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Wednesday, 29 August, 2001, 11:22 GMT 12:22 UK
France backs Tobin tax
Riots at G8 summit, Genoa
Global protests have convinced Mr Jospin of the need to respond
by BBC News Online's Steve Schifferes

France has become the first major industrialised country to support proposals for a tax on international financial transactions.

We shall pursue our efforts towards a humane and controlled globalisation, even if the new high-handed American unilateralism doesn't help matters

Hubert Vedrine, French foreign minister
Lionel Jospin, the French Prime Minister who is expected to stand in next year's presidential elections, told French television that he would be putting forward proposals for the so-called "Tobin tax" at the next meeting of European finance ministers.

The Tobin tax - named after Professor James Tobin, the Yale professor of economics and Nobel prize winner - would impose a tax of 1% on all international currency trades.

G8 leaders in Genoa
Mr Jospin must still convince sceptical leaders of other rich countries
The idea would be to reduce speculation against certain currencies, and to raise money which could be used for development in less economically developed countries.

With global trade on the foreign exchange markets alone running at $1,500bn every day, the tax could in theory raise many billions - and some predict it could more than double aid flows from rich to poor countries.

Controversy over globalisation

Mr Jospin said he was responding to the concerns of the anti-globalisation movement, which has a strong base in France among farmers and intellectuals, after the violent protests in Genoa last month during the G8 summit of world leaders.

If we can find wider support, then we really can change the lives of millions in the developing world

Steve Tibbett, War on Want
The French pressure group, Attac, which has been campaigning for the Tobin tax, welcomed the move. Its leader, Bernard Cassen, is seeking a meeting with Mr Jospin ahead of the Ecofin summit.

The UK campaign group, War on Want, also called for Britain to follow France's lead.

War on Want's Senior Campaigner Steve Tibbett said:

"The French are the key to turning the idea of the Tobin tax into a political reality. If we can find wider support, then we really can change the lives of millions in the developing world by raising some serious money and calming world markets at the same time."

However, Mr Jospin's move is unlikely to find favour among many other governments - or indeed within his own finance ministry.

Last year, French finance minister Laurent Fabius - a political rival of Mr Jospin's - told France's National Assembly that such a tax would destabilise foreign exchange markets, be difficult to implement, and would not hit the speculators it was designed to curb.

Key demand

The Tobin tax has become one of the key demands of many anti-globalisation protesters.

From the development lobby's point of view, it has the advantage of combining regulation of the international financial system with a means of raising money for development to counteract the falling aid budgets of most rich countries.

The Tobin tax - and the need for an international tax regime - has also gained the reluctant endorsement of the Zedillo Commission, a UN report on development finance which calls for an international tax organisation.

Widely condemned

But the notion has been widely attacked by many economists who believe that in a world of free capital markets it would be impossible to enforce and counter-productive if it prevented necessary exchange rate adjustments and capital flows to poor countries.

However, after the rapid currency devaluations during the Asian and Russian crisis, the idea has been attracting more interest.

And the widespread belief that the euro is undervalued by the markets against the dollar has contributed to the proposal's support in France.

Countries with a large international banking sector, such as the UK, the United States, Germany and the Netherlands, are likely to be strongly against the plan.

Confronting the United States

Mr Jospin may hope that by positioning France - already the most protectionist country in the EU - as the patron of the anti-globalisation movement, he can capitalise on the discomfort felt by many European governments over the policies of the new Bush adminstration in the United States.

In another speech, France's foreign minister, Hubert Vedrine, accused the US of hampering efforts to solve global probems, especially in relation to the environment.

"We shall pursue our efforts towards a humane and controlled globalisation, even if the new high-handed American unilateralism doesn't help matters," he told French diplomats at an annual seminar in Paris.

See also:

02 Jul 01 | Business
UN calls for globalisation summit
22 Jul 01 | Business
G8 extols globalisation
18 Jul 01 | Business
World inequality
25 Sep 00 | World
Globalisation: For and against
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