By Christopher Mason
GV Correspondent

OTTAWA-- At this month's G8 summit in Italy, aid organizations urged industrialized nations to honour their 2005 pledge to send an extra $50 billion aid dollars to Africa by 2010.

A year away from the deadline, G8 countries are $23 billion short on their promise, and may be hard-pressed to come up with the money amid a global recession.

Aid advocates say the world's richest countries have no excuse, having recently showed their ability to move swiftly in deploying trillions to rescue the global economy.

"Twenty-three billion dollars is not a lot of money compared to what has been spent bailing out the banks," said Farida Bena, head of Oxfam's Italian office.

Italy, as summit host, came under particular scrutiny for paying out only three percent of the aid money it promised in 2005, and for cutting its aid budget by 56 percent in December 2008, with a further 10 percent cut planned for 2010.

The latest G8 meeting showed the instability that politics and other factors can cause in efforts to establish effective and reliable aid to the world's poorest countries in Africa, Latin America and Asia.

This penchant has many asking: Is there a better, non-politicized way, of funding international development?

In that search, one idea has received particular attention, and praise, from global leaders ranging from United Nations Secretary-General Ban-Ki Moon and former French President Jacques Chirac.

The Currency Transaction Tax (CTT) is a proposal to tax international currency exchanges as a way of supporting development. The idea is to levy a tiny tax on the exchanges, small enough that it would be barely noticeable on most everyday transactions, to raise funds for foreign aid to be controlled and administered by an independent body.

The tax would charge 0.005 percent on international currency transactions. The money raised, conservatively estimated at about $33 billion annually, would be used to fund international development efforts free of politics and without affecting foreign exchange markets, the idea's advocates say.

"Everybody is reviewing the architecture of the financial system around the world and [the CTT] is taking on momentum that it hasn't had in a number of years," said Rodney Schmidt, principal researcher at the North-South Institute. "The number we're looking at, at least $33 billion, is about a third of current international development funding levels, so it's significant."

The concept-- around in some form since 1970-- has been buoyed by the success France has had charging €1 to all air passengers leaving France, with proceeds going to international health issues such as HIV/Aids.

Its success as an effective, easy to manage form of fundraising, has led to calls for a similar air levy to help poor nations fight climate change. The global recession has also forced once-reluctant countries to consider new ideas to tackle large-scale challenges.

Schmidt led a two-year study of the CTT for the North-South Institute, stemming from his interest in the idea born while working in Canada's Department of Finance. His research proved to him that the tax is an achievable solution to stabilize development funds, while also regulating the flow of capital across international borders.

"There's no doubt any more that it's feasible," Schmidt said.

The world powers have not met their pledge to devote 0.7 percent of GNI to foreign aid and few G8 members are on track to double aid to Africa by 2010. The Millennium Development Goals (MDGs), to be met in 2015, are also not on track.

 
This, Schmidt argued, supports calls for a new way of funding foreign aid commitments.

Implementing the concept is no easy task. Canada is perhaps a poor candidate to start the process because the fact that its economy is closely entwined with that of the US means the two would have to adopt the CTT together.

Meanwhile, in Europe, Belgium became in 2004 the first country to legislate a CTT, but the law will only come into effect if similar action is taken by other European Union governments.

That has been the sort of non-binding, cautious action taken by countries so far. Also in 2004, more than 100 countries meeting at a UN special session endorsed a proposal by Brazil, China, France and Spain, among others, urging a CTT-like tax.

In 1999, the Canadian parliament passed a non-binding motion calling for the implementation of a form of CTT though nothing has happened with it since.

But after years of small, symbolic steps, the global recession may be the push that forces world leaders to seriously consider adopting the idea of a tax on currency transactions that would de-politicize aid.

In May, a group led by British Prime Minister Gordon Brown and World Bank President Robert Zoellick held a joint meeting. Both Brown and Zoellick came out in support of the CTT as a leading  candidate for raising funds for health, climate, development issues and the MDGs.

"It's taking on momentum that it hasn't had in a number of years," Schmidt said.

One challenge of course is identifying an international body to govern the tax and manage its proceeds. Schmidt said there are a variety of options, but perhaps the best is the United Nations Development Program (UNDP), which coordinates efforts to meet MDGs.

"A UN body would be best suited for overseeing this," he said. "But firstly, the central banks would have to mandate the collection of the taxes." 

Associating the collection with the UN would lend the tax legitimacy and impartiality, which would help manage negotiations over how the money would be allocated.

Introducing the CTT will be a formidable task. Countries have enough difficulty establishing development priorities and funding levels within their own governments, yet alone making it an international affair.

But Schmidt and others feel that if ever there was a time to introduce the CTT, it is now. They say the global cooperation over stimulus packages and planned reform of the World Bank and International Monetary Fund, all because of the widespread recession, show a willingness and capacity to cooperate-- when properly motivated.