Speech to Council of Europe

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(Third part)

REPORT

Nineteenth sitting

Tuesday 25 June 2002 at 3 p.m.

ADDENDUM II

The International Monetary Fund and the World Bank

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The following text was submitted for inclusion in the official report by a member who was present in the Chamber but was prevented by lack of time from delivering it.

MR CULLEN (Observer from Canada).– Globalisation is a frequently used word which means very different things to different people. To some, globalisation is the natural and obvious extension of a shrinking world, faster communications and the tearing down of tariff protection walls. Most, if not all, economists would argue that the elimination of tariffs has the effect of significantly increasing incomes and wealth. To others, globalisation is the monopolisation of income and wealth creation by multinationals and political elites – to the detriment of the many.

The more recent debate on globalisation contains some ironies. The Bretton Woods institutions, namely the International Monetary Fund and the World Bank, were created to help all countries share in the benefits of global trade and commerce. This may be hard to believe as we have witnessed the protests during the last few years by so-called civil society at meetings of these institutions. I say so-called civil society because some of these groups, albeit a minority, support violence to achieve their objectives – not exactly a civilised response however noble the objective.

Where have we gone wrong as elected representatives to allow that level of distrust and lack of confidence, by some, in our international financial institutions? Is it a lack of transparency by these institutions that has led to misunderstandings or have the actions, or lack of action, by the international financial institutions been the cause of this level of animosity?

The role and reform of the international financial institutions have been a long-standing Canadian concern. Indeed Canada made international financial issues a central focus of a previous G7/G8 summit, which it hosted in Halifax in 1995, and Canadian parliamentarians also made a number of reform proposals in preparing for that summit. As you know, Canada is again hosting the G8 summit this year. G7 finance ministers met again in Halifax just a few weeks ago. And tomorrow is the first day of the summit, convening in Kananaskis, Alberta, where G8 leaders are addressing several key themes that relate to the mandates of the IMF and the World Bank – namely, sustaining global economic growth, and realising a new development partnership with the continent of Africa.

Once again, Canadian parliamentarians have been involved in preparing ideas for the summit. At the request of our Prime Minister, the House of Commons’ Standing Committee on Foreign Affairs and International Trade – the former chair of which is now Canada’s Minister of Foreign Affairs – undertook public consultations across the country and tabled a report on summit priorities in early June. There are similarities with some of the recommendations addressed by the rapporteur, Mr Gusenbauer, in the areas of international finance, development assistance, debt and trade.

Canada’s former finance minister, Paul Martin, has provided leadership and energy to the Heavily Indebted Poor Countries Initiative, but more needs to be done. We need to understand better what factors determine the sustainability of debt levels. We must provide assistance to poor countries in identifying debt capacities, and with debt management strategies. Transparent and accountable governance, and anti-corruption measures, need to be at the forefront of debt forgiveness.

With regard to the provision of concessional finance for low-income countries, notably in Africa, Canada was able to broker a compromise at the G7 finance minsters meeting in Halifax several weeks ago, when they endorsed a full replenishment of the International Development Association, with a limited increase in the use of grants to the 18 to 21% range, to enhance, as their statement put it, “the effectiveness of IDA in helping the poorest and debt vulnerable countries combat HIV/AIDS, support the social sectors including education, and overcome the effects of devastating conflict”.

With respect to promoting greater transparency and stability within the international financial system as a whole, Canada’s former finance minister Paul Martin has been at the forefront of proposals at the IMF and World Bank, and through leadership in the G7, G20, and the Financial Stability Forum among others. The objective is to put in place mechanisms for better early warning systems, more timely and orderly resolution of sovereign-debt financial crises and greater private sector participation in that process.

The rapporteur’s analysis would seem to support the compelling case which former minister Paul Martin has made for measures including debt repayment standstills, and collective action clauses in loan contracts that would make it easier to renegotiate debts which become unpayable, but also putting up-front limits on the amount of any future financial bailouts. The rapporteur supports the concept of an international bankruptcy court which could lay down clear rules and expectations to apply to cases of sovereign debt crises – similar to existing domestic regimes governing financial failures. At the same time, some Canadian non-governmental organisations which support such a debt arbitration mechanism have also argued for it to be independent of IMF control since the Fund is itself a creditor and may be subject to the political direction of its largest shareholder, the United States.

Combating money laundering and the financing of terrorism remain important challenges. Canada has recently enacted anti-money laundering legislation, and the agency responsible for its implementation, Fintrack, is now in operation.

Finally, I would like to note the work of the Toronto International Leadership Centre for Financial Supervision which was established in 1997 by the World Bank and the Canadian Government. Strengthening financial sector regulation and supervision is obviously an important objective that is especially needed in crisis economies. So far the Toronto Centre has provided training to nearly 400 senior public officials in more than 100 countries, and has recently also begun joint programmes with the Financial Stability Institute in Basle, Switzerland.

The work of achieving a more sound, equitable, socially and environmentally sustainable international economy is far from over. The IMF and the World Bank must continue to adapt and to reform themselves so that they are more transparent and accountable, and therefore better able to respond to the critical developments and new challenges which have been so astutely identified by the rapporteur. “Cookie cutter” solutions will no longer work. IFI’s will need to play the innovative and global public interest role that is expected of them.

As parliamentarians we can, and should, play a key role in this evolution.