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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1. The Committee recommends that the Government seek action by Summit leaders on a set of minimum working positions incorporating: the terms of reference for an initiative to redefine comprehensively the roles and structures of the international financial institutions for the 21st century; a programme of action for the best use of these institutions to reduce global poverty and support sustainable human development; the basic principles of an accord to improve international macro-economic cooperation and to assure the benefits from open capital markets and an increasingly integrated global trading environment encompassing both goods and services; and a clear commitment that these actions, in setting firm targets and timeframes for results, be pursued in ways which support the broader reform and review processes that need to be seen through to the implementation of concrete changes before the end of the century. (Page 5)

2. The Committee recommends that the Government develop a strategy for informing Canadians of its key objectives going in to the Summit, and for disseminating the results of Summit decisions. Priority should be given to an elaboration of specific commitments to Bretton Woods and international financial reforms. That subject should be a principal focus of the next national foreign policy forum to be held this fall, with this being seen as only one step in opening up the review process to greater public involvement, both directly and indirectly on an ongoing basis through their parliamentary representatives. (Page 9)

3. The Committee recommends that Canada propose to Summit leaders a "Halifax Initiative for Bretton Woods Institutional Reform". A special G-7 Task Force would be created for that purpose and in order to seek the views of other countries. The Task Force would be required to report to the 1996 Summit on specific measures for achieving real progress on the following principal reform objectives:

4. The Committee recommends that the Task Force's review of the IMF's mandate concentrate on reforms to strengthen the Fund's specialized surveillance, stabilization, and technical assistance functions, and to extricate it from confused de facto long-term development finance roles which overlap those of the World Bank. (Page 16)

5. The Committee recommends that the G-7 Task Force review the mandates of the multilateral development banks with the aim of reducing the confusion of overlapping roles and responsibilities; and in that process, determining in each case which functions remain essential, which benefit by being carried out separately, and which might be amalgamated or phased out. This review should also pay particular attention to redefining the World Bank Group's future relationship to the private sector, such that its role as a public lending agency is clearly related in this regard to high-priority development needs, and does not lead it into competition with private financial markets. (Page 19)

6. The Committee recommends that the G-7 Task Force, in scrutinizing the mandates of the existing Bretton Woods bodies, do so in the context of their relationship to the WTO and the United Nations system, with the aim of achieving a desirable coherence among the objectives of these institutions, and of supporting a broad global distribution of the benefits from an open trading and financial system, while avoiding further problems of institutional competition and duplication. (Page 20)

7. The Committee recommends that the G-7 Task Force examine closely the expenditure overheads of the IFIs from the standpoint of achieving frugality and maximum operational efficiency, in part through improving corporate learning and flexibility; identifying also areas and modes of operation in which savings might be obtained, with the expectation that these would be substantial and cumulative over several years. (Pages 21-22)

8. The Committee recommends that, in light of the importance of public disclosure of IFI activities and the basis for IFI decisions, as well as of putting information promptly into the marketplace, the policies of the IMF and of the multilateral development banks be examined with a view to allowing maximum transparency and accessibility to public review, consistent with their reformed mandates as recommended in this report. In particular, the focus in terms of the IMF should be on how its surveillance process functions, and in terms of the World Bank on the adequacy of its new access to information and inspection procedures. (Page 23)

9. The Committee recommends that, given the importance of strengthening the IFIs' accountability both to their shareholders and to all stakeholders, the G-7 Task Force consider reforms specifically in regard to: the accountability structures within the organizations; the relationships of executive directors to national elected bodies; the requirements of parliaments for sufficient and timely information and for independent audits, on which to base effective oversight of IFI operations; the need for stronger consultative and independent appeal mechanisms for those most affected by IFI decisions and activities. (Page 25)

10. The Committee recommends that the G-7 Task Force, in reviewing comprehensively IFI mandates, structures and practices, explore ways to make the governance of these institutions more representative of the respective contributions of their member countries to the world economy. In addition to examining the weighted voting structures of the IFIs, the Task Force should also seek ways to increase democratic oversight of IFI decision-making through involvement by parliamentary monitoring groups. Appropriately in this regard, consideration should be given to creating a G-7 parliamentarians working group on Bretton Woods reform that would be able to meet periodically with members of the Task Force throughout the duration of its mandate. (Page 27)

11. The Committee recommends that Canada propose to G-7 leaders at the June Summit, a "Halifax Programme of Action on Poverty Reduction and Sustainable Human Development". This Programme should outline a series of reforms to the policies of Bretton Woods institutions and should commit the G-7 to using their collective influence within the IFIs to achieve results in the following areas in particular:

12. The Committee recommends that, in light of the problematic evidence on the results from past IFI structural adjustment policies, the Halifax action programme call for reforms to these policies, giving close attention to the need for: making pragmatic assessments of the long-term viability of economic development approaches; taking into account the differential impacts of adjustment measures across social groups; increasing the important role of local knowledge and participation in designing more sustainable adjustment programs. (Pages 34-35)

13. The Committee recommends that to strengthen the performance of the IFIs in tackling broader issues of reducing poverty and social inequities, the Halifax action programme clearly declare this to be a primary objective of their development lending. Specifically, Canada should call for: the MDBs as a whole to devote a rising proportion-from a minimum of 25%-of their concessional lending to explicit poverty reduction purposes, and for the World Bank in particular to direct more of its resources to assisting poor African countries; the IFIs to deepen their analysis of the roots of poverty and social instability in the countries in which they operate, working increasingly through NGOs active in this field; and the IFIs to prepare public social impact assessments, following consultations with locally-affected populations, for their development operations, including all major phases of structural adjustment programs. (Page 36)

14. The Committee recommends that the Halifax action programme urge the IFIs to review as a matter of priority all of their policies and activities to ensure that they meet the tests of environmental sustainability, and that their use of resources assists countries to meet international standards. Consideration should be given to having in place strong environmental accountability mechanisms within the institutions, or external to them, to improve the IFIs' compliance with such standards. (Page 38)

15. 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. (Pages 39-40)

16. The Committee recommends that Canada continue to demonstrate international leadership on debt relief issues by raising at Halifax the Sachs proposal for a larger reformed IMF role in resolving sovereign debt crises. Recognizing, more particularly, the growing problem of unserviceable debts owed to the IFIs themselves by the poorest countries, the Halifax programme of action should specifically include measures to lighten the burden of multilateral debt for these countries, and should address changes in IFI rules which may be required to achieve a more long-term solution to this problem. The use of IFI reserves to resolve such debt problems should, under "Halifax terms", be applied on a selective country-by-country basis, and be broadly conditional on countries' commitments to sound economic policies and to poverty-reduction and sustainable human development objectives. (Page 42)

17. The Committee recommends that, given the importance of stabilizing international financial and currency markets, Canada should seek an agreement in Halifax on a study of ways to strengthen the coordination of macro-economic policies both within the G-7 and among other countries, especially those with important financial markets. This study, which would report to the next Summit, should as part of that task consult widely on the most appropriate manner for increasing the powers and capacities for effective intervention by a reformed IMF - particularly in regard to its ability to stabilize economies suffering sudden capital outflows, to stabilize as much as possible major currency movements, and to exert effective public surveillance and supervisory oversight over the relevant policies of major developed as well as developing-country economies. Specifically, this analysis should evaluate what practical modalities to achieve these objectives can be established in the medium term around which there is a realistic prospect for obtaining consensus. (Pages 53-54)

18. The Committee recommends that Canada propose to G-7 leaders an agreement to study innovative proposals for addressing problems of speculative turbulence and the need for increased prudential supervision, and for better disclosure of timely and reliable information to markets of the international monetary system. The anti-speculation proposals to be investigated should include possible levies, or more practically, margin requirements on foreign-exchange transactions. In addition, consideration should be given to ideas for leveraging more resources from the private international markets so as to make additional secure sources of finance available for global development purposes. (Page 58)

19. The Committee recommends that Canada seek an agreement at Halifax to examine the role which should be played by central banks and the Bank for International Settlements in the strengthening especially at the G-7 level of coordinated macro-economic cooperation and surveillance, including in particular the issue of what connection should exist between the IMF and the BIS. (Page 60)

20. The Committee, highlighting the importance of these issues for Canada's domestic economic security as well as for global welfare, recommends that the Government propose to Summit leaders a ``Halifax Accord on International Monetary and Financial Reforms''. Under the terms of this Accord, the G-7 would agree to pursue active consultations with other member countries of the Bretton Woods institutions, in order to report specific findings to the next Summit as the basis for concerted action in the following areas:

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