FWD: IMF/MAI Senate approved FY98 Suppl. Approp. (fwd)

[Robert Weissman <rob@essential.org>]

This was prepared by John Fitzgerald, an attorney working in cooperation
with Accounting for the Environment on the IMF funding issue. It
highlights in some detail how the language in the IMF funding bills would
undermine environmental protection in ways going beyond the environmental
damage connected with standard IMF loans

Robert Weissman



>Please read the Senate and House bills carefully. The Senate bill is much
>worse than the Committee-reported measure due to rewording of the first
>section on conditions in the substitute amendment (replacing McConnell's
>bill) that Stevens broght to the floor. It would have very broad
>implications for conservation and public health, labor rights and a
>variety of good governance tools. If the reason for the rush is to shore
>up failing markets, and even if we accept that argument, there is no
>demonstrated need to approve new overreaching language along with the
>money (see below).

To make matters worse, the new Senate-approved language includes the
condition that recipient countries remove restrictions on investment, as
well as trade, thus not only allowing, but directing, the Treasury to lead
the IMF in applying a form of Multilateral Agreement on Investment with
financial teeth.

Please find attached suggested amendments for the IMF portion of the FY98
Supplemental.  Since time is short I have generally worked from the basis
of the positions announced over the past two weeks by the Sierra Club,
NRDC, EDF, Accounting for the Environment and FOE. As another office
requested, the draft below provides the option at one point of allowing the
Secretary of the Treasury to do the environmental assessement and cost
accounting instead of insisting that the IMF do it, which would avoid a
"conditionality" situation attempting to bind the whole IMF for that
requirement. These groups have taken the position that any further funds
should be on the condition of standrds requiring greater IMF transparency
and environmental accountability. Please let me know if you have questions
or would like to discuss revising any of the items below.


>Furthermore, the Senate and House bills are still just as lacking in
>effective transparency for the public ( the GAO and eventually the public
>may get to see some documents late in the game ). In effect, the IMF
>directors leave their own countries' conservation and labor and human
>rights treaty obligations behind and expect the recipient government to do
>the same, elevating open trade above all other considerations. For
>example, even if the Convention International Trade in Endangered Species
>is construed as a trade treaty, this IMF langauge would turn it on its
>head and discourage the stricter domestic standards that CITES has
>explicitly encouraged. The Convention on Biological Diversity which has
>over 140 parties requires (in Article 14) environmental assessments of
>government actions, which in turn show whether the action is in compliance
>with other substantive conservation standards, just as our NEPA has since
>1969. It also calls on nations to use incentives such as tax and loan
>policies to further the conservation and sustainable use of natural
>resrouces (Article 11) The IMF amendments adopted so far by Congress
>ignore and may be used to override such treaties, not to mention the
>inherent power of national and state governments to require and encourage
>stewardship of natural and human resources.


>As the Senate language now stands, the first condition could be read to
>require that recipient countries remove all barriers to the export of
>goods to the extent that such export is not explicitly forbidden or
>controlled by international trade obligations. That means for example,
>that wildlife currently protected by federal or state law for conservation
>purposes (such as marine mammals and their skins) might have to be made
>available for harvest and export until an international trade treaty
>includes minimum national requirements to protect them. Even if the
>Convention International Trade in Endangered Species (CITES) is construed
>as a trade treaty, this IMF langauge would turn it on its head and
>discourage the stricter domestic standards that CITES has explicitly
>encouraged. For conservation treaties not so clearly "trade" oriented, the
>IMF language could be cited by those who would override them or require
>that countries ignore both their inherent and their treaty-derived general
>conservation obligations in order to open up trade in order to get IMF
>help. The same can be said about labor and human rights-related national
>laws, international treaties and other agreements that may be seen to have
>trade-inhibiting effects.  For example, the Korean labor laws that the IMF
>recently required Korea to change in exchange for money.

>Therefore, the first section (of the Senate bill) should be stricken or
>rewritten as follows:

>1) comply, thorugh the use of the iMF aid if necessary, with the
>international conservation, human rights, environment, labor and trade
>obligations and agreements; and

>The second section is so grossly overreaching and broadly worded that it
>would eliminate subsidies for energy conservation, land preservation,
>higher education, low income housing, etc.  In theory it is laudable if
>aimed at crony capitalism but the wording is so imprecise as to be very
>dangerous.  Therefore, the second section should be stricken or amended as
>follows:

>2) [insert at the end of (2) the following: ", except those loans and
>subsidies that are publicly available on the basis of objective criteria
>and are designed to encourage the conservation of natural resources,
>education, health and safety, the promotion of equity and other public
>benefits."


>It may be desirable to offer several separate amendments--one per issue,
>to force a vote for or against: compliance with human rights agreements;
>with labor agreements; assessment of policies required by IMF of borrowing
>countries including impacts on employment, poverty alleviation,
>environmental protection, etc. Or, one simple, separate amendment that
>would go along the following lines, could be offered:


>We should also add a new section:

>A) " Section __. Full Cost Accounting. The Secretary of the Treasury shall
>instruct the U.S. Executive Director to the International Monetary Fund
>that he must vote to disapprove stand - by agreements or other
>arrangements regarding the use of Fund resources until he certifies and
>reports to the General Accounting Office and the Committees on Banking and
>Appropriations of both Houses that either he or the Fund have, with public
>participation, assessed, accounted and published in the recipient country
>and to the public generally, before the IMF extends or approves any loans
>or agreements,
>1) the full projected economic and environmental costs and effects of any
>structural readjustments, or other terms and conditions of each loan or
>agreement, and
>2) the extent to which the borrower is in compliance with the terms of all
>international human
>rights, labor and environmental agreements and obligations of which they
>are a signatory. "



>B) We had proposed the following amendments to the bill as reported by the
>Senate Approps. Committee. They may still be useful. They require
>virtually no conditionality for env't or human rights or labor agreements
>beyond that which was required in the committee bill for trade agreements.
>They also require more transparency.

>>IMF SUPPLEMENTAL FUNDING AMENDMENTS


>>(A) -- DRAFT LANGUAGE CHANGES TO S.1769. Changes are in brackets.
>>Suggested deletion in parenthesis.

>>1998 Supplemental Appropriations Act for the International Monetary Fund

>>NEW ARRANGEMENTS TO BORROW

>>For loans to the International Monetary Fund (Fund) under the New
>>Arrangements to Borrow, the dollar equivalent of 2,462,000,000 Special
>>Drawing Rights, to remain available until expended; in addition, up to
>>the dollar equivalent of 4,250,000,000 Special Drawing Rights previously
>>appropriated by the Act of November 30, 1983 (Public Law     98-181),
>>and the Act of October 23, 1962 (Public Law 87-872), for the General
>>Arrangements to Borrow, may also be used for the New Arrangements to
>>Borrow.

>>UNITED STATES QUOTA

>>For an increase in the United States quota in the International Monetary
>>Fund, the dollar equivalent of 10,622,500,000 Special Drawing Rights, to
>>remain available until expended.

>>GENERAL PROVISIONS

>>SECTION 101. CONDITIONS FOR THE USE OF QUOTA RESOURCES-

>>(a) None of the       funds appropriated in this Act under the heading
>>`United States Quota, International Monetary Fund' may be obligated,
>>transferred or made      available to the International Monetary Fund
>>until 30 days after the Secretary of the Treasury certifies that the
>>Board of Executive Directors of the Fund have agreed by resolution that
>>stand-by agreements or other arrangements regarding the use of Fund
>>resources shall include provisions [ensuring compliance with Section 102
>>and 103 and]

>>(1) requiring the borrower--

>>(A) to comply with the terms of all international trade [, human rights,
>>labor and environmental] obligations and agreements of which the borrower
>>is a signatory;

>>(B) to eliminate the practice or policy of government directed lending or
>>provision of subsidies to favored industries, enterprises, parties, or
>>institutions; and

>>(C) to guarantee non-discriminatory treatment in debt resolution
>>proceedings between domestic and foreign creditors, and for  debtors
>>and other concerned persons, and

>>(2) requiring the Fund to establish within six months, and apply
>>thereafter before any further funds are made available by the Fund to
>>members, a systematic framework and open process through which it will
>>assess in advance and take into account in the formulation of alternative
>>policy proposals, potential impacts of each IMF lending agreement on
>>levels of employment, real income using full cost accounting, poverty
>>alleviation, sustainable management of natural resources, the environment
>>and public health, thereby ensuring that public comment, from within the
>>borrowing country and at large, is solicited and considered at least
>>sixty days in advance of decision-making and that Fund resources are to
>>be made available to members under adequate safeguards as mandated by
>>Article I of the Fund's Articles of Agreements.

>>(3) requiring the Fund to release to the public in each member country at
>>least one year in advance of any proposed change in the articles of
>>agreement or programmatic change in structural adjustment requirements.

>>(b) Subsequent to the certification provided in subsection (a), in
>>conjunction with the annual submission of the President's budget, the
>>Secretary of the Treasury shall report to the appropriate committees on
>>the implementation and enforcement of the provisions in subsection (a).

>>SEC. 102. TRANSPARENCY AND OVERSIGHT- (a) Not later than 30 days after
>>enactment of this Act, the Secretary of the Treasury shall certify to the
>>appropriate committees that the Board of Executive Directors of the
>>International Monetary Fund Board has agreed to provide

>>(1) Timely access     by the Comptroller General to information
>>and documents relating to the Fund's operations, program and policy
>>reviews and decisions regarding stand-by agreements and other uses of the
>>Fund's resources;

>>(2) Public release of Article IV Consultations, evaluation and audit
>>documents, Interim Committee and Development Committee documents and
>>Staff Country reports 30 days before Board discusssion; and

>>(3) Public release in the borrowing country and at large by the IMF of
>>Policy Framework Papers and Letters of Intent as part of all loan
>>agreements 30 days prior to the signing of the loan agreement, including
>>public release of draft PFPs no less than thirty days prior to Board
>>discussion of the Paper.

>>(b) The Secretary of the Treasury shall direct, and the U.S. Executive
>>Director to the International Monetary Fund shall agree to--

>>(1) provide any documents or information available to the Director that
>>are requested by the Comptroller General;

>>(2) request from the Fund any documents or material requested by      the
>>Comptroller General; and

>>(3) use all necessary means to ensure all possible access by the
>>Comptroller General to the staff and operations of the Fund for the
>>purposes of conducting financial and program audits [which shall include
>>an open process, using full cost accounting measuring real income, to
>>assess in advance the potential impacts of each IMF lending agreement and
>>alternative versions thereof on poverty alleviation, natural resources,
>>the environment, employment and public health.]

>>(c) The Secretary of the Treasury, in consultation with the Comptroller
>>General and the U.S. Executive Director of the Fund, shall develop and
>>implement a plan to obtain timely public access to information and
>>documents relating to the Fund's operations, programs and policy reviews
>>and decisions regarding stand-by agreements and other uses of the Fund's
>>resources.

>>(d) No later than July 1, 1998 and, not later than March 1 of each year
>>thereafter, the Secretary of the Treasury shall submit a report to the
>>appropriate committees on the status of timely publication of Letters of
>>Intent and Article IV consultation documents and the availability of
>>information referred to in (c).

>>SEC. 103. ADVISORY COMMISSION- (a) The President shall establish an
>>International Financial Institution Advisory Commission (hereafter
>>`Commission') [which shall include, but not be limited to, experts in
>>labor, business, human rights, and the environment, and shall address
>>through a public process the implementation of sections 101, 102 and
>>International Financial Institution reforms that Congress has previously
>>recommended.] (see Wellstone amendment 2128 adopted Wednesday for latest
>>version)