Recent data indicate that a global recovery is under way. Equity markets have rebounded, confidence has increased, financial conditions have improved, oil prices are expected to remain stable, and inflation is under control.
Macroeconomic policies should continue to support the recovery while ensuring medium-term fiscal sustainability. However, for growth to strengthen, be sustained, and be less unbalanced, structural reforms must be accelerated. We support the progress made to reform tax and regulatory regimes, labor markets, and pension systems. Further efforts are needed. Our top priority is to raise productivity and employment. We will do our part in further reforms as set out in the attached agenda for growth.
We reiterate the importance of a rules-based and multilateral approach to trade. We are disappointed at the breakdown of trade negotiations in Cancún and urge a speedy resumption of the Doha Round, which is vital for global growth and the alleviation of world poverty. We believe that the immediate blockages can be removed and, with an effort on all sides, agreement reached on the remaining issues. We welcome the international financial institutions’ proposed assistance for countries dealing with the transition to a more open trading system.
We reaffirm that exchange rates should reflect economic fundamentals. We continue to monitor exchange markets closely and cooperate as appropriate. In this context, we emphasize that more flexibility in exchange rates is desirable for major countries or economic areas to promote smooth and widespread adjustments in the international financial system, based on market mechanisms.
Effective and persuasive IMF surveillance is crucial. Even in current favorable conditions, the IMF should identify vulnerabilities, in particular currency mismatches, and provide candid advice on policy reforms. We welcome the agreement to publish exceptional access reports. We welcome the increasingly widespread use of collective action clauses in foreign sovereign bond issues. We look forward to further work on the code of conduct, which will be discussed at the Group of 20 meeting in October.
We encourage emerging market countries to pursue sound policies and to enhance their investment climate. This will help attract investment flows, reduce external vulnerabilities, and support sustained growth. We welcome the progress Brazil and Turkey have made in implementing structural reforms and support further efforts. We welcome today’s agreement between Argentina and the IMF. The implementation of the program will be key to restoring strong and long-lasting economic growth and the investment climate. We look forward to a speedy agreement with private creditors ensuring fair treatment.
We remain committed to transparency and effective exchange of information between countries as vital weapons in the fight against money laundering and tax evasion. We strongly urge those OECD [Organization for Economic Cooperation and Development] countries that have not taken necessary steps—in particular, in allowing access to bank information—to do so as soon as possible.
We welcome the work of the Financial Stability Forum—in particular in audits, financial analysis, credit risk transfers, reinsurance, and rating agencies—and encourage it to continue strengthening cooperation in these areas.
We reaffirm our commitment to fighting global poverty and helping developing countries achieve the international development goals of the Millennium Declaration. In this respect, we discussed financing issues and results-based measurement. We asked the IMF and the World Bank to do further work on aid effectiveness, absorption capacity, financing facilities, and results-based measurement mechanisms and to report at the Annual Meetings in September 2004. We welcome the views of developing and emerging market countries on these issues.
We reaffirm our strong commitment to completing the Heavily Indebted Poor Countries Initiative. We urge all bilateral creditors to join with us in canceling 100 percent of their eligible claims. We ask the international financial institutions to review the methodology for calculating the amount of “topping up” debt relief. We look forward to the outcome of the international financial institutions’ work on low-income countries’ vulnerabilities to exogenous shocks.
Since September 11, 2001, we have made significant progress in the fight against terrorist financing, although much remains to be done. We look forward to the IMF and the World Bank’s making terrorist financing and money laundering assessments a permanent part of their work. We have intensified the dialogue with several non-Group of Seven countries to prevent abuse of nonprofit organizations and alternative remittance systems. We seek to eliminate terrorist financing through the implementation of measures in accordance with the FATF [Financial Action Task Force]-8 special recommendations.
We welcome both the Afghan donors meetings this month and the upcoming Iraq donors conference. We reaffirm our support for a multilateral effort to help rebuild and develop Iraq, based on a needs assessment led by the World Bank, at the donors conference in Madrid next month. We support the IMF and the World Bank’s rapidly providing, subject to their policies, financial and other assistance to Iraq and call upon regional financial institutions to do likewise. We call upon the Paris Club to make its best effort to complete the restructuring of Iraq’s debt before the end of 2004. We urge all non-Paris Club creditors to cooperate.
Agenda for growth
We, the G-7 [Group of Seven] finance ministers and central bank governors, have today agreed on an agenda for growth. This agenda follows the successful cooperative approach of our two recent G-7 action plans—the October 2001 Action Plan on Terrorist Financing and the April 2002 Action Plan on Emerging Markets—in which we defined objectives and then reported on progress toward those objectives at subsequent meetings.
Higher growth is essential to raise incomes and create more jobs. Without higher growth, we will not have the resources to deal with an aging society, provide adequate national security, or, more generally, provide the means for people to pursue a more enjoyable life for themselves and their children. Moreover, higher economic growth in the G-7 countries is one of the most effective ways we can reduce poverty around the world. Higher economic growth throughout the Group of Seven will redress global imbalances that arise from, among other things, uneven growth within the G-7 countries. Economic growth has been too low for too long in the G-7, and, while there are notable recent policy changes, it is time to bolster our efforts.
Keyobjectives. The reasons for low growth differ from country to country. But as shorter-term demand-side problems are addressed and the global recovery proceeds, longer-term supply-side impediments to higher productivity growth and employment are being revealed in many countries. Our key objectives, therefore, are on the supply side—structural policies that increase flexibility and raise productivity growth and employment.
Whathavewedonerecently? Progress achieved so far provides a good foundation to build on. Examples, one for each country, include reductions in marginal tax rates on dividends and capital gains in the United States; improved incentives to work in the United Kingdom; sustainability of the public pension system along with higher limits on savings in private retirement plans in Canada; pension reform in France; tax reform in Germany; flexibility in labor contracts in Italy; and a new research and development tax credit in Japan.
Whatmorewillwedo? Each of our governments intends to pursue additional pro-growth policies. Examples include tort reform in the United States; a reform agenda 2010 for the labor market and pension system in Germany; public sector reform and further steps in health care reform in France; pension reform in Italy; Basic Policy for Economic and Fiscal Management and Structural Reform 2003 in Japan; measures to improve skills and labor force productivity in the United Kingdom; and full implementation of the five-year tax reduction plan announced in 2000 in Canada. In the European Union, investment needs to be revitalized, with a particular emphasis on infrastructure and research and development.
Whydothisasagroup? These are primarily national responsibilities, but there are spillovers. Higher growth in the United States benefits the other G-7 countries, but higher growth in the other G-7 countries benefits the United States too. Moreover, many pro-growth policies, such as trade liberalization, involve all of us. Working as a group, we intend to do regular supply-side surveillance and benchmarking proposals and to review results. This will complement our ongoing demand-side surveillance and mutually encourage progress toward pro-growth policies.