The Committee of Twenty agreed in its Outline of Reform, of June 14, 1974, that the structure of the Fund should include a new organ, the Council, that would be established “as soon as practicable.” Meanwhile, an Interim Committee of the Board of Governors would come into existence when the Committee of Twenty completed its work. The new Committee would have an advisory role on matters within the terms of reference of the Council as described in the Outline. The intention was to maintain without interruption the existence of a “political” entity within the Fund that would strengthen the organization. The word “political” referred to both the qualifications of the persons who would compose the entity and the kind of problems with which it would deal. John Maynard Keynes had wanted an executive organ of this kind, but had been resisted by Harry Dexter White of the U.S. Treasury, whose Plan was a major influence in the negotiations leading to agreement on the Fund. In the recent past, however, the United States has taken the initiative in favor of the Council.
The formal name of the Committee of Twenty was the Ad Hoc Committee on Reform of the International Monetary System and Related Issues. As is usual, the Executive Board drafted the resolution to establish the Committee and chose its name. Many members of the Fund were as anxious as the Executive Directors that the Board of Governors should not undermine the authority of the Executive Board by creating a new and powerful body. To communicate the thought that a permanent entity was not being established, the words “Ad Hoc” were incorporated in the formal name of the Committee of Twenty.
The Committee achieved some positive results and did not interfere with the ordinary functioning of the Executive Board. Evolution of the international monetary system seemed likely, if only because the prospective immediate steps did not go the length of the reform discussed in the Outline. For these reasons it was possible to agree on the Council as a permanent new organ and on the Interim Committee as its predecessor until the Council came into being. A major hindrance to agreement was overcome by the decision not to establish a special subordinate body. The Deputies, consisting of senior national officials, had been a subordinate body of the Committee of Twenty and had undertaken preparatory work for it. The Deputies had seemed to be more directly in competition with the Executive Board than had the ministerial Committee of Twenty. It was decided that the Executive Board should perform for the Interim Committee and the Council the function that the Deputies had performed for the Committee of Twenty.
The task of the Committee of Twenty had been the negotiation of a reformed monetary system for member states, and it was to be expected that such a negotiation would be conducted at all levels by the representatives of states. Negotiation on some occasions might be a function of the Interim Committee and the Council, but not on the scale of the task allotted to the Committee of Twenty. Supervision of the system was likely to be a more prominent function of the new entities. Moreover, this function would not be restricted to a limited period. It seemed obvious, therefore, that the Executive Board, as the organ of the Fund in continuous session, assisted by the staff, should undertake preparatory work for the new Committee and the Council. Experience had shown the necessity for a competent body to undertake such work.
The Outline of Reform recommended that the Council should be established promptly, and it was assumed at one time that it would spring into life the moment the Second Amendment of the Articles of Agreement of the International Monetary Fund became effective. Later, it was agreed that the Council would come into being only when the Board of Governors decided, by an 85 per cent majority of the total voting power of members, to establish the Council, in which event the provisions in the Second Amendment regulating the Council would begin to apply. This compromise was a way to put off the event sine die because of various objections to the Council, mainly on the part of developing members. During the drafting of the Second Amendment it became possible to accept an indefinite postponement because the Interim Committee had already shown much vitality in its work, so that it seemed to be a satisfactory de facto alternative to the Council. The Interim Committee also provided the opponents of the Council with the argument that more experience with the Committee would be helpful before a decision was taken on the Council. The justification for the word “Interim” has become attenuated and some such word as “Ministerial” to describe the Committee would be more apt.
Composition and terms of reference
The word “Ministerial” would be descriptive because each member that appoints, or each group of members that Selects, an Executive Director appoints a member of the Committee, who must be a Governor of the Fund, a Minister, or someone of comparable rank. This last expression was intended to comprehend governors of central banks, but it was meant to be vague and broad. Each constituency may determine freely whom it will appoint and by what procedures. Behind each of the current 21 seats there are 7 associates and an Executive Director. The proceedings, according to one Chairman of the Committee, are “frank, pertinent, and instructive.” Another Chairman has said that members of the Committee “have spoken with a degree of frankness that is not characteristic of many international discussions.” The proceedings are not staid, because meetings are brief, because a large number of persons from many countries are present, and, not least, because of the personality of the three ministers of finance who have been the successive Chairmen so far: John N. Turner of Canada, Willy De Clercq of Belgium, and Denis W. Healey of the United Kingdom. They have conducted the proceedings with panache and humor.
The Committee’s terms of reference are to advise the Board of Governors with respect to its functions in supervising the management and adaptation of the international monetary system, including the continuing operation of the adjustment process, and in this connection reviewing developments in global liquidity and the transfer of real resources to developing countries. Language of such density has been called “Stressperanto” because, although it is visibly thickened by compromise, it is understood by all disputants to give clear enough expression to their individual views.
The terms of reference also include the consideration of proposals by the Executive Board to amend the Articles of Agreement and the response to be made to sudden disturbances that might threaten the international monetary system. The consideration of amendment was included because it was clear when the Committee was established that the Executive Board would undertake the drafting of the Second Amendment. It was desirable to authorize the Committee, as a political body, to scrutinize, and if necessary resolve problems connected with, proposals to modify the treaty constituting the Fund. “Sudden disturbances are within the terms of reference because crises of the par value system had led some developed countries, particularly the Group of Ten, to hold meetings that were regarded by other countries as not representative of the full membership of the Fund. Finally, the Committee is authorized to react on any other matter on which the Board of Governors seeks the advice of the Committee.
The resolution establishing the Committee declares that it will meet ordinarily three or four times a year. It has not been convenient or necessary to meet so often. The Committee met for the first time in October 1974. It met three times in 1975, twice in 1976, three times in 1977, twice in 1978, and once in the first quarter of 1979. Meetings, which normally last one or two days, have been held in Paris, Kingston (Jamaica), Manila, Mexico City, and on all other occasions in Washington, D.C., where the Fund has its headquarters.
The meeting in Kingston in January 1976, the fifth, achieved special notice because of the range and importance of the topics on which understandings were reached and because of the contribution the Jamaica Accord made to the drafting of the Second Amendment. There was some concern that later meetings might be anticlimactic. The understandings reached at some of the subsequent meetings, particularly the eleventh in September 1978, show that the Committee is not likely to lack important problems or the will to solve them.
A draft agenda for a meeting is prepared by the Managing Director and settled by the Executive Board. It is then agreed with the Chairman of the Committee and dispatched on his behalf to members of the Committee as his proposal. At one time, there was a tendency to submit numerous technical questions to the Committee. If various solutions of a technical issue were possible, the proponents of each solution were tempted to stand fast and look to the Committee to make a choice. This practice has ceased because the Committee sent these issues back to the Executive Board with the adjuration that it find agreed solutions. Mr. Turner, in a report to the Board of Governors, said:
“Experience has shown that the agenda of the Interim Committee must not be crowded with a long list of issues that are to a large extent technical. These are issues that the Executive Directors must resolve. The Committee was intended to be composed of people with political responsibility. Therefore, the issues that are referred to it must be issues that do involve political considerations. If this procedure is followed, the Committee will be able to devote more of its time to the task of supervising the management and adaptation of the international monetary system.”
For each substantive item on the agenda there is a report of either the Executive Board or the Managing Director. A report by the latter avoids the accumulation of nuances, caveats, and special terminology involving such debated but unsettled usages as “some,” “a few,” “several,” or “many” Executive Directors when they are not in full agreement on a report of their own.
The Managing Director usually introduces each substantive item on the agenda, shares the rostrum with the Chairman at all times, and takes an active role in the proceedings. All members of the Committee tend to speak in turn on important items, and an active interchange can occur on any of them. But the Chairman has spoken of a “susurration” developing into a “brouhaha” and culminating in “tohubohu” to describe the scene on one occasion. This crescendo often occurs when the draft of a communiqué is being considered. The communiqués are not as precise as decisions of organs of the Fund, and sometimes when they record understandings on the basis of which an organ has to act or to draft a decision, opinions differ on the meaning of a recorded understanding. On the whole, the communiqués have expressed the Committee’s views effectively, sometimes because of what they contain and sometimes because of what they omit. For example, the reference to “SDR-denominated claims” in paragraph 6 of the communiqué of March 7, 1979 quietly eliminates the issue of SDRs proper against deposits in the account discussed in that paragraph.
If a matter of peculiar sensitivity is to be discussed, or an impasse is reached after discussion, a meeting of members of the Committee and the Managing Director is held in restricted session. The friendly interchanges in these sessions contribute to consensus. Sometimes, solutions are found at a similarly restricted dinner or luncheon, although on occasion an apparent agreement has turned out to involve a misunderstanding, perhaps because of the absence of interpreters.
The Committee may invite observers to attend during the discussion of items on the agenda. Observers have attended from the Bank for International Settlements, the Commission of the European Communities, the Joint Development Committee of the Boards of Governors of the International Monetary Fund and the World Bank, the General Agreement on Tariffs and Trade, the Organization for Economic Cooperation and Development, the Organization of Petroleum Exporting Countries, Switzerland, the United Nations, and the United Nations Conference on Trade and Development. Some observers deliver statements on topics within their own fields of competence, usually during the discussion of world economic conditions. Observers tend not to engage in active debate, but the importance attached to the Committee’s deliberations is demonstrated by the willingness, even eagerness, of other organizations and Switzerland, a nonmember of the Fund, to have their officials attend the Committee’s meetings. The observers from other organizations have been the executive heads of those organizations or their representatives.
Developed and developing members
In reviewing world economic conditions, the Committee gives much attention to the special problems of developing members and stresses the desirability of measures by developed members to improve the lot of developing members and to assure them of an increasing flow of real resources. On more specific issues, there are often differences of interest and opinion between developed and developing members, but the principle of uniformity that the Fund professes, although not without divagations in practice, deters an overt discrimination in favor of either class. When the Committee is faced with problems raised by the claims of developing members for favorable financial treatment because of their special circumstances, the appropriate persons with whom to discuss this political issue are the finance ministers of the members that would provide a substantial portion of the resources if these claims were met.
It is not a coincidence, therefore, that the loosely constituted Group of Twenty-Four, composed of the representatives of developing members, convenes at the level of deputies and then ministers before the Interim Committee meets. The objective of the Group is to hammer out a joint position on the items included in the Committee’s agenda and on other issues of interest to the Group, but its agreements on these issues are not always pursued vigorously in the Committee. The Group of Twenty-Four was organized because of the influence of the Group of Ten in negotiations during the 1960s on the international monetary system and because developing members wanted to ensure that they would be able to participate fully in any new negotiations. The Group of Ten often convenes at the time of the Committee’s meetings, but usually does not try to reach a unified position on the issues that the Committee is going to consider.
The financial topics of special interest to developing members on which the Committee has reached a consensus have included the creation of the Subsidy Account for the purpose of assisting the poorest members of the Fund to pay charges under the oil facility, improvements in the Fund’s policies on the use of its resources that might be particularly advantageous to developing members, creation and financing of the Trust Fund, and the distribution to developing members of part of the profit realized by sale of a portion of the Fund’s gold.
Work of the Committee
The work of the Committee can be classified according to a number of categories.
At each of its meetings, except for two that have dealt with organizational matters only, the Committee has discussed the world economic outlook and its implications for the international adjustment process, the management of domestic policies, and international financial relationships. There has been a steady increase in the importance attached to this discussion. The Committee has urged members to follow certain policies that would constitute a coordinated approach to international adjustment. The Committee publishes its views in its communiqués and has developed a progressively more detailed and forthright expression of recommendations on the policies that members, or classes of them, should pursue in their own interest and for the general welfare.
The Committee has reached understandings on a number of contentious issues relating to the Second Amendment. It was fortunate that the Committee had this chance in its early days, because it demonstrated not only that it could arrive at conclusions but also that these conclusions could have prompt and practical consequences. The Committee’s solutions affected the Second Amendment in relation to: improvements in the financial activities of the Fund; the principle that the Fund should be able to use all currencies in these activities; improvements in the characteristics and extension of the uses of the SDR in order to promote the objective of making it the principal reserve asset of the international monetary system; the reduction in the role of gold in the Fund; special majorities of the total voting power for certain decisions and for the adoption of amendments; and the obligation of members to collaborate with the Fund regarding policies on reserve assets.
The sixth and seventh general reviews of quotas gave rise to problems of labyrinthine complexity, particularly in connection with the total of increases in quotas, the distribution of increases among members, and the form of payment of subscriptions in respect of increases. Strenuous bargaining took place in the Committee and backstage, but agreement was reached.
The Committee has considered the Fund’s policies on the use of its resources at a number of meetings and has supported a number of developments, including the renewal and improvement of the oil facility (for 1975), improvements in the compensatory financing and buffer stock financing policies, a temporary extension of the credit tranches and possible use of the Fund’s resources beyond these augmented tranches in exceptional circumstances, and the creation and main characteristics of the supplementary financing facility.
The Committee has reached understandings, after much contention, on the exercise of other powers of the Fund. These understandings have had important effects on the activities of the Fund. Decisions based on the understandings include those that provide for the resumption of the allocation of SDRs, an increase in the rate of interest on holdings of SDRs, an increase in the rate of remuneration paid in the General Resources Account, and a reduction in the obligation to reconstitute holdings of SDRs.
The practice of sending back certain technical problems to the Executive Board has been mentioned already. In remitting these problems, the Committee made it clear that it was calling for decisions to resolve these problems that could be made effective promptly. The Committee has also requested the Executive Board to study or continue to study a problem because there was no prospect of early agreement. This procedure has been a convenient political alternative to the outright dismissal of a proposal. Topics relegated to further study for this reason have included the “link” between allocations of SDRs and development finance, and substitution accounts.
A project may be reinvigorated, however, after an earlier decline. The Committee’s endorsement at its March 1979 meeting of the study of an account, formerly called a substitution account, in which reserve currencies could be deposited in return for another reserve asset, is an example of the infusion of new life into a project about which earlier communiqués had expressed no more than the faint hope of further study. This example illustrates a function of outstanding usefulness. The Committee is a body in which those who exercise political authority can demonstrate that a political will has emerged or is emerging to give serious consideration to an idea as a practical measure and not simply as a subject for protracted cogitation.