Priorities for the G-20 Summit in Toronto
Under the theme of “Recovery and New Beginnings,” the G-20 Toronto Summit will focus on recovery from the global economic and financial crisis and the implementation of commitments from previous G-20 summits—Washington in November 2008, London in April 2009 and Pittsburgh in September 2009―while laying the foundations for sustainable and balanced growth for the future.
Securing recovery and restoring balance to public finances
The G-20 members’ commitment to inject growth-stimulating financial support (stimulus) equivalent to 2 percent of national gross domestic product (GDP) played a critical role in mitigating the impacts of the global economic and financial crisis and putting the world on the path to a promising but still fragile recovery. Recent volatility in financial markets is a reminder that significant challenges remain and underscores the importance of international cooperation. A key issue moving forward is how best to restore balance to G-20 members’ public finances, while keeping the world firmly on the path to recovery. While the pace and time frame for restoring balance will depend on conditions in each country, a coordinated approach remains imperative.
In early 2009, Canada delivered on its G-20 commitments with the introduction of a stimulus package worth $62 billion—more than 4 percent of Canada’s GDP. With commitments in place for more than 16,000 projects across Canada, this spending has helped put Canada on the path to a strong recovery that began in mid-2009. Since July 2009, the Canadian economy has created over 300,000 jobs, evidence that this plan is working.
As the Canadian economy improves, the Government’s focus is returning to budgetary balance over the medium term. In Budget 2010, the Government of Canada set out a three-point plan to bring the federal government’s finances back to balance, well before any other G-7 country (see additional details below under Canada’s Context).
As Co-chair of the G-20 working group tasked with implementing the Framework for Strong, Sustainable and Balanced Growth, Canada is pushing for countries to put their fiscal houses on a sustainable footing. To achieve this, plans must: 1) be credible and based on prudent assumptions, with specific measures that move those countries in deficit toward fiscal sustainability; 2) begin in 2011 (at the latest) in most advanced countries; and 3) focus on measures that foster long-term economic growth.
Reforming the global financial system
G-20 reforms to the global financial system—the most comprehensive package of financial sector reforms in modern times—are key to reducing risk, making our system safer and restoring a healthy financial sector that serves the needs of the economy. At the core of the G-20’s reform agenda are stronger capital and liquidity standards, and limits on leverage for banks and financial institutions. New rules are being developed and phased in throughout 2011 and 2012, as financial conditions improve and the economic recovery strengthens. Full implementation of transparent, neutral and risk-based principles for sound financial supervision remains critical to improving financial stability both domestically and internationally. Supervisory frameworks need to be responsive and flexible and supervisors need appropriate tools to ensure their effectiveness. Addressing moral hazard in the system with institutions that are perceived to be “too big to fail” is another key priority. There is general agreement with the principle that taxpayers should not bear the costs of rescuing financial institutions. G-20 countries have a range of potential policy approaches to protect taxpayers, reduce risks from the financial system, and protect the flow of credit in good times and bad. Approaches must take into account an individual country’s circumstances and help to promote a level playing field.
Canada’s banking and financial system proved to be one of the strongest, most stable in the world throughout the global financial crisis, thanks in large part to a strong regulatory framework already in place in Canada. Moving forward, Canada will continue to make important contributions in advancing discussions on the best means of mitigating the risks of future financial crises as co-chair of the G-20 Working Group on Enhancing Sound Regulation and Strengthening Transparency. Evaluating progress on financial sector reform, ensuring transparency in the marketplace, reducing excessive risk taking and encouraging a culture of prudent behaviour focused on the long-term remain key objectives.
Strengthening international financial institutions
The economic crisis has had a significant impact on developing countries and the most vulnerable. It will be important to strengthen development and build greater resilience to future shocks. Along with increased funding of some $850 million for international financial institutions including the World Bank, IMF and multi-lateral development banks, the G-20 has committed to governance reforms to enhance the credibility, legitimacy and effectiveness of those institutions. The Toronto Summit will highlight important agreements reached on capital increases and reforms at the multilateral development banks, as well as reforms to increase the “voice” of emerging economies at the World Bank. Discussions of quota and governance reforms for the IMF will also continue, with a view to meeting the November 2010 deadline for agreement.
Canada has played a leading role in boosting the resources of international financial institutions, providing $22 billion to organizations such as the IMF, the World Bank and the Inter-American, African and Asian Development Banks. To acknowledge the financing needs of low-income countries, Canada is also pushing members to commit to appropriate replenishments for the International Development Association and the African Development Fund and to broaden participation across the G-20.
Building for the future by liberalizing trade and investment
Today’s world economy is a highly integrated and interconnected system in which growth is driven by trade and investment. The G-20’s vocal opposition to protectionism has helped to avoid the types of protectionist measures that turned the stock market crash of 1929 into the Great Depression. At the Toronto Summit, G-20 leaders will continue their efforts to guard against protectionism and to liberalize trade.
Canada recognizes that the key to a lasting global recovery lies in forging more trade and investment. Canada recently implemented free trade, labour and environment agreements with the European Free Trade Association and Peru. We are also pursuing legislation to pass free trade agreements with Jordan and Colombia and recently signed a free trade agreement with Panama. In addition, Canada is engaged in discussions with the European Union and the Caribbean community of nations and other key markets. Furthermore, we are, unilaterally and without negotiations or reciprocity, eliminating tariffs on imported equipment and machinery, effectively putting Canada on track to be the G-20’s first tariff-free zone for manufacturing imports by 2015. Canada’s