Based on proposals submitted by various delegations
during the first reading, we expect that we will be able to
close the sections of the document dealing with FDI and trade
without excessive difficulty, although the breakdown of the


Doha trade round has soured the atmosphere on trade issues
and encouraged finger pointing.

Official Development Assistance
--------------


5. (C) We expect pressure on the U.S. until the very end of
the process to agree to stronger language on the 0.7 percent
of GDP target for ODA. We have indicated that we have no
flexibility on this point, since agreeing to the 0.7 percent
target would imply a massive increase of our current ODA
levels, from approximately $22 billion a year to more than
$105 billion. Also, although the current version of the
outcome document contains favorable references to the Accra
Action Agenda on aid effectiveness, the UK and some other
delegations are concerned that the G77 will oppose it
vigorously because the Accra process took place outside the
UN and without universal participation. However, we believe
that working with like-minded delegations we will be
successful in keeping it in the document. We remain hopeful
that we will be able to close this section before going to
Doha by resorting largely to previously agreed language.

Debt
--------------


6. (C) Debt issues will be very tough because of a concerted
effort by middle-income countries to win more favorable
treatment of their debt (international debt relief processes
to date have focused on least developed countries). There
is also strong pressure to agree to a "sovereign debt workout
mechanism" linked to the UN, a step we have indicated that we
are not willing to consider. USUN is working closely with
the Departments of State and Treasury and other delegations
from Paris Club countries to advance our positions in this
area.

Systemic Issues -- Complications From the Financial Crisis
-------------- --------------


7. (C) The current financial crisis is influencing the FfD
negotiations strongly. Developing countries are legitimately
worried about the impact of the crisis on their ability to
fund development, and want the Doha outcome document to
reflect their concerns. They also view the crisis as a once
in a generation opportunity to take the U.S. down a notch and
increase the role of the UN in financial issues. The
situation is complicated by European views (particularly
those of France) regarding the nature of the November 15 G-20
summit on the financial crisis. In normal times, the EU
would take positions very close to ours on issues related to
the structure of the international financial system, but this
year they are supporting uncharacteristically expansive


language.


8. (C) We have indicated that the U.S. believes the FfD
process, which is dominated by foreign ministries, is the
wrong place for detailed discussions that impact on financial
markets. The current zero draft contains unacceptable
language on a number of systemic issues, including reform of
the IMF and World Bank, regulation of national financial
markets, hedge funds, credit rating agencies, and the
formulation of financial standards and codes. There is also
a sweeping but ill-defined proposal for a global conference
to "review the international financial and monetary
architecture and global economic governance structures" that
would clash with the more carefully targeted November 15 G-20
summit in Washington. We have succeeded in freezing the
negotiations on many systemic issues until after the
financial crisis summit.


9. (C) We are working with the Department of State to
arrange a briefing by a senior administration economic
official on the G-20 summit. We believe this will provide a
useful opportunity to allow the UN Secretariat and the member
states to feel included in the latest developments. It would
also be a useful opportunity to meet privately with the
co-facilitators to provide a candid statement of the U.S.
position on several difficult issues contained in the text.
In order to retain the upper hand on the systemic issues
section, we recommend the Washington interagency team draft
an extensive re-write of this section of the zero draft to
table at our first, post-financial crisis summit negotiating
session on November 18.

Staying Engaged -- Should We Do This Again?
--------------


10. (C) The final section of the Monterrey Consensus outlines
the various mechanisms to review the 2002 Financing for
Development conference, including a biannual high-level
dialogue in the General Assembly, the annual ECOSOC Spring
meeting with the Bretton Woods Institutions, and the current
review conference. The current zero draft contains a
proposal to "consider the need" to hold a second FfD
conference by 2013, a commitment the G-77 wants to make more
definite. The zero draft also contains an equally
unappetizing proposal to "strengthen" the intergovernmental
FfD process, which is code for perpetual UN negotiations on
the topic. Few developed countries are enthusiastic about
either proposal, but the default position in the UN
invariably is to hold another conference.


11. (C) We are skeptical as to whether holding a second
review conference in 2013 is in the U.S. interest. The
logic of the current process is biased towards watering down
E


the important commitments by developing countries to manage
their economies properly and create an enabling environment
for growth. This is because the U.S. and like-minded
countries have not sought new commitments above those in the
Monterrey Consensus, but on each specific policy issue, at
least a few ofQhe G-77 members want more flexibility. These
commitments, in the sections of the document dealing with
domestic resource mobilization, private financial flows,
debt, and trade, are the prime Monterrey takeaways for the
U.S., because they gave us additional certainty that our
assistance dollars would not be wasted in countries with poor
economic policies. A related problem is that it is very
difficult to focus on country-level commitments in a
multilateral process.


12. (C) There is also strong pressure from a range of
countries to shift the focus of the FfD process to issues we
view as tangential to the core economic and governance policy
messages of Monterrey, such as gender, the status of
middle-income countries, climate change, and the food
security crisis. We expect the result of all these pressures
will be, most likely, a weakening of the most important
portions of the document coupled with an increase in emphasis
on issues we view as less central to financing for
development. This is obviously not an ideal outcome for the
U.S., and we have no reason to believe that a second review
conference would be any different.


13. (C) Rather than rejecting a second review conference
outright, the U.S. has tabled an alternative follow-up
proposal that is more decentralized and holds open larger
roles for the private sector and non-UN actors. Winning
acceptance of this proposal will be very tough.

Comment: Strong USG Effort to Date
--------------


14. (C) USUN has received outstanding support from
Washington agencies throughout the 10-month FfD process, and
the U.S. has consistently been the best-prepared delegation.
However, if we are unable to wrap up negotiations by November
26, it will be important to maintain a high degree of policy
coordination at the Doha conference itself. A strong
interagency economic team at Doha will be essential.
Khalilzad