1700

[Traduction en français]
I would add that's why being a member of this group is of such benefit to Canada. We can influence the group that really can make a difference in these institutions. It gives us direct access, and we play a part in these discussions. We're at the heart of a lot of these decisions to move ahead and bring about change.

Secondly...I'm sorry...?

Mr. Regan: It was the question of whether these institutions are as good at withdrawing from things as they are at going out and expanding.

Ms Fréchette: I would say it is more difficult to wind down anything in international institutions than it is to create new things. However, if you look at the kinds of things the World Bank has done, and the regional banks too, there's been an evolution, and yes, they vacate some fields and they specialize and they share the work among themselves.

But there is always a need to be vigilant. That's why one of the subjects we have put on the table for examination is overlap and duplication, and management efficiency, and do they need all these resources to do the job we ask them to do, and so on.

Mr. Regan: There was one more point. I think you and the deputy minister, Mr. Smith, are unlikely to wish to dictate or recommend to us, perhaps, what we should be focusing on, but it would be helpful to us if you could attempt to persuade us of what you think it would be most helpful for this committee to focus on.

Ms Fréchette: In fact, we consulted beforehand, and we very much agree that's an area where more inspiration--

The Chairman: I'm very surprised to learn that, Madame Fréchette.

Ms Fréchette: You are surprised to learn that? I think it's a very important subject. Africa in particular is a subject of real preoccupation, and any good ideas....

I would add my own twist, and it's based very much on my previous experience in the UN. There's a bit of a void, or gap, in the international machinery and mechanisms to get countries out of the chaos situation. The IMF, the World Bank, the regional banks, are providing financial support and economic policy and advice, or they provide development assistance. But sometimes, in some situations, there is a kind of first step on the road to real development when they come of chaos. I'm thinking of Rwanda, Somalia, even Haiti. What's the best way to deal with these issues?

[English translation]

M. Leblanc: À la page 3 de votre mémoire, vous dites ceci:

Peut-on réduire les redondances administratives et les chevauchements entre ces institutions?

Je n'ai pas d'opinion personnelle là-dessus, mais je vous pose la question: Est-ce que vous avez l'impression qu'on a créé un peu trop d'institutions? Lundi passé, je siégeais à Londres à la nouvelle Banque européenne de restructuration et de développement. Il me semble que cette banque-là aurait pu être une espèce de succursale de la Banque mondiale, par exemple, avec une vocation particulière dans une région particulière.

Or, on a créé une nouvelle banque, et là on se plaint qu'elle coûte très cher à administrer. Je pense que c'est 13 p. 100 pour l'administration. Cela dérange beaucoup de monde aussi. Beaucoup de ressources humaines sont dépensées; des gens doivent se réunir régulièrement et souvent, on discute des mêmes problèmes et on fait les mêmes analyses à plusieurs reprises.

Est-ce que vous avez l'intention d'examiner la possibilité de réduire ou d'empêcher la multiplication ou la création d'autres institutions financières dans le monde?

Mme Fréchette: C'est certainement un problème. Il y a eu une multiplication d'organismes, d'institutions. Je pense que, théoriquement, on pourrait s'interroger sur la nécessité d'avoir tant de banques régionales alors qu'on a une banque centrale qui s'appelle la Banque mondiale.

1705

Il faut cependant se rendre compte que dans bien des cas, ces institutions répondent à des besoins qui sont très spécifiques. La Banque européenne de développement est con‡ue sur un modèle différent de la Banque mondiale et des banques régionales, parce que c'est une banque qui traite d'abord avec le secteur privé, alors que les banques traditionnelles ont le mandat de travailler beaucoup plus avec les gouvernements. De plus, la situation en Europe de l'Est était tout à fait inédite. Il fallait peut-être des approches différentes.

Cela dit, ‡a fait beaucoup d'institutions et il serait plus facile d'en créer de nouvelles si, en même temps qu'on en crée de nouvelles, on était prêt à mettre fin à certaines institutions qui ont été utiles à une certaine époque, mais qui le sont moins maintenant. Justement parce que la création et ensuite l'abolition d'institutions demande le consensus international, il est souvent très difficile de prendre des mesures aussi radicales que fermer boutique à tel endroit.

La solution de rechange dans ce cas-là est au moins de s'assurer que ces institutions fonctionnent au plus bas coût possible et, deuxièmement, de s'assurer qu'elles ne font pas double emploi l'une avec l'autre. Par exemple, dans le cas de la Banque mondiale et des banques régionales, de plus en plus, on voit le concept de spécialisation, de partage des responsabilités dans certaines régions, ce qui fonctionne bien. Alan Gill, qui est avec moi, a été directeur exécutif à la Banque asiatique de développement. Il me disait qu'en Chine, par exemple, la Banque mondiale s'occupe des questions agricoles et la Banque asiatique de développement s'occupe du développement industriel. Il n'y a donc pas de dédoublement. Je pense que c'est ainsi qu'on va maximiser l'utilité et l'efficience de ces institutions.

C'est bien sûr qu'il y a quelques institutions qu'on serait porté, si on avait le pouvoir de décider, à abolir. De temps à autre, il y en a quelques-unes qui disparaissent, mais c'est difficile parce que ‡a prend l'appui à peu près unanime de la communauté internationale et ce n'est pas toujours facile à obtenir.

M. Leblanc: Au lieu de créer de nouvelles banques, on pourrait avoir des départements qui ont des fonctions différentes. Pour ce qui est de la Banque européenne de développement, la Banque mondiale aurait pu avoir un département très spécifique, parce qu'il me semble que c'est une banque qui, en principe, devrait être là pour un certain nombre d'années et non pas pour l'éternité. Elle a un rôle très particulier, et c'est la transition. Elle aurait pu être un département de la Banque mondiale. Enfin, je donne mon opinion parce qu'il me semble qu'on a créé cette banque peut-être inutilement, alors qu'on aurait pu tout simplement se servir d'une autre institution pour atteindre les mêmes objectifs.

Mme Fréchette: Je pense qu'il aurait pu y avoir des modèles alternatifs. Il faut cependant se rappeler les circonstances. Il y avait une dimension politique très importante, à savoir démontrer que la communauté internationale était prête à apporter une réponse résolue, claire, forte au défi et, évidemment, l'idée d'une banque séparée était particulièrement intéressante de ce point de vue-là parce que cela livrait un message très clair. Comme les fonctions sont très spécifiques, il y avait un certain nombre de justifications à l'idée d'une banque séparée dans ce cas-là. Mais il y aurait sûrement eu d'autres modèles à examiner.

[Traduction en français]

Ms Beaumier (Brampton): First, thank you for your hospitality in New York. I was extremely proud that you were our ambassador there.

I'm fairly new to these financial institutions, so my questions will be fairly rudimentary.

I've been concerned throughout all of our policy that human rights seem to be hidden. It's there. We want it, but we're a little bit afraid. Are there presently any rules or conditions on lending based on the percentage of GNP spent on armaments or a country's record of violation of human rights? If the answer is yes, what are they? If it is no, do you think it at all possible that Canada would be willing to push for these conditions, of sorts, in the upcoming G-7 in your new rules-based lending?

1710

Ms Fréchette: Thank you very much for your very kind comments. I can answer that I was very happy to be where I was, too. I'm very happy to be here as well. But when Ms Beaumier came to visit me, I certainly enjoyed the privilege of being our representative to the UN for the three years I had there.

I'm very happy where I am too. I can make that very clear.

There are no hard-and-fast rules about percentage of military spending or human rights concerns in these institutions. However, it is fair to say that over the years these are considerations that have become much more important. I think earlier in the session I indicated that even five years ago the notion that military expenditure would somehow be factored into consideration for a loan, was an acceptable concept, was really not well received at all, certainly not by the recipient countries. Since then there has been quite a bit of change.

I remember the first time the World Bank published some figures on military expenditure, comparing them with social spending. Now it is quite common to see that done by these institutions, both the World Bank and the United Nations DP. So there is greater recognition and acceptance that these are considerations that can and should be taken into account.

Whether we can take it to the next step and have an actual numerical criterion--for instance, to take the military expenditure side, no country should spend more than x on defence, or the proportion of defence to social sector expenditures should be such--that is more difficult to define. But it is certainly something we, Canada, have been pressing in the World Bank. In particular, we think we should be looking at how to factor in these issues of military spending more directly. It is very much part of our agenda there. We will also pursue it in the context of the Halifax preparations.

Ms Beaumier: It seems as though it's counter-productive when we have governments we know are extremely corrupt and commit horrendous acts against their own people, while we endorse lending these corrupts governments money. We also have to accept massive numbers of refugees, which then become another economic burden to Canada. It seems rather counter-productive not to factor in the human rights violation type of clause.

Ms Fréchette: Yes. I think the issue is more one of how you quantify or regulate that. The human rights dimension is one that is even more difficult to quantify than military.... You can't imagine some system of criteria in terms of percentage of expenditure on military spending. The human rights dimension is less in the technical sense. But on occasion there have been loans that have been turned down for human rights reasons.

The Chairman: I might follow up with two quite different questions.

Madam Fréchette, why do we never talk about the Bank for International Settlements, and should we? It seems to me it does have an important role, yet we never discuss it in relation to the other financial institutions. My own recollection is that, for example, when the Bank for International Settlements came up with the Cook formula, that had a very serious impact on world liquidity. There are those who think it was responsible for the recession that followed. Yet it rarely comes up in any of the academic discussions. So I'd be interested in whether you think we as a committee should concern ourselves with that institution, or whether it's part of your concerns.

Secondly, can you help us with the very difficult problem of how far we go, and how far one can go, in increasing surveillance, transparency, and openness and keep the credibility of the institutions with their primary or most important backer, which is the United States? In other words, it seems to me they are where they are today largely because the U.S. Treasury likes them the way they are and that if we push for too much reform, we antagonize the U.S. Treasury and the United States to the point where they turn their back on them.

1715

That leads me to a third question raised yesterday by Professor Helleiner, who is of the opinion that the United States, given its relative proportion of contribution to those institutions, has far too much control over them in today's world, that it has gone from being the primary provider of funds to down around 17%. Yet, it has enormous control through their presence in Washington, through the people who are appointed as president, etc.

Will it be on the agenda of Canada to broaden that perspective in a way that doesn't antagonize the Americans but at least makes them more representative?

Those are difficult questions, I know, but it would be very helpful to have your reflections on them.

Ms Fréchette: The role of the BIS is certainly part of this broader issue I've discussed a little bit, the functioning of the international financial system and its ability to respond to shocks. So, yes, the BIS is part of that picture. Although the main focus is certainly on the IMF, the BIS is not totally out of it.

Is the United States an obstacle to greater transparency and greater efficiency? That's a difficult question for me to answer.

What I would say is that the debate on transparency of IMF work relates to the effectiveness of the advice the IMF can give to countries in a confidential form versus a public form. There may be a trade-off between the bluntness of the language you can use on a country's economic performance and the measures it has to take to avoid a serious crisis and the desirability of greater transparency in this whole surveillance operation. I must say this is very much a debate, and the line-up is not at all north-south or east-west. Countries, including the G-7, are weighing these factors in a different way.

Thirdly, the weight of the U.S. power or influence is real. They still are the largest contributors to all these institutions. Therefore, it is a fact and it is recognized. At the same time, even the G-7 as a whole, the United States plus the rest of us in the G-7, cannot and do not dictate what happens in these institutions. So I think one can debate the influence of one or the other.

Part of it is a national choice as to how you deport yourself. Some countries are very important financial contributors, but they choose to exercise their influence in different ways. That's something that can be discussed.

The G-7 members recognize very much that they cannot and should not be dictating, that there are new countries that are playing a bigger role on the economic scene around the world, that we have to build partnership and understanding, and that in fact the mode of operation in these institutions is very much to build consensus. There's very rarely any vote taken in these institutions, and to build consensus means you have to be prepared to listen to the smaller as well as to the larger members.

The Chairman: Thank you very much.

[English translation]

Comme il n'y a plus de questions, je vous remercie beaucoup, Mme Fréchette, d'être venue cet après-midi nous donner vos opinions si réfléchies et si coordonnées avec celles de M. Smith.

1720

[Traduction en français]
The committee is adjourned until 9 a.m. tomorrow, when we will be receiving the Auditor General. We will also at that time adopt the subcommittee report--excuse me, we will consider the subcommittee report, the members have reminded me. I appreciate that reminder.