Financial Crisis - considerations for April UNGA

UNCLAS SECTION 01 OF 04 GENEVA 000279

SIPDIS
SENSITIVE

STATE FOR IO/EDA and EEB/OMA
USUN for JLAWRENCE and CNORMAN

E.O. 12958: N/A
TAGS: EFIN ECON EINV UNGA ECOSOC
SUBJECT: Financial Crisis - considerations for April UNGA
negotiations

REFS: A) GENEVA 220 B) GENEVA 262

SENSITIVE BUT UNCLASSIFIED; NOT FOR INTERNET


1. (SBU) SUMMARY: The report of the UNGA President's Commission of
Experts on Reforms of the Monetary and Financial System (Stiglitz
report) will contribute to a negotiated outcome document in the hope
of giving the UN a greater role in financial affairs. A greater
UNGA role would not necessarily serve USG interests. The US may be
able to avert that result, as well as improve the UN response to the
financial crisis, by proposing productive actions for the UN
Secretariat and UN agencies, actions such as those listed in
paragraphs 11-13. END SUMMARY.

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Lessons from the Fair Globalization
Negotiations 2004
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2. (U) The UN is preparing for April negotiations on an outcome
document which may include a response to the report of the UNGA
President-led Commission of Experts on Reforms of the Monetary and
Financial System (the Stiglitz Commission). Mission officer's
personal experiences negotiating another UNGA resolution (responding
to the ILO Director General Somavia-led Commission on the Social
Dimension of Globalization, which in 2004 produced the report "A
fair Globalization: Creating opportunities for all"),may provide
some relevant lessons. Stiglitz was a member of the Somavia-led
Commission, and Somavia is now an ex-officio member of the Stiglitz
Commission.


3. (SBU) The final 2004 UNGA resolution on the Fair Globalization
report took considerable time to discuss. Just arriving at
consensus to "take note" of the report required weeks of contentious
negotiations, because delegations who had government officials on
the Somavia-led Commission wanted the report endorsed. The Finnish
President was a Co-Chair of the Somavia-Commission, and the Finnish
delegate rallied EU support to insist on endorsing, or at least
welcoming, the report. The G-77 also demanded endorsement of the
report. Informally, several EU delegates admitted that some of the
positions in the report were not fully consistent with their
government's policies and priorities, but they backed the Finnish
effort nonetheless. The final compromise was to take note of the
report and also express appreciation for the specific efforts of the
co-chairs and the Commission as a group.


4. (SBU) Stiglitz, Somavia and the UNGA President appear to have
learned from the Fair Globalization process and have raised the
stakes by making the UNGA process, responding to the "Stiglitz
report," time-limited and leading to a high-level meeting. Member
states negotiating the modalities for the June High Level meeting
have also defused the argument that "the Stiglitz report was not
mandated by member states and so has no status," by calling upon the
Secretary General to prepare a report for the high level meeting.
We can expect the Secretary General to delegate drafting of his
report to the Department of Economic and Social Affairs' (DESA) and
the UN Commission on Trade and Development (UNCTAD),both of which
have served as Secretariats for the Stiglitz Commission. Therefore
we can expect the Secretary General's report to draw heavily on the
Stiglitz report. Given the pressures and expectations of substance
from a high-level meeting and the Department of Economic and Social
Affairs' (DESA) contribution to drafting the initial negotiating
document for the UNGA President, that draft likely will be full of
substance. It will be very difficult for the outcome document to
just take note of the Secretary General's report.

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Strategy
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5. (U) Since the outcome document will be substantive, it can be an
opportunity to put forward our own ideas on how to use the UN system
to respond to the global financial crisis. Focusing the
international community on practical responses by the UN could lead
to positive actions and would divert attention from any bad ideas in
the draft outcome document.


6. (SBU) In parsing out our response to the UNGA President's draft,
a first cut may be to separate actions that might help resolve the
financial crisis from those that might help alleviate the economic
downturn. The first set of ideas might be acknowledged, and
referred for action to the Bretton Woods Institutions (BWIs),to the
G-20, to member states, or to whoever is appropriate, with an
invitation to consider them. The second set of actions could then

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be reviewed and separated in terms of whose mandate they fall under
and so distributed. The key in doing this would be that the UNGA
"invites" others to consider the ideas, and thus avoids creating any
appearance of the UNGA having jurisdiction where it does not.


7. (SBU) Mandates: No developed country would want to have
financial issues and ODA decided in a forum like the UNGA where the
principle of one country, one vote, takes precedence over economic
weight. In second committee and UNCTAD, the US with support from
the EU and JUSCANZ (like-minded non-EU countries) has been vigilant
to avoid treading on the mandates of the BWIs. The Secretary
General's report and UNGA President's draft negotiating document
will likely intend to put financial and economic issues solidly in
the UNGA fold, along the lines proposed by the Stiglitz report.
Paul Oquist, Senior Advisor from the UNGA President's office,
previewed this position at the Stiglitz briefing in Geneva on March
12 (ref A),where Oquist said that the final solutions to the global
financial crisis need to come to the UN for approval as a matter of
legality; that the G7 and G8 have no basis in international law; and
that international solutions affect everyone, so everyone should
have a voice in them for them to be legitimate. Oquist concluded
that trillions are being spent to reinstate credibility in the
global financial system, but we must have equality and justice where
everyone feels their interests are represented. Oquist explained
further that UN leadership in responding to the financial crisis is
the logical next step following the initial breakthrough in the
Monterrey consensus, which gave DESA the Secretariat follow-up role
on Financing for Development and provided an agenda for an annual
spring UNGA-ECOSOC/BWI meeting (Monterrey Consensus paragraphs
68-73).


8. (SBU) It could be useful for USDEL to have a clear
pre-negotiating consensus with like-minded countries that this UNGA
negotiation will not address mandates of the BWIs or further expand
UNGA's role in finance. There may be a strong dynamic in favor of
leaving it to the USG to play hardball and take the hit for
protecting developed countries' interests. Unless there is lots of
advance preparation with the EU, encouragement of Japan to speak,
and coordination with JUSCANZ, the US risks being isolated and
portrayed as not only responsible for the global financial crisis
but being the obstacle to its resolution.


9. (SBU) To avoid the US being isolated, USDEL may wish to
consider:

-- Getting like-minded countries to agree on redlines for this
negotiation;
-- Getting commitments from other countries to speak out, so from
the onset any G-77 efforts to divide like-minded countries by
isolating the US come to naught.
-- Laying down redlines with the facilitators for the negotiations
of the outcome document, in the hopes that any chairman's compromise
proposals will take into consideration US redlines. (Those
facilitators are the Permanent Representatives to the UN in New York
of Netherlands and of St. Vincent.)


10. (SBU) Assuming it is impossible to just take note of the
Secretary General's report, USDEL may wish to have a back-up
position whereby we agree to some kind of open-ended working group
or dialogue in the appropriate forum to consider elements of the
report in detail. USDEL can make the short time-frame for
negotiations work in our favor by using the time to negotiate
practical ideas for how the UN should respond to the crisis and
relegating the ideas from the report to dialogue and discussion in
appropriate forums (since there is insufficient time for capitals to
really reflect on those ideas before the June high-level meeting).

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Practical Actions by the UN
Responding to the financial crisis
--------------


11. (U) The global financial crisis has caused Member States' to
reconsider the levels of their contributions to the United Nations
due to budget constraints they are facing in their respective
governments. Given overall budget constraints, the US could use
this discussion as an opportunity to continue to press the UN
Secretariat and UN agencies to prioritize and focus their work in
order to more effectively use available resources. The US could
promote the following principles/actions:

a. Recognize that collection of better statistics and use of more
transparent, effective impact measurement tools (such as collection
and analysis of gender-disaggregated data by member states and the

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UN) are essential if we are to effectively tailor and target
assistance programs and UN efforts.

b. Improve the UN regular budget presentation by showing expenditure
by activity. Providing greater transparency on expenditures by
thematic activity would complement ongoing efforts to implement
results-based budgeting. More detailed reporting would allow Member
States to direct resources to the precise activities that are having
the most impact. Implementation of results-based management and
international public sector accounting standards in the UN
Secretariat, should also draw on the best of what's used by the UN
agencies and be compatible with UN agencies' systems.
c. Increase its use of shared services, including possible carbon
neutral technologies, i.e. video-conferencing.

d. Call on the UN (DESA, LLDC/SIDS, NEPAD, and UNCTAD) and the
regional economic commissions to discuss with their governing or
advisory boards the use of the 91 new positions allocated to them by
the fifth committee under the UN development pillar in December
2008, and to report back to the UNGA on proposed best use of those
positions. The 50 positions in the regional economic commissions
were established effective January 1 and the 41 posts for DESA,
LLDC/SIDS, NEPAD and UNCTAD will be established effective July 1,

2009. For whichever positions are not yet filled, we could call on
the SG to ensure those positions are deployed towards helping
developing countries to maintain living standards and employment and
to continue work towards achievement of the MDGs.

e. Build on UN "delivering as one" experiences to implement what
works well across all agencies and countries, so that we can most
effectively use scarce resources. In this regard, we might look at
management of the Iraq Trust fund and website, which are transparent
and structured to encourage demand-driven inter-agency coordinated
UN projects.


12. (U) The USG could ask each US expert that follows a UN agency or
Economic Commission to come up with a few ideas for specific actions
and proposals. For example for UNCTAD, we could:

a. Consider supporting the UK-initiated proposal to have UNCTAD
monitor trends in direct foreign investment in response to the
global financial crisis. (ref B)

b. Pick up on the UNCTAD gender experts meeting's recommendation
that UNCTAD apply gender analysis to trade data and alert member
states on a timely basis of sectors and countries where men and
women are affected differently by the global financial crisis, so
that member states can develop gender-aware policy responses.
However, DESA may have more capacity to do gender analysis than
UNCTAD, since DESA's gender office will receive five new positions
under the development pillar, while UNCTAD has not yet established a
gender office.

c. Call for an acceleration of efforts to consolidate requests for
trade and development related technical assistance from member
states, and offers of assistance, into an accessible, transparent
database (perhaps along the lines of Reliefweb). Look at the
Enhanced Integrated Framework for LDCs in this regard.

d. Consider providing voluntary funds to help developing countries
that have requested UNCTAD's entrepreneurial training program
(EMPRETEC) to establish that program, since that program
specifically supports employment creation. Consider providing
voluntary funds as catalysts to expand the ASYCUDA customs software
program to all countries that have requested it, since that program
is proven to reduce corruption and to increase recorded government
revenues from customs.


13. (U) The international Trade Center (ITC) also has proven
programs aimed at poverty reduction through exports and tourism. We
should consider making voluntary contributions to those programs
since they directly support achievement of the Millennium
Development Goals and employment creation.

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COMMENT
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14. (SBU) This is the time, first, to use what exists to the best
possible benefit of supporting living conditions and economic growth
in developing countries; and then second, once we have done all we
can to help people continue to earn livelihoods, to look
thoughtfully at proposals for structural changes to the
international financial architecture. USG should use the

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opportunity created by the Stiglitz report to make the UN system
fight fires, and not get side-tracked by a bigger debate on
financial architecture that can happen more thoughtfully (and
ideally elsewhere) after the existing financial system is again
functioning more normally. By engaging all parts of the UN system
to work effectively within their existing mandates, in support of
developing countries, the US would show its desire to work with the
global community and to make the UN system, within its existing
mandates, effectively respond to the global financial crisis. The
US could consider reinforcing this approach and statements against
protectionism, by targeting more of its voluntary contributions
towards programs that facilitate trade and generate employment in
developing countries. END COMMENT.

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