House of Commons Issue No. 16 Minutes of Proceedings and Evidence of the Standing Committee on Foreign and International Trade
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From Bretton Woods to Halifax and Beyond:
Towards a 21st Summit for the 21st Century Challenge

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Although the Committee did not hear extensive testimony on these themes, it is clear that, as in the area of environmental obligations, the IFIs are being asked to act as much more than just bankers and suppliers of concessional finance, concerned only with matters of prudent financial management and imposing strict conditions on borrowers in the overriding expectation that these loans be paid back. Increasingly, indeed, the financial "conditionalities" have been queried on both broader economic and sustainable human development grounds, with the IFIs being challenged to live up to international normative standards of "good behavior". The IFIs, as John Foster suggested, are also being called upon to reorient their use of resources in order to play a constructive role in assisting members of the United Nations to meet their obligations under a variety of conventions and international law instruments.

In the case of working to increase respect for human rights, to assist democratization and government reforms, and in particular as well to reduce the clear financial drain that results from excessive spending on armaments, the argument is that IMF and the World Bank cannot simply exempt or absolve themselves from any responsibilities. Moreover, as specialized agencies of the UN, they should recognize and make every effort to uphold UN standards and goals. 37 In this way, as well, proceeding on the basis of universal obligations, it cannot be claimed that such "political conditionalities" are merely another unjust imposition of Western donors on developing-country borrowers, and an undue infringement of their sovereignty. This newer and compelling basis for conditionality needs to be frankly recognized and carried forward as such into the revision of the Bretton Woods policy framework.

Nevertheless, these are obviously sensitive issues which require additional careful analysis. The World Bank's General Counsel Ibrahim Shihata indicated to us that, while it was critical to address corruption and other "good governance" challenges, this meant "walking a tightrope" between applying policy pressures that could be justified on economic grounds and crossing over the line into unacceptable political interference. While referring to a recent European Parliament resolution to change the Bank's articles of agreement to include democratic and human rights criteria (similar to the EBRD's constitution), Shihata's preference was to support such objectives more indirectly in the context of continued economic liberalization. At the same time, but for different reasons, some critics of the IFIs on economic grounds (for example, Manfred Bienefeld in our Ottawa hearings), may well be wary of having them move into the "political" grey areas of governance and institutional reforms.

That said, the Committee believes there is a growing case for the IFIs to become more involved, in a frank and open way, in issues of whether international human rights standards including of democratic expression - are being observed, principles of good public administration are being followed, and especially whether external resources are permitting countries to maintain large military budgets and to engage in regional arms races. Put bluntly, why should Canadian taxpayers fund projects in countries whose leaders can then direct a disproportionate amount of their national wealth towards military uses, often in the process abusing human rights and engaging in corruption? Just as countries ought to be held to their commitments to observe universally accepted human rights, it hardly can be overly interfering in their jurisdictions to expect some reasonable efforts to comply with wider standards in this regard. The issues of demilitarization were raised by Wolfgang Reinecke in Washington, and also emphasized by John Kirton as a priority around which G-7 Summit consensus might be obtained. As yet, the IFIs engagement on these issues has been too tentative and constrained to have had much positive impact.

Therefore, the Committee recommends that the Halifax action programme call for the IFIs to take into account in their lending policies and programs the obligation to respect universal human rights, including those of democratic expression, and also the need to implement principles of sound public administration and to support demilitarization, including the reduction of military budgets. In addition, the G-7 Task Force on Bretton Woods institutional reform should be asked to examine, as part of its review of IFI mandates, whether changes to their articles of agreement are warranted in order to achieve the above aims.

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