The Governors’ discussions, Brown noted in opening remarks, reflected both a shared belief that the world economy is strengthening and a keen sense that now is the time for each country and continent to step up and meet its responsibilities to ensure higher growth. The meeting emphasized the vital importance of pursuing key structural reforms and called on Europe to accelerate and deepen progress on its reform agenda, on Japan to continue strengthening its banking and financial sector, and on the United States to focus its fiscal policy on strengthening sustainability over the medium term. In this context, Köhler stressed that a “multilateral spirit” would be essential to the task of strengthening growth outside the United States and to achieving more flexibility in exchange rates—two actions that he stressed would be needed to resolve, in an orderly fashion, the current imbalances in the global economy.
With the IMFC meeting taking place in the immediate aftermath of the collapsed Cancún talks, the status of multilateral trade negotiations became an urgent concern. Despite the disappointment over Cancún, there was determination, Brown noted, “that the world should not submit either to protectionists or to defeatists” The meeting reaffirmed the importance of a full political commitment to a multilateral, rules-based approach to trade liberalization and called for a speedy resumption of the Doha Round, which, Brown emphasized, was “vital for stronger global growth and for our development objectives.”
To underscore the importance it placed on moving forward and of having all countries play their part, the IMFC asked the heads of the IMF and the World Bank to prepare a report on the critical role that trade plays in the development agenda and the need to move speedily to resume trade talks and complete the Doha Round. The IMFC also requested that this report be sent, with a letter from the heads of the two organizations, to all heads of state and trade and finance ministers.
This letter, Köhler explained to reporters, would have a twofold purpose. It would reiterate the well-known benefits of liberalizing trade for poor and advanced countries alike but would also place these benefits in a broader context, including the contribution that a trade agreement could make to the achievement of the Millennium Development Goals. Trade negotiations are not just a matter of technical arguments, Köhler said; they are also a matter of “effective leadership.”
The Committee also asked the IMF to make its facilities available to help countries as they adjusted to a more liberal trade regime. Did this mean, one reporter asked, IMF support for French farmers? No, Brown explained. This assistance would be targeted to developing and emerging market countries to help them cope with trade-related problems. It was hoped that with concerns such as these addressed, the focus would shift back to trade-distorting subsidies, notably in agriculture, and that this renewed focus would give impetus to compromises by all concerned. The finance ministers remained optimistic, Brown noted, that “progress could be made.”
The rich and the poor
The IMFC was also determined, Brown said, to show that “economic change round the world need not impoverish millions of people, but can enrich even the poorest communities.” The meeting specifically requested an IMF report on gaps in the provision of debt relief and asked the organization to cooperate with the World Bank in examining aid effectiveness, absorptive capacity, and results-based measurement mechanisms. The IMF was also asked to explore, in conjunction with the World Bank, the various policy options and financing mechanisms that could help achieve the Millennium Development Goals.
Photo credits: Denio Zara, Padraic Hughes, and Michael Spilotro for the IMF.
On terrorism and Iraq
The committee heard progress reports on efforts to root out the financing of terrorism. The IMFC reiterated that “there is no hiding place, no safe haven for those who finance terrorism” and urged countries to seek out IMF technical assistance to implement the laws that are needed to accomplish this task.
With regard to Iraq’s reconstruction and redevelopment, Brown indicated that the IMFC was unanimous in wanting to see these efforts move ahead. In this context, the IMFC “reaffirmed its support for a multilateral effort” and for the IMF’s “providing, subject to its policies, financial and other assistance to Iraq.” Asked to comment on reports of a possible crisis of funding Iraq and on the possible outcome of the upcoming donors conference in Madrid, Brown noted a forthcoming needs assessment that the World Bank, the IMF, and the United Nations were compiling and indicated that it would be up to the donors conference to reach specific financing decisions.
In the same boat
Whether the topic was helping Iraq rebuild, ensuring sustainable debt in low-income countries, making more rapid progress toward the Millennium Development Goals, or seeking more balanced growth, the committee’s deliberations made clear that these problems had international ramifications and that multilateral solutions were needed. More than ever, Köhler said, governors from all over the world recognized that “we are now sitting in one boat”