From Pittsburgh to Muskoka:
Building a Sustainable Global Recovery
By Stephen Harper, prime minister, Canada
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The actions taken by Canada and the rest of the G8 and G20 have helped stabilise the global economy. But the world cannot become complacent. Much remains to be done to ensure a full recovery and prevent similar crises in the future
The world is now a year into an unprecedented economic crisis, which has shown dramatically how interconnected all of our economies have become. Since the onset of the crisis, the world’s major economies, led by the G20 countries, who are meeting in Pittsburgh, have responded in a coordinated way to stabilise the international financial system and provide stimulus to our economies. Thanks to these efforts, economic recovery is now in sight – although it is fragile. Coordination and prudent management of our economies must continue.
Canada was fortunate to enter the crisis in a strong fiscal position and with healthy financial institutions. We have one of the lowest ratios of debt and deficit to gross domestic product in the G8 and the world’s soundest banking sector according to the World Economic Forum. But, like all economies, Canada has been affected. That is why we identified early on four key priorities for action: getting banks working again, providing stimulus, resisting protectionism and reforming the financial sector for the longer term.
Canada and the world have made progress toward these goals over the last year. In Pittsburgh the G20 leaders will take stock of where we have come from and where we need to go. And Canada looks forward to hosting next year’s G8 summit in Huntsville, in the Muskoka region of Ontario, as another milestone on the road to economic recovery.
In London in April, G20 countries pledged $750 billion in new resources for the International Monetary Fund (IMF), as part of a $1.1 trillion package to restore credit, growth and jobs, especially in developing and emerging economies, through multilateral institutions.
The G20 is bringing change to international financial structures, calling for reforms to the IMF and creating an enhanced and expanded Financial Stability Board. Canada co-chaired the G20 working group that developed an ambitious plan to reform the way financial markets are supervised and regulated.
G20 leaders were united on the need to resist protectionism, pledging to avoid bringing in any domestic protectionist measures through to the end of 2010, reaffirming their commitment to completing the Doha round of World Trade Organization negotiations and pledging $250 billion to financing for trade.
While Canada’s sound financial system and strong fiscal balance sheet helped the country weather the storm better than most other economies, Canada has also experienced the downturn. Therefore we have worked hard both at home and with our international partners to restore stability and growth.
Canada’s stimulus effort – federal, provincial and municipal – is among the largest in the G8, at more than $80 billion in measures, some 5.2 per cent of GDP. And money is flowing, with more than 80 per cent of the measures in our economic action plan already being implemented.
Canada has also been forceful in fighting protectionism, not only avoiding taking protectionist measures, but also encouraging greater free trade. This year we have unilaterally reduced tariffs and lowered barriers to foreign investment. We are actively pursuing trade agreements, concluding or signing agreements with the European Free Trade Association, Peru, Colombia, Panama and Jordan, while seeking new agreements with Korea, Central American countries and the Caribbean community.
Canada is committed to ensuring that international financial institutions have the resources they need to respond to the crisis. We have committed $10 billion in new resources to the IMF and doubled Canada’s capital subscription to the Inter-American Development Bank.
We are following through on our commitments to help protect the most vulnerable. In 2009 we met our G8 commitment to double international assistance to Africa compared to 2003-04. We are on track to double international assistance overall by 2010.
Last July at the G8 Summit in L’Aquila, Italy, Canada announced a doubling of spending on agricultural aid, with an additional $600 million over three years. This builds on our commitment last year to completely untie procurement of humanitarian food aid.
The actions taken by Canada and the rest of the G8 and G20 have helped stabilise the global economy. But the world cannot afford to become complacent. Much work remains to be done to ensure a full recovery and prevent similar crises in the future.
First, we must continue to fix those banks that remain in need of repair. Until banks are sound and credit is flowing, a sustained recovery cannot be ensured. Toxic assets must be removed from bank balance sheets or ring-fenced. Until this happens, financial markets will not be able to function properly.
Second, stimulus must be implemented quickly and efficiently to ensure maximum impact. Countries should continue to coordinate their actions and avoid trade-distorting measures in their domestic stimulus packages.
Third, G20 members and international bodies must continue to strengthen financial regulation and supervision to avoid the threat of a future systemic crisis. Canada’s experience shows that good financial regulation starts at home. But strong domestic regulation must be supported by regular and transparent independent reviews.
Finally, everyone must continue to resist protectionism. We need to ensure that the gains achieved by trade liberalisation over the past five decades are not jeopardised. In tough times, domestic pressure for protectionism always intensifies. But we must not only resist that temptation, but liberalise trade even further.
While there are encouraging signs, economic recovery remains fragile. Governments must remain resolute and continue to act together to ensure a sustained global recovery.
While the extraordinary fiscal, monetary and financial measures that have been undertaken were necessary to stave off financial disaster, over time governments must pull back from some of these temporary actions and let market forces reassert themselves. Leaders need to plan and coordinate the exit strategies from these measures carefully and in full consultation with each other.
Canada looks forward to hosting the G8 leaders in Muskoka in 2010. Both the G8 and the G20 have had important roles in addressing the economic crisis. Canada intends to help continue that leadership. As G8 chair in 2010, Canada will work with our G8 and G20 partners to ensure coordinated approaches, and use our role as chair to help build and sustain economic recovery for all of our economies and peoples.
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