Global Development: Views from the Center

I think the idea of a fund to fight AIDS in the developing world is fabulous. And I don't really have a problem with an airline tax, either, as it's sensible for airline prices to rise so as to curb emissions and global warming. But why are the two lumped together in such a way? Even this "tax-loving liberal" feels that forcing every airline passenger to contribute to a cause that they may not want to is suspect. We all pay income taxes to governments who make decisions like this for us any day, as part of foreign policy, but that seems much more acceptable philosophically, as people expect that the government they elect into power will make foreign policy decisions that include things such as foreign aid.

Perhaps there is some logic behind this that I'm missing? Why do you support a proposal that seems so random?

Are the arguments for this airline tax any stronger than the arguments in favor of the old "Tobin tax" on financial transactions? Again, the assumption seems to be that promoting development means spending a lot more money, when CGD itself pretty convincingly argues that without better evaluation of what is already being spent on development assistance -- and what works or does not work -- we might be throwing a whole lot more good money after the bad.
Since Mr. Chirac is leaving office next year, I suppose he is anxious to have some kind of legacy. Perhaps there is more room for promoting voluntary donations for such activities, e.g., Gates, Buffet, Branson, etc., where there may be closer monitoring of performance than leaving it up to the usual suspects.

Unfortunately, Dr. Birdsall is in error about the use of money raised by the (French-led) International Drug Purchase Fund. IDPF spending decsions will be made by the IDPF Board, and the announcement was that initial money would go to drug companies, not to the Global Fund.
In a decision pushed by recipient countries and activitsts, but opposed by the US, the Global Fund Board decided some time ago that in-kind contributions of drugs to the Global Fund are not permitted. It is entirely permitted that all or part of the revenue from the French air ticket tax (France is the only country taxing air tickets for IDPF; other countries are contributing out of their regular ODA budgets) could be donated in cash to the Global Fund, but the IDPF has specifically rejected this option. 90% will go to purchase AIDS drugs from manufacturers (10% is undecided) and none will go to the Global Fund.
Global Fund principal recipients COULD, country-by-country, request IDPF for drugs to SUPPLEMENT what the Global Fund (or their own government or PEPFAR, for that matter) is financing. But it is important to recognize that IDPF/Unitaid is an entirely new organization, with its own board, staff, rules and as-yet-undefined methods of determining beneficiaries. In spite of extensive high-level contacts with the Global Fund, the IDPF decided to set up an independent multilateral organization, which, because of its structure cannot contribute to the Global Fund, unless the Fund's rules are changed. Like all of the contributors to IDPF, except the French, the US uses its regular budget to fund global AIDS efforts, such as to purchase drugs for AIDS treatment, including second-line and pediatric formulations.
We (the U.S.) are by far the biggest funder of AIDS drugs in the world. We welcome the French, British and others into this field, where needs are enormous, but the French Parliament must vote, like any other expenditure of tax money, whether to contribute air ticket taxes to IDPF. The US does not accept that there are morally superior or inferior taxation systems. We fund AIDS programs transparently and generously through the US income tax system. If France chooses a different way of taxing its citizens and foreigners for the same purpose, that is a decision for the French to make.

Jimmy Kolker makes a great point, that the French (and other participants in the tax scheme) can choose any method they wish to fund their international aid programs. But I must ask: Why do they feel the need to fund pharmaceuticals for poor countries out of a special levy on a group of people with no organized representation in their parliaments (mostly business-class airline travelers, i.e. much less than 1% of the population, many from other countries)? The answer, I fear, is that they have failed to build a domestic constituency for foreign aid. Even a tiny increase in common voters' willingness to spend their tax money on foreign aid would free up far more funds than all the "innovative" development finance schemes put together. Perhaps convincing voters that aid is a good idea, rather than coming up with schemes to get around voters' skepticism, is the real frontier for innovation.

Boy did I goof! Many thanks to Jimmy Kolker(see below) and others who gently set me straight. I stand corrected. See my new posting: Airline Tax Proposal Falls Short

Another common mistake I'd like to flag: France is not the only country to use an airline tax to fund UNITAID. Chile implemented a tax on January 1st (thus even before France). Other countries are apparently developing such legislation.
That being said, one thing that puzzles me about the whole airline tax/UNITAID discussion is that everyone takes for granted that these tax revenues will be stable and predictable. But is that so? Airline traffic can be quickly and dramatically disrupted (eg SARS, 9-11); it eventually bounces, but tax revenues would decrease for a while. Also, parliaments retain the power to reduce, eliminate and/or reorient those taxes (in fact, the French tax must be reviewed after 2 years).
UNITAID's success seems to depend on predictable financing to negociate better prices for drugs. It will be interesting to see manufacturers' reaction - will they have faith in this new source of funding and agree to sign long-term contracts (and invest in new equipment etc on that basis)? Will donors have to guarantee a minimum level of funding, irrespective of the real tax revenue? I'll stay tuned.