A Big Step Forward for China

8/16/2019 A Big Step Forward for China

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A Big Step Forward for China's AIIBMember countries have agreed on a charter for the Asian InfrastructureInvestment Bank.

In March, a flurry of counties (including U.S. allies like the U.K., South Korea, and Australia), applied to join China s ne! Asian Infrastructure In"est#ent $ank (AII$) %efore the March &' deadline for joining as a founding #e#%er. he ne! %ank !illha"e authori ed capital of *'++ %illion, to %e used in infrastructure projectsthroughout Asia.

$eing a founding #e#%er #eans ha"ing a say in the AII$ charter especiallyi#portant for countries that had e-pressed concern a%out go"ernance issues relatedto the ne! %ank. oday, China s Ministry of inance announced that the /0 founding

#e#%ers of AII$ ha"e agreed upon the %ank s charter, !hich !ill %e signed in acere#ony in $eijing at the end of 1une.

he AII$ negotiators #et in Signapore fro# May 2+322 for talks on the %ank scharter. At stake !ere a nu#%er of concerns4 ho! the %ank s capital !ill %e pro"idedand the corresponding stakeholder le"els of each country. China has pre"iously saidthat 0/ percent of AII$ shares !ill %e reser"ed for Asian countries, #eaning5uropean countries like the U.K., 6er#any, and rance !ill ha"e little say.

7elegates fro# the Singapore #eeting told Reuters that China !ill likely !ind up

!ith a 2/3&+ percent stake in the %ank, #aking it the largest shareholder. India ise-pected to %e the second largest shareholder at '+3'/ percent. hat #eshes !ith predictions fro# the Korean Institute for 5cono#ic 8olicy , !hich calculatedthat China and India !ould %e the largest shareholders at roughly &+ and '+ percent,respecti"ely. KI58, !hich %ased its calculations on ha"ing 0/ percent of shares for Asian countries and allocating shared %ased on 678 and 888 (purchasing po!erparity), predicted that Indonesia, 6er#any, and South Korea !ould %e the ne-t threelargest shareholders, all !ith just under 9 percent.

he %iggest :uestion #ark for KI58 !as the status of ;ussia is it included as an Asian country or not< If ;ussia is part of the Asian group splitting 0/ percent of AII$shares, it !ould (along !ith India) !ould ha"e around '+ percent, !hile China spercentage !ould drop to 2/. Mean!hile, other non3Asian countries (6er#any,rance, the U.K., etc) !ould see their shares rise %y co#parison, as ;ussia !ould nolonger count to!ard the 2/ percent of shares reser"ed for non3Asian #e#%ers.

hat :uestion re#ains unans!ered for no! there are "ery fe! details on the actualcontents of the charter (for#ally kno!n as the Articles of Agree#ent, or A=A). hat !ill likely change soon as each indi"idual go"ern#ent %egins the process of ha"ingthe A=A ratified through do#estic processes.

In addition to allocating shares, the A=A contains infor#ation on the go"ernancestructure (including the :uestion of !hether or not China has "eto po!er o"er %ank

http://news.xinhuanet.com/english/2015-05/22/c_134262076.htmhttp://www.reuters.com/article/2015/05/22/us-asia-aiib-idUSKBN0O709420150522http://www.reuters.com/article/2015/05/22/us-asia-aiib-idUSKBN0O709420150522http://www.businesskorea.co.kr/article/10321/local-infrastructure-korea%E2%80%99s-aiib-share-ratio-estimated-less-4http://www.businesskorea.co.kr/article/10321/local-infrastructure-korea%E2%80%99s-aiib-share-ratio-estimated-less-4http://www.reuters.com/article/2015/05/22/us-asia-aiib-idUSKBN0O709420150522http://www.businesskorea.co.kr/article/10321/local-infrastructure-korea%E2%80%99s-aiib-share-ratio-estimated-less-4http://news.xinhuanet.com/english/2015-05/22/c_134262076.htm


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decisions) and on the processes for appro"ing and o"erseeing loans. China haspre"iously pro#ised that the AII$ !ill follo! the sa#e international standards asother lending institutions like the IM !hen it co#es to en"iron#ental concerns andla%or rights. China has also pro#ised, ho!e"er, to keep AII$ >lean and efficient?rather than !eighted do!n %y %ureaucratic procedures. In other organi ations,>so#e standards are harsh and e"en attached !ith political conditions,? Xinhuanoted , saying that China founded AII$ precisely to get around those issues.

China says AII$ is e-pected to %egin operations %y the end of 2+'/, although so#edelegates are uncertain if e"ery #e#%er country !ill %e a%le to !in legislati"eappro"al for the A=A that :uickly.

8oliticians not tough enough on ta- a"oidance, say "oters

Atte#pts %y so#e #ultinationals to use co#ple- arrange#ents to pay lessta- ha"e pro"oked !idespread anger.

@oters in $ritain s key #arginal seats !ant tougher action to crack do!n onta- a"oidance and ha"e uni#pressed %y pledges %y political parties to raise %illions of pounds fro# rich indi"iduals and corporations, according to apoll pu%lished on hursday.

he Co#;es sur"ey found that al#ost three3fifths of those :uestioned(/ B) thought the pro#ises #ade %y the Conser"ati"es, a%our andthe i%eral 7e#ocrats did not go far enough.

8ro"iding e"idence of pu%lic dis:uiet a%out the acti"ities of #ultinationalfir#s that ha"e #ini#ised their ta- %ills, the poll also sho!ed that nine in'+ "oters in #arginals thought ta- a"oidance %y %ig corporations !as#orally !rong e"en !hen it !as legal.

he poll !as co##issioned %y the a- 7odging $ill ca#paign , a coalitionof de"elop#ent organisations including ActionAid, =-fa# and Christian

Aid, that is calling on the ne! go"ern#ent to introduce a la! to tackle ta-

a"oidance !ithin '++ days of co#ing to po!er.

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Its findings ca#e as the a%our leader, 5d Mili%and, insisted in hisinter"ie! !ith the co#edian ;ussell $rand that a%our had to respond tothe pu%lic outrage at #ultinationals using co#ple- arrange#ents to payless ta-.

a%our s plans for the pu%lic finances rely on it %eing a%le to find DE.0%nfro# tougher ta- a"oidance #easures, !hile the Conser"ati"es !ould needD9.E%n and the i%eral 7e#ocrats DF.0%n to #ake their %udget arith#eticadd up. he Institute for iscal Studies, descri%ed the figures as>aspirational?.

1enny ;icks, head of ca#paigns at ActionAid, said4 > his poll sho!s that

!idespread anger a%out corporate ta- a"oidance %oth in the UK and in poorcountries is sho!ing no signs of going a!ay.

>8eople still don t %elie"e that the pro#ises #ade %y political parties ontackling ta- dodging go far enough. 8ressure is #ounting on all parties toact. hat s !hy the ne-t go"ern#ent #ust introduce a ta-3dodging %ill itcould %ring in %illions in the UK and poor countries #oney %adly neededto fight po"erty.?

Co#;es inter"ie!ed ',+++ "oters in 9+ %attleground seats. A "ast #ajority( 9B) thought it !as still too easy for large co#panies to a"oid paying ta-in the UK, !hile a si#ilar proportion ( 'B) said ta- dodging %y largeco#panies in de"eloping nations har#ed people li"ing in those countries.

Google, Amazon, Starbucks: The rise of 'tax shaming'

Global frms such as Starbucks, Google and Amazon have come under freor avoiding paying tax on their British sales. here seems to be a gro!ingculture o naming and shaming companies. But !hat impact does it have"

Companies have long had complicated tax structures, but a recent spate of storieshas highlighted a number of tax-avoiding rms that are not seen to be playing theirpart.

Starbucks, for example, had sales of £4 m in the !" last year, but paid nocorporation tax. #t transferred some money to a $utch sister company in royaltypayments, bought co%ee beans from S&it'erland and paid high interest rates toborro& from other parts of the business.

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(ma'on, &hich had sales in the !" of £).)*bn in + , only reported a taxexpense of £ . m.

(nd /oogle0s !" unit paid 1ust £2m to the 3reasury in + on !" turnover of£) *m.

he art o paying less tax

5ultinationals such as /oogle, (ma'on and Starbucks have beencriticised by the #ublic Accounts $ommittee over tax avoidance

Stung, Starbucks plans to change its arrangements and pay !"corporation tax

Global frms% tax pay %an insult%

6verything these companies are doing is legal. #t0s avoidance and not evasion.

7ut the tide of public opinion is visibly turning. 6ven years ago ne&s of acompany minimising its corporation tax &ould have been more likely to be inside thebusiness pages than on the front page.

8hat changed9 (nd is shaming of companies 1usti able and e%ective9

5omentum has been gro&ing for the last fe& years.

#n September + , the :bserver ran &ith the headline; &Avoiding tax robs ourpublic services, declares minister& . 3he paper reported that thegovernment &as planning to say tax is a moral issue and that it &as determinedto end avoidance and evasion.

:ctober + - and the


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+ithdra!al o custom

(nother impact of tax shaming is that some people, such as 4*-year-old self-employed businessman 5ike 7uckhurst, from 5anchester, boycott brands.

#0ve uninstalled /oogle Chrome and changed my search engine on all myhome computers. #f # &ant a co%ee # am no& going to go to Costa, despiteStarbucks being nearer to me, and even though # buy a lot of things online, #am not using (ma'on.

#0m sick of the 0change the la&0 comments, # can vote &ith my feet. # feelvery passionate about this because at one point in my life # &as a top rate taxpayer and # paid my tax in full, he says.

3o some extent, the shift is do&n to the recession, according to $r Stuart @oper, acorporate reputation expert at 5anchester 7usiness School.

8e are in an age of deep public spending cuts and real austerity. (nd this AtaxavoidanceB is not a victimless crime, if you like. #f this &as six or seven years ago,pre- nancial crisis, # don0t think it &ould have had the same impact it0s had no&, hesays.

8ar on 8ant0s tax 1ustice campaigner 5urray 8orthy says there has also been achange in public perception.

(s the public have got to understand better &hat corporate tax avoidance is, thereis a clear sense of outrage that is going &ell beyond a small group of protesters - it0ssomething that the public feels is really not right &ith the current system, he says.

$iscussions of the ethics of tax avoidance are no& every&here. 7ut a fe& yearsback, it &as a hardcore gaggle of activists and campaign groups like !" !ncut that&ere staging sit-do&n protests in stores such as the (rcadia /roup, 7oots, ortnum and 5ason.


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ournalists and ne&spapers are also doing their o&n investigations, argues 8orthy,&ith the appearance of /oogle, Starbucks and (ma'on before the =ublic (ccountsCommittee a result of stories by the $aily 3elegraph, @euters and the /uardianrespectively.

#n a report published on onday , the committee0s chair&oman 5argaretDodge said the level of tax taken from some multinational rms &as outrageousand that D5 @evenue and Customs needed to be more aggressive and assertive inconfronting corporate tax avoidance .

5=s also called for those &ho do not pay their fair share to be named by thegovernment, but =rime 5inister $avid Cameron and Chief Secretary to the 3reasury$anny (lexander ruled it out, saying it &ould breach taxpayer con dentiality.

7ut 1ust ho& e%ective is tax shaming any&ay9

3he idea that Starbucks &ould voluntarily pay more tax than it legally needs toseems extraordinary on the surface, and an argument for the e%ectiveness of taxshaming.

!p until yesterday, # &ouldn0t have thought these stories had much e%ect. # thoughtcompanies &ould carry on doing &hat they &ere doing, but look over their shoulder,in terms of their reputation, says 5ichael $evereux, a tax expert at Said 7usinessSchool, !niversity of :xford.

$orporate tax avoidance

?ocating factories, service and distribution hubs and regional DEsin lo!2tax 3urisdictions

Starbucks, for example, sources its !" co%ee from a &holesale tradingsubsidiary in S&it'erland

(nd /oogle operates in 7ermuda and #reland

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rans er pricing is &hen a division of a multinational in one countrycharges a division in another country for a product or a service

3his means arti cially high charges can be levied internally, to siphonmoney from a high-tax country to a lo&-tax one

$orporation tax1 asy to avoid"

4o! do companies avoid their tax"

Starbucks appears to be saying they don0t think they o&e any more money, but &illpay any&ay. #f that0s true, it0s having a reputational e%ect - but it0s a bit odd in termsof the tax system, &e &ouldn0t &ant the tax system to be voluntary, he says.

7randing experts agree the reputational side of things is key, as it is hard to measurethe direct impact of tax shaming on sales and pro t.

$r Sue 7ridge&ater, a marketing expert at 8ar&ick 7usiness School, says if acompany &ith a strong brand damages that, it also damages its nancial value .

Customers have very long memories and their emotional tie to a brand is a veryimportant part of the loyalty, she says.

7ut @oper says even reputational damage is diFcult to ascertain and can Guicklydissipate.

(nother impact of tax shaming is that individuals can boycott brands, but @oper saysthe number of people &ho take direct action is relatively lo& .

8hat is more dangerous for companies is social media, he says - citingHboycottstarbucks, &hich &as formed in the &ake of the Starbucks story - becausea small number of people AcanB activate and ferment dissent among another group .

7ut is tax shaming 1usti able9

(ma'on, Starbucks and /oogle are by no means uniGue in minimising their !" taxliability. (nd individuals often try to lo&er their o&n tax bill by exploiting rules ininheritance tax, or gifting to charity.

5s it remotely plausible that Google, Amazon and Starbucks !ouldsuddenly emigrate and stop trying to sell as much as possible toBritish consumers"

7ridge&ater says large multinational corporations have been using various methodsof being tax eFcient for decades, and it is probably sound business practice .

3he issue arises &hen &e feel that a company has crossed a line and &hat it does to

be tax eFcient is morally, if not legally, inappropriate, she says.

http://www.bbc.com/news/business-17625874http://www.bbc.com/news/business-20580545http://www.bbc.com/news/business-17625874http://www.bbc.com/news/business-20580545


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>or a lot of companies, it is about fairness, according to Simon 8alker, directorgeneral of the #nstitute of $irectors.

#t is very frustrating for many companies &ho pay large tax bills that somemultinationals are able to avoid doing so.

3he solution must be simplifying the tax system, not simply hectoring from8estminster. #f these rms are immoral to take advantage of tax loopholes, thenpoliticians are surely immoral for creating the loopholes in the rst place. 3axesshould be simpler to cut do&n on avoidance and relieve the burden our complex taxcode puts on companies &ho do try to do the right thing, he says.

3he director-general of the C7#, ohn Cridland, agrees the crux of the debate comesdo&n to fairness.

( company may be making good revenues but pay lo&er amounts of tax forcompletely legitimate business reasons. 7ut if it0s doing this by using so-called0black-box0 arrangements, &here transactions are designed for no commercialpurpose at all, other than to avoid tax, then the C7# does not condone it, even if it islegal, he says.

De says if the government &ants a di%erent result from the tax system, it mustchange the rules.

3he pressure to do so has rarely been greater.

It's t ime for a global minimum wage

Capitalism has b een globalised, but the rules t hat protect people from capitalism

have not.

Last April, 1,127 orkers ere killed hen !ana "la#a, a garment factor$ in %avar,

Bangladesh, collapsed. &o put this in perspective, that's more than t ice the number of

Americans that have been killed in mass shootings since 1()*. &his unfathomable traged$reached us around the orld in the form of images troubling enough to make even the most

calloused consumers think t ice about here their clothes come from. %urel$ + e all

thought + the companies that source from Bangladesh ould do something to address the

pervasive problems ith the industr$.

hat e have so far is a ne Accord on -actor$ %afet$ in Bangladesh, hich *) companies

around the orld have agreed to sign. &he Accord does have serious shortcomings, of

course it's voluntar$, temporar$,


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Last April, 1,127 orkers ere killed hen !ana "la#a, a garment factor$ in %avar, Bangladesh,collapsed. &o put this in perspective, that's more than t ice the number of Americans that have

been killed in mass shootings since 1()*. &his unfathomable traged$ reached us around the orld in

the form of images troubling enough to make even the most calloused consumers think t ice abouthere their clothes come from. %urel$, e all thought, the companies that source from Bangladesh

ould do something to address the pervasive problems ith the industr$.

hat e have so far is a ne Accord on -actor$ %afet$ in Bangladesh, hich *) companies around

the orld have agreed to sign. &he Accord does have serious shortcomings, of course it's voluntar$,

temporar$, and it doesn't include most ma/or 0% firms such as ap, al+Mart, &arget, Mac$'s,

%ears, 3"enne$, 4ordstrom, and so on 5 ho have initiated a separate agreement that anal$sts have

alread$ denounced

as a 6sham6 . %till, it represents an important step to ard better global labour

standards.

But the singular focus on safet$ that has come to dominate the debate about !ana "la#a obscures

the far more serious, s$stemic problems that are ultimatel$ to blame for this traged$. 8ven if the

Accord ere mandator$, permanent, and universal, it ould still leave these deeper issues untouched.

Indeed, the companies that have signed the Accord have likel$ done so in hope of putting an end to

the public outcr$ before it generates pressure for the more substantive reforms the$ kno need to

take place.

A rigged labour market

&he real problem has to do ith the a$ the global labour market orks. Because of neoliberaleconomic policies imposed over the past fe decades, companies no have the po er to rove the

globe in search of hat 389s refer to as the 6best investment conditions6. "oor countries like

Bangladesh have to compete ith other poor countries to attract much+needed foreign capital b$

offering the lo est minimum ages, the flimsiest safet$ standards, the cheapest ta:es, and so on.

Most economists /ustif$ this destructive 6race to the bottom6 under the banner of 6comparative

advantage6.

As part of this deal, companies no longer have to bargain ith local orkers + the$ can opt out of the

social contract henever it suits them. If orkers in %avar, sa$, got together to demand better ages

or safet$ standards, the companies that use them ould /ust start sourcing from some here else,

leaving them unemplo$ed. %uch a move ouldn't take more than a mouse+click at the head;uarters of

ap or al+Mart.

http://www.fas.org/sgp/crs/misc/R43004.pdfhttp://www.fas.org/sgp/crs/misc/R43004.pdfhttp://www.fas.org/sgp/crs/misc/R43004.pdfhttp://www.huffingtonpost.com/2013/05/17/bangladesh-factory-safety-accord_n_3286430.htmlhttp://www.nytimes.com/2013/05/31/business/american-retailers-announce-new-effort-for-factory-safety-in-bangladesh.html?_r=0http://www.nytimes.com/2013/05/31/business/american-retailers-announce-new-effort-for-factory-safety-in-bangladesh.html?_r=0http://www.newleftproject.org/index.php/site/article_comments/a_short_history_of_neoliberalism_and_how_we_can_fix_ithttp://www.newleftproject.org/index.php/site/article_comments/a_short_history_of_neoliberalism_and_how_we_can_fix_ithttp://www.fas.org/sgp/crs/misc/R43004.pdfhttp://www.huffingtonpost.com/2013/05/17/bangladesh-factory-safety-accord_n_3286430.htmlhttp://www.nytimes.com/2013/05/31/business/american-retailers-announce-new-effort-for-factory-safety-in-bangladesh.html?_r=0http://www.newleftproject.org/index.php/site/article_comments/a_short_history_of_neoliberalism_and_how_we_can_fix_ithttp://www.newleftproject.org/index.php/site/article_comments/a_short_history_of_neoliberalism_and_how_we_can_fix_it


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%o orkers are made to face a stark choice accept dangerous conditions and minimum ages

of istoricall$, unions have pla$ed a crucial role in helping orkers bargain for a better deal the end of

child labour, the ?=+hour ork eek, safet$ standards, and so on. But toda$ the h$per+mobilit$ of

capital renders unions po erless. In their absence, e're itnessing a rapid descent back to 1(th+

centur$ labour conditions + the sort immortalised in classic books like Oliver Twist and The

Jungle .

ages in man$ sectors are falling as desperate people the orld over compete to sell their labour for

less than the ne:t person, even as orker productivit$ increases and corporate profits reach record

highs.

&o put it bluntl$, the global labour market is rigged in the interest of multinational companies@ it is

designed to allo them to pump value out of human bodies + mostl$ poor, bro n, female bodies + as

efficientl$ as possible. &hose bodies generate the enormous ealth that flo s into corporate coffers,

but onl$ a fraction of it goes back to them in ages + the vast ma/orit$ gets pocketed as profits and

389 bonuses.

&his process of appropriation + or theft, reall$ + helps e:plain the shocking trends in globaline;ualit$ that e have seen over the past fe decades, to the point here the richest 2== peopleno have more ealth than the poorest *. billion + more than half of the orld's population.

Putting a floor on the 'race to the bottom'

In a conte:t of globalisation, it's clear that countr$+b$+countr$ fi:es /ust on't do. If e improve labour

standards in one poor countr$ + as ith the Bangladesh Accord + then companies are likel$ to move

some here else, iping out local /obs and slashing much+needed ". &he upshot is that local

polic$makers have a perverse incentive to not improve things too much, for fear of causing

more harm than good. 8ven if the$ anted to, the$ often can't most free trade agreements + like

4A-&A and the forthcoming &"" + empo er foreign corporations to sue sovereign governments for

regulator$ legislation that reduces their profits.

101 East - Worked to death

http://www.globallabourrights.org/alerts?id=0297http://www.globallabourrights.org/alerts?id=0297http://www.youtube.com/watch?v=uWSxzjyMNpUhttp://www.youtube.com/watch?v=uWSxzjyMNpUhttp://www.aljazeera.com/indepth/opinion/2013/04/201349124135226392.htmlhttp://www.citizen.org/TPPhttp://www.citizen.org/TPPhttp://www.globallabourrights.org/alerts?id=0297http://www.youtube.com/watch?v=uWSxzjyMNpUhttp://www.youtube.com/watch?v=uWSxzjyMNpUhttp://www.aljazeera.com/indepth/opinion/2013/04/201349124135226392.htmlhttp://www.citizen.org/TPP


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&his s$stem ould go a long a$ to ards helping to eliminate povert$ , and ould help reduce

ine;ualit$ ithin countries + indeed, for this reason the 04 ould be ise to adopt a global minimum

age as a ke$ strateg$ to ard realising the post+Millenium evelopment oals development

agenda. !aising ages also has positive economic benefits it stimulates demand and thus

facilitates local economic gro th, and it does so in a a$ that doesn't depend on debt.

%ceptics ho orr$ that a minimum age s$stem might negativel$ affect emplo$ment can take

comfort in the no +over helming evidence to the contrar$ 5also see here .

hat ould a global minimum age mean for consumersD 4ot much, it turns out. 8conomist !obert

"ollin has found that doubling the ages of s eatshop orkers in Me:ico ould raise the price of

clothes sold in the 0% b$ onl$ 1.) percent. In fact, $ou could raise s eatshop ages b$ a factor of ten

and consumers in rich countries still ouldn't be fa#ed a stud$ b$ the 4ational Bureau of 8conomic

!esearch sho s that people are illing to pa$ 1 percent more on a


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Dr Jason Hickel lectures at the London School of Economics and serves as an

adviser to /The Rules. He has contributed political critique and anal sis to

various ma!a"ines# includin! e !onde "iplomati#ue$ Foreign Polic% in

Focus$ &he Africa eport$ and !onthl% e(iew) He is currentl $orkin! on ane$ book titled &he "e(elopment "elusion* Wh% Aid !isses the Point about

Po(ert%)

Documents

A Big Step Forward for China