[Traduction en français]
While a review process at the global level is entirely appropriate, what has, however, generated considerable anger--or at least annoyance--in large parts of the world is the manner in which the G-7 unilaterally took over the leadership of this review, seeming to announce that it would complete its review for the consideration of the world in time for the Halifax summit conference, their next summit conference.
This process of G-7 review, outside the normal machinery, generated a strong communiqué from the developing country caucus in the IMF and World Bank at the last meeting of the IMF and World Bank in Madrid. It has generated annoyance on the part of the Nordics, the Dutch, the Belgians and a number of other middle-sized powers.
There will be annoyance expressed again at the spring meetings in Washington of the interim and development committees of the IMF and World Bank. There will certainly be another strong communiqué of protestation from the developing country caucus.
All of this would suggest it is inappropriate for a group accounting for less than one-fifth of the world's population--and a proportion that is declining--to unilaterally map out a process of review for the world's financial institutions.
Halifax therefore should be seen as an opportunity not to complete the review and make decisions, but rather to launch a process that is fully participatory, a process in which a sense of ownership can be felt on the part of other governments and that may therefore be effective.
Any review process that is not more representative, in which there isn't a greater sense of participation, simply will not function. Indicative of the possible outcomes is the bust-up that occurred in Madrid in the interim committee when the G-7 tried as usual to impose their precooked deal upon the other members of the interim committee on the subject of special drawing rights.
I think the world is no longer prepared to allow the G-7 to take this degree of control; they will have to be involved. I believe Canada has a unique opportunity as the, so to speak, weakest member of the G-7, the one with the greatest affinity with the non-members of the G-7.
You may have noted a column by Peter Cook in The Globe and Mail a couple of months ago. He recommended not the expansion of the G-7, as Professor Kirton mentioned, but rather that Canada's principal contribution at Halifax should be to resign from the G-7 and make way for India or China.
I don't think one needs to go that far, but I do think Canada has a special responsibility, both as a small member of the G-7 and as the host, to build the necessary bridges with the rest of the world.
Canada should also work to establish a proper process of review, one that might well build on the intergovernmental model of the so-called Committee of 20, which between 1972 and 1974 undertook a major review of the international financial system, in particular the monetary system and the functioning of the IMF.
From that review came the interim committee, the development committee and a number of other things. Unfortunately the review was interrupted by the first oil price crisis and to some degree was never completed.
Canada then has an opportunity here that I think it should use on process matters.
As far as substance is concerned, I mentioned three main public goods.
First, on macroeconomic management, it isn't always understood that the IMF is actually relatively weak in its capacity to deal with global economic shocks and global macromanagement. It's barely tolerated in the meetings of the Group of Seven itself.
Effectively, the Group of Three within the Group of Seven conducts macroeconomic management at the global level. Neither the smaller industrialized countries nor the developing countries have great confidence in the capacity of the G-3 or the G-7 to conduct policies that are in the global interest.
Interest rate policies, the monetary fiscal mix chosen by the United States and the G-7, played a major role both in the debt crisis of the 1970s and again in the recent Mexican debt crisis. One needs a broader orientation in the discussions at the global level of what the global economy requires rather than what the G-7 requires.
The IMF's capacity to influence in this sphere needs to be strengthened. If it is to be effective in this role, the IMF's own processes need to be democratized so that the interim committee is not seen as simply a rubber stamp for what the G-7 has already decided, as it frequently has been seen, and so that the entire machinery becomes one in which people feel a greater sense of ownership throughout the world.
Second is global liquidity. There is an active discussion now, made more dramatic by the Mexican events, of the capacity of the global system to provide short-term finance to tide countries over temporary difficulties. The way in which it was done in the Mexican case, however, breaches IMF rules in several dimensions.
They took the decision in four days when it's supposed to take three weeks. They gave them 700% of quota when they're only supposed to have 100%. They broke article 6, which says you are not allowed to provide finance for sustained long-term capital outflows. The managing director of the IMF has been trying all of the past year to create a new facility to allow him to deal with Mexican-type crises. He has not yet succeeded, yet they did it anyway.
This kind of ad hoc approach to shocks is one that cannot be sustained. If there's more than one Mexico--two, three, many Mexicos, to take a phrase from an earlier decade where the word was Vietnam instead of Mexico--this could generate real difficulties. The financial machinery, which should be able to deal with this and should be centred on the IMF, is centred instead in the G-7, subject to the peculiarities of the U.S. Congress and the difficulties of negotiating with the Bank for International Settlements.
One must simply get that together and systematize it on a longer-run basis so that special drawing rights can again be provided in sufficient size, the size of the IMF's resources can be expanded sufficiently to allow them to deal with such issues and problems, and the conditions attached to their lending are clarified and democratized. No doubt if that is done well it will also involve an increased IMF role in the surveillance and the provision of early warnings to those who are engaged in the macroeconomic management at the national level throughout the world.
Lastly is development finance. It's not always recognized that the World Bank has become a relatively marginal actor in the provision of development finance. I refer not purely to markets, which are providing massive amounts again. Even within the official arena, other institutions, particularly regional development banks, are gradually taking over much of the function that the World Bank at the global level has previously performed.
One has to ask not only the question of the adequacy of the overall size of resources for the provision of official development finance for the poorest parts of the world, particularly Africa, in places where markets will not supply it, but also of the terms and conditions upon which different institutions, notably the regional ones as against the global one, will supply such finance.
One also hears, appropriately I think, increasing discussion of the principle of subsidiarity applied to the international development financial institutions. Should it not be the World Bank's role to deal principally with world issues, leaving the regional development banks, which are already as important in some regions as the World Bank, to deal with regional finance?
In any case, the supply of official development finance looks uncertain. We must find new sources of finance and we must find automatic sources of finance--global tax revenues through such devices as taxes on foreign exchange transactions, the so-called Tobin tax, revenues from the global commons, taxes on airline or other international luxury products.
One must find some way to offset the projected significant decline in flows of resources to sub-Saharan Africa. About 30 of them finally have their policy act together, democracy is increasing, exchange rates have been not only stabilized but the degree of misalignment has been massively reduced--this is not the time to reduce official flows. We must find ways to get that back up.
I think the potential Canadian role in this is great. I believe we have much in common with the Nordics, the Dutch, the Australians and the Swiss, with whom we consciously share the extra burdens Professor Kirton referred to. There are only half a dozen countries that devote more than 30% of their development assistance to multilateral agencies, and we are one of them. The reason is that is how we best express our national objectives and national values.
You cannot at present expect much leadership from the United States. The administration is strangled by the Congress, and it looks like the Congress may be vetoed by the administration.
However, as Professor Kirton seems to imply, it may be the right time to question some of the practices and customs around the international financial scene. The unfortunate illness of the president of the World Bank, who has been forced to step down, may provide an opportunity to raise the practice of just having the World Bank president appointed by the United States. It is anomalous. It's not just that the U.S. role has become much smaller; it's also that the World Bank is the world's foremost development institution, and the development literature is full of statements to the effect that development institutions must involve participation and a sense of ownership and democratic process.
So while there isn't much to be hoped for from U.S. leadership in this sphere in the short term, the current American political difficulties might create an opportunity, because of the illness of the president of the World Bank, to reform one of the most peculiar practices on the international financial scene.
The Chairman: Thank you, Professor Helleiner.
[English Translation] Je donne maintenant la parole à M. Jacques Bertrand, le coordinateur des ressources pédagogiques de l'Organisation catholique canadienne pour le développement et la paix.
M. Jacques Bertrand (coordinateur des ressources pédagogiques, Organisation catholique canadienne pour le développement et la paix): Merci, monsieur le président.
Comme vous l'avez suggéré plus tôt, je vais vous présenter un peu l'Organisation, qui est peut-être relativement peu connue de la plupart des gens ici.
Il s'agit probablement de l'organisation la plus importante au Canada dans son domaine. Il s'agit essentiellement d'une organisation de solidarité avec les pays et les peuples du Sud.
Nous avons deux volets à notre activité. Le premier est un appui financier à des groupes, à des programmes, à des projets qui ont lieu dans les pays du Sud. Le deuxième est l'éducation du public canadien aux questions de développement.
Dans les pays du Sud, on appuie financièrement des instituts de recherche en développement économique, des groupes populaires et des groupes de défense des droits de la personne. Cela nous met en lien avec quelque 400 partenaires ou groupes dans les pays du Sud.
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