A new Policy Brief examines how the UNCTAD concept of interdependence may be employed in the follow-up and monitoring process of the 2030 Agenda for Sustainable Development.

The 2030 Agenda for Sustainable Development substantially increases the demand for evidence-based analysis and integrated and coordinated policy support in the area of expertise of UNCTAD. Its comprehensive and integrated nature mirrors the UNCTAD concept of interdependence between countries and policy areas.

This concept can now be employed in the follow-up and monitoring process of the Agenda to assess: (a) the impact of the international environment on the effectiveness of national implementation strategies; and (b) trade-offs and synergies in those strategies.

Tailored policy support to member States should alleviate national implementation and reporting burdens, thereby facilitating the adoption of coherent national implementation strategies.

Closer collaboration among the multiple stakeholders in the new development agenda will facilitate the effective use of the skills and expertise available across the United Nations system.

Key points:

• The 2030 Agenda for Sustainable Development requires evidence-based analysis and integrated and coordinated policy support in the area of expertise of UNCTAD.

• Tailored support to member States should alleviate implementation and reporting burdens, facilitating the adoption of coherent national implementation strategies.

• Multi-stakeholder collaboration will facilitate the effective use of skills and expertise available across the United Nations system.

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An enabling international environment can make or break implementation at the national level

While primary responsibility for the implementation of the 2030 Agenda for Sustainable Development lies at the national level, the comprehensiveness and universality of the Goals makes a supportive international environment an important determinant of effective implementation. Such an environment takes the form of supportive global trends, international policy frameworks, multilateral rules and effective partnerships, and may be reflected in seven channels:

• The trade channel. While trade integration generally improves efficiency of production, the contributions of trade to investment and ensuing enhanced production, technology upgrading and productivity growth are more important for sustainable development. Exporting increases market size and generates economies of scale that make firms more productive and invest to further expand productive capacity. Export earnings also allow financing imports of capital equipment that embody advanced technology, as well as goods required to address basic needs, such as medicine. These links between trade and investment catalyse structural transformation, employment creation and skills development, directly supporting the accomplishment of Goals 8, 9 and 10.

• The investment channel. Implementing the Goals in developing counties requires an investment push of an estimated $3.3 trillion to $4.5 trillion a year, with current levels of investment leaving an annual gap of $2.5 trillion. Foreign-direct investment (FDI) flows can boost investment in developing countries beyond domestic investment, while a dominance of mergers and acquisitions over greenfield investment would make FDI contribute little to building productive capacity.

• The finance channel. Financial integration confers benefits when it helps to finance imports of capital goods for the creation of productive capacity and reduce pressure for macroeconomic adjustment to temporary shocks. It can also make domestic financial markets more efficient. However, financial integration increases vulnerability, as cross-border private capital flows tend to be highly volatile and associated with global financial cycles with often adverse consequences for macroeconomic stability, the sustainability of foreign-currency denominated debt and income distribution. The balance of these effects is country specific. Benefits are more likely to occur in countries with strong financial regulation and a high level of financial development. The finance channel would be strengthened by bringing the level of official development assistance to internationally committed levels and reorienting such assistance in line with the strategies of recipient countries to implement the Goals.

• The technology channel. Expanding the digital revolution into production processes promises universal benefits by reversing the slowdown in productivity growth that has plagued the world economy over the past few years. Its development benefits will add to those derived from enhanced technology transfer, especially when innovation-based investment raises productivity growth and allows workers operating new machinery and software to demand higher wages, with resulting higher aggregate spending further boosting investment and the prosperity of society as a whole. Innovation could also enhance the environmental sustainability of creating productive capacity. If the recent substantial decline in the cost of producing solar and wind energy continues, there will be massive investment in renewable energy that would substantially transform the global energy sector. It could also transform the world economy itself, for example by triggering major productivity increases and accelerating growth in the real economy, irrespective of how the digital revolution is going to move forward.

• The regulatory channel. Norms governing international trade have increasingly been set through bilateral and regional agreements. These often spur global trade less than multilateral agreements, as they are less about market access and more about regulatory convergence and standards that reshape global value chains. Further, their norm setting is non-inclusive and distorts international competitiveness by providing different trading partners with different conditions, often at the expense of lower-income countries that see their preferential margins in international markets erode. International investment agreements govern FDI but are often perceived as paying insufficient attention to inclusive growth and the Sustainable Development Goals. Trade and investment agreements may also unduly hamper domestic policies and regulation set in the public interest. Financial reforms agreed at the international level may insufficiently take account of developmental needs by prescribing overly complex implementation requirements and encouraging too little the proliferation of financial products and organizations that support investment in productive capacity.

• The fiscal channel. Fiscal revenues are a prime source of finance for public investment. But their international origin has been limited by so-called “tax optimization” strategies of transnational corporations that declare profits in tax havens. According to UNCTAD estimates, investment-related tax avoidance schemes cost developing countries some $100 billion annually – about twice the amount of FDI that went to Africa in 2015. Decisive multilateral action in this area would help augment public revenue available for the investment push needed to attain the Sustainable Development Goals.

• The institutional channel. Unresolved institutional deficiencies regarding sovereign debt workouts and the provision of official international liquidity in periods of balance-of-payments difficulties raise questions about the development orientation, coherence and consistency of the international monetary and financial architecture. These deficiencies, combined with the close interlinkages between the trade and finance channels through the balance of payments, tend to reduce support from the global economic architecture to sustainable development.

Addressing these channels in an integrated way from the perspective of sustainable development will make it possible to develop a forward-looking assessment of the support from the international environment to the effectiveness of national implementation strategies and of the collective implications of national measures for global processes.