[Traduction en français]
So that's how we are approaching our work at this stage, in the preparation for Halifax. In closing, I would like to endorse very much Gordon Smith's suggestion to your committee for the kind of contribution we would welcome regarding how to better address the problems of the poorest countries.
I will stop here, Mr. Chairman, and thank you very much.
The Chairman: Thank you very much. Those were very helpful comments.
I have Mr. Penson, Mr. Volpe, and Mr. Regan on my list.
Mr. Penson: It's particularly timely that we are going to be discussing the international financial institutions at the Halifax G-7 summit. I heard your comments about the ability of those institutions to be flexible and to adapt, but I am concerned that we have to be a little bit more forceful than you might have suggested earlier.
We have those institutions because we want them to have the ability to function when there's a problem. We've seen the Mexican example, and it wasn't very reassuring that they were acting quickly and were in control.
I believe that in the discussion that will take place at the G-7 in Halifax, Canada's position should be that we want to do whatever we can to strengthen particularly the IMF, to give them the ability to be able to fulfil that role of basically functioning in a crisis situation to stop a crisis from happening or to deal with it quickly.
I understand what you're saying, that we can't sort of commandeer the process, but I believe that the G-7 countries are very influential and can exercise a lot of influence in these areas.
I wonder what your comments would be in that regard.
Ms Fréchette: I would have absolutely no difficulty with the way you have phrased the challenge, because that's very much the way we see it. Indeed, that was very much in the nature of the discussion among ministers in Toronto.
Yes, at the end of the day I think the institutions and the leading countries managed to provide a response to the Mexican situation, but it called, especially in the case of the IMF, for the invocation of quite exceptional rules, which were cobbled together very much under pressure, and the question is whether there could not be better mechanisms or new mechanisms in place so that you would have a kind of.... Nothing will ever be ready-made, but the question is whether you could have in place a system whereby you could call on the kind of resources needed more quickly and with better leg-work being done in advance. That certainly is on the table, very much so.
At the same time, I think there is a realization that the more you can do to prevent these crises from happening, the better off we all will be. That's why the other leg of this work is very much on surveillance, which is a code word for getting more information, more adequate information, more regular examination and questioning of how the situation is evolving around the world, so you're not taken by surprise, so you can be warning the countries that seem to be going into a crisis situation and try to stop it before it happens.
Mr. Penson: It just seems to me that these international institutions that we've put in place are sort of an insurance policy for all of us, and we want to feel reassured that they're going to be there when we need them and not be subject to a political process where they're afraid to get involved and do their job. I just urge you to continue to advance that. That's seems to be the most important issue worldwide, at least as of the moment.
Mr. Volpe (Eglinton--Lawrence): Madame, I would like to join everybody else in welcoming you before our committee. If you'll forgive a sort of pedestrian approach to this, I wonder if you could answer some questions of a blunter nature.
I'm experiencing a bit of confusion in what our deputy minister, Mr. Smith, says and what you are saying about the directions of Canadian interest and these international financial institutions. I think as a committee we initially want to take a look at this and see where Canada fits in and how these institutions could best reflect Canadian interests. I thought I heard that word used a couple of times, even after I had written it down. I must be on the same wavelength. But if we're going to advance Canadian interests, unless I've misunderstood something you've said, how can we advance those interests if we are not willing to do anything more than just monitor what these institutions are doing?
Ms Fréchette: If that's how I was understood... I don't think we see ourselves as playing a passive role of just monitoring the institutions--to the contrary.
To come back to your question about interests, especially for a country like Canada, we have always considered that our interests were best served by international rules--rules of the game everybody will respect, so the bigger ones will not bully the smaller ones. We're considered a very large country by the vast majority of the world, but we're smaller than others, such as some of our G-7 partners, in fact. Therefore we've always considered that our interests are best served by having a rules-based system and having a kind of international recourse through these institutions. Therefore we have always attached a lot of importance to these institutions. We have been much more committed and engaged than many other countries in making them work better.
So we're not too content to sit back and monitor what they're doing. We have very often been an agent for change and improvement and strengthening of these institutions. It's certainly true for the IMF and the World Bank, but I think it's also true in the GATT and now the WTO. Based on my past experience in the UN, I know that's always been part of our policy. So in fact we're more activist in these institutions than many other countries: for change, for improvement, for tightening, for strengthening, for making them efficient.
Mr. Volpe: I gather, Madame, from reading your presentation and listening carefully to your presentation, Mr. Smith's, and the responses to questions, that change and improvement involve transparency, accountability. All of these items elicit in my own mind the suggestion that perhaps we're going to be much more directive and prescriptive. That has to be the ultimate objective of transparency and monitoring.
If that's the case, I must refer back to the inconsistency about our reluctance to move ahead a particular program that would ensure what Mr. Penson alluded to, and that is that an insurance capacity is built in which might be of some use to all countries that would have need of these institutions, not only from a financial point of view but from the perspective of international governance... rules-based and collaborative.
Ms Fréchette: I would say in fact the very raison d'ątre of these institutions, from the day they were created, was to provide this kind of insurance policy. The IMF was provided to ensure some stability in exchange markets and to provide instant assistance to countries that have serious balance of payments problems. Over time they've added other functions related to that, but that is the core function of the IMF. That's why it exists, and it is providing that.
I think what we have seen in the case of Mexico is a crisis of a new type, one that reflects some very significant evolution in international financial markets, which are bigger and faster and can affect any given country much more quickly and much more radically than might have been possible ten or fifteen years ago.
So what we're looking at is saying, fine, we have this kind of insurance policy system that has evolved, and it has evolved quite a lot over time. However, I think the Mexican example has told us something about the new types of situations we may be facing--we hope there won't be too many Mexicos in the future but there could be--and therefore the need to go over the rules again, to look at the way the IMF functions, and to figure out a way to be better prepared to respond more quickly and more efficiently to this new type of challenge that reflects changes that have taken place in the marketplace in the last 5 or 10 years.
Mr. Volpe: Do you think that if we carry through this activist spirit to which you make reference and we follow through and drive for greater transformation and change in these institutions, we would not end up giving them more credibility than they currently have in terms of influencing the international marketplace as it pertains to its reaction to countries like our own--I think Italy was another one that was mentioned only last week--that we might have the intervention or the dictates of the World Bank, the IMF in particular, in our own fiscal policies and economic policies?
Ms Fréchette: The IMF plays a very important role in advising countries on the health of their economic situation. They do that with every country of the world. There's a system of review every year. The IMF has traditionally had a lot of credibility with the countries concerned. When the IMF tells you you're on the right path and your policy course is correct, that's very credible and comforting advice. When the IMF tells you you have problems in this or that area and you should take this or that course, that also is very important.
We think that for international stability, the preservation of economic stability around the world, the IMF must continue to perform that function and must perform it, in fact, even better than it has so far. I think the credibility of the IMF is very important to ensure stability and to instil a bit of discipline in economic policy management around the world. It applies, and should apply, to all countries.
Mr. Volpe: Including the G-7.
Ms Fréchette: Yes, and it does.
Mr. Regan: Ms Fréchette, as we attempt to enhance and expand the rule of law for the governance of global institutions and global commerce and exchange markets, it seems to me to be clear that the G-7 can't dictate that. It's my impression that our G-7 partners have been obstacles to those changes. Is that a fair assumption? That's my first question.
Second, you were talking about evolution in the IMF, for example, that changes have occurred over the years and that the IMF has expanded into new areas. It has been good perhaps at expanding. Has it been good at retracting from areas?
Last, was it your wish to perhaps persuade this committee we should be focusing in the next two months before May on the issues of surveillance and financial support mechanisms, which you referred to?
Ms Fréchette: On the attitude of other G-7 countries, of course, as Gordon Smith said, every country carries the weight of its own priorities, its own interests. At times, specific interests can stand in the way of one specific change or the other.
However, I think that at the same time one has to recognize that a lot of these changes I described, particularly in the IMF--these new responses and new mechanisms that were created to respond to sudden challenges--would not have been possible without the full support of the G-7 countries. So I think it would be unfair to describe many of our partners as being systematic obstacles to any change, any improvement.
In fact, these institutions have evolved, in our view, in a very positive fashion in many, many respects. That was largely because of the backing, the support, of the large countries, without which these things cannot happen.
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