Global Policy Forum

France, Brazil Relaunch "Lula Fund" to Tax Arms Sales and Fight Poverty

Agence France Presse
January 30, 2004

Brazil and France relaunched the idea of international taxes on arms sales and financial transactions to revitalize the flagging global drive against hunger and poverty, in a joint declaration made in Geneva. President Jacques Chirac of France and his Brazilian counterpart, Luiz Inacio Lula da Silva, called on other countries to join a group of experts which would report back by September 2004 on possible new sources of financing to tackle poverty. The two presidents, backed by UN Secretary-General Kofi Annan and Chile's President Ricardo Lagos at a meeting here, said official development aid had reached a ceiling and new money needed to be found. "We cannot avoid setting up a system of international taxation," Chirac told journalists afterwards.

An estimated 840 million people live in hunger and 1.1 billion people struggle to survive on less than one dollar a day, according to the United Nations. And Lula warned: "There is no more room in today's world for societies made up of illiterate, unemployed, hungry and extremely poor people".

The declaration by the four leaders also supported a British proposal to raise additional finance for development aid through capital markets. The "innovative sources of financing" under consideration include Britain's proposed International Finance Facility, "as well as taxation on certain international transactions such as, among others, certain kinds of arms sales and certain financial transactions," the declaration said. Any new resources would be channelled to "a special fund to combat hunger and poverty,", which Chirac dubbed "the Lula Fund".

"We considered it vital to forge a truly global partnership in order to mobilize political will and financial support, engage governments, the UN system and the financial institutions, re-orient development priorities and policies," the declaration stated.

Alarm has grown in recent months over the fate of aid targets dubbed the Millennium Development Goals -- including a target to halve the number of malnourished people by 2015 -- amid flagging funding from governments. "The implementation of those goals must be revitalized," Lula told journalists. Chirac said government development aid alone could not provide the estimated 50 billion more dollars a year needed to fight poverty. But with eight trillion dollars worth of global trade exchanged every year, funds could be harnessed in another way, he indicated.

The idea of international taxation draws on a controversial proposal first made by Nobel prize-winning economist James Tobin in the 1970s. Tobin advocated a levy on currency transactions aimed at stabilising financial markets by calming speculation while simultaneously raising huge sums for development. Attempts to turn the Tobin tax into reality have drawn critical reactions from financial markets over the years and from the United States. "This will not be the Tobin tax because it has not succeeded," Chirac insisted, suggesting it could take other forms.

The four leaders also emphasized a greater role for developing countries in the moulding world economic affairs. They "acknowledged" the emergence of the G20 group of developing countries in the World Trade Organisation last September. The group, which includes Brazil and Chile, is demanding an end to farm subsidies in rich countries that skew trade for poor nation exports.

"Developed countries, Europe must open markets to all products from developing countries," Annan warned. But Chirac reiterated his defence of subsidies, insisting that there were no barriers in the European Union markets to farm produce from the poorest countries.

The three presidents also endorsed Annan's recent calls for a realignment of international affairs away from pure security concerns following conflicts in Afghanistan and Iraq. "We stressed the need for an effective multilateralism," they said in the declaration, which also "reaffirmed the central role of the United Nations".




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