Why coherence counts for development

Coherence in policies within countries and between them will be vital to restoring economic growth and development.

Cadmium is extremely toxic to humans. Ingestion or prolonged exposure to this heavy metal can cause fever, chills and muscle aches, and in the most extreme cases, kidney failure. So when the European Commission in 2002 set the permissible level of cadmium in swordfish at 0.05 mg/kg, most people considered it a wise policy choice.

Except in the Seychelles, where swordfish was an important export product to the EU. Why, they asked, did the EU forbid the import in mid- 2003 of their swordfish while it permitted the import of crustaceans, oysters and beef liver that could contain up to 1.0 mg/kg of cadmium, or 20 times above the limit set for swordfish? This might have been passed off as an oversight, an error in calculation, until the fishermen went on to note that European vessels were allowed to catch swordfish in those same cadmium-laced waters. It took policymakers almost two years to revise the policy and set cadmium levels at a more reasonable level, thus allowing the Seychelles to resume exporting swordfish in early 2005.

While all this was being sorted out, however, fishers in Seychelles lost their export earnings and many vessels diversified their activities by targeting sharks for their fins. The intensive fishing of sharks during the ban heightened conservation and management concerns for this vulnerable group.

The OECD has long stressed the importance of policy coherence, not just in fisheries, but in every area of activity, and particularly where development is concerned. Especially today, in the throes of an economic crisis, incoherent policy will only cause matters to get worse. In fact, one could say that the financial crisis is another example of incoherent, non-co-ordinated policies that world leaders are now trying to correct. OECD countries are leading this effort alongside emerging economies such as Brazil, China, India or Russia. If globalisation is to succeed as a vision, the accepted view is that it needs coherent and comprehensive policies to transform it into reality.

High food prices is a salient example of the shiver that runs through a global economy when policy decisions are taken without fully evaluating the possible outcomes: the global prices of many commodities such as rice sparked food riots in several developing countries earlier in 2008, leading governments to limit or even temporarily suspend exports. Crises of this order make it imperative that the sometimes subtle connections between policy and market forces must be identified. Otherwise, the objectives of both will be compromised.

In June 2008, the OECD Ministerial Council Meeting adopted the Declaration on Policy Coherence for Development (PCD). Two of the OECD accession countries, Estonia and Slovenia, adhered to the Declaration. Ministers agreed that global issues such as climate change, trade, food prices and effective aid to developing countries demanded comprehensive and coherent policies. Signatories of the Declaration pledged more dialogue with partner countries and called for more international co-ordination to ensure that the benefits of globalisation are shared more equitably.

But ministers also recognise that countries, peering into the gulf of a major recession, are apt to be more worried about not losing their own balance than in capping emissions or reducing poverty in developing nations. Introducing national reforms is never easy. Already, promoting policy coherence is a challenge within countries, with domestic interest groups and different government departments all with their own agendas to pursue. Convincing governments to consider the effect of reforms beyond their borders, as on those Seychelles fishers, is tougher still. Decision-makers need to be well informed, and need to see the overall costs and benefits of their initiatives before finally spending public money.

One danger to avoid is for an incoherent wrinkle to cause different policies to cancel each other out. Agriculture is a sector where policy is often at odds with itself. Some 75% of the world’s poor live in rural areas. Of that, an estimated 86% depend directly or indirectly on agriculture for their livelihood. By contrast, less than 10% of people in OECD countries earn an income directly from agriculture. And while farmers in OECD countries receive support of some US$268 billion, total development assistance from OECD countries to poor nations comes to less than half that, at $104 billon.

Policies on climate change are also a particularly thorny issue for developing countries. There is a correlation between climate change and poverty. The Human Development Report, issued by the United Nations Development Programme, warns that delayed action on climate change will condemn more and more families to poverty and expose the most vulnerable to ecological disaster. OECD reports back this view. Future policies will have to be “climate proofed” if they are not to do more harm than good.

No-one knows exactly how much ground can be lost due to incoherent policy, though we do know that for policymaking, coherence within and across borders pays. Our organisation stands for economic co-operation and development around the world, and helping governments forge coherent development policies is a central part of our job. The adoption of the Declaration in June 2008 gives this mission real political support. If we can use it to help keep policymakers, businesses and other players, whether in fisheries or elsewhere, from tangling their lines and losing their catches as they attempt to restore growth, then everyone can win. And that includes the developing world. LT


©OECD Observer No 270/271 December 2008-January 2009

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