House of Commons Issue No. 16 Minutes of Proceedings and Evidence of the Standing Committee on Foreign and International Trade
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House of Commons Issue No. 16

Minutes of Proceedings and Evidence of the Standing Committee on Foreign and International Trade

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[Traduction en français]
This group is trying, with the Government of Ukraine, to implement an action plan that will eventually result in the closure of the dangerous nuclear reactors at Chernobyl. Previously, it focused on safeguarding them.

In terms of what we often say or refer to as hooks for Halifax, there are a number of items in the Naples communiqué that suggest there will be continued work for the Halifax summit. First and foremost, you will see in the preamble there is a reference to institutions for the 21st century. The Bretton Woods institutions, meaning the International Monetary Fund, the World Bank and now the WTO--which is also a Bretton Woods institution, but a very junior one--are 50 years old this year. The United Nations is 50 years old this year.

Leaders felt that perhaps there could be a discussion of how these institutions are geared or prepared to face the global circumstances of the 21st century.

There was also a reference to having a conference on partnership for economic transformation in Ukraine. This conference took place in Winnipeg in October. It was largely a discussion between senior officials of the G-7 countries and Russia was also present. Mr. Kozyrev, the foreign minister, attended. This was to look at various stabilization plans through the international financial institutions that would support the economic reform process in Ukraine.

International trade, again, comes up for discussion for Halifax, and that is the establishment and the clean launch of the WTO, as I had mentioned. There is a reference to national environment plans and to environment in general, particularly the Rio commitments on climate change and biodiversity.

I have mentioned nuclear safety. That continues to be a great challenge for the G-7 because there is recognition that the reactors at Chernobyl are only the tip of the iceberg, if you like.

Lastly, there was also the question--and it's more a question of process--of summit and summit reform. So what we're looking at in Halifax will be a leaner summit, unlike the previous ones, with a de-emphasis on the pomp that has occurred before and an emphasis on trying to develop some action-oriented strategies.

Thank you.

The Chairman: Thank you very much, Professor Helleiner. That is a helpful introduction.

Can I go next to Professor Kirton?

Professor John Kirton (Department of Political Science, University of Toronto): Thank you very much. It's a real pleasure to be here.

My expertise, such as it is, primarily relates to the G-7 as an institution itself. That's what I'll be focusing my remarks on, the more practical question of what, by way of reform of the international financial and economic institutions, we can reasonably expect through the Halifax summit process and at Halifax. But I will also deal with the G-7 itself as one of the major financial and economic institutions in the international system.

In thinking about the question of international financial institutional reform and the broader question of international institutional reform, I think it's appropriate to begin with the recognition that the world today does not suffer from a shortage of international institutions.

In fact, what we have accumulated in the 50 years since the Bretton Woods and San Francisco conferences is four separate generations or layers of international institutions: the United Nations family, the Atlantic family of institutions that soon followed, the regional organizations, beginning with the Organization of American States and the European Union, and what I think of as the beginnings of the post-Cold-War system of international institutions centred on the G-7 system itself from 1975 onwards and steadily institutionally developed in the subsequent two decades.

That, I think, has demonstrated the extraordinary flexibility of the leading governments of the world in focusing on new issues. But it is an accumulation that has had its costs.


I think we are facing today a major problem with overlapping activities, compounded by the institutional rivalries amongst these different generations of institutions. We face a problem of obsolescent purposes, of outdated patterns of representation, and of inadequate procedures, and in some ways most fundamentally the question of inadequate political control by heads of state and government to address the reform challenges.

It is the latter point that I think points to the importance of the G-7 summit in prompting a close scrutiny and an actual reform of the international system.

The very raison d'être of the G-7 was to replace the failed system of fixed exchange rates set in Bretton Woods, which collapsed on August 15, 1971, and more recently with the Plaza Louvre accords of 1985 and 1987. It did succeed, primarily through the G-7 finance ministers' institution, in putting in place a system of managed floating, which preserved to a surprising degree over the past decade or so exchange rate stability and flexibility in the international system.

More broadly, the G-7 summits over the years have provided the critical political impetus to reforming particular functional agencies of the UN system and other parts of the firmament in ways that the international institutions themselves have been unable to manage.

Thus at Halifax...I think it is important that the year before at Naples the question of international institutional reform, with a focus on the Bretton Woods twins, was identified as the centrepiece of that summit.

In taking up that task I would think it important that the G-7, and certainly Canada as host, continue to focus on taking a medium-width vision of international institutional reform and focusing not simply on the two Bretton Woods pillars of the system--the International Monetary Fund and the World Bank--not deluding its focus on the other hand by looking at the entire array of institutions in the United Nations galaxy and elsewhere, but focusing on the economic and financial pillars--the bank, the fund, the multilateral development banks, and the closely related economic institutions, if you will--the missing pillars of the Bretton Woods system, the New World Trade Organization and a comparable global environmental organization, to provide the balances multilaterally that we have recently achieved within the NAFTA community more closely at home.

Secondly, I think there is a tendency in the wake of the Mexican peso crisis to focus unduly on the short-term question of how the G-7 system can manage shocks to the international financial system. That's the same tendency we saw on the road to Toronto in 1988 when the stock market crash of October 1987 very much focused attention on short-term questions of liquidity and stabilization.

Nonetheless, as the months progressed we were able to adopt a longer-term vision. As a result, the Toronto summit of 1988 did pioneer some fairly fundamental new agenda items for the G-7 summit, which bore fruit over the subsequent years.

Thirdly, and I guess on a tactical level in thinking of the international institutional reform agenda for Halifax, it is important to recall that despite the impressions conveyed by the media, the system tends not to work in delivering successes in one-year instalments. Many of the permanent accomplishments through the G-7 summits have taken many years, often a three-year sequence of concerted effort, on the part of the leaders present.

That's why I think it's particularly important that Canada, in considering its own emphasis for Halifax, work in fairly close association with the hosts of the subsequent two years, France in 1996 and the United States in 1997.


With those caveats, then, what can we reasonably expect the Halifax summit to do by way of furthering the badly needed international financial institutional reform agenda?

I think the first answer to that question is to use Halifax to mobilize more resources through better burden sharing amongst the existing array of international financial institutions and multilateral development banks. The aggregate resources available through those institutions, and the distribution of the burden or the contribution within them, still bears the legacy of the arrangements of 1945 and distant decades.

In the broadest terms, there's a significant under-contribution on the part of the leading G-7 members--the United States itself, Japan especially, and even Germany in some cases. It is against that backdrop that Canada, relative to its own economic weight in the world, is a substantial over-contributor on every single one of the international financial institutions and multilateral development banks. I think this is dramatically highlighted by comparing our share of economic weight with our contribution to the multilateral development banks relative to that of the United States, as well as Japan and Germany.

In ordering the G-7 in terms of relative economic capability there is of course a striking contrast between Canada and the United Kingdom. The United Kingdom has about twice the raw economic weight of Canada in the world, yet we find that in contributions to the multilateral development banks, Canada is contributing more than twice as much to the African fund for development, more than twice as much to the Asian Development Fund, and, in the home hemisphere, almost twice as much to the Inter-American Development Bank as well.

There are of course some clear policy responses to this. One temptation is to pursue a policy that I think is normal for a middle power such as Australia: continue to be a good global citizen and contribute to the bank and the fund--the broad multilateral institutions--but retreat to the home regional theatre--in Australia's case, the Asian Development Bank--in looking at the broader array of regional institutions.

I believe this is an inappropriate choice for Canada, if only because we are a major and fully engaged G-7 player. But I do think it's important that we use our seat at the table in the G-7 to encourage our ranking G-7 partners to devote more of the resources to providing the funds needed to make the full array of international financial institutions work. And this does not need to come at the expense of their own fiscal deficits if, within their own countries, it represents a diversion of funding in their international systems envelopes, and particularly a diversion from such military assistance programs that they manage.

Failing this, it is important for Canada to explore, as a fall-back position, the advantages of returning to a profile of giving that more resembles that of the average of G-7 countries rather than maintaining our current and unique over-contributions across the board. But a concerted effort or an upward consensus would clearly, I think, bring into the system the new financial resources that it badly needs. Of course, the current debate over the replenishment of the latest international development agency for the 1996 to 1999 period is at the leading edge of that process.

Secondly, in considering the reform agenda of the international financial institutions, we need to strengthen the focus on the poorest of the poor, and on Africa above all. During the past half-decade or so, the G-7 system and the international financial institutions have overwhelmingly borne the weight of managing the incorporation of post-communist societies into the international economic system, with a considerable degree of success.

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