Brown: Our meeting today has taken place at a testing and challenging time for the global economy. It would have been understandable at a time like this for each country to have turned inward and focused on its domestic concerns. But I believe today’s meeting has reaffirmed the importance of global cooperation. Indeed, it has reflected the fact that the global slowdown requires and demands global cooperation. The alliance that we have formed against terrorism has been boosted today by the decisions of the IMFC to declare its support for the special recommendations on combating the financing of terrorism. We are calling on all countries to take action to ensure that financial institutions are able to report suspicious transactions, and we are calling on all countries to ratify and implement the United Nations (UN) instruments to counter financial terrorism.
For the first time ever, the IMF has committed itself to extending its bilateral surveillance to include members’ efforts to counter the financing of terrorism. We have agreed that all 183 countries should consider establishing financial intelligence units to analyze potentially suspicious transactions. We have agreed on the need to share information and ensure cooperation between national financial intelligence units, and we have agreed that the IMF should provide targeted, expert assistance—in some cases financial assistance—to ensure that every country can play its part and has the resources to do so in the fight against terrorist financing. We have called on the UN to create a technical register of countries and their needs in relation to tackling terrorist financing. We said all these things should be moved forward by the first of February, and we would want to report at our April meetings.
Our global cooperation has extended also to the decisions we have reached on the global economy and the need to strengthen international cooperation and our international financial institutions. I want to draw your attention to the communiqué itself, to the statement that we have made about the world economy. We say that the outlook remains uncertain, and we say that continuing vigilance is needed. We say that bold policy action has already been taken to support a robust recovery during 2002, and we say that it is essential that the international community stand ready to take timely action to maintain stability and reinvigorate growth. We say that the monetary authorities stand ready to take further action if appropriate. We say also that, while the scope for discretionary fiscal policy action varies across countries, the advanced economies should allow automatic stabilizers to operate. We emphasize the importance of the agreements on trade at Doha being pushed forward to reinvigorate world economic growth.
We also agree on the need in the different continents for structural reforms to continue and, indeed, in some cases, to be stepped up so that we can have the increased productivity that is important for growth in the longer term. We turned our attention also to the needs of the poorest countries and the problems that many will face as a result of the slowdown in the world economy. We agreed on the recommendation of IMF Managing Director Horst Köhler, who has done so much in this area, that we must take into account worsening global growth prospects and declines in the terms of trade when updating the HIPC [Heavily Indebted Poor Countries] Initiative and debt sustainability analysis at the completion point. We say that advanced economies must also be prepared to meet the responsibility in providing increased development assistance and debt relief to tackle the increased challenges of poverty reduction and to achieve the Millennium Development Goals. These are the goals for 2015: that every child be in primary education, that we halve poverty, and that we cut infant mortality by two-thirds. Ministers reiterate the importance of fully financing the enhanced HIPC Initiative and urge bilateral donors to fulfill this commitment. We also discussed improving the IMF’s facility to engage in crisis prevention and crisis resolution.
This has been an important meeting for the international financial system. Global financial cooperation is being strengthened; we accept and act upon the increasing interdependence of the world economy; and we recognize the responsibilities of the richest countries to the poorest countries around the world. We affirmed that it is not only right to focus on globalization but that it has never been more important to get globalization right.
Köhler: I fully agree with our Chair. He conducted the meetings in an excellent and most efficient way. I am very happy with the outcome of this meeting. From my side, there were three objectives. First, to have the IMFC take place in a timely fashion—a demonstration that our 183 members could come together and solve problems. Second, to have a very focused meeting. Third, to address two topics: the global economy—and the sense of urgency for the appropriate policy response—and the fight against money laundering and the financing of terrorism. The outcome of this discussion, chaired by Gordon Brown, is a milestone to build up confidence and make clear that the international community is united in its fight against money laundering and the financing of terrorism.
Köhler: You may know that Paul O’Neill and I have a bet: if economic activity is better than the IMF forecast, then I have to invite him to dinner. I will be very happy to invite him to dinner. But the IMF’s forecast is a reasonable, working assumption. It provides us with the appropriate balance between awareness about the economic situation—its fragilities and risks—and the need not to be overly pessimistic, instead looking to the underlying strength of the global economy, seeing the potential for productivity gains and further growth.
In this regard, Paul O’Neill impressed his colleagues with his reasonable optimism, not only on the U.S. economy and its ability to promote productivity but also on the ability of the international community to find the right policy response. So, this meeting is a confirmation that there is leadership and a concept for a policy response that will pay off, and it should build confidence.
Brown: I agree. All the monetary authorities represented around the table have said that they stood ready to take further action, if appropriate, and it was also agreed by the finance ministers that, of course, the scope for discretionary fiscal policy does vary but that the advanced economies should allow automatic stabilizers to operate.
Brown: What I said in my speech on Friday was that there had to be a new deal between developed and developing countries. It was as an increased recognition of our interdependence that, in return for actions in developing countries to pursue pro-poor growth policies and to pursue the trade regime suggested at Doha and, equally, to attract investment for the future, the international community should be prepared to do far more. The Zedillo report estimates that it would cost $10 billion for primary education to be available for all; $12 billion for the global health initiative to work in cutting infant mortality by two-thirds; and $20 billion to halve the amount of poverty, as we promised to do, by 2015. We must as an international community look at this $50 billion figure suggested by Zedillo.
What you have from today’s meeting is an agreement that advanced countries must be prepared to meet their special responsibility for providing increased development assistance and debt relief to tackle the increased challenges of poverty reduction and to achieve the Millennium Development Goals.
Köhler: I heard that the Deputies of the G-20 have been instructed to work on that, so I am interested, of course, in receiving their product. The IMF has a work program on private sector involvement, and I am quite confident that we will come up with a reasonable concept for private sector involvement.
Brown: Can I add that we were all grateful to Canada, and particularly to Paul Martin, the Finance Minister, for hosting these meetings today. The Group of 20 discussion reflected the view that, in return for the operation of codes and standards and the increased transparency that we are asking of individual countries, as well as for the transparency that is being created by the surveillance work of the IMF and the enhancing of it . . . then the private sector too must accept increased responsibilities.
Brown: There is growing agreement in the international community that we must try to move from what has essentially been an ad hoc and crisis-triggered approach to a far more systematic approach to both crisis prevention and crisis resolution in the international financial system. Some measures that are being discussed are designed to create a more presumptive than an ad hoc approach to dealing with financial difficulties when they do arise.
Köhler: We have a work program, and I feel it is appropriate that the IMF should work before we talk.
Brown: There is a recognition that the problems of globalization—the large numbers of people in poverty—can be dealt with only by strengthening our international institutions. When I talk about a new deal between the developed and the developing countries, I believe there is scope for a new strategy, a new consensus to develop around trade, investment, policies for stability, and increased development aid. I believe there is support in developing as well as developed countries for that approach. It is a recognition, particularly after the events of September 11, that our interdependence means that what happens in rich countries affects poor countries and what happens in poor countries affects rich countries. There is a new determination and political will to make the changes that are necessary to make the international economy work better, particularly in the interest of those people who are presently excluded.
Brown: We said in 1997 that it was completely unacceptable that only one country was moving through the debt reduction process. Horst Köhler and Jim Wolfensohn agreed with many of us that we had to move that process quickly. Now, 24 countries are going through the debt reduction process, and so $50 billion has been pledged in debt relief. Potentially, if the conflict-ridden countries could be part of that initiative, and are disqualified because of conflict, we would be in a position to give $100 billion in debt write-offs. In other words, there was an international coalition—the churches, community organizations, individual countries, and the inspired leadership of Horst Köhler and Jim Wolfensohn—that made that debt initiative happen.
Now, of course, we have do to more. We are doing more for postconflict countries. We will have to be more flexible because of what has been happening as a result of the slowdown in the world economy. We will be reconsidering, if necessary, the position of the indebted countries at completion points so that there is a sustainable exit from debt. The same coalition of forces must be brought together now for that new deal between the developed and developing countries. I believe there is now also the political will to do that. People understand that the real issue is not whether you are for or against globalization; globalization is moving forward. The real issue is whether you are for or against social justice on a global scale. I believe there is increasing recognition that we have to work together to make the world and the global economy a better place for the world’s poor.
Köhler: I reported to the Committee about Jim Wolfensohn’s and my commitment to work further—very hard, indeed—on the HIPC Initiative and also to review this process country by country at the so-called completion point. Second, we are in a very comprehensive review process of what we call the poverty reduction strategy paper process.
But debt relief is an important part of a comprehensive strategy to fight poverty. We should not forget about the other two pillars of this concept: market access and more official development aid. I gave some very concrete numbers here at the Committee about cotton, sugar, and rice subsidies directed to the United States, the European Union, and Japan to make clear that whenever, however, and how much we will give for debt relief, if the poor countries do not themselves have a better chance to get sustainable business activity, we will not be successful in fighting poverty. Therefore, this market access—opening of markets in the advanced countries and phasing out the subsidies in advanced countries—is the number one issue.
The number two issue is the objective of reaching 0.7 percent of GNP for official development. This is direct, this is grant money, this is money in my view that goes via the budget where the parliaments can really measure the magnitude of solidarity or lack of solidarity in this fashion. I am a bit concerned that the concentration of the debate on debt relief or the Tobin tax is distracting us from an awareness that there is a major problem in the fight against poverty—this is the selfishness in the advanced economies and their difficulty in speeding up the pace of their structural reform. To fight poverty successfully, we need to be serious that growth is based on structural reform in two ways: the poor countries have to adapt to a modern economy, but the advanced countries also have to adapt and restructure their economies. Labor markets and subsidies based on the twentieth-century economy, in principle, are outdated.