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Kudos to Finland in 2016 for ascending to the top spot in CGD’s annual Commitment to Development Index, our ranking of how a country’s policies help or hinder development. Other countries of note this year include France, New Zealand and Austria. We just published the latest rankings, and I discuss them, their implications, and the political landscape that could affect them in our latest CGD Podcast with Owen Barder, senior fellow and director of CGD Europe, which produces the Index.
Now in its 14th year, we derive the CDI rankings by crunching the numbers from millions of data points across seven policy areas: aid, trade, migration, finance, security, technology and environment. The result is a measure of which country has the most development-friendly policies. It shows where countries do well and how they can learn from each other to do better.
Vice President, Director of CGD Europe, and Senior Fellow
We want to show how development can be a race to the top. Most of the policies that score well on the index require some sort of international cooperation—so what does the CDI tell us about the apparent retreat of globalism across the political landscape? Take a listen to the podcast to find out! And please also check out the interactive CDI rankings to see where each country stands and how they could improve.
In a world with the 2030 Agenda for Sustainable Development, the international investment policy system stands as an obsolete regime in urgent need of revision and reform. This is the main conclusion of the analysis that the think tank CIECODE conducted for CGD’s 2017 Commitment to Development Index (CDI). The analysis measures the amount of “sustainable development content” included in International Investment Agreements (IIAs) signed between developing and developed countries. Here, we look at best practices, main issues and which countries could do better.
But, first, what do IIAs have to do with sustainable development? By balancing foreign investor’s protection on one hand and States’ right to pursue public policy interests on the other, IIAs have the capacity to influence the type of foreign investments and the conditions under which they are made. Foreign investments have been developing countries’ main source of external finance for the last two decades (beyond remittances, external debt, or ODA) and that they have concrete implications in host countries’ day-to-day realities (job creation, environmental impact, fiscal revenues generation, or the promotion of vulnerable social groups).
Worldwide, the investment regime is a complex spaghetti bowl made up of more than 3300 IIAs (mainly, Bilateral Investment Treaties and Free Trade Agreements), which has been expanding relentlessly since the early 80’s.
Figure 1: Trends in Number of IIAs Signed, 1980-2017
Note: Preliminary data for 2017. 3,323 is the cumulative number of all signed IIAs, independently of their entry into force. Terminated IIAs, for which termination has entered into effect, are not included.
CIECODE has analyzed over 300 IIAs signed by developing countries with the 27 CDI countries, and has observed that sustainable development is often poorly secured in these agreements. When IIAs include social or environmental safeguards, they are so weak and full of caveats that their impact is highly diminished. They are focused on protecting foreign investors’ rights and interests leaving aside their obligations. Finally, they have failed in finding equilibrium between protecting foreign investors from unjustified discrimination measures by the host states and ensuring that these retain their right to regulate for pursuing public policy interests. This bias has prevented IIAs from becoming a useful tool to boost and promote sustainable investments at the global and domestic level.
CIECODE’s analysis also shows that IIAs signed with those developed countries most in need are the ones presenting the scarcest development content.
Figure 2: Development Content of IIAs Related to Human Development of Partner Country
Source: CIECODE’s analysis for 2017’ Commitment to Development Index. Data available.
Leaders and laggards
These general conclusions hide many interesting facts and variance at country level. For instance:
Four EU countries (Denmark, Germany, Portugal, and Spain) have obtained the minimum score on all the analyzed issues, meaning that in their treaties there is no disposition in place promoting sustainable development through foreign investment. This is a surprising result as both Denmark and Germany are leaders on the CDI overall—ranked first and fifth in the 2017 edition.
At the upper end of the scoreboard, Canada stands alone as the best student of the class, with the United States and New Zealand in second and third, respectively. In their treaties, they explicitly recognize the right of the Parties to regulate in pursuit of their legitimate public policy objectives. Further, detailed provisions to ensure the independence and transparency of the dispute resolution system are in place.
Although none of the existing IIAs are yet perfect instruments to promote sustainable development, the results of the analysis indicate that some countries are aware of the links between foreign investment and sustainable development when drafting and negotiating their agreements. There is a huge opportunity for countries to learn from each other’s policy design and make their investment agreements more development-friendly.
There is some good news
In terms of the inclusion of sustainable development and human rights content in investment treaties, the overall situation is still unsatisfactory (the average score of the 300 IIAs analyzed by CIECODE is below 2 out of 10). But, it’s at the same time true that almost all the improvements have taken place in the last 5 to 10 years (see Figure 3). The Investor-State Dispute Settlement system (ISDS) is a relevant area in which some advances have been observed.
Figure 3: The Evolution of Development Content on IIAs (2017-2000)
Originally, the ISDS was designed as a tool to protect foreign investors against undoubtedly discriminatory measures by host states. It grants foreign investors the possibility to take their disputes with host states to private international arbitration courts and seek for economic compensation if they believe any law or measure by the host state has damaged its investments and reduced its expected profit.
Today, with more than 60 new ISDS cases presented to tribunals each year, the system has mutated into something vastly different from its original expectations—at times with grave consequences. It gives foreign investors the power to challenge democratic choices by host states, elevates property rights over any other consideration (incl. human rights) and allows for fully confidential procedures. In recent decades, it has allowed investors to oppose health legislations against tobacco and environmental laws against industrial discharges' contamination, and even to challenge the end-of-apartheid laws in South Africa. States, exposed to unforeseen legal and financial risks, may decide to freeze legitimate government policymaking or even withdraw existing regulations. Many actors—from the UN and the EU to academia—agree on the main strands of this verdict.
CIECODE’s analysis shows that the ISDS dispositions are the ones in which few improvements have been made. Around 70 percent of the analyzed agreements do not include any meaningful content to improve the ISDS’ transparency, impartiality, or due process standards.
But there is a new and promising trend. More than 20 States have signed the UN’s Convention on Transparency in ISDS since 2014. This Convention, once in force, will oblige States (and their investors) to comply with a set of stringent transparency standards such as the publication of all relevant documents by the ISDS tribunal or the admittance of any “third persons” affected by the dispute to the process. While these might seem as minor improvements, they are almost disruptive innovations in a system that has remained untouched for almost three decades.
Sustainability and public pressure
One of the most unexpected conclusions of the analysis comes from applying CIECODE’s methodology to the investment chapter of the draft version of the EU-US Transatlantic Trade and Investment Partnership (TTIP). Despite the concerns with loss of democracy and the power of big corporations that the TTIP provoked in European and North American societies, none of the 300 IIAs analyzed in CIECODE’s study have shown a more development-friendly approach than the TTIP’s draft. This draft safeguarded states’ policy space to “achieve legitimate policy objectives, such as the protection of public health, safety, environment or consumer protection” and granted that the ISDS would operate under adequate independence, fairness, and openness.
The fact that the TTIP’s draft—being produced under high levels of social awareness and public scrutiny—is the IIA with the most advanced provisions in terms of development-content and transparency highlights the importance of public scrutiny to achieve sustainability outcomes in policymaking.
Meeting the 2030 Agenda
Today, it is no longer enough for investments to create jobs, contribute to economic growth, or generate foreign exchange. The development challenges that lie ahead demand investments that, on top of everything else, are not harmful for the environment, bring social benefits, promote gender equality, and help local companies to move up the global value chain.
If the 2030 Agenda for Sustainable Development is to be taken seriously, the international community must rise to the occasion and fast track the reform of the global investment policy regime in a coherent and ambitious manner. There are evidences, experiences, and best practices ready to be exploited.
Javier Perez is the director of CIECODE, a Spanish research institute working in development and specialized in the analysis of public policies with an impact on sustainable development, social justice and human rights. Economist and jurist, his main area of expertise is international trade policies and its implications for development and human rights. Lately he has lead two innovative projects to monitor and evaluate the Spanish parliamentarian activity from a PCD perspective. Javier worked until 2011 at Oxfam International as Economic Justice Research Coordinator.
Maria Vega is a researcher at CIECODE. She holds a BA in Journalism from Universidad Complutense de Madrid and a MA in International Public Administrations and Politics from Roskilde University. Her main area of expertise is the analysis of migration public policies from a PCD perspective.
Think tanks and international organisations publish a lot of indices that rank countries or institutions by their policies. We ourselves here at CGD we have recently published the fifteenth edition of the Commitment to Development Index (CDI), which ranks 27 rich countries by how their policies affect the lives of people in poorer countries. As we embark on a review of the CDI, here we start by looking other across country-level indices to see if the CDI is still distinct.
Reviewing the CDI
Because we strive to continuously update and improve the methodology, “before the CDI launch is after the CDI launch.” Indeed, the CDI has evolved substantially over since its inception. Still, we think 15 years is a good point to step back and think about its aims and design: the world has changed since we launched the CDI in 2003: the Agenda 2030 and the SDGs replaced the MDGs; emerging countries such as China and several Arab countries have diversified the donor community and global issues such as climate change; gender and migration receive more attention—and rightly so. In the coming months and years we’ll be taking a fundamental look at the CDI, in particular: how it assesses “development;” whether it measures the most important countries; and whether there are new or alternative components and measures we should consider. We look forward to discussing these issues with you further.
As part of our early thinking, we looked at other country-level indices and the CDI’s comparative advantage—but before we look at those, let’s revisit why indices are potentially valuable.
First, why are indices generally are so popular with the public, with policymakers, and with the think tank world?
But indices truly do have distinct advantages, they can:
Formalize and quantify the things they assess
Holistically assess issues, rather selectively picking on a single element
Create a race to the top and engage the media and public
Consistently assess non-market goods—like global public goods (GPGs)
Initiate discussions about what is important, and what can hopefully change
Secondly, what other indices are out there that are similar to the CDI, and what is our competitive advantage?
To answer this we have surveyed our competitor indices. But there are so many indices that we had to restrict our assessment. Given the CDI is a meta index with subindices measuring countries policies on aid, finance, technology, environment, trade, security, and migration, we have decided to focus our survey on those (a meta-meta index if you will).
Below are the main indices that we identified as comparable to the CDI (if you can think of any indices that fit our search criteria and we’ve missed—we’d love to hear from you in the comments section below).
Country-level indices: aims, measures, and coverage
Name of the index
Tagline / aim
Number of indicators
Commitment to Development Index
Ranks 27 of the world’s richest countries on their dedication to policies that benefit people living in poorer nations.
Seven components: aid, finance, technology, environment, trade, security, and migration
27 countries (OECD)
Good country index
To measure what each country on earth contributes to the common good of humanity, and what it takes away, relative to its size.
Science, Technology & Knowledge; Culture; International Peace and Security; World Order; Planet and Climate; Prosperity and Equality; Health and Wellbeing
Social progress index
An aggregate index of a country’s own social and environmental indicators that capture three dimensions of social progress
Basic Human Needs (nutrition, health, etc.), Foundations of Wellbeing (knowledge, environmental quality), Opportunity (rights, tolerance, advanced education, etc).
Sustainable Development Goals index
Provides a report card for country performance on the historic Agenda 2030 and the SDGs. The annual report shows how leaders can deliver on their promise and it urges countries not to lose the momentum for important reforms.
set of indicators for each of the 17 SDGs
77 indicators of which 14 variables are only available for OECD countries
149 of the 193 UN member states
INFORM Index for risk management
To understand and measure the risk of humanitarian crises and disasters within a country, and how the conditions that lead to them affect sustainable development.
Hazard and exposure to natural and human made risks; Vulnerability; Lack of coping capacity
The Good Country Index (GCI) is perhaps closest in terms of its mission in what it is trying to measure: how much countries do for other countries (we published a more detailed blog post of the GCI from a CDI-perspective previously). This is in contrast to the SDG index, the Social Progress Index, and the INFORM index for risk management, that all measure countries based on their own development progress and performance. This point in particular is where the CDI adds value relative to the SDG index.
Rich countries in particular have the duty and the means to contribute to global development.
This explains our focus on relatively few rich countries for which policy improvements seem most tractable given that only some countries governments will be receptive to policy ideas and are inspired to perform well in international comparisons. For instance, after the poor performance of Japan on the CDI in 2006, the Japanese Ministry of Foreign Affairs issued a statement that started a constructive discussion on the methodology of the CDI.
The other thing that jumps out is that, although the CDI covers far fewer countries than the indices above that aim for virtually exclusive coverage, we do have more indicators overall. There is a clear tradeoff between higher country coverage and fewer indicators due to data availability. Even though all else being equal it would of course be ideal to measure every country’s performance, for poorer or smaller countries, data is often scare. The Sustainable Development Index doesn't have complete data for all its indicators, but only managed to have all the indicators for the OECD countries. Limited data availability severely affects how we can track the implementation of the SDGs.
Building on the CDI’s comparative advantage
In conclusion, the CDI is distinct in its focus on policy effort of developed countries' (rather than all countries) and how they affect poorer countries (including through global public goods). This contrasts with indices that assess outcomes, how countries do in terms of their own development, or only how they contribute to global public goods. Even after 15 years, the CDI’s focus is still unique—and highly relevant to the SDGs. However, the increasing importance of other development actors like China, the changing nature of development, and better data availability on global issues will lead us to review its structure over the next couple of years. We will keep you posted on our next steps and appreciate you sharing any of your ideas.
Our new analysis shows that, despite recent improvements, rich countries' intellectual property policies are still worse for development than they were more than a decade ago. Here we look at why these policies became inflexible, and what countries should be doing to let technology flow more freely.
Technological progress, which mostly originates in developed countries, is at the heart of improving social well-being and advancing productivity across the globe. Despite the vital role of technology for development, we show here that after a promising start in 2003, rich countries have since impeded the spread of technology across borders. Even though there has been an upward trend lately, rich countries can do more to allow knowledge to spread, without hampering innovations at home. Smart intellectual property policies such as liberal copyright laws or eased access to health and agricultural innovations will improve the lives of people across the globe.
Stringent protection of innovations at home comes at a price
In our interdependent world economy, productivity advances occur not only through locally developed knowledge and skills, but also from the absorption of expertise and technologies developed in other parts of the world. To name a few examples, just look at how mobile phones and digitalization affect developing countries and how biometrics can make development outcomes more effective, if well designed. For smaller economies in particular, the major source of their productivity growth is the technology and knowledge produced by the leading developed economies. That said, there are often impediments to the flow of technologies from the developed world to the developing world that prevent the latter from fully benefiting from global knowledge. Part of the problem of access is commercial—the lack of trade and investment opportunities. But another is regulatory, such as intellectual property rules (IPR) that prohibit the free dissemination of innovative technologies, or which impose contractual conditions on the utilization of new technological knowledge.
A lost decade? Little progress in intellectual property rules after a promising start
Since 2003, CGD's Commitment to Development Index (CDI) has been tracking the commitment of 27 developed governments to support the spread of technology to the developing world. The CDI has focused on two ways in which the developed economies can affect this process: The first is to help create technologies that foster economic and human development as measured by public and private spending on Research & Development (R&D) and tax incentives for R&D. The second is to help make the technology created more accessible via appropriate IPR.
Independently, the World Trade Organization in 2003 (following the Doha Round) instituted procedures to help ensure that developed country governments were fulfilling their mandate to facilitate technology transfers to the least developed country members. Until that point, it was uncertain whether and how developed country members were complying with the mandate to foster technological development in the developing world. As we have demonstrated previously, it is still unclear whether these rich countries are sufficiently fulfilling those obligations.
While the CDI’s technology component is not a measure of developed country compliance with international technology transfer mandates (nor was it designed to be), the CDI assesses developed governments’ commitments to objectives that are similar in spirit, such as raising the productivity potential of poorer nations. We do this by measuring and analyzing the restrictiveness of the country's patent regime as laid out in its legislation and rules.
Moreover, the CDI heavily weights the role of IPR of developed countries in facilitating—or at least not harming—the developing world’s access to global knowledge goods. As the chart below shows, since 2003, there has been a downward secular trend in developed country commitments to the spread of knowledge and technologies. The rating shown is for the 27 countries as a whole. However, since 2014, their commitment to the global spread of technology appears to have increased again.
This is a good sign. But there is scope for greater efforts on the part of rich country governments. The recent efforts are still shy of the dedication to technological development shown by developed country leaders back in 2003.
How supporters for a free internet became advocates for development
Much of the trend in the CDI’s technology component is due to changes in IPR. During the 2000 decade, developed economies like the United States, Japan, and the European Union pursued regional free trade agreements with developing country partners that included more stringent intellectual property provisions—especially provisions that limited exceptions to IPR. For example, developing country governments were required to limit the use of compulsory licensing, whereby intellectual property holders could be compelled to license their technologies to third parties if the technologies were not widely supplied in the market or licensing fees were too prohibitive. Other provisions tended to limit “fair use”; namely the ability of the public to use certain copyrighted works in certain ways and conditions without obtaining permission. Developed economies also pursued global agreements like the Anti-Counterfeiting Trade Agreement (ACTA), which attempted to raise enforcement standards. Individual countries, like the United States, pursued legislation like the Stop Online Piracy Act (SOPA) which sought to more heavily regulate internet service providers and search engines.
The public and user rights groups pushed back against such legislation and international agreements, regarding them as undermining internet freedom, and as unduly restricting fair use and other intellectual property exceptions. Consequently, during the 2013–2017 period, developed country governments appeared to retreat somewhat from further reforms. This helped, by default, to raise their CDI scores since less stringent regulations better enable technologies to flow to the developing world.
At the same, developed country governments were also more proactive in enabling the flows of technological knowledge. The European Union issued a “stay” on the patenting of plants and animal subject matter, while New Zealand raised the bar for approving such patents. This should benefit the developing world’s access to medicines and agricultural innovations. Canada, France, Germany, and the UK helped make digital technologies more accessible by tightening standards for software patentability. In 2015 Australia created more exceptions for copyright law, potentially enabling greater scope for learning-by-doing and imitation.
Help innovations to arise and spread, even beyond borders
Intellectual property regulations have effects beyond national borders. While they support incentives for innovation, they do affect how innovation spreads across borders. Developing economies typically require standards of IPR appropriate for their technological needs. Realistically they are not likely to fulfill their needs for combating poverty, disease, and fragility to environmental shocks by raising their intellectual property standards to those of developed economies. This would not increase local R&D, not with their limited technological resources, nor stimulate global R&D, given their relatively small market size. If anything, access to goods may be hampered if higher intellectual property standards raise market prices. Instead, developed governments should continue to fill the global R&D gap by contributing resources for R&D and design regulations—with flexible exceptions and exemptions—to support the wide diffusion of technologies to the developing world.
Walter Park is a professor of Economics and the PhD program director (Economics) at American University.
Germans have given Chancellor Angela Merkel a fourth term as chancellor, but once again without a parliamentary majority. It seems likely that Merkel will now try to negotiate a black-green-yellow “Jamaica coalition” (referring to the parties’ colors) with the Greens and the pro-business Liberals replacing the Social Democrats as coalition partners. Despite the gain in vote for nationalists, our analysis suggests the Jamaica coalition could actually strengthen Germany’s role in accelerating global development, as well as benefitting Germany.
In this blog, we look at the what the Jamaica coalition means using the framework of our Commitment to Development Index—which ranks rich countries on aid, migration, technology, environment, trade, finance, and security.
Germany’s starting point on Commitment to Development
Overall, Germany ranked fifth (out of 27 countries that we assess) and first on migration, largely because it has accepted so many refugees in recent years. We counted migrants as “1” when they came from the poorest country (Democratic Republic of Congo) and “0” when coming from the richest country (Norway). This method quantified that Germany lifted the equivalent of “880,000 poverty weighted migrants” out of extreme poverty last year! But a ratio of one new migrant for every 92 Germans, contributed to the rise of the far right nationalists (AfD) who have become the third largest party in parliament. Regardless of the election results, mounting public pressure will reduce migration. But a poll of economists thinks the Jamaica coalition is actually more migration-friendly than a continuation of the previous grand coalition would have been.
On aid, Germany met the international commitment of 0.7 percent of national income (GNI) on aid (overseas development assistance) for the first time in 2016. This included high expenditure on hosting refugees—but to maintain 0.7 when fewer refugees arrive, overseas development assistance would have to ramp up quickly.
On environmental policies, high emissions per capita mean Germany might not meet the Paris agreement commitment to reduce emissions by 40 percent by 2020. The global poor will suffer the consequences: climate change might push 100 million people back into poverty by 2030. This is partly due to Germany’s poor policy choices, like burning and subsidising fossil fuels. Both the Greens and Liberals want to phase out these subsidies.
On technology more widely, there has been an increase in overall R&D spending to 0.88 per cent of GDP, but this is still lower than in many other countries. Spending more to create new technologies like mobile phones or biometric IDs can transform development and is a perfect example of investing in global public goods. All major parties want to increase R&D spending to 3.5 per cent of GDP by 2025—a “Jamaica coalition” will not change anything significantly here but this is a positive direction for development.
Germany’s trade policies have a significant impact on developing countries. Free trade agreements such as the EU’s “everything but arms” initiative give poor countries tariff-free access and have the potential to dramatically reduce poverty. For instance, a recent natural experiment suggests trade deals such as these can lower infant mortality by about 9 per cent.
On security policy, Germany has been criticized by the US for failing to spend 2 per cent of GDP on defence. This figure includes spending on UN peacekeeping, for which Germany spends only 0.03 per cent of GDP—less than the OECD average, and this at a time when the UN peacekeeping budget is facing deep cuts. This is a matter of real concern because security and development are closely interlinked—for instance, one study suggests that civil wars decrease GDP per capita by 17.5 percent. Merkel’s conservatives want to double defence spending to reach 2 percent of GDP by 2024. The Liberals also want to increase defence spending, unlike the Greens, who want to specifically focus on increasing support for UN peacekeeping.
Overall then, taking the policy commitments of the Liberals and Greens and adding them to Merkel’s conservative bloc in a “Jamaica coalition” could bode well both for Germany, and development beyond aid.