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]
Prof. Kirton: Thank you. On the first question, I think the basic point is that it is far easier to create international institutions, which then acquire a bureaucratic life of their own and become entrenched inter alia in the non-discretionary funding of the envelopes of the Departments of Foreign Affairs and International Trade here. While the purposes may have been appropriate to the particular historical era in which they were born, there is no institutionalized provision for what I think of as an international program review.

Even within the system of the United Nations, to provide for one example, we did, in the San Francisco generation, create the Food and Agriculture Organization, which is headquartered in Rome. In the 1970s, we added the World Food Program, which we continue to fund. We also continue to fund a third institution, the International Fund for Agricultural Development or IFAD. Even within the UN system, it does seem that there are three institutions competing broadly for the same policy space.

It's within that context that I think a review should be focused. A comprehensive inventory is the first item.

The second question is whether or not they efficiently and effectively accomplish the purposes for which they were originally designed. I think the methodology is in place and available to be transposed to the international level, as developed here in Ottawa over the past year or two.

There's also a question of whether or not the broad, multilateral system in the regional institutions are duplicative rather than supportive. The Canadian government funds, at quite healthy levels, the World Health Organization, but also the Pan American Health Organization as well.

While there may be unique hemispheric diseases or health concerns, it may well be that this layering process is something that, while it may have made sense in the late 1960s when we went in to the PAHO, is no longer necessary. There has been, I think, the odd case in which Canada has withdrawn from even a UN institution--UNIDO comes to mind--but there has been very little systematic attention for this.

The broader question of the international financial institutions and multilateral development banks follows from some of that. For example, we and the British have, in my judgment, quite appropriately funded the Caribbean Development Bank and its soft-loan window. The United States and the Japanese are not contributors to the Caribbean Development Bank.

They do give--they argue--to the larger Bretton Woods institutions and also to the Inter-American Development Bank, but, at this subordinate level of regionalism, they are absent. That is particularly curious, given the location of the United States as a Caribbean power and of course the emerging long-term structural trend of Japan as being the leading creditor country in the international system and, in that sense, very much a country with global responsibilities.

It was from that thinking that the G-7 appeared as the right place for us to engage in dialogue with the capital-rich countries about the appropriate division of burden and regional responsibilities. Many of our non-North American colleagues contribute about only 1% of the capital share to the Inter-American Development Fund, leaving Canada a disproportionate amount for its home region. However, if we go to different regions of the world in which they have long had more historic involvements, we are funding at a much more robust level than the 1% out-of-region figure, which is normal for the club. I think that is the dialogue we need to engage in, but with an initial emphasis very much on having our G-7 colleagues contribute more to the working institutions in the regions that need them.

Mr. Martin: Do you think the IFIs should focus an increasing amount of their money on soft loans? Also--this is my last question--what do you think will be the over-arching affect of the increasing world population on development and dwindling foreign aid from first world nations?


Prof. Kirton: I really do think we have to modernize the bias in the international financial institution system. That's why the strong emphasis on demilitarization is a process that we have to embed into all of them, as I mentioned.

There are quite practical reasons. Here I recall the summits of 1989, 1990, 1991 when we were mobilizing money to support the democratic and market transformation of the Soviet Union and then Russia. It was very difficult for some of our major G-7 colleagues to understand why they should give when that same country was providing assistance in the order of $5 billion to neighbouring countries that they thought of as being hostile. In the case of Japan, of course, with very low levels of per capita and per GNP of military spending, it is difficult to have them provide the money the system needs at the same time as they see many of the potential recipients maintaining large military establishments. So that bias, I think, would help both at the receiving end and at the giving end.

There is a second broad comment, though. It is one of the reasons I would exempt Africa from much of this, and perhaps it's an elaboration of a point introduced by Gerry Helleiner. It is all too tempting to think of many of the problems of Africa as being regional problems. In fact, I think the basic evidence of sustainable development suggests that they are very much global problems. Thus the contributions we make in Africa, in countries like China, targeted toward issues of population and directly toward purposes of sustainable development, have relatively immediate and direct benefits for Canada itself. So targeting geographically and regionally to take account of the new scientific evidence on global warming and other subjects should be the emphasis, as well as the modernization of the post-Cold-War period.

Many of the problems of African societies, to conclude, are not the results of a distant European-based imperialism...the result of the Cold War rivalries of the past fifty-odd years. Now that the Cold War is over, the task of focused reconstruction deserves priority.

The Chairman: Thank you very much, Professor Kirton.

Mr. Flis (Parkdale--High Park): I have a couple of questions for various panellists. The first would be to Professor Kirton, because you indicated that we were proportionately an over-contributor to the international financial institutions. The question I'm going to ask you relates to our participation in the G-7 summit. Do we have a weight in the G-7 summit arrangements proportionate to our over-proportionate contribution to international financial institutions? Or is it more likely that in spite of our over-contribution proportionately, we are not getting the bang for our buck that we should be getting?

To Professor Helleiner and perhaps to Mr. Bertrand as well, we hear a great deal, particularly from the NGO community, about the problem of conditionality of loans. Mr. Par‚ elicited a response from Professor Helleiner that this is the new imperialism. Having had some experience as a banker myself before I came here, I always found that all creditors think the banker's point of view is an imperialistic one.

Where is the difference between conditionality, which is a responsible gestion de fonds, if I can put it that way, and improper interference? Are you telling us, Professor Helleiner, that it would be new imperialism for us to say to our world institutions that they should not lend money to Zaire if $5 billion is going to go into Mr. Mobutu's private bank account in Switzerland, that we should not lend money to countries that over-expend on armaments rather than allowing the money to be spent on the poor? Is that imperialism or is that ensuring that world resources are properly allocated? How do we achieve that balance?

1055 In your remarks, you seem to suggest something about the need for a better balance within the structures. We will be going to Washington, and while we're there we hope to be able to ask questions that will, prior to the world summit, enable us to give a report to the government on concrete ways that will enable us to reform the institutions. But they must be responsive to the overall questions; they can't be too narrowly focused. So those would be my two questions.

Prof. Kirton: Thank you.

On the first question, I would certainly say that Canada has a real influence within the G-7, at least proportionate to its real weight in contributing to the international financial institutions, although it does not constitute a direct effect of this. In part, our influence stems from the fairly unique nature of the group as a small, consensus-oriented club--when it works well--of heads of state and of governments. In the past, I think we've seen examples of that influence being exerted. Together with Mr. Mitterrand, Mr. Trudeau refused to allow Mr. Reagan's 1983 summit in Williamsburg to proceed until he got some adjustment in a more accommodating approach towards the Soviet Union. In 1987 Mr. Mulroney refused to allow the summit to proceed unless it took up the issue of South Africa. I think the act of doing so was an important contributor to the democratic transition in South Africa.

Looking at the record of the past summits--and particularly at the record of the summit in keeping its commitments as recorded in the final communiqu‚s, because ultimately it makes no sense to get an agreement at Halifax, or anywhere else, if it's not honoured in subsequent months and years--I think we have some confidence in saying the summit seems to have worked well in terms of coming to agreements and commitments that are kept in the fields of trade, energy and environment and, to a lesser degree, in the fields of debt and development. That's why I think we see Canada's particular emphasis on and particular record of summit achievement in those areas.

The whole process of debt reduction initiated with the Toronto terms in 1988, for example, could and should extend into the Halifax terms, by which we would take up to the multilateral institutions a conceptually more difficult issue of actually relieving debt and of coping with the question of moral hazard. It's in discussions like these, of course, that Canada's voice is given added weight by its ability to provide real resources in the multilateral system. So while there are elements of connection, in broader terms the actual degree of financial contribution is not the cause of many of the successes we've enjoyed.

The Chairman: Mr. Helleiner, on conditionality....

[English translation]
Monsieur Bertrand, vous avez peut-être quelque chose à ajouter.

[Traduction en français]
Prof. Helleiner: I know of no one in a responsible position, in developing countries or anywhere else, who advocates the elimination of conditions on the part of those who provide finance--not at all. But the....

The Chairman: It's a question of what conditions.

Prof. Helleiner: There are two arguments. One is the proportion of total finance that should be made available on a fairly unconditional basis in response to shocks and droughts and in terms of trade collapse and so forth.

Initially, in the early days of the International Monetary Fund, all its credit was unconditional. There were certain rules, and if you met the terms you got it. We've now moved to the other extreme, where 100% of the lending on the part of the major financial institutions is highly conditioned. We have one argument about whether the move to 100% has overshot and whether we shouldn't go back to some contingency financing arrangements to deal with foreseeable problems that are not the fault of the borrower.

The second, more controversial issue is the content of the conditions. There are two principal grounds for concern. One is technical. There is professional debate on the efficacy of particular policy reforms and the sequence with which they are introduced. There have been mistakes made and admitted by the IMF and the World Bank.

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