International Consensus in Trading and Investment

Paper Group Assignment

As the requisite of International Business Subject that lectured by Prof. Eko Ganis Sukoharsono, SE, MCOM-HONS, PH.D

By: Muhammad Arief Rasyid 105020303121006 Kharisma Devi 105020303121007 Monica Audrey Jaya Suwana 105020303121008

International Accounting Major Economic and Business Faculty University of Brawijaya Malang October 2011

International Consensus in Trading and Investment

ABSTRACT To cooperate in any field would require a treaty, agreement, or better known as the consensus.Consensus is a phrase to produce or make a deal agreed jointly between groups or individuals after the debate and research conducted in the collective intelligence to get a consensus decision-making. Consensus is done in an abstract idea, has no

practicalimplications for political consensus will but follow up the implementation of the agenda will be easier to do in influencing the politicalconsensus. Consensus can also be started with only Consensus is a phrase to produce or make a deal agreed jointly between groups or individuals after the debate and research conducted in the collective intelligence to get a consensus decision-making. Consensus is done in an abstract idea, has no practical implications for political consensus will but follow up the implementation of the agenda will be easier to do in influencing the political consensus. Consensus can also be started with only an opinion or idea that was later adopted by a group to the larger group because Based on the interests (often through a facilitation) to be achieved at the level of convergent decisions that will be developed.an opinion or idea that was later adopted by a group to the larger groupbecause Based on the interests (often through a facilitation) to be achieved at the level of convergent decisions that will be developed. In international business there are two consensus is considered important,the consensus on trade and investment. As we knowinternationalbusiness consists of trade and investment from within and outside the country. Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market.Trade exists for man due to specialization and division of labor, most people concentrate on a small aspect of production, trading for other products. Trade exists between regions because different regions have a comparative advantage in the production of some tradable commodity, or because different regions' size allows for the benefits of mass production. As such, trade at market prices between locations benefits both locations. Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a

high degree of security for the principal amount, as well as security of return, within an expected period of time. In contrast putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation or gambling. Investment is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance whether for households, firms, or governments. So, in this paper we will try to explain about what kind of consensus that regulate the investment and ttrading in internasional business. And we hope you can understand what rules to make a consensus, the kind of consensus and you can know the example of the consensus.

INTRODUCTION

A. Background The activity of trading and investment has been developed over the years since 1700 centuries ago. On that time, people use the simple way to trade and invest the money. For example in trade, they usually do barter or change the goods with another good that viewed as same value. But this theory has no good measurement of value of goods. So in nowadays, the theory and the way to do a trade is more develop than before. In investment, people used to provide by legal framework for investment establishing a means for the pledge of collateral by arrange the debtor and creditor rights in order to fulfill the pledge. In Indonesia, the development of trading and investment has begin since the Dutch colonial era in 16th century. The history of colonialism is the history of capitalist imperialist exploitation. At that time, Colony has established VOC (Vereenigde Oost-Indische Compagnie) or Company Organization on East India. This organization has purpose to build the activity of trading and investment. There lots of regulation on the organization that adverse Indonesian. On that situation, Indonesian could learn about regulation of trading and investment. Now, since 1973 the Investment Coordinating Board (Badan Koordinasi Penanaman Modal) has been formulating the policy about investment, include planning, permission, controlling and evaluating. Investment is one of the proper way to develop the overseas industry rather than maintain the policy in the country. In the world scope, World Trade Organization (WTO) supervise and liberalize international trade. This organization deals with regulation of trade between participating countries, provides a framework for negotiating and formalizing trade agreements and dispute resolution process. Trading and Investment has important role about economic development in developed country like in Indonesia. And theres some arrangement to regulate it. In order to make it structural and every user could get the advantages of the activities.

CONTENTS

A. Consensus Consensus is a group process where the input of everyone is carefully considered and an outcome is crafted that best meets the needs of the group. It is a process of synthesizing the wisdom of all the participants into the best decision possible at the time. The root of consensus is the word consent, which means to give permission to. When you consent to a decision, you are giving your permission to the group to go ahead with the decision. You may disagree with the decision, but based on listening to everyone elses input, all the individuals agree to let the decision go forward, because the decision is the best one the entire group can achieve at the current time. The heart of consensus is a cooperative intent, where the members are willing to work together to find the solution that meets the needs of the group. The cooperative nature of consensus is different mindset from the competitive nature of majority voting. In a consensus process the members come together to find or create the best solutions by working together. Key attributes to successfully participation include humility, willingness to listen to others and see their perspectives, and willingness to share your own ideas but not insist they are the best ones. B. Benefit By Using Consensus Consensus gathers the experiences from the whole group

Within every member of any group there is a lifetime of experiences and knowledge. Consensus is a way to tap the collective knowledge of the group to craft the best decision possible. Consensus builds relationships between people

In a consensus process, people extend their relationships to each other as part of the listening and talking process. Consensus takes time and effort, honest communication and a willingness to trust the relationship. The communication of ideas and feelings, and the empathetic listening, builds trust and bonds between group members. By encouraging shared leadership and participation, consensus empowers all the members of a group to

make the best decision. By working together to clarify ideas and proposals, the members build trust and communication skills that continue to grow and expand as the group works together. The longer the group works together, the better they get. The synergy of building collaborative agreements also builds a strong sense of commitment to the group and its mission, and a sense of belonging and commitment among the members. Consensus moves toward doing what is best for the common interest

In the process of defining individual boundaries and issues within the group context, individual desires and boundaries are tested against the best interests of the group. The key element of making consensus work is a commitment by each individual to honor the best interests of the group. As people work through issues, they have their own needs reflected back to them against the context of the larger group needs. This encourages them to consider other interests beyond just their own. Consensus agreements need less enforcement

Once an agreement is made, and everyone gives their consent to it, the agreement is backed by the relationship. If you honor your relationship to the group, your respect for the agreements which you participated in guides you to follow the agreement. Agreements made by consensus are self enforced and rarely require anything more than a reminder of the agreement to ensure compliance. Consensus means everyone has given permission for the agreement to go ahead, and by not following through on the agreement, you jeopardize your relationship and your sense of community. If the desire for community relationship is strong, then the decisions made by the groups consensus will also be strong. There is no subgroup of angry, outvoted participants that will work to undermine the decision or ignore it. C. Ingredients of Successful Consensus Process Facilitation. Some of the group members have an understanding and the skills for running a consensus process. Participants understand the process.

The participants have a basic understanding of what consensus is, how the group applies it, and what the expectations of the group are. Participation.

Group members need to be present for the discussion part of the decision so your ideas can be shared, and you hear the other perspectives and ideas. Cooperation.

A willingness among the participants to trust the wisdom of the group and to cooperate. A safe place to talk about the decision at hand.

The group environment needs to be comfortable so that individuals will freely share their ideas and thoughts, fears, opinions and experiences. Ideas are heard and acknowledged.

Each participant feels that their contributions are considered. They might not be part of the final solution but the ideas were fairly and equally considered. Decisions are Documented

When the group agrees, the agreement is captured in writing so the group can refer to it later. The process is reviewed

At some interval, the decision process is evaluated. Meeting elements and decision processes that are working are identified to be continued. Things which are not working well are examined and changed. D. Three Stage Process for Consensus Consensus decision process typically goes through three stages: Discussion, Proposal, Modification.

The discussion stage is where the group meets and the topic is widely discussed. People freely share thoughts, opinions, feelings, ideas and react to each others contributions. This is the heart of consensus, because it is where you come together and synthesize all the thoughts. This is also where your opinions, if you have any, are subject to change as you listen and hear other perspectives. When a person misses this stage, they are seriously handicapped in their ability to help the group, because they did not hear any other perspectives to help them modify their own thinking, thus they are limited to only their own perspective.

The proposal stage comes after the discussion stage. The thoughts and ideas are synthesized into one or more proposal statements. This is where a good facilitator adds a great value, because they look for the common areas of understanding and agreement and bring those out and summarize them for the group. As the common ground emerges from the discussion, or as common ground is created, it is captured in writing.

The modification stage is where the summary proposal is tested and modified to meet the needs of the group. In some cases this is done at the same meeting, by adjusting the working draft of the proposal by including, removing, or modifying the language of the proposal. In other situations this is done weeks or months after the meeting, as the decision is implemented and new things are learned from the experiences, and so the decision is reviewed and amended as new information becomes available. Or in larger groups, a small group takes the discussion information, creates proposals and comes back at a later time with a proposal for modification.

E. Typical Problems Groups Have Using Consensus Lack of participation

For consensus to work, a large majority of the membership, ideally a minimum of 80%, needs to be present for the discussion phase of the decision. Those not present during this phase need to be brought up to speed. Some consensus groups sign up to be buddies for those not present, and the buddies job is to convey the perspectives of the meeting to the person not present. When half or less of a group participates, the group misses too much perspectives and decisions end up poorly made, and often unsupported by those that missed the discussion.

People who miss the discussion but come in on the proposal

When people miss the discussion, and its perspectives, they may bring up the same conversations and points that the rest of the group has already been through. If this occurs regularly, people may become resentful of those that dont participate in the discussions, or may even stop coming to meetings because they end up rehashing the same discussions over and over again. Many consensus groups do not allow those not present for the discussion stage to be part of the proposal and modification stages, or have special considerations for those that did not participate in the discussion. Participation in the full cycle of the consensus process is a important for a successful consensus decision. The meeting environment discourages contributions

If there is a lot of cross talking, or loud rebuttals, or sarcastic tones it will keep some people from sharing their ideas. In the worse cases people are personally insulted, belittled, or laughed at. It is unlikely in such an environment people would feel good about being part of the process and willingly contribute ideas that might add value but run counter to the ideas of others in the group. If there is a strong hierarchy in the group, for example a dominate person such as a supervisor, it can affect peoples willingness to bring up all the ideas, especially those that might run counter to the bosses opinions. Poor communication of decisions, agendas and information

If you dont know when or where the meeting is, you cant attend. If you dont hear about the agenda of the meeting, you have no time to think about it before the meeting. Some people do need time to get think, they dont do well having to process ideas and information immediately. Everyone consents but puts no energy behind it

A decision is reached, everyone consents to it, but it never gets done. This occurs when the during the modification stage of the proposal, the who will do this work question does not get asked or resolved. At the end of the modification process a plan can be added for who does the work and how they will be held accountable for the work. An individual inappropriately uses blocking

The groups interests are not being served by a block, for example a person blocks a decision from their own preferences or as a power play over the group. Or a personal threatens to block even before the discussion phase is held. This is where the facilitator needs to help the group negotiate by defining what is the real issue. Often there are hidden issues unresolved which are driving the individual to block. In the final case, a majority vote can override an inappropriate use of blocking.

F. EXAMPLE OF CONSENSUS 1. UK Emissions Trading Schemes The UK Emissions Trading Scheme was a voluntary emissions trading system created as a pilot prior to the mandatory European Union Emissions Trading Scheme which it now runs in parallel with. It ran from 2002 and it closed to new entrants in 2009. Management of the scheme transferred to the Department of Energy and Climate Change in 2008. At the time, the scheme was a novel economic approach, being the first multiindustry carbon trading system in the world. (Denmark ran a pilot greenhouse gas trading scheme between 2001 and 2003 but this only involved eight electricity companies). It took note of the emerging international consensus on the benefits of carbon trading that were being proposed in the mandatory Kyoto Protocol, which had not been ratified at that time, and allowed government and corporate early movers and to gain experience in the auction process and the trading system that the later schemes have entailed. It ran in parallel to a tax on energy use, the Climate Change Levy, introduced in April 2001, but companies could get a discount on the tax if they elected to make reductions through participation in the trading scheme. The voluntary trading scheme recruited 34 participants from UK industries and organisations who promised to make reductions in their carbon emissions, this has since expanded to 54 sectors of the UK economy. In return they received a share of a 215 million "incentive fund" from the Department for Environment, Food and Rural Affairs (DEFRA). Each agreed to hold sufficient allowances to cover its actual emissions for that year, and participate

in a cap and trade system, with an annually-reducing cap. Each participant could then decide to take action to manage its emissions to exactly meet its target, or reduce its actual emissions below its target (thereby releasing allowances that it could sell on, or save for use in future years), or buy allowances from other participants to cover any excess. From March 2002, DEFRA ran an auction of emission allowances to perform allocations to participants, after the start of the mandatory EU scheme. The UK's National Audit Office and DEFRA's consultant ran reviews of the system in order to establish its basis and drew lessons from it. They concluded that the scheme did achieve some emission reductions from the participants, although more could have been achieved had targets been more demanding. The 34 companies that participated took advantage of the incentive fund to pay for reduction measures, and in practice most were incentivised to make additional efforts to further cut emissions beyond their targets. They gained experience in pricing strategies and were prepared in advance of the start of the mandatory scheme. The companies that provided emissions trading brokerage and verification were able to establish their new businesses in the UK, and have since translated that first mover advantage to establish themselves on the European and wider international trading arena. DEFRA discovered the issues and practicalities of negotiating and setting baselines and running an auction process.

2. Washington Consensus The term Washington Consensus was coined in 1989 by the economist John Williamson to describe a set of ten relatively specific economic policy prescriptions that he considered constituted the "standard" reform package promoted for crisiswracked developing countries by Washington, D.C.-based institutions such as the

International Monetary Fund (IMF), World Bank, and the US Treasury Department. The prescriptions encompassed policies in such areas as macroeconomic stabilization, economic opening with respect to both trade and investment, and the expansion of market forces within the domestic economy. Subsequently to Williamson's work, the term Washington Consensus has commonly come to be used in a second, broader sense, to refer to a more general orientation towards a strongly market-based approach (sometimes described, typically pejoratively, as market fundamentalism or neoliberalism). The term Washington Consensus is also sometimes used in a historical sense to refer to the era when, as some authors suggest, the policy prescriptions involved (whether interpreted in the broad or narrow sense of the term) were especially influential. Williamson himself has argued (below) that his ten original, narrowly-defined prescriptions have largely acquired the status of "motherhood and apple pie" (i.e., are broadly taken for granted), but that the broader neoliberal manifesto "never enjoyed a consensus [in Washington] or anywhere much else" and can by now reasonably be said to be dead. Discussion of the Washington Consensus has long been contentious. Partly this reflects a lack of agreement over what is meant by the term, in face of the contrast between the broader and narrower definitions outlined above (there has been much debate, but less consensus, over the success or failure of countries that are variously claimed to have embraced (or rejected) the key recommendations of the consensus, however defined). But there are also substantive differences involved. Some of the critics discussed in this article take issue, for example, with the Consensus's emphasis on the opening of developing countries to global markets, and/or with what they see as an excessive focus on strengthening the influence of domestic market forces, arguably at the expense of key functions of the state. For other commentators reviewed below, the point at issue is less what is included in the Consensus than what is missing, including such areas as institution-building and targeted efforts to improve opportunities for the weakest in society. Despite these areas of controversy, a great many writers and development institutions would by now accept the more general proposition that, rather than any single "one size fits all" formula, strategies need to be tailored to the specific circumstances of individual countries.

3. Copenhagen Consensus Copenhagen Consensus is a project that seeks to establish priorities for advancing global welfare using methodologies based on the theory of welfare economics. It was conceived and organized by Bjrn Lomborg, the author of The Skeptical Environmentalist and the then director of the Danish government's Environmental Assessment Institute. It is now run by The Copenhagen Consensus Center under Lomborg's directorship at the Copenhagen Business School. The project considers possible solutions to a wide range of problems, presented by experts in each field. These are evaluated and ranked by a panel of leading economists. The emphasis is on rational prioritization by economic analysis, justified as a corrective to standard practice in international development, where, it is alleged, media attention and the "court of public opinion" results in priorities that are often far from optimal. The project has held conferences in 2004, 2008 and 2009. The 2008 report identified supplementing vitamins for undernourished children as the worlds best investment. The 2009 conference, dealing specifically with climate change, proposed research into marine cloud whitening (ships spraying seawater into clouds to make them reflect more sunlight and thereby reduce temperature) as the top climate change priority, though climate change itself is ranked well below other world problems. The initial project was co-sponsored by the Danish government and The Economist. A book summarizing the Copenhagen Consensus 2004 conclusions, Global Crises, Global Solutions, edited by Lomborg, was published in October 2004 by Cambridge University Press. A book summarizing the 2008 conclusions is in the process of publication.

4. Seoul Development Consensus The Seoul Development Consensus for Shared Growth is a set of principles and guidelines set up to assist the G20 nations and other global actors in working collaboratively with less developed countries in order to boost their economic growth and to achieve the UN's Millennium Development Goals. It was endorsed by the

leaders of G20 nations at the 2010 G-20 Seoul summit , with a multi year action plan drafted for the delivery of tangible results. In contrast with the older Washington Consensus, the Seoul Consensus allows a larger role for state intervention. Rather than seeking to impose a uniform "top down" solution, it postulates that solutions should be tailored to the requirements of individual developing nations, with the developing countries themselves taking the lead in designing packages of reforms and policies best suited to their needs. The Washington Consensus as originally defined was a set of ten key principles. The new Consensus is based on six core principles and has nine "key pillars". The six core principles of the Seoul consensus are:

Focus on economic growth The G20 suggest that economic growth is closely linked with low income countries' (LICs) ability to achieve the Millennium Development Goals. They state that measures to promote inclusive, sustainable and resilient growth should take precedence over business as usual.

Global development partnership. LICs should be treated as equal partners, with national ownership for their own development. Partnerships should be transparent and accountable.

Global or regional systemic issues. The G20 should prioritise regional or systemic issues where their collective action is best placed to deliver beneficial changes.

Private sector participation. The G20 recognise the importance of private actors in contributing to growth and suggest that policies should be business friendly.

Complementarity. The G20 will try to avoid duplicating the efforts of other global actors, focussing their efforts on areas where they have a comparative advantage.

Outcome orientation. The G20 will focus on tangible practical measures to address significant problems.

5. Monterrey Consensus The Monterrey Consensus was the outcome of the 2002 Monterrey Conference, the United Nations International Conference on Financing for Development. In Monterrey, Mexico. It was adopted by Heads of State and Government on 22 March 2002. Over fifty Heads of State and two hundred Ministers of Finance, Foreign Affairs, Development and Trade participated in the event. Governments were joined by the Heads of the United Nations, the International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO), prominent business and civil society leaders and other stakeholders. New development aid commitments from the United States and the European Union and other countries were made at the conference. Countries also reached agreements on other issues, including debt relief, fighting corruption, and policy coherence. Since its adoption the Monterrey Consensus has become the major reference point for international development cooperation. The document embraces six areas of Financing for Development: 1. Mobilizing domestic financial resources for development. 2. Mobilizing international resources for development: foreign direct investment and other private flows. 3. International Trade as an engine for development. 4. Increasing international financial and technical cooperation for development. 5. External Debt. 6. Addressing systemic issues: enhancing the coherence and consistency of the international monetary, financial and trading systems in support of development. Some critics suggest that the US has ignored the Monterrey Consensus because the amount of US official development assistance (0.18% of its gross domestic product in

2008), is still well below the 0.7% target, which it endorsed in the Consensus. It is much lower than some other developed countries, especially those in Scandinavia. The Follow-up International Conference on Financing for Development to Review the Implementation of the Monterrey Consensus (Doha,Qatar, 28 November 2 December 2008) was attended by some 40 Heads of State or Government, 9 Deputy Heads of State or Government, 50 ministers and 17 vice-ministers of foreign affairs, finance, development cooperation and trade, as well as other high-level officials of 170 States and major institutional stakeholders. Doha Declaration Following intense intergovernmental negotiations, the Conference concluded with the adoption of the Doha Declaration on Financing for Development (). The two key messages included in the document were a strong commitment by developed countries to maintain their Official Development Assistance (ODA) targets irrespective of the current financial crisis, and a decision to hold a UN Conference at the highest level on the impact of the current financial and economic crisis on development. Other main highlights of the Doha Declaration are: Domestic resource mobilization: the importance of national ownership of development strategies and of an inclusive financial sector, as well as the need for strong policies on good governance, accountability, gender equality and human development. Mobilizing international resources for development: the need to improve the enabling environment and to expand the reach of private flows to a greater number of developing countries. International trade as an engine for development: the importance of concluding the Doha round of multilateral trade negotiations as soon as possible. External debt: the need to strengthen crisis prevention mechanisms and to consider enhanced approaches for debt restructuring mechanisms.

Addressing systemic issues: the need to review existing global economic governance arrangements, with a view to comprehensive reforms of the international financial system and institutions. Plenary meetings The Conference was chaired by the Emir of Qatar and included seven plenary meetings. A total of 133 Governments made statements to the plenary. The SecretaryGeneral of the United Nations, the President of the General Assembly, the DirectorGeneral of WTO, the Secretary-General of UNCTAD and the Administrator of UNDP spoke at the opening. In their statements, Member States took stock of the progress made in the implementation of the Monterrey Consensus, identified obstacles and constraints encountered and put forward ideas and proposals to overcome these difficulties. Many statements focused on the consequences of the global financial crisis for development and the need for bold and urgent measures to address them. Much attention was also devoted to the food and energy crises and to the untapped potential of innovative sources of finance. Round tables Six interactive multi-stakeholder round tables were held concurrently with the plenary meetings, centering on the six thematic areas of the Monterey Consensus. Each round table was co-chaired by two Heads of State or Government and ministers from developing and developed countries and moderated by a high-level official of the major institutional stakeholders. Panelists included HRH Princess Maxima of the Netherlands; S-Gs Special Envoys for the Conference, Mr. Trevor Manuel, South African Finance Minister and Ms. Heidemarie Weiczorek-Zeul, German Minister for Development Cooperation. Following presentations by panelists, interactive discussions took place among representatives of Member States, inter-governmental organizations, UN agencies, civil society and the business sector.

Pre-conference events The Conference was preceded by a high-level retreat on the global financial crisis, hosted on 28 November by the Secretary-General of the United Nations and the Emir of Qatar. The retreat was attended by some 30 Heads of State or Government and ministers from both developed and developing countries, as well as high-level representatives of the major institutional stakeholders. The retreat was meant to serve as a bridge between the discussions on the financial crisis that had taken place among smaller groups of countries and the wider membership of the United Nations. A Global Forum of Civil Society was held from 26 to 27 November on the theme Investing in people-centered development and attracted participation of more than 250 civil society organizations and networks. In addition, an International Business Forum, held on 28 November focused on mobilizing private sector resources for development and was attended by more than 200 participants from the private sector. Side events More than 50 side events took place at the Conference site. In the spirit of Monterrey, the organizers were Governments, inter-governmental and nongovernmental organizations and the business sector. The issues of inclusive and innovative financing for development featured prominently in several side events. High-level speakers included: HRH Princess Maxima of the Netherlands, the President of Tanzania. Press and NGO reactions to the Doha Conference The press noted that few leaders of Western countries attended the meeting. The meeting was also marked by the absence of the heads of the Bretton Woods institutions (World Bank and IMF). The United States aid chief still thought the meeting was worthwhile, and welcomed the outcome. Other, such as the Eurodad network criticised it.

CONCLUSION Benefit By Using Consensus Consensus gathers the experiences from the whole group Consensus builds relationships between people Consensus moves toward doing what is best for the common interest Consensus agreements need less enforcement

Ingredients of Consensus Facilitation. Participants understand the process. Participation. Cooperation. A safe place to talk about the decision at hand. Ideas are heard and acknowledged. Decisions are Documented The process is reviewed Consensus decision process typically goes through three stages: Discussion, Proposal, Modification. Typical Problems Groups Have Using Consensus People who miss the discussion but come in on the proposal The meeting environment discourages contributions Poor communication of decisions, agendas and information Everyone consents but puts no energy behind it An individual inappropriately uses blocking

REFERENCES

http://nica.ic.org/Process/Consensusbasics.php http://en.wikipedia.org/wiki/UK_Emissions_Trading_Scheme http://en.wikipedia.org/wiki/Copenhagen_Consensus http://www.un.org/esa/ffd/doha/documents/Doha_Declaration_FFD.pdf http://en.wikipedia.org/wiki/Monterrey_Consensus http://www.un.org/esa/desa/desaNews/v13n01/global.html#Doha http://www.un.org/esa/ffd/doha/index.htm