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37th PARLIAMENT, 1st SESSION

Standing Committee on Foreign Affairs and International Trade

COMMITTEE EVIDENCE

CONTENTS

Thursday, January 31, 2002

0910

The Vice-Chair (Mrs. Jean Augustine (Etobicoke--Lakeshore, Lib.))

Mr. John Duncan (Vancouver Island North, Canadian Alliance)

The Vice-Chair (Mrs. Jean Augustine)

Professor Gerald Helleiner (Department of Economics, University of Toronto)

0915

0920

0930

The Vice-Chair (Mrs. Jean Augustine)

Mr. Roy Culpeper (President, North-South Institute)

0935

0940

0945

The Vice-Chair (Mrs. Jean Augustine)

Mr. Reid Morden (Chair, KPMG Corporate Intellingence Inc.; KPMG Canada)

0950

0955

1000

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Francine Lalonde (Mercier, BQ)

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Aileen Carroll (Barrie--Simcoe--Bradford, Lib.)

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Aileen Carroll

The Vice-Chair (Mrs. Jean Augustine)

Mr. Reid Morden

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Myriam Gervais (Senior Research Associate, McGill University Centre for Developing Area Studies)

1010

The Vice-Chair (Mrs. Jean Augustine)

Mr. Rocheleau

Ms. Myriam Gervais

1015

The Vice-Chair (Mrs. Jean Augustine)

Prof. Gerald Helleiner

The Vice-Chair (Ms. Jean Augustine)

Mr. Roy Culpeper

1020

Mr. Rocheleau

Prof. Gerald Helleiner

The Vice-Chair (Mrs. Jean Augustine)

1025

Mr. John Harvard (Charleswood St. James--Assiniboia, Lib.)

Mr. Reid Morden

Mr. John Harvard

Mr. Reid Morden

Mr. John Harvard

Mr. Reid Morden

Mr. John Harvard

Mr. Reid Morden

1030

Mr. John Harvard

Mr. Reid Morden

Mr. John Harvard

Prof. Gerald Helleiner

Mr. John Harvard

Prof. Gerald Helleiner

Mr. John Harvard

Mr. Reid Morden

Mr. John Harvard

1035

Mr. Reid Morden

The Vice-Chair (Mrs. Jean Augustine)

The Clerk of the Committee

The Vice-Chair (Mrs. Jean Augustine)

1040

Mrs. Francine Lalonde

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Francine Lalonde

The Vice-Chair (Mrs. Jean Augustine)

Mr. John Harvard

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Marlene Jennings (Notre-Dame-de-Grâce--Lachine)

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Marlene Jennings

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Francine Lalonde

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Francine Lalonde

The Vice-Chair (Mrs. Jean Augustine)

Mr. Bonin

1045

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Francine Lalonde

Mr. Bonin

Mrs. Francine Lalonde

Mr. Raymond Bonin

Mrs. Francine Lalonde

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Francine Lalonde

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Aileen Carroll

1050

Mrs. Lalonde

Mrs. Aileen Carroll

Mrs. Lalonde

Mrs. Aileen Carroll

The Vice-Chair (Mrs. Jean Augustine)

Mr. Reid Morden

1055

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Aileen Carroll

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Marlene Jennings

Mrs. Francine Lalonde

Prof. Gerald Helleiner

1100

1105

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Francine Lalonde

A voice

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Marlene Jennings

The Vice-Chair (Mrs. Jean Augustine)

Mr. Roy Culpeper

1110

Mrs. Marlene Jennings

Mr. Roy Culpeper

Mrs. Marlene Jennings

Ms. Myriam Gervais

Mrs. Marlene Jennings

Ms. Myriam Gervais

1115

The Vice-Chair (Mrs. Marlene Jennings)

Mrs. Francine Lalonde

Ms. Myriam Gervais

1120

Mr. Roy Culpeper

Ms. Myriam Gervais

The Vice-Chair (Mrs. Jean Augustine)

Mr. Roy Culpeper

Mrs. Francine Lalonde

The Vice-Chair (Mrs. Jean Augustine)

Mrs. Aileen Carroll

Prof. Gerald Helleiner

1125

The Vice-Chair (Mrs. Jean Augustine)

Mr. John Harvard

Mr. Roy Culpeper

Mr. John Harvard

Mr. Roy Culpeper

Mr. John Harvard

Mr. Roy Culpeper

Mr. John Harvard

Mr. Cardin

Mr. Roy Culpeper

Mr. John Harvard

Mr. Roy Culpeper

Mr. John Harvard

The Vice-Chair (Mrs. Jean Augustine)

CANADA

Standing Committee on Foreign Affairs and International Trade

NUMBER 054

1st SESSION

37th PARLIAMENT

COMMITTEE EVIDENCE

Thursday, January 31, 2002

[Recorded by Electronic Apparatus]

¿ (0910)

[English]

The Vice-Chair (Mrs. Jean Augustine (Etobicoke--Lakeshore, Lib.)): Good morning. Welcome to the committee and to our witnesses today. Pursuant to Standing Order 108(2), we are continuing the study of the agenda of the 2002 G-8 summit.

It's the first time that we're having witnesses who have come to join us from outside organizations. We have, from the University of Toronto, Professor Gerald Helleiner, Professor Emeritus from the Department of Economics; from the North-South Institute, the president, Roy Culpeper; the chair of KPMG Corporate Intelligence Incorporated, Mr. Reid Morden; and from McGill University Centre for Developing Area Studies, Ms. Myriam Gervais.

Mr. John Duncan (Vancouver Island North, Canadian Alliance): Madam Chair, before we launch into the witnesses, may I just register my objection to the fact that we have not got a letter on record from the chair of the committee, who is now the minister, authorizing you as acting on his behalf to constitute this meeting? It's not a precedent that we like or agree with. There is nothing personal in it whatsoever. We have the same difficulty with a couple of other committees for the same reason. It's a technical and procedural argument that we're making. I want to put it on the record. I realize we have enough members to hear witnesses, but not to deal with business. I simply want to put that objection onto the record at this time.

The Vice-Chair (Mrs. Jean Augustine): Thank you, Mr. Duncan. Your objection is noted.

I am the legitimate vice-chair of the committee. I am acting on behalf of the chair, the past chair. Your objection is noted, but we will proceed with the hearing of witnesses, because we do have a quorum to do so. At the same time, if this question comes up, we'll have to have quorum in order to deal with it.

So we'll proceed with the witnesses. I ask your forbearance on this. We'll begin with Professor Emeritus, Department of Economics, Dr. Helleiner.

Professor Gerald Helleiner (Department of Economics, University of Toronto): Thank you, Madam Chair.

Let me begin with some comments on Canada's potential role within the forthcoming G-8 meeting. Without question, the struggle against terrorism and increased G-8 cooperation in security matters narrowly defined will be prominent in the G-8 discussion, and the voice and influence of the United States will dominate debate.

Canada, while certainly having an interest and a role in these security issues, is unlikely to be able and probably doesn't aspire to have much impact upon what G-8 leaders may decide in this sphere. On the other hand, in other matters on the agenda, not only are differences among individual G-8 members quite evident already, but there is no sign of constructive leadership emanating from the United States.

These other areas include, first, appropriate responses to Africa's development problems, in particular the NEPAD proposal--the new economic partnership for Africa's development--and second, the need for more effective global economic governance in support of the internationally agreed development goals as set by the UN millennium summit.

In these latter two spheres, the governments of the United Kingdom and a number of European non-G-8 members, Holland and the Scandinavian countries in particular, have recently offered more positive responses and proposals than the still foot-dragging United States or Canada.

By adding its voice, its concrete proposals, and its own policies to those of others, the Government of Canada can and should have an important impact upon G-8 policies that could promote global development, a brighter future for Africa in particular, more multilateral responses to global problems, and more holistic approaches to global security issues.

Apart from the continuing moral imperative of formulating an effective response to global poverty, it's important to recognize that our overall security cannot be achieved purely through police and military activity. Our security is also significantly influenced by poverty and hopelessness overseas. These have implications for the global spread of infectious diseases, environmental degradation, religious fanatism, and terrorism.

The African NEPAD proposals bring, in my opinion, new hope for more effective poverty reduction than development-oriented action in Africa.

What are the key elements of an effective response to Africa's needs and its new partnership proposals? I'll address eight points.

First, there must be international recognition, not just in rhetoric but in actual country-level practice in Africa, that development projects and programs must be African-led and African-owned rather than, as is too frequent still, driven by external institutions and donors. Every effort must be made to foster local ownership of development efforts, and this can be done in a variety of ways: through strong support, when requested, for improved accounting, financial management, and audit systems that provide assurance to financial backers that their funds are being well utilized; through increased provision, where effective financial management systems are in place, of general or sector-level budget support for locally led development programs in which donors are collaborators in planning rather than sources of uncoordinated and independent projects; through increased coordination and standardization of donor approaches to reduce the still inordinate and inexcusable transaction costs to already-stressed African administrations; and through much-increased emphasis upon building and using indigenous capacity and, to an increased extent, Africans in the overseas diaspora, rather than continuing to resort to expensive foreign technical expertise.

My second point is that all such external assistance will be more cost-effective when procurement is not tied, either formally or informally, to any particular source.

My third point is that aid will also contribute to more effective planning if it can be provided on a more stable and predictable basis, and if it can be quickly supplemented in response to such unforeseen adverse economic shocks as the recent falling in half of the price of coffee.

¿ (0915)

Fourth, an absolutely critical need, in my judgment, is the independent monitoring and evaluation of performance, not simply of African governments--whose performance is thoroughly assessed by donors and international financial institutions on a regular basis already--but also of the performance of external donors.

Much of the perceived failure of earlier aid is attributable to deficiencies and defects in delivery mechanisms and the inability or unwillingness truly to transfer ownership to locals. These matters can and should be monitored and reported upon. This monitoring or assessment or reporting must be undertaken by independent people; moreover, it must be undertaken at the level of individual African countries, not for aggregate donor performance worldwide. In Tanzania, by the way, experimentation with such independent monitoring and evaluation systems, which incorporates donor as well as recipient government performance, is already under way.

The creation of effective, balanced, and independent performance monitoring and evaluation systems--or not--constitutes the acid test of the seriousness of donors about their rhetoric--rhetoric concerning new partnerships, aid coordination, and the desirability of local ownership. The NEPAD has specifically asked for such new, more balanced, aid relationships.

A fifth point is that, apart from assistance to particular African countries, the donor community should be increasing and improving its support for major underfunded activities that carry very high developmental returns wherever the expenditures take place through institutions whose success is not so dependent upon the performance of individual African governments. This can be done through such bodies as the CGIAR on agricultural research, the IBRC, Médecins sans frontières, and so forth.

These activities have a very high return that goes across countries. They include research on tropical diseases, which typically does not offer the prospect of profit for private pharmaceutical companies because of the poverty of the potential beneficiaries. There are major efforts and proposals in this sphere, not the least of which is the Médecins sans frontières proposal for new activities to research drugs for the treatment of neglected diseases.

A second such high-return activity is research on the improvement of small-holder agricultural productivity in African soil, water, and climatic conditions. Research expenditures have been declining dramatically in this sphere; one finds it difficult to understand how this can be. A third would be improved health and education for poor African children--especially girls--through UNICEF and other channels; and a fourth, the long-term professional, technical, and institutional capacity building in all spheres--government, civil society, and the private sector--and in particular, support for the work of Africa's own capacity building foundation.

My sixth point: it must be accepted that it is not merely improved forms of aid or improved aid relationships that are required, important as I've suggested these are; significantly increased resource flows are also necessary. Nominal official development assistance flows to Africa fell by roughly 40% in the 1990s. Debt relief has often been helpful, but it has typically had negligible impact upon actual net flows, since most of the debt that was written down was not previously being serviced anyway. The remaining debt of the heavily indebted poor countries, the HIPCs, should be written down more quickly and more completely. This is simply a matter of good bookkeeping. But such further debt write-downs will not address the need for significantly expanded, real resource flows.

Informed estimates of what would be required to begin to meet agreed global developmental objectives--not just Africa's--suggest the doubling of current aid flows, an increase of about $50 billion per year. The British Chancellor of the Exchequer has called for a campaign to raise extra resource flows of exactly that amount.

¿ (0920)

The UN has estimated that to meet African growth targets of 6% a year--the NEPAD actually aims for 7%--assuming that all African countries were eligible for full support, which they clearly will not be, would require about $10 billion per year.

Let me try to place such numbers into some context. If all OECD members actually delivered on the promise to utilize 0.7% of their GDP for aid, as three Scandinavian countries and the Dutch consistently do, aid flows would immediately rise by $100 billion.

The U.S., of course, has never accepted that target, and has opposed recently--just last week--its re-inclusion in the draft text for the coming UN conference on finance in Mexico. Its aid performance is the worst in the G-8--indeed, the worst in the OECD.

At the same time, President Bush's new proposals for increases in military and security spending, together with the amounts already appropriated for the war, have generated an $85 billion increase in one year for military and security spending in the U.S. alone.

Those Canadian officials who claim that significantly increased official development assistance is just not on really mean it is impossible in the current political circumstances in the United States. It is bizarre to suggest it would not be used well.

There is no reason to let U.S. politics determine the behaviour of the rest of the global community in development efforts, any more than in the many other spheres in which the U.S. prefers to go its own way: land mines, global warming, international criminal courts, the convention on the rights of the child, and the rest.

The seventh point is as follows. Much has been made, both in the NEPAD proposal and elsewhere, of the possibility of expanding African trade and investment opportunities. Improved and predictable market access for African products can certainly be very helpful to them; so would stable increases in private investment inflows be, particularly in equity form.

But it's an illusion to think reduction in trade and investment barriers will by themselves do much for the poorest countries. Rather, the poorest need investment--which will have to be primarily governmental, because the private flows are not forthcoming--in the infrastructure, skills, and other elements of supply capacity that will enable them to respond to expanded market opportunities when they are created.

If the poorest countries are to achieve greater success in the global trade and investment community, there are other immediate requisites that the rest of the world can help to provide:

--First, freedom to deploy policy instruments in support of humanitarian objectives, and relevant capacity building for longer-term development without penalty, regardless of whatever harmonized rule systems may have been created in the WTO or elsewhere--such matters as export subsidies, investment measures, intellectual property. That is to say, there should be true, special, and differential treatment for the poorest countries.

--Second, high-quality and demand-driven assistance for these countries as they seek to negotiate equitable agreements, implement them when they're already written, defend their negotiated rights, and build their own legal and policy-making capacities to do these things for themselves. Non-governmental initiatives of this kind are being launched, and deserve immediate and generous support.

They also require effective and enforceable source-country codes of conduct, to govern the behaviour of foreign investors operating in countries with limited enforcement capacities, in the spheres of the environment and human rights--in particular, of their own.

Lastly, the eighth point: as global economic government systems are improved and reformed, special effort should be made to ensure that the voices of the poorest are effectively heard and their interests protected. Immediate steps, which may seem to some to be little more than symbolic, can be taken in recognition of this need and in implicit response to the NEPAD.

First, there's the creation of third African seat in the executive boards of the IMF and the World Bank. The current workloads of the African executive directors, each of whom is responsible for over 20 countries, most of which have both IMF and World Bank programs, are, quite frankly, impossible.

Second, there's the addition of a representative of the HIPCs to the Canadian-chaired Group of 20.

Third, we need a clear commitment to development objectives in the rules and practices, rather than merely the rhetoric, at the WTO and governance arrangements in the WTO that reflect it.

Fourth, there should be support for a continuing, and even expanded, role for the United Nations in the sphere of development finance after the coming Mexico conference on finance for development. It has a role in research, in the establishment of norms and targets, in the provision of a more democratic and freer forum for discussion than the Bretton Woods Institutions at present provide, as well as in direct support for the social sectors and for global public goods of the kind the UN has always provided.

In conclusion, Madam Chair, Canadians would, I believe, take great pride in a government that joined others in seeking to move the G-8 and move the world towards constructive responses to African and other development challenges. If some G-8 members will not seriously embrace the suggested new development partnership, the NEPAD, or other such suggestions, let Canada at least join those, within the G-8 or without it, who will, and let us, in that case, if other G-8 members will not go along, abandon the search for an inevitably watered down, purely G-8 plan of action.

Thank you.

¿ (0930)

The Vice-Chair (Mrs. Jean Augustine): Thank you very much. I would imagine you've said a few things here that our committee would further question.

We'll now move to our second speaker, the North-South Institute president, Roy Culpeper.

[Translation]

Mr. Roy Culpeper (President, North-South Institute): Thank you, Madam Chair. I would like to thank you for your invitation. I would have liked to have thanked Mr. Graham as the Chair of this committee, because I believe it was his idea to invite me to appear. However, as we all know, he is our new Minister of Foreign Affairs, and I congratulate him most sincerely on his appointment. I think this is a deserved reward not only for his work as chairman, but also for the fine work done by the committee in recent years.

[English]

Madam Chair, I'd like to speak about one of the three agenda items, the item about Kananaskis strengthening global economic growth, which I feel is of overarching importance.

Leaders of the G-8 countries are understandably preoccupied with overcoming the current recession after experiencing the unprecedentedly long boom of the 1990s. That boom powered the global economy for much of the decade, but at the same time, serious flaws emerged in the nature and scope of globalization. There were major financial crises emanating from Mexico and Asia, plunging millions of people into poverty and causing financial turmoil and uncertainty around the world. The current crises in Argentina and Turkey show that recurrent financial instability will continue to erupt since we still do not have the proper tools to prevent it or to deal with it equitably when it does erupt.

More generally, I would argue that the kind of global economic growth that was encouraged in the 1990s created both winners and losers, both among countries and within countries. That in turn has increased human insecurity in large portions of the world, particularly Africa, and instability in countries that do not or will not redistribute the benefits of growth internally.

There seem to be signs that recession will be short-lived and that growth in the U.S. at any rate may reemerge during the course of this year. Even if that is the case, there are reasons to be concerned about the prospects for the growth and stability of the global economy and about the policy choices that G-8 leaders seem willing to contemplate at home and abroad.

Moreover, we should not think of the 1990s as the golden age of growth and prosperity into which we can slip back if only we get our policies right again. Let me make briefly the following seven points, although if I were to add an eighth point, I would strongly endorse what Gerry Helleiner has said about the need to connect the security agenda with the development and human security agenda and also the need to forge an independent foreign policy for Canada in these realms.

My first point is that despite its appearance as the world's strongest economy, the United States is in fact now the world's largest debtor country, with a net indebtedness of $2.2 trillion, and is becoming more indebted to the rest of the world at an accelerating pace. Its current account deficit is now 4.5% of GDP and rising.

While financial flows are increasingly mobile among countries, there is considerable uncertainty among investors as to the economic fundamentals in each country. In this context, the U.S. economy has become a global safe haven where investors think they can more safely park their money, but in so doing they have contributed to creating a precarious and unsustainable relationship between the U.S. and the rest of the world.

In particular--and this is my second point--the massive inflows into the U.S. have driven the external value of the U.S. dollar far above its real value measured in terms of its purchasing power. For practically all other countries of the world, not only Canada, this translates into a decline in the value of their currencies against the U.S. dollar to levels considerably below their purchasing power parity, for no particular fault of their own.

For example, measured in terms of what it can buy, Canada's dollar should really be worth more than 80¢ U.S., not 61¢, 62¢, or 63¢, the range that it's been trading in. While an artificially high greenback and a low loonie may be a blessing for Canada's exporters, it is a curse to American exporters and American suppliers to the domestic market competing against imports, as a result contributing to the bilateral trade tensions between our countries and to U.S. protectionism, often manifested in anti-dumping duties towards all countries.

Lowering the value of the U.S. dollar relative to other currencies I believe is unavoidable, but lowering it too rapidly could seriously destabilize the global economy, particularly if it led to a sudden withdrawal of foreign investments from the United States and a collapse of world export markets. Some very careful macroeconomic coordination among the G-7 finance ministers and central banks will be necessary to ensure that the adjustment, when it comes, is orderly and appropriate.

¿ (0935)

My third point related to this refers to uncertainty about the world's currency regimes. We have just witnessed the demise of the Argentine currency board, which fixed the exchange rate between the peso and the dollar at one to one. As recently as a year ago such hard-pegged currency regimes along with completely flexible exchange rate regimes were lauded by the International Monetary Fund as the only regimes believed to facilitate stability and avoid currency problems. Argentina and Asia proved that hard pegs don't work. But neither has complete flexibility worked, since it has driven currency values other than that of the U.S. dollar way below their proper levels. In Canada there is a rising chorus of opinion favouring the hardest currency peg possible, the outright adoption of the U.S. dollar. Nothing, in my view, could be more ill-advised.

Fortunately, research is now indicating that both fixing and floating should be avoided--and managed floating is recommended instead. Canada, which is a consummate practitioner of managed floating, should reinforce this message with its G-7 partners, the IMF, and non-G-7 countries.

That brings me to my fourth point. The lesson of the last decade, with its recurring financial crises, is that international capital mobility is a mixed blessing. Highly mobile foreign capital brings not only the promise of added savings, investment, and growth, but also the threat of sudden capital flight and with it income and job losses.

Part of the problem is the increasing sophistication of financial engineers, who can fool some of the people some of the time, but as we are seeing with the meltdown of Enron, they cannot get away with it forever. Moreover, on the international stage investors have been able to move their capital instantly between countries with impunity, bailed out if necessary by the International Monetary Fund, the G-7 countries, and ultimately the borrowing developing countries through their willingness to impose huge sacrifices on their people in order to prevent foreign investors from leaving or in order to entice them back.

What is missing from this picture is any equitable sharing of responsibilities for crisis prevention or management. After four years of discussions aimed at involving the private sector in preventing financial crises and at sharing in the costs of their resolution, finally last November the IMF floated a proposal for an international bankruptcy mechanism to work out differences between debtors and their international creditors. However, this proposal faces serious obstacles and may take a couple of years to implement, so it will come too late to be of value to Argentina or Turkey.

Finance Minister Paul Martin has long advocated stand-still arrangements, which would bring immediate relief to countries in crisis and could complement longer-term workout arrangements between debtors and predators. Accordingly, Canada should continue to press for stand-stills as well as workable bankruptcy mechanisms, both through the G-7 and the G-20, which Mr. Martin chairs.

A fifth related point is that international capital is not only volatile and a cause of international instability, it does not flow to where it is needed most, the poorest developing countries. Indeed, it is going where it is least needed, flowing massively to the United States. The poorest developing countries are told by the IMF, the World Bank, and the G-7 that if they adopt liberalized trade and financial policies and other economic reforms, they will be rewarded with private foreign investment inflows. But the reality is that private foreign investors, if they contemplate developing countries at all, principally seek profitable opportunities and tend to overlook economic policies.

For example, China is a favourite destination for foreign investors, not because it has a particularly liberalized economy, but because of its large market and cheap labour. Countries like Nigeria and Angola attract oil companies despite poor policies and latent or active civil conflicts. Hence, Canada should stop pressuring developing countries to liberalize their economies on the grounds that this would lead to a flood of private foreign investment, because it won't.

Private investors should not be expected to provide long-term capital to the poorest countries. That is precisely why we have foreign aid. This is my sixth point. There has been much soul-searching over the past decade about the effectiveness of foreign aid. Ironically, while a consensus has been emerging about how foreign aid can be more effective in reducing poverty, donors have been cutting back their foreign aid instead of increasing it, as Professor Helleiner has said.

¿ (0940)

While donors have been quick to press for economic reforms by recipient countries—and I'll come back to this in a minute—they have been slow or unwilling to reform their own policies and practices, such as tied aid and poor coordination, which undermine the effectiveness of their own aid efforts.

Last December's increase in the aid budget was terribly inadequate and must be followed in subsequent budgets by some serious increases in Canada's aid program, in my view. These increases should be targeted at achieving the millennium development goals to which Prime Minister Chrétien and the government subscribed last year at the millennium summit. Principal among these goals was the objective of reducing world poverty by one-half by 2015.

My seventh point is fundamental, since it relates to the impact of the economic reforms urged on developing countries by the IMF, the World Bank, and the G-7, reforms focused on liberalized trade and financial and domestic policies. There is increasing evidence from recent research that such policies do not necessarily lead to growth or to poverty reduction, but instead cause widening income and wealth inequalities. In turn, those widening inequalities undermine economic growth. These are important findings, since they overturn the conventional wisdom that widening inequalities are an unavoidable and indeed desirable part of the growth process, and that growth will make all citizens better off.

The implication of this research is that liberalization policies should be implemented with great caution, along with policies aimed at growth and poverty reduction and policies of redistribution in favour of the poor. Such policies of redistribution are not only equitable, they're also necessary for boosting productivity and growth.

There's also a connection between globalization, widening inequality and insecurity, and political instability. Is it surprising that, when economic policies create winners and losers, the losers take recourse to violence or illegal migration when other options offer no promise?

Today, economic policies around the world are unfortunately biased against redistribution and growth, and favour government downsizing and privatization. I would add that macroeconomic and particularly fiscal policies have a distinct deflationary bias, since surpluses are applauded by the market as a sign of prudent management. But as any student of economics knows, a surplus means the government is taking purchasing power out of the economy. Nor do low interest rates necessarily stimulate the economy if investors and consumers are unwilling to borrow.

Today's policies are eerily reminiscent of the Great Depression of the 1930s, when interest rates were also very low and governments were expected to balance their books, until John Maynard Keynes came along. Even more sobering perhaps, was the earlier depression over a century ago, which lasted two decades, from 1876 to 1896. That was a period in which, it should be noted, liberal economic policies and globalization of trade and investment were even more pronounced than today. We need to remind ourselves about these historical precedents, if only to avoid repeating them.

To sum up, current economic policies based on liberalized markets and capital flows and deflationary macroeconomic policies have led to serious distortions in the world economy, manifested in recurrent financial crises, huge current-account imbalances, and grossly misaligned exchange rates. G-8 leaders, along with their colleagues in the rest of the world, need to do some fundamental rethinking if they really want to generate equitable growth and sustainable development. Unfortunately, there is little sign they are willing or able to question the fundamentals of the current system and its institutions.

An opportunity to discuss these issues in a global forum is in fact coming up before the G-8 summit, at the UN International Conference on Financing for Development, to be held in Monterrey, Mexico, in March, which Professor Helleiner alluded to. Regrettably, to date, there has been too little public discussion in Canada about this potentially crucial international conference, which will discuss the impact of international trade, aid, private investment, domestic resource mobilization, new and innovative sources of financing, and systemic reform on developing countries.

¿ (0945)

In my view, Canada should be looking to that forum in Monterrey, not just to inform the G-8 discussions we're hosting this year, but more importantly to initiate a process of far-reaching change and far-overdue change to the current global economic system.

Thank you.

The Vice-Chair (Mrs. Jean Augustine): Thank you very much, Dr. Culpeper.

We now will move on to our next presenter, from KPMG, Mr. Reid Morden.

Mr. Reid Morden (Chair, KPMG Corporate Intellingence Inc.; KPMG Canada): Thank you, Madam Chair.

I'd like to thank the committee for the opportunity to address it this morning on the terrorism agenda item for the upcoming summit in Kananaskis.

My KPMG title may not make it clear why I'm taking up the committee's time this morning, so perhaps I should just say that in terms of my own background, I dealt directly with Canada's counter-terrorism effort when I was director of the Canadian Security Intelligence Service. I also saw developments globally, with respect to terrorism, from the vantage point of my term as Deputy Minister of Foreign Affairs. During that tenure I had the privilege of serving as personal representative to three different prime ministers, and I have attended G-7 summits in different capacities.

Mr. Fowler's remarks to you on Tuesday, at least according to the text that was circulated, were fairly general, when touching on the terrorism issue. However, I'm sure this issue is prominent among those he indicated will see a lot of work accomplished by G-8 members and their ministers in the intervening months before the summit is held.

It is clear that our public and the international community generally, particularly in light of September 11, expect that this summit in Canada will produce concrete results. I don't think they will understand if no more than a general hortatory statement emerges from the summit.

According to his text, Mr. Fowler told you he has been instructed by the Prime Minister to prepare a “summit of substance, not form.” Within the area of counter-terrorism alone, there is ample scope to make that a reality.

Many of the G-7 summits, going back almost to their beginnings, have included some mention of terrorism, often reflecting response to prevalent means by which terrorist groups have carried out their operations. This goes back as far as Bonn in 1978. They dealt with hijacking in Venice in 1980, where the group supported conventions against the taking of hostages, and crimes against internationally protected persons.

The Ottawa--or more correctly, Montebello--summit of 1981 brought us the first reference to Afghanistan, where the G-7 put the spotlight on the Afghan government for harbouring aircraft hijackers.

In 1996 the G-8 established their action plan of some 25 measures, on which governments have since been working. In 1997 in Denver they highlighted the UN convention on terrorist bombing, and, ironically and tragically, given recent events, also promoted improved international standards for airport security for explosives detection. They also urged that by 2000 all states should have joined the international counter-terrorism conventions, which has clearly not happened so far. The call for support for these conventions was reiterated in Birmingham and in Okinawa in 2000.

I'd like to take just a little bit of the committee's time to look at these international legal instruments. My basic premise is that Canada is a nation of laws: Canada and Canadians respect the rule of law; and we favour the development of a body of international law to govern the behaviour of members of the international community and those over whom they have jurisdiction.

Counting regional conventions, there are 19 instruments on the books, with most already in force. In the United Nations there are 12 such conventions dealing with issues that range from the financing of terrorism to protection against the hijacking of aircraft and safety in maritime navigation. Of these 12, Canada has ratified 10. I note that Canada's ambassador to the United Nations has recently stated that Canada will move soon to ratify the remaining conventions that deal with terrorist bombing and the financing of terrorism.

In addition, the special committee established by the United Nations General Assembly has recently resumed work in New York on a draft comprehensive counter-terrorism treaty. My understanding is that of the treaty's 27 articles, 24 have been pretty much agreed to, in principle. The debate will now focus on the few remaining but obviously most difficult issues, including the legal definition of terrorism itself. Solving that one issue will require a real act of political will on the part of a number of countries.

At the same time, the counter-terrorism committee established by the United Nations Security Council, under its resolution 1373, which itself was adopted in the wake of the attacks of September 11, is completing the first phase of its work.

¿ (0950)

The committee has been eliciting responses from the 189 member states on the degree to which they're in compliance with the provisions of that resolution. The resolution directs that member states will undertake a series of measures to combat terrorism. The next phase of this important work will be to assess the incoming responses and then reply to the states, indicating whether or not they are believed to be in compliance with provisions of the resolution, and if not, to ascertain what help those states might require to become compliant.

With some justice, the G-8 can claim paternity to most, if not all, of the 12 counter-terrorism conventions. These instruments are currently the main pillars supporting the international counter-terrorism effort. I noted above Mr. Heinbecker's statement that Canada had ratified 10 of 12 of these conventions and was not alone in that in the G-8, having ratified at least 10. Equally, many members of the G-8, or indeed a number of members under the EU umbrella, have not ratified even that many. I think a clear demonstration of leadership to the rest of the international community would be a very clear push, led by the Canadian presidency, for all members of the G-8, including member states of the European Union, to ratify all 12 conventions in time for Kananaskis. This would represent both very powerful symbolism and, even more important, broaden the coverage of these important pieces of international law.

In the same context, members of the G-8 could be encouraged to seek other ratifications outside the group. It's interesting to note that it's with only one exception that the earliest conventions--which deal essentially with air hijackings and violence at airports, which in the late 1960s and early 1970s were the favourite terrorist modus operandi--have garnered anything like a substantial majority of existing states or, for that matter, even ratifications that exceed 100 adherents. If you look at the statistics, it's mostly in the neighbourhood of somewhere between 40 and 60 states having ratified these instruments.

Clearly, if these pieces of international legislation are to have real force and effect, they must attract the broadest possible body of the international polity. As the United Nations Secretary-General has pointed out, states will only achieve success in their counter-terrorism efforts when the global struggle against terrorism is seen as necessary and legitimate by their peoples.

I mentioned a few minutes ago the work of the Security Council committee on counter-terrorism and that the next stage of its work would be enquiring of states not compliant with resolution 1373 what help they will need to become compliant. Enhancing a state's ability to deal with terrorism is even now attracting the buzzword “capacity building”. I think we and others in the G-8 can help others build that capacity. This will mean a commitment of funds, but the increased security for us all makes it, in my view, a very cost-effective expenditure. I think this is another area in which the Canadian presidency of this summit could and should take the initiative to bring this about.

Also in terms of concrete action, I think we should look at the suppression of terrorist financing. Much has been done, particularly since September 11, to freeze terrorist assets. The efforts made by governments, including our own, should be highlighted at the summit and additional measures articulated to reflect the work that has been going on in the G-8 context for some time.

In terrorism, as with organized crime, you can do far worse than follow the money trail. That trail, for both kinds of illicit activity, is remarkably similar. In fact, the links between terrorism, traditional organized crime, illicit drugs, money laundering, and trafficking in small arms are all too well known. I would therefore draw the committee's attention to a major initiative undertaken by the American Bar Association, which is addressing cybercrime, which is one of the fastest-growing areas of both criminal and terrorist activity. In developing this initiative, the ABA has worked closely over a few years with various G-8 bodies, complementing the work of governments.

¿ (0955)

Their project is intended to extend the work of the G-8 and other industrialized nations to developing countries, with the goal of promoting the enactment of cyber-crime laws, cooperation with national and international law enforcement and Internet service providers, and third, cooperation regarding jurisdictional issues. I think the work of this project is really multi-dimensional. It will help advance legal frameworks around the globe. It will assist industrialized nations to investigate cyber-crimes. It will help prevent that kind of crime. It will help promote public-private cooperation in developing countries. Finally, but certainly not least important, by giving confidence, it will help promote foreign direct investment and high-tech opportunities in developing countries. Recognition and support for this initiative, now scheduled to come to fruition this summer, would be another real and practical measure for the summit.

Finally, Madam Chair, I'd like to say something along the lines followed by some of the previous speakers, the litany of issues that foster terrorism: poverty, intolerance, regional conflicts, denial of human rights, environmental degradation, lack of access to justice and equal protection under the law, as well as the lack of sustainable development.

Kofi Annan has said it should be clear that there is no trade-off between effective action against terrorism and the protection of human rights. Frankly, Madam Chair, in the long term, human rights, along with democracy and social justice, are the best preventions against terrorism. Terrorism is a weapon for alienated, desperate people, and it's often the product of despair. If human beings are given real hope of achieving self-respect and a decent life by peaceful methods, terrorists become a lot harder to recruit.

For decades, at various conferences, summits and council meetings, the world's leaders and politicians have discussed the gulf that exists between peoples. Economically, culturally, politically, there are chasms that have seemed unbridgeable, but we have continued to try. I think, if we've learned anything from this war on terrorism, it is that the foundation for a successful foreign policy can no longer be built simply on strategic alliances with historically like-minded countries. Instead, nations derive their greatest strength from identifying common goals to pursue globally, with the resolve and power of the global community behind them.

Bill Gates, Warren Buffett, and Paul Allen were estimated last year to be worth something in the neighbourhood of $121 billion. The assets of those three men equal the output of roughly the 48 poorest countries in the world. What becomes very obvious, then, is the fact that all nations have a responsibility to work on more ambitious goals than money laundering and arms smuggling. Poverty, disease, the proper use of natural resources maybe are issues that don't make much of a difference in the lives of those three men, but for over 70% of the world's population these issues are more than just topics to be discussed on panels, they are the reality of daily life.

No one is shrugging their shoulders that the--

À (1000)

The Vice-Chair (Mrs. Jean Augustine): Excuse me, a moment.

Madame Lalonde.

[Translation]

Mrs. Francine Lalonde (Mercier, BQ): I would just like to say that I have to go to the House. I know that according to our rules, that could mean that we would have to suspend the meeting, but I do not want that to happen. I will come back. I am sorry that I will not be able to hear Ms. Gervais' presentation, but I must go to the House now and I will return later. I think you can continue.

[English]

The Vice-Chair (Mrs. Jean Augustine): Please return as quickly as you can.

Mrs. Aileen Carroll (Barrie--Simcoe--Bradford, Lib.): I would take advantage of the interruption to ask whether I am without Mr. Morden's comments because I came late after two other meetings. Or are they not available? I would like very much to have a copy--I'm writing as fast as I can. I know we'll have the blues, but are they available?

The Vice-Chair (Mrs. Jean Augustine): Not for circulation, sorry.

Mrs. Aileen Carroll: All right.

The Vice-Chair (Mrs. Jean Augustine): Mr. Morden, please continue. Sorry for the interruption.

Mr. Reid Morden: I'm coming to the end here.

In a statement on terrorism that was made on September 19 by the G-8 leaders I think we can see a real sense of global community, and the idea, to quote from it, that “an attack on one is an attack on all” is very strong. The perpetrators of September 11 have launched an offensive against innocent persons and against the central values and interests of the international community, and the G-8 leaders at that time said that we will not allow those who seek to perpetrate hatred and terror to divide the peoples and cultures of the world. These are very good sentiments, they are fine sentiments, but frankly, the leaders should also be held to them and translate them into concrete action.

World leaders certainly need to look at terrorism, but I think they have to look at a cure for the problems, not the symptoms, because I think, from the three richest men in the world right down to the citizens of those 48 poorest countries, these issues are going to affect everyone unless globalization is made more sustainable and equitable.

Thank you, Madam Chair.

The Vice-Chair (Mrs. Jean Augustine): Thank you very much, Mr. Morden. Again, I'm glad that you put on the record your background and your experience on this issue.

We'll now go to Ms. Myriam Gervais, McGill University Centre for Developing Area Studies.

Madame Gervais.

[Translation]

Ms. Myriam Gervais (Senior Research Associate, McGill University Centre for Developing Area Studies): Madam Chair, distinguished committee members, for a number of members of the G-8, the 1990s were characterized by the aid fatigue syndrome with respect to Africa. The aid given to Africa by the individualized countries, compared to their total net aid, dropped steadily between 1991 and 1999.

In spite of this lack of interest, the donor countries have not been able to ignore human consequences caused by the wars between African countries. As a result of pressure from public opinion, the donor countries provided significant emergency aid to meet the immediate needs of refugees and other people affected. Paradoxically, this humanitarian aid proved very costly and placed a great deal of pressure on the budgets earmarked for development programs. In the case of Rwanda alone, Canada provided close to $75 million in humanitarian aid between 1994 and 1998.

It is therefore in Canada's interest and that of the other G-8 countries to reduce the major sources of political and economic crises that threaten the security of the African people by providing significant support for reforms and initiatives designed to make lasting improvement in poverty elimination and human security in Africa for all its people. This therefore involves a firm, long-commitment on the part of the G-8 member countries.

Too often, in our countries, development programs suffer from a lack of continuity because of budget cuts. The effectiveness of our aid efforts is based to a large extent on the ability to plan and continue our projects over a longer period time.

The new African initiative put forward by African leaders reminds us that confining oneself to short-term measures does not allow us to undertake and consolidate changes that could result in sustainable development.

There's already a broad consensus within the international community and among most G-8 members to eradicate poverty and contribute to human development in Africa. The challenge lies more in acting on these objectives. Before suggesting what can be done to achieve these objectives, I would like to make two important points.

First, if all bilateral and multilateral organizations agree to fight poverty in the context of their own development programs, logically, the priority for their aid programs should be to address the needs of the poorest countries. However, this is far from what actually happens. For a number of G-8 members, geopolitical criteria take precedence in many cases over the need to fight poverty. Consequently, we should not underestimate the different attitudes among G-8 members regarding development issues. In addition, while Canada tends to favour the multilateralism option, some G-8 members, such as France and the United States, always start by opting for the bilateral approach.

Second, the creation of new structures to establish or consolidate a new partnership with Africa is not the first approach to be considered. The fact is that there are already structures in place to coordinate the efforts of donor countries.

One of these mechanisms, the Strategic Partnership for Africa, which includes co-financing activities between the World Bank, donor countries and the UNDP, is one of the most important coordination mechanisms used by all countries that provide aid to Africa.

In addition, concerted efforts on the part of donors, particularly in the case of sectoral strategies, are already a common practice. In the case of decentralization in Burkina, for example, Canada is working with the Netherlands, Switzerland and Denmark. One of the major weaknesses that G-8 members could correct is the slowness of the procedures for approving and setting up projects.

A firm commitment on the part of the political decision-makers in the G-8 member countries should therefore result in, first, an attempt to reach a consensus within their parliaments and their societies with respect to the significant and ongoing efforts, over the long term, to be provided to African countries; second, the introduction of procedures to speed up aid payments; and third, the promotion of consistent policies designed to reduce poverty.

In view of the current situation in Africa, it is important to try to get some agreement among G-8 members on the main approaches designed to reduce the major causes of both political and economic crises, and to guarantee human security in a lasting way.

The current state of local conditions in Africa shows that efforts to have a significant impact on poverty and insecurity require the establishment of new relationships between the State and the people, relationships based on the collective interests and the fair redistribution of resources. Structures and mechanisms should be put in place to ensure that the people of Africa, in their societies, can participate in policy development in their countries, as we do here in Canada, and can be involved in managing development initiatives.

À (1010)

Contrary to what we may think, the people of Africa would like to manage these programs and to make the decisions that have an impact on them, for example in the case of social infrastructures, such as schools, water systems, and health centres. This is also true of efforts to introduce activities that will provide income for the poorest people.

Consequently, the decentralization of power within African societies and the emergence of producer groups and associations are key to ensuring greater public involvement in finding solutions to problems that concern them directly.

In concrete terms, the donor countries should therefore: in the area of good governance, provide financial support for the decentralization process underway in many African countries, and provide financial support to strengthen the democratic association movement, which would also empower women through these associations; in the area of resource allocation, recognize the existence of non-government groups and individuals and their ability to channel financial resources and, through the projects, support revenue-producing activities initiated by the associations and communities.

In conclusion, Madam Chair, I would say that in order to achieve sustainable development in Africa, there must be a reduction of socio-economic inequities, and a guarantee of a safe, secure environment for all people. An essential condition for achieving these objectives is the establishment of a genuine partnership with the countries of Africa, involving not only institutions, but also the people themselves.

Our past experience has shown that providing financial support for infrastructure and strengthening public administrations were not enough. There must be a more comprehensive dialogue with all the parties involved, including the rural people, who are the majority in these countries, in order for aid to be directed toward meeting the needs of all people of Africa.

Thank you very much.

[English]

The Vice-Chair (Mrs. Jean Augustine): Thank you very much.

We'll now start our questioning of the witnesses. Is Mr. Rocheleau ready?

[Translation]

Please proceed, Mr. Rocheleau.

Mr. Yves Rocheleau (Trois-Rivières, BQ): Thank you, Madam Chair. I apologize for being late. I have hurried over to replace Mrs. Lalonde.

I had some experience on the Ivory Coast, where the two main products are coffee and cocoa. That country's economy experienced something dramatic: a destabilization in prices. If I remember correctly, production costs were higher than the price paid for the basic commodity.

Do you think the international community has the resources to ensure that people will get a minimum return and that people can continue to farm without worrying, because they know that they will get a decent return?

Ms. Myriam Gervais: At the world level, it is difficult for me to answer your question, because these are economic issues regarding price stability or the acknowledgment of the price of raw materials. However, I can mention, and my colleagues may have something to add on this point, because they have more expertise than me, that within the Ivory Coast, it was clear that the farmers who grow coffee were getting prices much below the price of the exported product. In other words, the government was taking a very large cut. The export taxes generated a large part of the revenues, but almost none of the revenues were passed on to the producer. So there was unfairness within the country with respect to coffee production.

I would like my colleagues to answer this question as it applies to the world situation.

À (1015)

[English]

The Vice-Chair (Mrs. Jean Augustine): Professor Helleiner.

Prof. Gerald Helleiner: Thank you, Madam Chair.

The principal device we presently have at the international level for addressing problems like that of the price of coffee in Côte-d'Ivoire is in the International Monetary Fund. It has had something called the compensatory financing facility for many years, with some additional elements associated with other contingencies. Its principal object was to stabilize flows in exactly these kinds of circumstances. In the last two years, the price of coffee has fallen by half, the price of cotton has fallen by a third, the price of cocoa similarly. The price of oil for oil-producing countries like Nigeria has also suffered.

The difficulty with the compensatory financing facility of the IMF for the poor African countries is that the interest rate charged upon it is the normal market rate of interest. On all other IMF and World Bank lending for these poor countries, the interest rate is highly subsidized. It is not subsidized for this compensatory facility, and as a result, it's essentially useless for the poorest countries that need it the most; they don't utilize it.

There's no reason that there could not be an equally subsidized compensatory facility. If the IMF, for whatever reason--essentially the structure of its governance--doesn't want to do it, individual or collective groups of bilateral donors could.

For many years the European Community did have a scheme explicitly designed to offset unexpected price declines, the so-called Stabex scheme. In its application, it proved to work rather less than perfectly, but that isn't to say there aren't better ways in which it could and should be done. If no one else does it, individual bilateral donors could stagger their own disbursements in such a way as to at least reduce the horrendous impact, particularly on public revenues and therefore schools, medicine dispensaries, and road maintenance. They could stagger their disbursements in such a way as to offset these ups and downs in commodity prices.

The Vice-Chair (Mrs. Jean Augustine): Dr. Culpeper.

[Translation]

Mr. Roy Culpeper: I would just like to add that the dependency of African countries on basic commodities is not sufficient in the long term. Consequently, I agree 100% with Gerald Helleiner regarding the inadequacy of a program such as Stabex, Compensatory Financing Facility, etc. In the long run, I think it is important to identify investment opportunities to diversify these economy into manufacturing another sector to avoid their dependency on basic commodities.

À (1020)

Mr. Yves Rocheleau: Let's take a concrete example. Suppose something were to be done by Nestlé, which is no newcomer to cocoa or perhaps coffee, and which has dealings with one or more countries. What is to stop Nestlé from playing one country off against another or even playing a number of countries off against one another to bring prices down to the lowest level? What actual role do international institutions like the World Bank and the International Monetary Fund play in protecting small producing countries against giant companies like Nestlé? And we could probably name others.

[English]

Prof. Gerald Helleiner: There has, as I'm sure you know, been a long history of attempts to support primary commodity prices in these kinds of circumstances. They have included efforts on the part of producers to bargain collectively with large foreign companies on the world market, and when they do that, the western countries usually denounce them as cartels. However, they prefer to call themselves “producers' associations”, and they attempt exactly what you are describing.

Discipline is difficult to keep among producers to restrain supplies collectively and so on. Since that has not worked too well, there have been concentrated efforts, particularly in the 1970s, to build international consumer-producer agreements in which we, the buying countries from which Nestlé comes, agree with the producers in international agreements in which the voting power is split 50% for consumers and 50% for producers to maintain prices for cocoa within some pre-agreed range subject to pre-agreed conditions under which one changes the range in which you're trying to stabilize the price.

There has been a lot of experience--in cocoa, coffee, sugar, tin, copper--with attempts of this kind. By and large, one has to say they haven't worked too well. There has been disagreement as to where to set the stabilizing price, the floor price in particular. There has been disagreement about how wide the range should be. There has been disagreement about the degree to which producers should be allowed to restrain supplies when prices get too low. As to the continuing disagreements that stem from disagreements between Nestlé and other consuming countries and the people who sell to Nestlé, the bottom line is that at present, I think it's fair to say, there's a fairly general skepticism about the capacity for international producer-consumer agreements on commodities to function well.

Because of that, the international community has retreated to devices of the kind I described, which seek merely to stabilize total revenues, so whether it's the price of cocoa that is too low or whether it's a natural disaster that destroys the crop, either way you qualify for assistance when such unfortunate events occur. That at present, I think, is a more hopeful direction in which to push policy than trying to resurrect international producer agreements for commodities, which have been so disappointing in the past.

The Vice-Chair (Mrs. Jean Augustine): Thank you very much.

Mr. Rocheleau, your time has expired. We'll now go over to Mr. Harvard.

À (1025)

Mr. John Harvard (Charleswood St. James--Assiniboia, Lib.): Thank you, Madam Chair.

I must say at the beginning, Mr. Morden, that I particularly enjoyed your closing remarks having to do with poverty, hopelessness, intolerance, and lack of human rights in some of the poorer countries in the world.

I didn't catch Professor Helleiner's opening remarks, but I did look at your opening text, and you do say on the first page that:

“It is important to recognize that our overall security cannot be achieved purely through police and military activity. Our security is also significantly influenced by poverty and hopelessness overseas”.

My question to you and perhaps to Mr. Morden as well concerns the terrorism we saw on September 11. Was it partly driven--not justified, but partly driven--by hopelessness and poverty?

Mr. Reid Morden: Would you like to go first?

Mr. John Harvard: Is that a difficult question? I know it could be delicate, but is it--

Mr. Reid Morden: I don't think it's overwhelmingly difficult.

Mr. John Harvard: Is there a yes or a no to it?

Mr. Reid Morden: There's probably not a yes or a no to it, because the answer is almost a Canadian answer--yes, partly.

Over the years in a succession of groups that have sought various political things and have turned to the use of terrorist methods to achieve their political ends, you can draw I think a number of conclusions: that poverty, hopelessness, and various things that did not make life worth living under the current conditions in which they found themselves, their nation, their people, made them turn in desperation to terrorism, because they weren't making progress in achieving these things by non-violent means.

That's not to justify it in any way, but it is certainly to say yes, partly that is what it is.

Mr. John Harvard: If you pick that answer, the Canadian answer, partly driven, do we then have to say that these terrible people who committed these terrible acts in New York and in Washington are not just terrorists and evil-doers?

Mr. Reid Morden: I think they are. That's the other side of the question. They are terrible people and evil-doers to have done that.

À (1030)

Mr. John Harvard: Solely.

Mr. Reid Morden: Solely? I think any time, whether it happens in Ireland, or whether it happens in Kurdish territory, whether it happens in the Punjab, or over the sea in Ireland, people who cause the deaths of innocent people are wholly bad.

Mr. John Harvard: I appreciate those answers, because I think this subject, especially perhaps as I have framed it, makes it somewhat difficult to talk about it, because I think there's a great fear that if we suggest at all in our arguments that there is intolerance and poverty and hopelessness driving these things, somehow or another we're just “soft on crime”, to perhaps use a favourite phrase, or a commonly used phrase.

Right-wing commentators have said many times since September 11 that things like poverty and hopelessness do not drive these acts of terrorism, because poverty and hopelessness exist in countries that have experienced the same kind of poverty and hopelessness as has, say, Afghanistan, but they don't harbour terrorists; they're not repositories for terrorism. So there is this argument that perhaps intolerance and poverty and lack of rights and so on just don't drive these terrible acts.

What do you think, Professor? What is your response to what the right-wing commentators say?

Prof. Gerald Helleiner: I agree with Reid Morden, in the typically Canadian way, that it is part of the story.

The right-wing comment on softness on crime I think is a very good analogy you've drawn, because the same sorts of arguments apply to the drug trade, to crime, and no amount of police action will ever eliminate all crime. No amount of increased policing of our highways will stop people from speeding. There are calculations that we make as a society as to the likely return from expanding expenditures on police and the military to deal with these things, as opposed to expanding expenditures on these underlying conditions.

Mr. John Harvard: If I could put it this way, what have we learned from September 11?

We've seen a huge military response, especially by the United States, but we in Canada have chipped in our share. I understand that President Bush has proposed an increase of $48 billion in the defence budget.

So what can we conclude from that, other than that there has been this heightened awareness about security, an overwhelming response militarily? What else have we learned? Is there something that could be encouraging, that perhaps the world is more sensitive to the things you talk about--hopelessness, poverty, and so on?

Prof. Gerald Helleiner: My own view is that the world is, but United States politics has not yet reflected it. United States people and media are still so fixated upon this horrendous event that they have not, unlike the most of the rest of the world, accepted the need for greater multilateral action that is not necessarily led and controlled by themselves, the need for greater attention to these broader underlying objectives.

There are, of course, people within the United States who are making this case, but they are being vilified. There are university professors now who speak out in the sort of way I am now speaking out and are placed on a list that has been created by a group, the name of which I've forgotten, chaired by Mrs. Cheney. Their object is to identify all those who are disloyal to the current war effort. This has been reported in the latest bulletin of the Canadian Association of University Teachers, where it is reported with great alarm. For all I know, my name now goes on the list, having spoken this morning, and I find that unfortunate.

But I do think that in the rest of the world, and I do think in this country, there is a much greater understanding. Certainly in the United Kingdom, even though Tony Blair is flying around, he also is making speeches that suggest that his government fully understands the underlying social and economic problems that can give rise to these things that didn't necessarily drive these 19 people and those who back them but that will in the future. In the words of a recent writer in the Financial Times of London, we cannot continue to drive our limousines to the world's slums and not expect people to periodically throw stones through our windows.

Mr. John Harvard: I find it interesting that the people on the political right often say that they loathe political correctness, but I think in this particular context they insist on political correctness. If you don't follow the line that is put down by them, you're going to be perhaps named, as you were suggesting.

Mr. Reid Morden: Perhaps I may direct the attention of members who are interested in pursuing some of the background that incorporates many of the things you've just raised, and which takes a very close look at how the world got to September 11, to a very good article by Bernard Lewis, who's Professor Emeritus of Middle East studies at Princeton, in the The New Yorker in the November 19 edition. I think it's well worth everybody's attention. It's a long and rather dense article, but it's worth reading for an understanding of these things.

Mr. John Harvard: Mr. Morden, you were talking about cyber-crime.

Mr. Reid Morden: Yes.

Mr. John Harvard: Is it centrally located in a particular part of the world, or is it spread out?

À (1035)

Mr. Reid Morden: The issue is that there isn't much law at the moment and we're really at the beginning of the path to try to find out how to deal with this. Let me give you a concrete and real example that my own company has worked on. The names, you might say, have been changed to protect the innocent.

A Canadian criminal hacked into a Canada-based company's website using an Internet service provider based in the Ukraine. He hacked into the site, and the company that owned the site is Canadian but the server on which the information was held is located in one of the Caribbean Island states. He downloaded it and he downloaded proprietary information, which went to the core of the company's value. He then stored the information on a server in Texas. Now, the question is, who is the criminal, where is he located, where did the crime take place, who has jurisdiction to investigate, and where are you going to try it?

Those are the kinds of issues that now have to be addressed, and they are amazingly complex. But that is now the way that not just organized crime but terrorists are finding ways to finance themselves and to finance their operations. So in the development of international law--and I guess that's why I spent a few minutes on it this morning--we have to make a start. I think that getting the global community onside, including developing countries, to see that it is in everybody's best interest to have a body of law that tries to deal with this, is very important.

Mr. John Harvard: Thank you.

The Vice-Chair (Mrs. Jean Augustine): Thank you.

I'll ask the witnesses to bear with us as we deal with a piece of business of the House.

A reference has come to this committee that I would like to clear off our present agenda. I'll now ask the clerk to read this reference of the House from January 28.

The Clerk of the Committee: It is ordered, pursuant to Standing Order 39(5)... [Technical Difficulty--Editor].

The Vice-Chair (Mrs. Jean Augustine): I will start from the top. Standing Order 39(5) requires that within five sitting days of such a referral the chair of the committee will convene a meeting of the committee to consider the matter of the failure of the ministry to respond. This matter of the failure to respond is what we have now before us as a committee.

We cannot determine the substance of the question, but we can ask for the necessary explanation as to the failure of the ministry to respond within the timeline.

Since we have the parliamentary secretary with us, a response from the parliamentary secretary could suffice, or the committee could decide on future action.

Marlene Jennings, would you like to respond for the department?

À (1040)

[Translation]

Mrs. Francine Lalonde: Since we were not informed of this, I think that for the other members of the opposition who did not know that this was what we would be dealing with this morning, it would be fair to defer this question until our next regular meeting.

[English]

The Vice-Chair (Mrs. Jean Augustine): You would like this done at another meeting?

[Translation]

Mrs. Francine Lalonde: Yes, that is right.

[English]

The Vice-Chair (Mrs. Jean Augustine): Could we hear the explanation and then make the decision as to whether or not we want to take this further? I think at this point we would want to proceed by hearing from the parliamentary secretary.

Mr. John Harvard: I would like to say, Madam Chair, that I think when Francine hears the answer from the parliamentary secretary she'll understand why we can deal with this right now.

The Vice-Chair (Mrs. Jean Augustine): Okay.

We will now hear from Marlene.

[Translation]

Mrs. Marlene Jennings (Notre-Dame-de-Grâce--Lachine): Madam Chair, thank you very much for giving me the opportunity to explain what has happened.

It is true that the government's response was not tabled in the House on time. The deadline was Monday, January 28. The minister signed the government's response this week. It will be tabled in the House today by the Parliamentary Secretary to the Government House Leader. We all know there was a Cabinet shuffle. As soon as the new minister was appointed, she had to go to Tokyo to take part in meetings on the reconstruction of Afghanistan. She just got back on Monday, January 28. She is very sorry that she has not had the time, due to the shuffle, to table her response, but that will be done today.

[English]

The Vice-Chair (Mrs. Jean Augustine): Thank you.

[Translation]

Mrs. Marlene Jennings: On behalf of the department and the minister, I would ask whether the committee is satisfied with the answer. If so, I imagine that will be the end of the matter.

[English]

The Vice-Chair (Mrs. Jean Augustine): Then I'll ask the question. Is there--

[Translation]

Mrs. Francine Lalonde: Madam Vice-Chair, I have just come back. As you have heard, some incidents have happened in the House. I had to leave, but as far as I can remember, I did not receive this notice in yesterday's notice of meeting.

[English]

The Vice-Chair (Mrs. Jean Augustine): I think we will ensure that as these references are made to us in the future, they will be on the order paper. We are, at this point in time, trying to deal with this issue that has come up, and I think this is the first our committee has had to deal with since the change in the orders. So we will make sure it's on the order paper for any future references to this committee.

[Translation]

Mrs. Francine Lalonde: Thank you, Madam Chair. I agree in that case.

[English]

The Vice-Chair (Mrs. Jean Augustine): All right.

So do we move?

Mr. Raymond Bonin (Nickel Belt, Lib.): Madam Chair, I would like to make a comment, because I chair the aboriginal affairs and natural resources committee, and we will be dealing with two questions at 11 o'clock this morning.

The new procedure, I feel, is an abuse of committee members, to say that within five days you must convene a meeting. This week is good, and we're able to do it, but there will be times when we will have to drop everything we're doing because there's a procedure that says the department didn't respond to a question, so you 16 members of Parliament, drop everything within five days. I think it's really a bad policy. I could see ten days or more, but for us to drop everything in five days is asking committee members to do an awful lot--and witnesses.

À (1045)

[Translation]

The Vice-Chair (Mrs. Jean Augustine): Mrs. Lalonde.

[English]

Mrs. Francine Lalonde: I would like to say to Mr. Bonin that....

[Translation]

I will say it in French, particularly to him.

Ordinary members of Parliament have so little clout on issues of this type, where departments have ample time to respond... The point of this rule is not to be used, but to ensure that departments respond in time. In that respect, you should be in full agreement.

Mr. Raymond Bonin: Mrs. Lalonde. I have no objection about the policy, it is the five days...

Mrs. Francine Lalonde: Yes, but that is the point.

Mr. Raymond Bonin: It is very difficult to ask members to stop everything. In any case, I have expressed my view...

Mrs. Francine Lalonde: But the department should respond, and there will be no five-day period.

[English]

The Vice-Chair (Mrs. Jean Augustine): I'll call the question in this regard. You've heard the explanation, and at this point, let the committee decide. Satisfied?

[Translation]

Mrs. Francine Lalonde: And you're not interested in Africa?

[English]

The Vice-Chair (Mrs. Jean Augustine): We will, then, return to our questions. Next on our list is Mrs. Carroll.

Mrs. Aileen Carroll: Thank you, Madam Chair.

There was so much said, and I know how short my time is. It's impossible to comment on everything or ask the questions I'd like to. I would like to thank you all very much for the thorough presentations you've made.

Mr. Harvard did come in with something I probably would have begun with, but I guess I would like to go on record as saying that I hesitate to accept that it's courageous to say the things you both have said because that acknowledges dynamics I don't want to acknowledge. By that I mean that after September 11 a political correctness kicked in. It's beginning to be somewhat diluted. We will help that dilution by speaking up, and I'm very glad that we have done that this morning.

I had the opportunity to go to Strasbourg, to the Council of Europe, just weeks after September 11. The difference was remarkable between the mindset we had quickly engulfed ourselves in here and the freedom the European members of 44 nations felt, expressing exactly what you have said today, Mr. Morden, in their urgent debate, while at the same time expressing horror at what had happened and condemnation of those acts.

I think you've said it very well, Professor. I don't know if it was Canadian or not to say that we're not saying that we can pass judgment on the 19, on some people who, it would appear, have come from wealth and privilege but who have still so distorted a religion as to justify these acts, which are totally unacceptable.

But again, I think, Mr. Morden, you've used an excellent word in saying “recruit”. It perhaps becomes difficult to recruit the soldiers, such fanatics, once we address the alienation and poverty.

I would just like to say I'm very glad you have mentioned that, and I as a committee member would join you very much. I hope we aren't seeing “Cheneyism” to replace McCarthysim, and what you've mentioned, Professor, is rather upsetting to realize. It may be that in fact those lists are exactly what is occurring.

I just wanted to say that and then jump quickly, because I can feel the chair coming.

On your point on what the ABA is doing, Mr. Morden, on cybercrime, it's certainly something I would like very much to hear more about. I think it's a very real phenomenon. I've had considerable experience with the CBA and see often that this is where the necessary innovation comes from to compel governments and others to address that.

One last point I'd like to make is that Mr. Robert Fowler came before our committee and talked about aid. Professor, I think you and everyone else have mentioned the reduction in aid levels as well as the bends by which we determine whether they're effective, and that's an excellent point.

Mr. Fowler made the point--and I had to disagree with him--that over the years government had cut back in aid so as to reflect a lack of interest or a lack of prioritizing on the part of the population. I don't think that this was the cause. I think it was more governments being more concerned about their fiscal houses and their deficits than they were about reflecting the priorities of, in this case, the Canadian population or electorate and perhaps others. I think that that's a very important distinction, and I drew his attention to Minister Pettigrew saying just the opposite as he gave an accounting of what had happened at Doha, that those ministerial statements reflected what Canadians want with regard to development and that it's only when they see their government responding that we will get their political support to move forward with the kind of things you're recommending. I respect Mr. Fowler very much, but I did find differences there.

I'm going to take advantage, Mr. Morden, of your background, if I may, to ask a question a little off the topic. And that is, could I ask you as former head of CSIS--if you don't mind, this isn't the hat we asked you to wear today--do you think that in Canada we should be creating a separate foreign intelligence agency? Do you think we should be following the model of the United States, Britain, and even Russia in that we keep domestic and foreign separate and therefore don't hand the whole--

Some hon. members: Oh, oh!

À (1050)

[Translation]

An honorable member: [Editor's note: inaudible]

Mrs. Aileen Carroll: Yes, but sometimes it is necessary.

Mrs. Francine Lalonde: We will not get an answer.

Mrs. Aileen Carroll: Yes, but there are not many opposition members present. This is a day for the government.

Mrs. Francine Lalonde: Every day is a day for the government.

Mrs. Aileen Carroll: No, that is not right. Remember... [Editor's note: inaudible]

[English]

The Vice-Chair (Mrs. Jean Augustine): Mr. Morden.

Mr. Reid Morden: This is also a hat that I didn't want to wear. Coming here, I thought it was quite pleasant not to be going to the committee on the Solicitor General, where there's far too much discussion about these things, most of it hostile.

I must tell you, my feelings on this topic have evolved over the years. A while ago I really was very much in favour of creating a separate foreign intelligence agency. Frankly, I don't know, maybe I've mellowed or maybe I've thought about it more, but I've now come to the other view--that there is no need for one.

Basically, the CSIS Act is crafted very carefully, and it permits under section 16 that the agency, at the request of either the foreign minister or the defence minister, may gather foreign intelligence pursuant to such a request.

I find it hard to believe that it is not within the wit of the departments serving those ministers, or those ministers themselves, to craft questions for CSIS so they can then go and do whatever has to be done abroad, if such a thing is required for Canada's security.

The other point is that firstly, I think we have the power to do everything we need to do; and secondly, foreign intelligence services are extremely expensive animals. In the aftermath, when there was a tremendous amount of press coverage and public debate about this particular issue, among others, and a lot of emotional heat, naturally, because of the horrendousness of the events, I'm sure this was one of the options that must have been considered by the committee that Mr. Manley chairs.

But I think at the end, one of the things legislators and the government have to make up their minds about is you can do it in the first blush of emotion and high feeling, but do you have the backbone to then support that agency and the various things it does--because it's going to be doing things that don't come into your kitchens or your living rooms every night--and are you going to be prepared to continue to give several hundred million dollars a year to the support of another agency?

For those two reasons, I've come firmly to the opinion that we don't need one and that we can do whatever we have to do through the CSIS Act.

À (1055)

The Vice-Chair (Mrs. Jean Augustine): Thank you.

Mrs. Aileen Carroll: [Inaudible—Editor]...so I don't look bad with the chair for having used all my time.

The Vice-Chair (Mrs. Jean Augustine): I think that was a very thorough answer there for you and it's forestalled a number of sub-questions that might have come out from this.

We'll now go to our next questioner, Mrs. Jennings. Oh, we go back to Madam Lalonde? All right.

[Translation]

Mrs. Marlene Jennings: Yes, because she missed her turn.

Mrs. Francine Lalonde: It seems to me it would only be fair, Madam Chair.

A few quick points.

Mr. Culpeper, it was not Bill Graham who proposed this study; I did. But I have to say he was immediately interested and the committee as a whole was in agreement, although not all members of the opposition are here today to confirm that.

Mr. Morden, I am not going to talk about security, but I have to tell you that I greatly appreciated your final remarks about the need to combat inequality, and how social justice was one, although not the only way, to work toward security. Thank you very much.

Ms. Gervais, I did not hear what you had to say. I will therefore address my first question to Mr.Helleiner.

You presented us with an extremely interesting global policy. I am very pleased that it is in line with others. It contains all of the elements. I am also very pleased that you gave it to us in writing and that it is part of our documentation. However, I would like you to tell us, we who are going to be making recommendations that, we hope, will not be shelved, but be followed by those organizing the G-8, where you would put the emphasis. What would your priorities be so that this meeting of the G-8 does not become another dashed hope for the Africans seeking co-operation with developed countries?

[English]

Prof. Gerald Helleiner: If you're asking me to prioritize among the variety of things I have put out, I simply want to say two things, because I want them all.

First, ally with what I regard as the most progressive northern governments in addressing these issues, and do not depend upon leadership or full cooperation from the United States, which seems extremely unlikely to be helpful in this regard. That is to say, in this context, consciously work with the British in the G-8, and in the broader context, consciously work more with the Dutch and the Scandinavians, although the Danes have recently had an election, which changes their position somewhat. These are the countries that have moved in the directions I have suggested. These are the countries that have led in the innovations in the aid relationship I described in Tanzania, over the opposition of the United States, Japan, and France, among others, at times even Germany. I think one needs to look for allies in this struggle, not wait for all to climb aboard before one moves forward. One chooses one's allies in this effort and simply moves with them. That's the first thing I would say. It's a matter of tactics.

As for the priorities, my own judgment, and I probably won't carry my colleagues with me on this, is that what has been missing from all prior plans of action, global coalitions for Africa, UN special programs for Africa--the last couple of decades are strewn with failed programs that the international community has announced--is independent evaluation of the performance of the northern participants, in particular evaluations of what they do at the country level. They are answerable to no one. There is some peer review within the OECD, in which the donor countries assess one another's performance, but that's a recipe for mutual back-scratching. It's not independent. It doesn't suffice.

One of the things the African NEPAD is asking for is a new aid relationship, one which is more balanced, even though we know he who pays the piper calls the tune, as we put it. I don't know if there's a French equivalent of that proverb. If we believe, as we say, that development programs must be led by those who are to benefit from them and that they don't work if they aren't--and that I think is the record, at the project level, the country level, at every level--then we simply must achieve a more balanced relationship between those who offer and those who receive financial resources. I think there are ways, and they are ways that can satisfy auditors general and parliamentarians that the money is not being squandered. They are being experimented with, and they must be built upon.

Á (1100)

I would put evaluation of what is being done, independent evaluation of everyone on an equal basis, on a par with increased resources. If we continue to supply aid in the uncoordinated, donor-driven fashion in which most aid is still provided, it is not as effective as it could be. I'm not speaking of small effects. I'm suggesting that it would be just as important to get the aid relationship right as to double aid flows. I advocate both, but I'm afraid we won't get the doubling in aid flows. It's probably easier to achieve a more balanced, proper, and effective aid relationship.

If I were prioritizing, allowing for the political constraints and the likelihood of alternative outcomes, I think I would put my money on improving the aid relationship and evaluation systems.

Á (1105)

The Vice-Chair (Mrs. Jean Augustine): Thank you very much.

Madame Lalonde, your time is up.

[Translation]

Mrs. Francine Lalonde: I did not get my 10 minutes.

[English]

A voice: I took too much of your time.

The Vice-Chair (Mrs. Jean Augustine): Madame Jennings, you're next.

I think our vote is at 11:15.

A voice: No, it would be 11:30.

The Vice-Chair (Mrs. Jean Augustine): 11:30? It's a 30-minute bell? Oh, good.

Mrs. Francine Lalonde: We have a vote?

The Vice-Chair (Mrs. Jean Augustine): Yes, we have a vote.

An hon. member: Opposition obstructionism.

The Vice-Chair (Mrs. Jean Augustine): All right, we'll not go there.

Madame Jennings.

[Translation]

Mrs. Marlene Jennings: Thank you very much, Madam Chair. Thank you very much for your presentations.

I would like to address my questions to Ms. Gervais and Mr. Culpeper, as they have to do with the issue of international development assistance, which must be strategic and effective. You of course know that CIDA has begun a whole process of consultation across Canada to see how international development assistance from Canada can truly be effective. What do we have to do?

In the context of NEPAD, the African continent is made up of 54 countries. Some countries are relatively rich in natural resources, relatively well-governed and relatively stable, whereas other countries are extremely poor, badly governed, mismanaged and so on.

We have a set budget allowance. In the 2001 budget, in December, there was an announcement of $1 billion, of which 500 million is for the Africa fund and the rest is for increases to CIDA's budget over the next three years, if I am not mistaken. In the February 2000 budget, there was an increase of 435 or 434 million dollars over three years, but we still do not know whether these were permanent or one-time increases.

Under these circumstances, how can the Government of Canada, through CIDA, support NEPAD in a very effective way? Some say our assistance should only go to certain African countries that are very well managed, where positive results are much more likely, and there is a greater likelihood of hitting the mark, rather than thinly spreading our assistance here, there and everywhere.

Given the expertise both of you have, I would like some ideas from you on that. That is my first question.

My second question has to do with the point you raised, Mr. Helleiner, about debt reduction and the fact that the most indebted countries are not even paying off their debt. Debt forgiveness has no effect. So what do you suggest, within the NEPAD context? What position should Canada take on this issue? Canada has been one of the quickest countries to act on the issue of debt reduction for the poorest countries. I think we have a lot more to do, but if you are saying debt forgiveness has no real effect, I am going to go back to my riding and tell my constituents, who were very involved in the Jubilee 2000 campaign, that it was a good effort, but we will have to consider other alternatives.

Those are my two questions.

[English]

The Vice-Chair (Mrs. Jean Augustine): Dr. Culpeper.

Mr. Roy Culpeper: Let me respond to this on two levels.

First of all, I think there's something rather alarming in the sort of triage philosophy that seems to be emerging on Africa, that we might be able to save half a dozen countries, and the rest we'll just have to keep a watch in brief. I find this a very alarming thought that seems to be surfacing even in Canada, even from some of the things that I've heard Bob Fowler say.

Secondly, however, I do feel Canada's own aid program could be more usefully concentrated, not among the winners as opposed to the losers, but in countries where the strategic intervention of CIDA and other Canadian foreign policies are brought to bear in a more coherent way. Certainly this has been a consistent recommendation of the institute and of many other critics of our aid policy, that we could usefully concentrate our aid program in 20 countries as opposed to 100 countries.

But to come back to the first point, if we were to select six countries in Africa, that would be an abdication of most of the continent. The real challenge facing not only CIDA but all aid agencies is how you turn around the countries facing these very deep issues of governance. I dare say hardly any of the countries in Africa are without them.

It seems to me incumbent on aid donors and external partners to help these countries in the ways Professor Helleiner was talking about, to build their capacity to govern themselves more effectively. Sometimes this might involve rather arcane functions, not simply judges and so forth--which of course are important--but also auditors and accountants and people who keep the books. We've seen even in our own continent how auditors are letting us down. There's a crying need for better auditors all over the world.

Á (1110)

Mrs. Marlene Jennings: KPMG, with Anderson.

Mr. Roy Culpeper: KPMG aside. Let me leave it at that.

[Translation]

Mrs. Marlene Jennings: Ms. Gervais.

Ms. Myriam Gervais: I do not think the problem should be expressed as a choice between stable countries and countries where there is insecurity. That is not the problem, and it is even quite dangerous, because it would take our program in a direction that would break the past. We need to pursue social justice and combat poverty in keeping with the fundamental policy of our program.

Let's not forget that among these countries where there is insecurity, some are poor, and they are many. Indeed, one of the development challenges in Africa is contributing to the solution of the root causes of insecurity, which are very often political in nature, but also economic. The problem should therefore not be expressed in this way: choosing stable countries will guarantee results. I think that is a mistake.

Mrs. Marlene Jennings: Let me just interrupt you.

You know that this is precisely how the problem is expressed, as Mr. Culpeper said, even at the level of Ambassador Fowler, the sherpa. That debate is currently underway.

Ms. Myriam Gervais: My response to that is that our policy was based on reducing poverty. We therefore focused on the needs of poor countries. Take the case of a country like Rwanda, which is a country where there is still insecurity, but where we restarted our development program three years ago. A lot of progress is being made in Rwanda. People are getting back on their own two feet again. They have gone beyond mere survival. If we continue to help these countries develop but fail to address the root causes of their insecurity, we will have to pay in terms of emergency aid. That is a problem that is always overlooked. We respond to situations where there are urgent needs, and this becomes more costly than our development programs. That is why I say this approach is dangerous. It is not even effective.

In the 1990s, in the case of Rwanda and all other cases of internal conflict in Africa, when we chose to cut off aid to those countries because they were countries where there was insecurity, we wound up footing the bill anyway. That aid is very short term and highly ineffective. So in terms of effectiveness, we must continue to assist unstable countries, but direct our aid to associations or groups, through non-governmental channels, if we feel our aid will not reach the people.

Furthermore, to increase the effectiveness of our assistance, we have to stop thinking in terms of short-term peace-building activities or even projects of one, two or three years' duration. If we want to be more effective, we should instead be considering projects that are planned over five or seven years.

Á (1115)

The Vice-Chair (Mrs. Marlene Jennings): Mrs. Lalonde, you have the floor.

Mrs. Francine Lalonde: Thank you, Madam Chair.

I think you have all used different arguments to emphasize the absolute need for assistance. You have clearly said that trade is not enough, and I was glad to hear you say that. Private investment is not occurring in Africa, even though, as you said, countries are making trade freer. We have to be very careful not to widen the gaps. That is important to me. Assistance is therefore indispensable.

These are arguments that my colleagues and I will use to insist that Canada follow the example of the Nordic countries and Holland, which are seriously attempting to reach 0.7, because currently, we are not heading in that direction at all, not at all. I thank you for that. We need that because the argument we very often hear is that trade will take care of everything. Thank you very much for that.

There is something else I would like to add. We know there are companies, both Canadian and foreign, that thrive on insecurity and profit from wars they fuel. I have drafted a private member's bill, which has not yet been chosen, that would amend the Special Economic Measures Act so that Canada would have a tool to pressure companies that engage in senseless practices. We have seen this kind of company in Sudan, but we know there are others in Angola and Liberia that contribute to the insecurity, and this runs counter to the virtuous circle we wish to create.

Finally, we have to work politically so that... My constituents, even though my riding is not wealthy, understand that international assistance is not charity. It is a necessary contribution to social and economic stability, and it will pay dividends, not in the form of tied aid, but otherwise. Tied aid is not what we are after.

Perhaps Mrs. Gervais could respond to that.

Ms. Myriam Gervais: I would prefer to let Mr. Culpeper respond to that.

Á (1120)

Mr. Roy Culpeper: Go ahead.

Ms. Myriam Gervais: It goes back to the question that was asked earlier. It is fine to look for concrete assistance, but if people think that development in Africa will happen through the private sector and trade, and that growth will necessarily raise the incomes of the inhabitants there and thereby improve their health and education status... The past 40 years have shown us that financing infrastructure and aid to strengthen the administrative capacity of governments have not worked in Africa. In the 1980s and 1990s, in fact, it was not even enough for the stable countries in Africa.

A factor that is always overlooked is the need to allow the people in these countries to express themselves, to make choices and to take charge of their own development. Those people hold the keys to their future development. We must not decide for them, by providing aid, planning projects and telling them that their problems will be solved if they open up their economies and adopt our type of economic and development model. Instead, we need to look at the various possibilities with them and support those societies in the choices that they make as societies.

As a starting point, we need to support the decentralization process that is underway in African countries in order to get the local people involved in developing their own policies, making their own choices and deciding on their priorities for how to use the resources of their countries and the assistance provided by donors.

[English]

The Vice-Chair (Mrs. Jean Augustine): Very briefly.

[Translation]

Mr. Roy Culpeper: I would like to add a few thoughts. In my opinion, this issue of how the private sector conducts itself in Africa or elsewhere in the developing world revolves around the need for coherence in our foreign policy. What we are lacking is a coherent policy. We do not have a development policy, a foreign affairs policy. We have a lot of policies: a foreign affairs policy, a CIDA policy, a defence policy, etc.

A year ago, in December 2000, the United Kingdom issued a white paper on global development:

[English]

how to make globalization work for the poor.

[Translation]

That is what we do not have in Canada: a policy covering how the private sector conducts itself. I have actually raised this issue of coherence in the context of a research project that we are doing in the North-South Institute in Mali.

I raised this issue of coherence with Mr. Good, the CIDA president, and he replied:

[English]

“We don't have the necessary statute to govern this kind of problem”.

[Translation]

So your own piece may be necessary, but it would be more important, in my opinion, for Mr. Graham or Ms. Whelan, or both of them together, to develop a policy to integrate all these aspects.

Mrs. Francine Lalonde: Thank you very much.

[English]

The Vice-Chair (Mrs. Jean Augustine): You have ten minutes to go on the clock. Okay? Then we'll go to Mrs. Carroll, I think.

Mrs. Aileen Carroll: I'll ask a question and make no preamble. I'll be very brief.

Professor, in talking as you do about making the detachment, if I may call it, of aid from the political and economic umbilical cord of donor countries a priority, do you think we're making progress?

In the 1960s---I hate to admit this---while on education leave from what was then the external aid office, I tried to capture, under the title of conflict within the administration of Canada's aid programs, some of what maybe Keith Spicer was saying then, in his samaritan state. I mean, that was a thousand years ago.

Have we made any progress? I look back and say I was a Pollyanna. Are we still Pollyannas?

Prof. Gerald Helleiner: We're both probably bloody and unbowed, I hope. I haven't seen great progress in the reduction of political, economic, and strategic interest, certainly not in the U.S. aid program, and I don't think in our aid program. But I truly think I have seen it in the Scandinavian, Dutch, and post-Clare Short British programs. There is something very hopeful happening there.

I'd also like to take the opportunity to correct what I hope was not a misunderstanding--that I said debt cancellation had no impact. I did not mean to say that at all. I meant to say that debt cancellation did not increase sufficient resource flows, and it wouldn't have a significant impact on that. But I was among the campaigners for cancelling the debt, and it should be cancelled for all kinds of reasons. It's just that it doesn't generate the resource flows we need.

Á (1125)

The Vice-Chair (Mrs. Jean Augustine): Mr. Harvard.

Mr. John Harvard: I'll try to make this short.

Mr. Culpeper, you indicated in your opening remarks that developing countries are often required or forced to accept some pretty draconian economic policies before making themselves eligible for assistance of one kind or another from IMF and/or the World Bank. On balance, at least in some countries, do these policies do more harm than good? If so, would it be better for these recipient countries to simply say to the IMF or the World Bank, "Keep your damn assistance--shove it"?

Mr. Roy Culpeper: In fact, some countries have said precisely that, South Africa being one of them. Also, both the IMF and the World Bank have, so to speak, confessed that their programs of structural adjustment during the 1980s and 1990s have not worked. What we're coming around to now is something different, or maybe different, under the rubric of ownership that Gerald Helleiner was talking about, and I think the jury will be out as to what that really means.

What we're seeing now is a system whereby countries are told to develop their own economic policy framework involving consultation with NGOs and civil society and so forth, then present it in the form of a poverty reduction strategy to the Bretton Woods institutions in Washington as an expression of the body politic and the citizenry of that country. The problem that I see happening and others see happening is that the countries who are going through this mill of the poverty reduction strategy know quite well what it is that the listeners on the other end in Washington want to hear.

So even though the old system of having structural adjustment sort of forced down people's throats has gone, we have a new system now in which there's more of an implicit notion of what constitutes correct economic policies and what will pass muster in Washington. So there's a lot of debate going on about this right now. On the one hand, I think one should be thankful that at least the principle of ownership is acknowledged as being important, but at a deeper level some of the issues of doctrine and dogma are still there.

Mr. John Harvard: One more short question. I would argue that because of September 11, we should put more emphasis on aid and on assistance and development, not less. I'm worried that at least in the short term it might go the other way because of the preoccupation we have with security. Would you agree or not?

Mr. Roy Culpeper: Well, I agree with what you've said, but I also agree that outside of the United States there's a great deal of sympathy to the idea that--

Mr. John Harvard: But the Americans are the drivers to a great extent, aren't they?

Mr. Roy Culpeper: But I think Gerry's point is why should they be the drivers?

Mr. John Harvard: I know, but that's reality.

Mrs. Aileen Carroll: He's just saying “ought”, he's not saying “is”.

Mr. Roy Culpeper: It's only “is” because we allow them to be.

Mr. John Harvard: We being who? Do you mean “we” being everyone except the Americans?

Mr. Roy Culpeper: We being the Canadians and the Brits and everyone else in the G-7. I think the French and Germans can be recruited now as well.

Mr. John Harvard: Thank you.

The Vice-Chair (Mrs. Jean Augustine): Thank you so much to our witnesses for coming before us today and also for enabling us to do some business while you were here. We appreciate hearing from you. And I hope we'll be able, as we progress in this study, to call on you and your resources and your expertise as the committee work continues. Thank you so much.

We now have a vote in the House, so this meeting is adjourned to the call of the chair.