Fewer than 30 days into the new year, the foreign policy agenda for Europe and North America has already become crowded.  North Korea, Iran, Syria, potential breakthroughs in Burma, and the still roiling revolutionary fervor in the Middle East are but a few of the issues facing transatlantic policymakers.  Iraq, facing renewed violence in the wake of Coalition troop withdrawals, and Afghanistan, where France just lost more soldiers and ambivalence reigns on negotiating with the Taliban, have not gone away.

Add to this volatile mix national elections in the United States, France, and elsewhere and it is easy to forget one of the landmark events of 2011:  the July 9^th independence of South Sudan.  Moreover, although remembrance of the new nation’s founding is appropriate, what is more critical is that Europe and North America sustain the generally positive and optimistic dynamics of South Sudan’s birth.

These dynamics came into focus for me when I attended the recent International Engagement Conference on South Sudan, organized by the U.S. Agency for International Development (USAID) in Washington.  The two-day session, addressed by the first President of South Sudan, the Honorable Salva Kiir Mayardit, saw presentations by World Bank President Zoellick, United Nations Development Programme Administrator Clark, senior European Union officials, and numerous ministerial level representatives from Sudan, Europe and North America, including U.S. Secretary of State Clinton.  The conference list of co-sponsors boded well for continued world engagement with South Sudan:  The UN; the World Bank, including the International Finance Corporation; the African Union; the European Union; the governments of Norway, Turkey, the United Kingdom, and the United States; the NGO coalition InterAction; and the Corporate Council for Africa.

And well should these international heavyweights be interested.  Not only does South Sudan possess very large – how large is yet to be fully determined – petroleum reserves, but the White Nile and other resources could be world-class sources of renewable energy.  Some of us are old enough to remember when the southern reaches of Sudan were heralded as Africa’s “breadbasket,” and the combination of vast, fertile, and well-watered lands has re-awakened interest in South Sudan’s food-producing potential.  Although its internal population is under ten million, South Sudan is at the center of a regional market containing 250 million.  And, politically, a stable South Sudan could be a bulwark against trans-national violence in a Great Lakes region that has hovered on the edge of chaos for decades.

Looked at through a slightly different lens, the risks of the transatlantic community not focusing on this fragile, newborn state are high.  South Sudan lies in a rough, violent neighborhood, bordering on regions of eastern Democratic Republic of Congo and northern Uganda notorious for fragile governance and violent atrocities.  South Sudan remains one of the most underdeveloped regions of the world (there exist fewer than 200 kilometers of paved roads in a nation-state the size of France), and underinvestment in the country’s optimistic, rapidly growing population runs the risk of spawning a crisis of rising, but unfulfilled, expectations.  Despite the generally cordial breakup of Sudan last July, the specter of continued instability haunts the Sudan-South Sudan border, with the risks of violence and human displacement ever present.  USAID reports that the U.S. government alone spent nearly $10 billion in primarily humanitarian aid in the six years prior to independence alone, a level of resources from donor nations that must now be shifted to the long-term development account, if the promise of independence is to be fulfilled.  Foreign investment, on which the new government in the capital of Juba is relying heavily, comes at this point primarily from Asia, with Chinese investment in petroleum exploration prominent.  Personally, I harbor no antipathy to Chinese investment in Africa, but – a little competition being a healthy thing – business people from the transatlantic nations should be on the ground, as well.

The International Engagement Conference on South Sudan provided a useful venue to focus on the new state’s potential.  The challenge for Europe and North America, going forward, will be to maintain, amid a daunting foreign policy agenda, the sustained focus required to fulfill the promise of a successful South Sudan, and avoid the substantial risks of under-investing in the world’s newest country.

James Kunder is a non-resident fellow at the German Marshall Fund in Washington, DC.

With traditional donors locked in economic stagnation, scant progress being recorded on the targets set for donors in the Paris Declaration, and the main providers of South-South co-operation set on maintaining freedom of action, one could be forgiven for having low expectations of the latest in the series of High Level Forums on Aid Effectiveness.

These meetings – Rome 2003, Paris 2005, Accra 2008 and now Busan 2011 – have taken place in an ad hoc but expanding configuration. In Rome, less than 100 delegates, mostly donor officials, met in a room at the Italian Foreign Ministry; in Paris over 500, with civil society present and a stronger Southern participation, filled a much larger space in the French Finance Ministry; in Accra, over 1000 met in a gigantic tent; and in Busan, some 3,000 met in the super-modernist environment of the BEXCO, with attendance from among others the UN Secretary-General and Secretary Clinton for the United States.

Did the Busan outcome justify the profile? Two key questions are whether the Outcome Document represents a qualitative shift in understanding between ‘traditional’ donors and the emerging economies and whether it will have any impact on real development at country level.

The answer to the first question must be a qualified ‘yes’. The traditional donors, skilfully led by Development Assistance Committee (DAC) Chair Brian Atwood, had signalled a strong wish for a new relationship with emerging economies. The main South-South providers had been understandably cautious, arguing that South-South co-operation was radically different in character from North-South aid.

Busan has brought the two positions closer together, not least thanks to patient and determined efforts of South Korea. The outcome document highlights four principles –ownership, focus on results, inclusive partnership, and transparency and accountability – that are agreed to apply to all forms of co-operation. And there is agreement that a new Global Partnership for Effective Development Co-operation will be established in which the emerging economies will be full participants. The existing OECD-hosted Working Party on Aid Effectiveness will be wound up, and new working arrangements are to be agreed by June 2012, with secretariat support from not just OECD but also the UNDP. None of this removes national interest, but it should help to cement the common interest in sustainable progress by poor and aid-dependent countries.

The answer to the second question is less clear. The monitoring of the targets set for 2010 in the Paris Declaration shows that while recipient countries have made modest progress, donors have changed little. True, the independent evaluation of the Paris Declaration argues that the quality of the relationship between recipients and aid providers has changed for the better, and has begun to deliver results. Nevertheless sceptics could well argue that the whole process has proved toothless when donors’ day-to-day incentives do not adequately encourage aid that is more strongly aligned to locally-owned priorities, more supportive of (improved) local systems, more predictable, transparent and results-oriented, and better harmonised among donors.

If the Busan outcome means that global commitments, despite references to Paris/Accra, will be adjusted to what (much poorer) emerging economies are willing to accept, pressures on donors for more effective delivery at country level may be even lower in future. The indicators which the participants have pledged to agree on by June 2012 will be significant in judging this.

The Busan outcome correctly places more responsibility on individual recipient countries or regional groups to push for more effective aid delivery.  Here the signs are quite positive. For example, the African Union mobilised not just governments but African civil society, business and academia to produce a powerful statement of Africa’s wish both to press ahead with the unfinished agenda of aid effectiveness and increasingly to look beyond aid to all the channels that can lead to effective development. This is a sign of a shift towards a more mature relationship between countries that will still need to depend significantly on aid for many years and those who will be providing it.

And Busan also recorded some practical progress, notably on aid transparency. Providers – emerging economies as well as traditional donors – have agreed to make ‘the full range’ of information on publicly-funded development activities publicly available and to implement a common electronic standard for doing this. Meanwhile a key existing standard, the International Aid Transparency Initiative, gained the support of important additional donors, notably the United States, meaning that 80% of all traditional aid will now be reported to the IATI standard. Aid transparency on its own is no panacea, but Busan underscored the need for engagement by Parliaments, civil society, and the private sector, and for addressing corruption – all important if executives are to be held to account.

Transparency, recipient country (not just government) leadership, and a better dialogue among all providers of assistance: even in very tough times for aid, these moves may prove strategically important for more sustainable results.

Richard Manning is a member of the German Marshall Fund Transatlantic Taskforce on Development

NEW YORK – They came, they met, and they bargained in Brussels, and after yet another European Summit, member states agreed to be more like Germany—more conservative and disciplined about spending, deficits, and debt.

Yet the euro endgame remains far from clear.  Agreeing to fiscal discipline is one thing but implementing such provisions will be quite another in nations already in the grips of grinding austerity that has crushed workers incomes, lengthened jobless lines, and squeezed real growth.  The financial markets, meanwhile, remain nervous about the future of the eurozone, unsure and unconvinced that Europe has finally got it right and that the pact hammered out last week will end the region’s sovereign debt crisis.

Skepticism is warranted because European leaders have failed to address the region’s most pressing problem:  the lack of real economic growth.  In the near-term, enforced austerity will only make Europe’s unfolding recession deeper and more painful, and exacerbate the sovereign debt crisis in Greece, Italy, Ireland, and other debt-laden countries.  This backdrop suggests more market volatility, rising social instability, and incessant political haggling among eurozone members, all of which will make for a trying 2012 for two American constituents desperate to see Europe get its act together — the White House and corporate America.

The Obama administration fears that a prolonged recession in Europe will ultimately lap up to American shores and tip the U.S. economy into recession during an election year.  The odds of this happening are slim given decent underlying consumption levels in the United States, rising capital expenditures, and robust U.S. exports to the emerging markets.  The White House, in other words, has other things working in its favor that could negate, at least in the near-term, the effects of a European recession on the broader U.S. economy.

The outlook for corporate American is a little dicier.

Why?  Because over the past 50 years, no other region of the world has attracted as much U.S. foreign direct investment (FDI) than Europe, with the latter accounting for 56% of total U.S. global FDI stock in 2010. America’s global footprint is largest among the wheezing economies of Europe versus the spry and vigorous economies of Asia, South America, and Africa.  To this point, America’s investment stock in Ireland–$190 billion on an historic cost basis—is more than three times larger than the comparable figure for China.  In other words, notwithstanding the fact that the entire population of Ireland, some 4.5 million people, would not even rank as a large city in China, the one-time Celtic Tiger is more important to U.S. firms than the 1.2 billion folks that reside in the Middle Kingdom.  Meanwhile, U.S. investment in Spain is double the U.S. investment position in India; ditto for Sweden and South Korea, where U.S. investment in the former ($58 billion in 2010) is nearly double the stake in the latter ($30 billion).

All of the above runs counter to the common narrative that it’s cheap labor and loose regulations that entice U.S. firms to decamp the United States.  Not really.

Cheap labor is nice but it’s large, wealthy, and well-integrated foreign markets that make U.S. multinationals salivate.  And as Europe recovered from the trauma of WWII, becoming larger, wealthier, and more economically integrated, the more U.S. firms sent and sank capital across the pond.  Over the 1950s, Europe attracted only one-fifth of total U.S. FDI outflows; then, American firms were motivated by natural resources not markets, making Canada and Latin America the primary destination of U.S. FDI.

The emphasis of U.S. multinationals, however, shifted in the 1960s.  The hunt was on for new consumers, and the wealthier, the better for U.S. firms, a strategic objective that triggered the U.S. corporate migration to Europe.  Of cumulative U.S. investment outflows over the 1960s, roughly 40% went to Europe.  Thereafter, the share of capital flowing to Europe steadily climbed, with Europe easily accounting for over half of total U.S. investment in each of the last four decades.  Hence what’s good for Europe is good for corporate America. By the same token, when things go bad in Europe, U.S. multinationals are hardly immune.

The question now is whether Europe’s ongoing financial crisis and its aftershocks will prove to be a tipping point for corporate America.  A prolonged recession in Europe, juxtaposed against political instability in Europe and dwindling transatlantic policy coordination between the EU and the United States, could trigger a fundamental rethink among U.S. companies as to Europe’s place in the their global networks.  The upshot—a structural shift in U.S. foreign investment, with less flow to Europe and more capital destined for the high-growth regions of Asia and South America.  Such a trend would undermine the vitality of the transatlantic economy, producing losers on both sides of the Atlantic.

Time is short.  Thus far, transatlantic policymakers have squandered the opportunity to use the financial crises of 2008 and 2011 to craft policies that promote greater transatlantic integration.  It is not too late, however, for U.S. and European leaders to re-define and re-invigorate bilateral commercial ties.  Doing so, in fact, would help boost economic prosperity on both sides of the Atlantic.

Joe Quinlan is a Transatlantic Fellow with the German Marshall Fund’s Economic Policy Program.

WASHINGTON—The past three years have been very good for China. No country has emerged from the ashes of the 2008 U.S.-led financial crisis stronger and more influential than China. Beijing’s international reserves are now more than seven times larger than the deployable funds held by the International Monetary Fund.

With such a huge cash stockpile, it is little wonder that Europeans turned to Beijing in recent days for financial help. Containing Europe’s current financial crisis will require a massive amount of money. And Europe hopes that Beijing will ante up the necessary billions to save Europe and, by extension, the world.

China has every reason to throw Europe a financial lifeline. The EU, after all, is China’s largest export market. China is also a significant foreign investor in Europe. And, from a strategic point of view, Beijing certainly views Europe’s dire plight as leverage when it comes to other issues that have long bedeviled Sino-European relations. In short, Europe’s financial crisis has handed China a golden opportunity to increase its global heft. Yet it is highly doubtful China will become Europe’s “savior.”

Despite Western fears over the rise of China, Beijing is not entirely comfortable as a global power. The mainland, to be sure, has not been shy about criticizing the United States for its part in triggering the global recession of 2008/09. Beijing has even gone so far as to broach the sensitive topic of having the Chinese renminbi replace the U.S. dollar as the world’s reserve currency. But China, in general, has been careful and coy about stepping out on to the global stage. It is almost as if China’s moment arrived too early — for Beijing and for the world at large. Beijing would like to lead from behind, when it leads at all.

Beijing is reluctant to grasp the mantle of global leadership since that would go against Deng Xiaoping’s famous directive:

“Observe developments soberly, hide our capabilities and bide our time, remain free of ambition, and never claim leadership”

Observe, hide, and bide your time — all of that was possible for China a decade ago, when the global economy beat to the U.S. tune. Then, the global economy was driven by the profligacy of the U.S. consumer. The Chinese pleaded poverty, and for good reason. China’s per capita income — roughly $5,100 in 2010 — is still a fraction of that in the United States or Europe. Sixteen percent of China’s population (some 215 million people) still lives on less than $1.25 a day. The mainland’s energy and food supplies are woefully insufficient for a population that is rapidly urbanizing. With only 8 percent of the world’s cultivated land, China must sustain nearly one-fifth of the world’s population. Decades of pell mell growth has decimated China’s environment. More problematic: roughly two-thirds of China’s approximately 660 cities have less water than they need, and 110 of them already suffer severe shortages. The lack of clean water and the deteriorating environment has become a social and political lightning rod, with the number of pollution-related protests rising steadily over the past decade.

Demographics represent another herculean challenge — China will grow old before it grows rich, placing tremendous pressure on the government to help care for China’s elderly. And income inequality is rising in the People’s Republic, raising the specter of further social and political unrest.

These challenges threaten China’s avowed goal of creating a harmonious society, one economically and politically in unison. This is paramount to Beijing’s chief goal: internal stability. As Kishore Mahbubani, author of “The New Asian Hemisphere,” notes:

“The Chinese mind has always focused on developing Chinese civilization, not developing global civilization. China today is willing to be a responsible stakeholder in the global order, but given these overwhelming domestic concerns, the Chinese leaders have little appetite to lead the world.”

In other words, throwing a financial lifeline to a bankrupt nation like Greece matters less to China than maintaining internal cohesion. The two objectives, of course, are intertwined. China surely understands that it is in its own self-interest not to see Europe implode. At the same time, Beijing risks a domestic backlash if China’s leadership appears to be more concerned about the plight of wealthy Europeans rather than the interests of poor Chinese.

In a sense, the global financial crisis has spawned an identity crisis in China. The country wants to be a global power but on its own terms and timetable.

Against this backdrop, China is most assuredly tempted to ride to Europe’s rescue, knowing that a Chinese Marshall Plan for Europe in 2011 would undermine the economic authority of the United States and subject Europe to the economic humiliation of being under the economic umbrella of the Middle Kingdom. The West, quite frankly, would never be the same. Such a move would confirm the rise of China and usher in a new world economic order.

However, the odds of any of this happening are slim. No matter how tempting, China is not about to become Europe’s “savior.”

Joe Quinlan is a Transatlantic Fellow with The German Marshall Fund of the United States.

By Mark Allegrini and Kate Ritterspach

This summer, the issue of food security in sub-Saharan Africa has been thrown into cruelly sharp focus. The United Nations reports that over 3 million Somalis (almost half the country’s population) are in need of food aid, and the U.S. Agency for International Development claims that over 12 million people in the eastern Horn of Africa are in need of immediate food, water or medical assistance. Last month the U.N. declared an official famine in two regions of Somalia, and recent U.S. statistics indicate that nearly 30,000 children under the age of five have already died.

Hunger in Africa is a daily reality for many across the continent, though it rarely makes headlines. The current situation in the Horn of Africa is, to be sure, a particularly dramatic case, with several of its own peculiarities. The current famine was triggered by a severe drought that affected the whole of eastern Africa. Somalia, where the official famine has been declared, is essentially a failed state, and long-standing armed conflict and militant control over some areas of the country exacerbate the effects of the drought and make delivery of essential food aid much more difficult.

However, some of the food crisis’ other contributing factors are more structural, and are not unique to one region or one dry season. Drought, while potentially devastating to farmers around the world, does not automatically produce food shortages or famine. But a basic and crippling problem in many parts of Africa is the lack of reliable, fully functioning food systems. This includes the lack of technology required to protect crops and maximize yields, and, just as crucially, the lack of infrastructure necessary to harvest, store, process, transport, and ship food locally, regionally, and internationally.

Since 2009, major donors have devoted significant attention and funds to agriculture and food security. Encouragingly, there is widespread recognition that real food security requires a holistic, value chain approach. Ultimately, for donors this means a shift away from business as usual, where large sums of money are allocated and spent largely by the donors themselves on isolated projects. The imperative of transatlantic budget austerity has added to the urgency of doing things differently. Donors must leverage the skills and financial resources of other donors, host countries, regional institutions, civil society and businesses. They can no longer go it alone.

Actually implementing this new approach, however, has proven to be a difficult task.  While high-level donor dialogues have produced commitments to coordination and a more holistic approach, there remain large gaps on the ground.  In many cases, donors’ focus on decreasing the number of countries and sectors receiving funds and attention for the sake of efficiency and specialization (“selectivity,” in the development vernacular) has not been accompanied by the necessary increase in coordination.  In order to achieve development goals in a time of smaller budgets and greater need, a focus on partnerships is a good place to start.

While one could characterize most donor programs as partnerships between the donor and host country, it has become essential to look beyond this traditional dyad toward ways to leverage other funding sources.  Generally speaking, the private sector is best suited to create economic growth. Functioning food systems are, of course, ultimately built and operated by business. Therefore, a key part of a donors’ role in ensuring food security should be helping to create a friendly and stable investment climate.  In the context of food security, donors need to bring in both the private sector and civil society to determine where investment can have the most catalytic effect. Once this is determined (for example, in Tanzania a study found that investments in food processing have a higher multiplier effect than those in any other sector), donors and businesses must come to an agreement about the right balance of resources and roles to make investments scalable and sustainable.

While partnerships with the private sector and coordination amongst donors are not new concepts, they have become increasingly important given today’s political and economic realities. To be successful, donors need to find better ways to coordinate and leverage existing sources of funding at all levels.  Country-led plans such as the Comprehensive Africa Agriculture Development Program (CAADP) and the Feed the Future Initiative represent a good first step toward this approach.  Coordinating directly with a country on its own priorities, as in CAADP, and having a clear set of goals and mechanisms, as outlined in the Feed the Future Initiative, create a transparent platform for high-level donor dialogues.  The United States and European Union have gone so far as to identify priority countries that will be the focus of increased efforts at coordination.  However, while much of this work has begun at the highest levels, these are two programs where change will require a renewed focus on ground-level action and partnerships.

There are many instances where ground-level focus has yielded real development results.  Much of the work left to be done lies in identifying, scaling, and duplicating the successes that have already been achieved while getting past those projects that have failed to achieve real results.  It is all too apparent that some partnerships exist more on paper than in reality, and in a time of increased constraints, donors should not shy away from distinguishing success from failure and concentrating resources. Successful partnerships with host countries, civil society, and business need to be recognized and repeated; those that have not been successful need to be honestly acknowledged and left behind.

The German Marshall Fund is supporting a Transatlantic Experts Group to examine successful and failed food security partnerships in east Africa, with the goal of transmitting best practices and policy recommendations to transatlantic and African policymakers and other stakeholders in early 2012. The group will look beyond high-level commitments to partnerships in practice on the ground, and will work to provide an honest view of what works and what doesn’t.

Even aggressive action to increase coordination and focus on successful partnership models will not relieve the current crisis in the Horn of Africa. The current situation calls for intensive and immediate humanitarian relief. However, in order to minimize the likelihood of future famines and food emergencies, much remains to be done in creating the robust, functioning food value chains that so many in the developed world take for granted.

Mark Allegrini is a Program Officer and Kate Ritterspach a Research Assistant for GMF’s Economic Policy Program.

On July 9, a new nation will join the international community. Six months after a full 98 percent of voters approved the split, South Sudan will become an independent country. The German ambassador to the United Nations, Peter Witting, said that the UN is poised to admit South Sudan, possibly as soon as July 14.

It may be tempting to call this a happy ending and move on to the next of many crises, but without the support of donor nations, South Sudan could easily go the way of neighbors like Somalia. Consider some of the statistics. The new country, which is the size of Spain and Portugal together, has less than 100 miles of paved roads. Out of a population of 8 million, 90 percent live on less than $1 per day. And a girl in South Sudan is three times more likely to die from complications of pregnancy or childbirth than she is to reach the 8^th grade.

The transatlantic community, particularly the United States, has a responsibility to South Sudan, given the amount of pressure it brought on parties in the north and south to end the 20-plus-year war. When the Comprehensive Peace Agreement was signed in 2005 (in a ceremony witnessed by then-U.S. Secretary of State Colin Powell and two European ministers), international leaders pledged to stand behind South Sudan through the vote on independence. The vote has been held, but the need for assistance remains.

South Sudan’s relations with the government in Khartoum will continue to be tenuous, with numerous allegations that the north is arming splinter groups in the south as well as conducting what some are calling ethnic cleansing campaigns along the border. As the north loses access to South Sudan’s oil revenue (South Sudan controls 80 percent of the former Sudan’s oil fields), the northern Sudanese pound is falling, which is driving up food prices. This can only increase domestic pressure on the government of Sudan President Omar al-Bashir, already under international pressure from an arrest warrant to face charges of genocide in Darfur. The international community must continue this pressure to ensure that Bashir doesn’t give in to the temptation to exert greater control over South Sudan’s oil, which must flow to Port Sudan in the north for export.

China, too, is a player in north and South Sudan since the China National Petroleum Corporation controls as much as 60 percent of the oil produced. President Hu Jintao is sending a special envoy to the independence celebrations despite China’s earlier preference for Sudan to remain one country. China will continue to be an important trading partner with Khartoum, and so it will maintain its influence. China has responded favorably, albeit reluctantly, to Western pressure on its policy toward Sudan in the past, and so it may be a partner in maintaining peace between north and South in the future.

Of course, as mentioned above, South Sudan needs much more assistance than just keeping nosy neighbors in check. The government in Juba is building a country from the ground up. The United States, Canada, and countries across Europe have valuable wisdom to share in this process, from experiences with fledgling democracies in Eastern Europe, to building health systems in the U.K., to encouraging community involvement in schools in the United States. Even in times of budget austerity, funding must be found to help South Sudan become a productive member of the international community.

WASHINGTON — The Easter deadline to have the Doha Round endgame in sight has come and gone with no sign that the nearly decade-long stalemate has been broken. The commitment by the leaders of the G20 nations to complete the Round in 2011 now seems out of reach. World Trade Organization (WTO) Director General Pascal Lamy’s entreaties of the leading trading nations to table improved concessions have thus far not generated any meaningful outcomes. Bilateral negotiations between major parties including the United States, the European Union, Japan, Canada, China, Brazil and India have failed to bridge the insurmountable gaps. The “ambitious outcome” from Doha requested by the United States now seems remote. The Round is in a coma and the patient is about to die.

The Doha Round was launched in 2001 to address major challenges faced by the multilateral trading system in the 1990s. It got off the ground thanks to the leadership and determination of the United States and Europe, who put Third-World development at the center of the new negotiations by calling for meaningful concessions by advanced economies, including new disciplines on agricultural policies. But, in the past decade, the Round has stalled several times due to long-standing controversies around agriculture with little progress on reductions of tariffs, trade-distorting export subsidies, and support programs for agriculture.

Recently, negotiations in Geneva have focused more on industrial market access and services, with the United States calling on China and other emerging markets to enhance their commitments in key sectors, such as chemicals. But little has come of this effort.

Pressures from narrow business lobbies and the current sentiment in Congress toward Doha have made it difficult for the Office of the U.S. Trade Representative to accept any deal that does not include further access to China and other major emerging economies.  Hence, the United States seeks additional concessions for chemicals, industrial machinery, electronics, and services such as telecommunications, insurance, and other financial services. While the United States is also requesting guarantees for its exports in soya, cotton, rice, and poultry, it does not offer any concessions in return. The United States remains particularly reluctant to cut agriculture subsidies. Dissatisfied with existing offers, Ambassador Ron Kirk opined last week that the Doha Round “doesn’t have to be over” but that WTO members should decide whether a “Plan B” can be sorted out.

However, it would be wise to weigh the gains against the losses before completely abandoning Plan A. Even with what is on the table now, a successfully concluded Doha Round would provide significant benefits for the United States and the world economy.  Numerous reports, including a 2008 study by Professor Patrick Messerlin of Sciences Po in Paris supported by the German Marshall Fund, show that, without a Doha deal, emerging economies have the flexibility to more than triple their tariffs on average and still not violate their WTO commitments.  Moreover, a successful Doha conclusion based on what has been on the table since 2008 would increase U.S. income by $37.9 billion, while adding 393,000 new jobs to the U.S. economy, according to a study by the Trade Partnership Worldwide, LLC.

Moreover, the death of Doha might have broader political implications than those that can be quantified in numbers. Many low-income economies in sub-Saharan Africa and other parts of the world lack resources and the prospect of financial support to fight unemployment, to feed their entire population, and to maintain their economic, social, and political stability. Without a compromise on a development agenda, governments of low-income countries will not have any motivation to commit to market-based reforms that could provide increased economic opportunities for their citizens.  A failure to conclude the Doha Round might thus also spur broader security problems, economic instability, and food insecurity that could trigger floods of economic refugees seeking to enter Europe and the United States illegally.

The failure of the negotiations would moreover tarnish the credibility and even question the relevance of the WTO. If Doha fails, the already-troubled balance between the rule-making (the Doha negotiations), the executive functions performed by Lamy and the WTO secretariat, and the judicial function—the Dispute Settlement Mechanism (DSM)—would completely be upset. The failure would put insurmountable pressure on the DSM and the executive system that must operate at the behest of the members.  Additionally, a failure might undermine the well-functioning DSM. Compliance with dispute settlement rulings is likely to suffer since countries would no longer feel the same pressure to comply with adverse decisions in order to gain trust, respect, and concessions in the negotiating arena.

The death of Doha would ultimately give a clear carte blanche to rampant regionalization and further fragmentation of trade rules. Finally, the demise of Doha would be an acknowledgement of the lack of transatlantic leadership in multilateral institutions. And it would be unrealistic to expect much progress on other issues that require burden-sharing such as food security or climate change.

There is still time and opportunity to show political determination for a final push to finish the Doha Round this year. But to achieve an ambitious outcome it will require transatlantic leaders to take the helm from negotiators in Geneva, give further concessions to emerging markets, and breathe life into Doha. This patient does not have to die just yet.

Serdar Altay is a Program Officer in the Economic Policy Program of the German Marshall Fund in Washington.

By Jonathan White and Kathryn Ritterspach

The Marshall Plan helped facilitate Western Europe’s economic integration and revival through market-oriented policies, leaving behind the protectionism of the 1930s. The European Coal and Steel Community – the precursor to the European Union – further encouraged European integration, pooling these much-needed resources among Western European countries.  The EU expanded membership to countries in the East after the Cold War, offering aid, market access and a common regulatory framework. The Marshall Plan and the European Union, while not perfect by any means, are considered among the most successful development programs.

One lesson from these initiatives has been that to get a bigger bang for your buck, you need the alignment of aid, trade and investment policies toward a unified objective – in this case the rebuilding of Europe. Both the Bush and Obama Administrations have sought to foster vibrant private sectors that complement critical health and education programs in the developing world. In that spirit, the U.S. Presidential Policy Directive on Global Development and the U.S. Feed the Future initiative seek to harness both aid and trade to help lift countries out of poverty and become reliable trading partners.

For full article, please visit:

http://www.modernizingforeignassistance.org/blog/2011/04/14/harnessing-aid-and-trade-in-a-time-of-fiscal-austerity/

WASHINGTON – With all the focus on democracy and despots, the rising price of food is being overlooked as a trigger in the uprisings in North Africa and the Middle East.

Food prices are at an all-time high, and while the impacts are hardly felt in the United States and Europe, where basic commodities are a small portion of the total cost of diets comprised largely of processed food, the spike in commodity prices is felt much more acutely in developing countries. The densely-packed cities of North Africa, heavily reliant on imported food, are particularly vulnerable to spikes in commodity prices.  Bad weather in Russia, Ukraine, and China has already pushed prices above even the highs of 2008, which led to unrest in 30 countries at the time.  Although it is impossible to know to what extent, this year’s building food crisis has fed into the revolts and revolutions in Tunisia, Egypt, Libya, and elsewhere.

Bread revolts are among the oldest varieties of social unrest, and the Arab world is no stranger to them.  Past decades saw a series of Arab uprisings in which food played a significant role, including in Egypt (1977), Morocco (1981), Tunisia (1984), Algeria (1988), and Jordan (1989).  While not the primary catalyst in all cases, access to food, or lack thereof, was a stark reminder to the oppressed of their overall condition and poor economic prospects.  Such events led to the emergence of a delicate dance between autocrats and their populations, reinforcing an unwritten pact in which the people, at the very least, would be fed.

This dance has become more and more difficult to sustain as, over time, the ability of dictators to live up to their end of the bargain has been diminished.  Africa, in particular, has become increasingly reliant on imports of even the key commodities in which it had previously enjoyed an advantage, undermining the entire continent’s ability to feed itself.  A vast hinterland of arable land has been exploited, mainly by subsistence farmers eking out a harsh living on small plots, lacking the means or the incentive to feed the hungry coastal cities. Non-functioning markets at the local, regional, and national levels have made it difficult for food to travel from areas of surplus to those in deficit. In the past, regimes would employ a variety of measures to maintain a supply of cheap food, ranging from export restrictions to subsidies and price controls.  From a market perspective, none of these fixes are optimal.  From a political economy perspective, they are unsustainable, relying on the availability of affordable commodities at a relatively stable and predictable world-market price. Price management has long been the prop of failed regimes, as was evidenced by the 1977 riots in Egypt that erupted after the IMF and World Bank imposed conditions on lifting food subsidies in exchange for loans.  Once the price support was gone, the people began to suffer and the regime began to totter.

Their increasing reliance on imports—Arab countries are projected to import 40 percent of the world’s wheat by 2021—made the autocratic regimes increasingly vulnerable to forces beyond their control.  Fires in Russia, floods in Australia, biofuels mandates in Europe and the United States, changing diets in China and India suddenly translate into higher food prices worldwide.  Taken together with the Arab world’s relatively young populations and high poverty rates—with populations spending up to 40 percent of their income on food—the age-old dance of the dictators has become ever more precarious to perform.  As rising prices fed growing popular discontent, hunger for food became a hunger for democracy.  This has been one part of the story of the “Jasmine Revolutions” of 2011.

While the toppling of aged despots is hardly a cause for lament, the spiraling hunger and poverty that has helped to drive the unrest surely is. The onset of the second food crisis in less than three years has put the world on notice that we have now definitively entered a new phase of global agricultural production.  The commodity markets of the future will be characterized by increasing volatility and recurring price shocks.  How policymakers respond will be critical.  As old systems break down, democracy and food insecurity must not be allowed to become one and the same.  Instead of the compromised government-to-government transactions of the past, efforts to promote food security should focus instead on ground-up support of agricultural markets.  Building the capacity of local farmers to produce more and helping create the conditions for commerce within countries and regions will relieve some of the pressure that comes from reliance on global markets—and on vicious autocrats.  This will not be easy; it is the hard but necessary work we face as an increasingly hungry planet.   But absent enlightened leadership and genuine action on global food security, the consequences will be grim.   Events in North Africa and the Middle East are just the beginning.  The promising Arab spring could give way to a long, hot summer.

Mark Allegrini is a Program Associate with the Economic Policy Program at the German Marshall Fund.  Joe Guinan is a GMF Fellow and Director of the TransFarm Africa Initiative at the Aspen Institute.

Photo taken by Eneas De Troya

On both sides of the Atlantic budgets are under severe pressure. Governments are seeking to improve the effectiveness of development resources. Last week, the State Department and the U.S. Agency for International Development unveiled the Quadrennial Diplomacy and Development Review, which seeks to bring a more unified, focused and results-based approach to U.S. civilian power. Starting in January 2011, under the Lisbon Treaty, the European Union will launch a new European External Action Service to strengthen policy coherence in areas such as development. Such initiatives could lead to better planning and management of scarce resources with a stronger focus on results. This could help boost legislative oversight as well as evaluation by development agencies. But, there are perils involved with this trend. The following blog posts by Transatlantic Taskforce members Andrew Natsios and Richard Manning offer some insightful perspectives on this subject (http://blog.gmfus.org/2010/12/20/the-dangers-of-development-metrics/).

Andrew Natsios raises important concerns about how ‘Obsessive Measurement Disorder’ can and does make aid agencies less rather than more effective. This is a timely and important issue. In Europe too, the chase is on for donor agencies, their budgets under extraordinary pressure given the bleak economic and fiscal situation in many EU members, to demonstrate ‘results’ and to make themselves ever more accountable.

In some European countries, perhaps most notably in the UK, there is however at least the recognition that over-prescription of targets (in the UK, strongly associated with Gordon Brown) can have counter-productive effects. For example, targets for cutting health service waiting times merely resulted in a queuing system to get on to the controlled waiting lists. As a result, the new Coalition government prefers ‘business plans’ (just published for all British Government Departments). These focus more on what will be done by when than on target-setting as such.

Aid agencies do need to be held to account, value for money needs to be promoted at every level, and results do matter (a focus on results is a much better framework for sound and creative decisions than a focus on commitments or spending), but Andrew Natsios is right that an intelligent rather than formulaic application of a results focus is needed. What might this look like?

A first principle should be that donors’ accountability to their taxpayers must not weaken the incentives for greater local accountability. Instead of building ever more detailed systems of accountability to donors (separate project implementation units, donor-designed project M&E systems, donor-imposed Technical Assistance) donors should be doing much more to help implementing governments and agencies build their own audit and accountability systems.

At country level, this should mean a much more focussed attempt by donors to assist the ‘institutions of accountability’ that all countries need to keep their executive branches honest and effective. So donors should invest in better local audit capacity, better parliamentary scrutiny, a more informed civil society, independent media, more transparent budget systems, and better and more accessible statistics.  Donors should also encourage many more locally-commissioned independent evaluations of key programmes, rather than the present practice where almost all such evaluations are commissioned by donor agencies.

Second, donors should step up action on the transparency of their own aid delivery (strongly urged by President Obama, but also European governments such as Sweden and the UK), ideally in a way that follows consistent standards, such as those set by the International Aid transparency Initiative. Donors have in fact made important commitments in this area at the Accra High Level Forum in 2008: they need to deliver.

Third, donors should be honest about what can reasonably be attributed to aid. In most cases, aid is a complement (often an important one) to locally-funded projects and programmes. It is much better therefore seen as a contributor to the outcomes which such activities are designed to promote. Donors should see themselves as ‘co-investors’ in programmes for, say, enhanced education for girls or lower child mortality. While they should be rigorous at working with local actors to promote the outcomes in question and should report on these to taxpayers, they should be less concerned at having an identifiable ‘British’ or ‘French’ or ‘American’ piece of such programmes that they can showcase separately.

Finally, they should experiment further, as the European Commission has done in its ‘Millennium Contracts’, with making aid more responsive to local performance. Under such ‘contracts’, part of European budget support is enhanced or reduced depending on actual progress registered towards MDG indicators. A similar notion underlies the various forms of ‘output-based aid’ which are being given close attention in various donor capitals.

It is good to see that the next OECD DAC Chair, Brian Atwood, will for the first time ever, be a former head of a major aid agency. Brian is also the first U.S. Chair in over a decade, and well aware of the pressures which Andrew Natsios has underlined. Here’s a real chance for the DAC to move the ‘results agenda’ in a direction that actually promotes……..results.