Canada Leads: Improving International Governance

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PAUL MARTIN was Prime Minister of Canada from December 2003 to February 2006. A member of the Liberal party, he has been the Member of Parliament from LaSalle-Emard in Montreal since 1988 and served as Minister of Finance from 1993 to 2002.

At the 2004 Sea Island Summit of the G8, the policies you implemented as Canadian Finance Minister were cited as a model for reforms in other G8 countries. What is the core principle behind these policies? Are they applicable to other G8 nations?

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Intergenerational equity dictates that a government should not go into debt to pay for its current expenses. That is why we eliminated the deficit, why we had the objective of getting our debt-to-GDP ratio down to 20 percent within a decade, and why we hold the conviction that that we will not go back into deficit in Canada. The basis for this is threefold. First, sound governance requires sound financial management. Second, the G8 countries have aging populations. Deficit reduction is essential if the state is to assume its responsibilities in terms of healthcare, education, and pensions. Third, in a world in which emerging markets are rapidly becoming major economic powers, the resulting competition means the unexpected has to be expected.

Sound financial management enables governments to deal with unanticipated economic upheaval and downturns. A sound balance sheet should be a given, and targets should be in the areas of universal education and investments in medical and other areas of research.

The G8 has specifically advocated microfinance as a route to development. What do you believe to be the most effective means by which the G8 may promote development?

Good governance, and the transparency and openness that follow from good governance, is the answer. Microfinance is important, but so is achieving international standards in primary and secondary school education. Investment in infrastructure is absolutely essential, as is the presence of a growing indigenous private sector. Indeed the dynamism created by indigenous entrepreneurs, a direct result of microfinance, must be extended through any developing economy if it is to succeed. For example, the private sector has to expand into the mid-market opportunities, like retail distribution and higher-value-added agriculture, because that is how a growing middle class will be developed.

The other area in need of focus is the dilemma that Hernando De Soto and C.K. Prahalad have written about, which is the recognition that huge wealth lies untapped in the assets that are owned by the poor. Giving them title and the ability to borrow against their assets and providing regulation that will benefit rather than oppress the poor is vital. G8 nations like Canada, in working with domestic institutions like the African Development Bank, can do a great deal to facilitate these legal reforms and can provide the capital to see their potential realized.

What steps must the G8 take toward trade liberalization and economic openness?

We must do more than talk about open economies or trade liberalization. In more cases than not, what the developing economies face is the closing of the developed world's markets because of global distribution networks, which are the means by which a product gets to its final consumer, and hidden tariff barriers.

The current distribution networks in rich countries militate against higher-value-added agricultural products from the poorest countries. What is required is for the G8 to recognize that the developing countries of the world must be allowed to move up the economic chain in areas that reflect the capabilities of their local economies.

As Prime Minister, you proclaimed a strategic partnership with China in September 2005 with the goal of strengthening bilateral ties and trade. What do you see as the future of Sino-Canadian relations?

Sino-Canadian relations have always been important for Canada and are increasingly so today. …