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]
On the review mechanism, it is linked to a large extent to greater transparency in the work of the IMF. This is an issue that is very much alive and I think will be looked at in the context of our preparation for Halifax and the institutional review item.

The extent to which you can reproduce the kind of World Bank model that works on projects and specific program lending as opposed to a macroeconomic program is a difficult analogy to establish. However, the issue of transparency and greater evaluation of the effectiveness of the IMF economic policy approach, I guess, is very much one that is current in the IMF and in our group.

Military expenditures--that is certainly a theme Canada has pushed in the World Bank in particular. I'm struck by the fact that over the last three or four years it has been emerging as a subject of legitimate debate both in the World Bank and other development banks and in the UN. In fact, the UNDP human development report is now every year publishing data and statistics. I think we're creating an acceptance for the notion that this is a legitimate concern.

The real question facing us is the extent to which you can actually establish hard-and-fast rules, quantify percentages, relationships. That's more difficult.

But it's very much on the table. It's an issue we've carried in the World Bank, and it is one we are in fact discussing in the context of the reform.

Third, EDs', executive directors', accountability to parliament--I would need to have a legal opinion on that. But you have to remember EDs are officers of the bank or the IMF, and they are paid for by these institutions. Secondly, in our case at least, they represent a constituency. They don't speak only for Canada; they speak for a group of countries that in fact elect them, both in the IMF and in the World Bank. You have also to remember that the accountability is through the governor of the bank; and the governor is the Minister of Finance, who is accountable in that sense.

As I say, I would need legal advice. I'm just pointing out that there are some characteristics of EDs that make this accountability relationship to raises a question in my own mind, at least.

Mr. Regan: Are there people we appoint as delegates, at least, to those institutions where there are directors?

Ms Fréchette: No.

Mr. Regan: We simply have a vote on who gets elected as a director.

Ms Fréchette: Yes.

Mr. Lastewka (St. Catharines): We have talked about the economic and financial crisis around the world. The question I always have is this. Is the G-7 group in a frame of mind to look at the economic crisis we have around the world, to face it in a cooperative way? Is there a will to look at the problems we have around the world and face them?

Mr. Smith: You have to look at this historically. The G-7 has been around for twenty years. On some occasions in the past the G-7 has done well and addressed what is the current major issue. At other times it has probably done less well.

One of the problems that inevitably confront the G-7 is that individual countries have different problems. We may not all have exactly the same problem. Mr. Leblanc called attention to our high deficit-to-GDP and debt-to-GDP ratios. Well, Italy is there with us. Other countries don't have that problem to the same degree. The United States is focused on its trade imbalances, as we know. There is inevitably pressure on the Japanese to increase consumption in their economy.

Inevitably what comes out, therefore, is something of a compromise that meets the varied interests of all the member countries. So whether it's been a success or not depends a little on what point of view you're coming from, because all countries are not facing the same issue.


Now, with respect to the capacity to deal with the challenges ahead, which I said is the underlying theme for Halifax, there may be a higher degree of common interest that would result in a consensus on those issues, which would try to basically--and I will come back to that--push them forward on the international agenda. It's not within the capacity of the seven, as I said, to take decisions that will affect institutions that have a broader membership than the seven.

Mr. English (Kitchener): We had a round table two days ago with Dr. Boehm, among other participants, and two of the panellists, Professor Kirton and Professor Helleiner, differed in their views on the banks. Professor Kirton said that we give twice as much to the banks as they germinate, and in the case of Britain four times as much. We give too much. Professor Helleiner said that's not true, we just look at it in a different way.

I think the question will end up with Mr. Smith.

In their discussions it was quite clear that Dr. Helleiner thought that Canada's place was as a representative of those countries that were excluded, not simply the poor ones but countries such as the Netherlands and Sweden that have high percentages of donations to the multilateral banks.

In terms of the perception of Canada's role in the banks, within the G-7 are we perceived as representing those who aren't there? In terms of our own role in the banks, do we perceive ourselves as being more of a spokesperson for those that are left out than the other countries of the G-7?

Mr. Smith: I would be very hesitant about Canada taking on the role in the G-7 to speak for anybody other than Canada. I think that if you look back at the origins of our participation in the G-7--and we were not at the first meeting--it was because the summit was rather European dominated, because our Americans friends were anxious to have another North American perspective on the international issues, and because we were a credible member of the club in our own right.

Now, that said, there has been a history. I think back to when Prime Minister Trudeau presided over one of the G-7 meetings, where he went out and talked to people in the less developed part of the world to try to be able to bring forward their point of view. It's one of the reasons why it strikes me, as I said earlier, that a focus on the capacity of the institutions to deal with the problems of the poorest would be an appropriate one for Canada. There's a certain history of that.

I think President Mitterrand did the same thing.

I think therefore what you saw was our seeing there's a problem in the world and feeling the summit should be addressing that problem--the north-south problems, as they were described then. However, I don't think we ever arrogated to ourselves the responsibility to speak on behalf of those countries. Similarly with the ASEAN countries we will consult with, I think our position would be better informed if we understand what their concerns are, but I think it would be inappropriate for us to take on a responsibility to actually be speaking on their behalf.

Ms Fréchette: Mr. Chairman, I would just like to underline one fact. In the bank and in the IMF we actually speak on behalf of a number of developing countries because we are heading this constituency.

Secondly, to complete Gordon's thought, I think part of the value-added we bring to the G-7 table is the fact that by virtue of who we are, we happen to have particularly good relations with several groupings around the world. We are unique in that situation. We do not necessarily speak for them, but we certainly bring an understanding of the atmosphere of the Francophonie, of the Commonwealth, that no other G-7 country can match. In that sense we bring a knowledge and an intimacy that others don't.


Mr. English: In a sense, then, what you are saying, if I can interpret the comment, is that we're reluctant to admit we are seen in that way, but sometimes we act in that fashion. That was the argument Professor Kirton made, if I remember correctly. Dr. Boehm was there. He gave examples from 1983 and 1987, specific Canadian initiatives on behalf of not Third World simply but, in the case of 1983, Cold War issues, saying Canada would be somehow more representative of the countries that are not the great powers, the countries that are not the major powers, whether they be the United States or Japan or Germany.

Mr. Smith: All I would say is that I think we act on the basis of our perception of what our own interests are. As Louise Fréchette has said--and I think this is also a partial answer to Mr. Leblanc--we are, for a variety of reasons, members of a lot of different groups. We are not a superpower with superpower interests, be they of a political, military, or economic nature.

But where we are...and this is what I think brings--and maybe there isn't the contradiction that appears here--the issue together. For us, where we sit in North America, the system is particularly important. It's important in trade terms. It is important in international political terms. It is one of the reasons why we've always been a supporter of a strong GATT and the creation of the WTO. It is one of the reasons why the United Nations has played a central part in our diplomacy. We believe a rules-based system, with strong international institutions, is very much in our own interest. It happens also to be in the interests of a number of other countries that are in more or less similar situations. But I still think when we advance positions, we do so on that basis of our own concept of national interest. But it's done in that context I've just described.

The Chairman: Mr. Smith is going to leave shortly. Before he leaves, on behalf of the committee, I want to probe him a little on something he has said. This is a double-barrelled question.

You said the reform of the Bretton Woods agreements and that process would be welcome. From that I have two questions.

The first is this. We have the impression from within our own government that reform process is more welcome from your side of the table than from the Finance side of the table, and Finance is more conservative about reform of those institutions than other members of the government. I would ask if you both would comment on that.

That is only the first part of the question. The second part is more difficult, in a sense. When we speak of reform of the Bretton Woods institutions, are we genuinely saying we will give them authority over our lives as well as the lives of others? Are we, as Canadians, willing to urge reform of those institutions?

It's all very well for us to say the World Bank should have conditionality on armaments so we won't give money to countries that don't have certain arms practices, or military practices, but is Canada going to urge that the IMF should have authority, for example, to come up with intelligent financial management practices that would bite into us, the United States, Japan, the European Union, and the other big players? In fact, it's my understanding there is a IMF desk watch on Canada today. Are we encouraging that? Do we like it? How will we live with it? How far are we willing to go down this road? How far are our allies going to go down this road? Or is this just a lot of talk?

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