Evidence of meeting #61 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was transfer.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Glenn Campbell  Director, International Policy and Analysis Division , Department of Finance
Gilles Moreau  Director General, National Compensation, Royal Canadian Mounted Police, Department of Public Safety
Jonathan Roy  Senior Policy Analyst, Social Policy, Health, Justice, Culture, Department of Finance
Daniel MacDonald  Chief, Federal-Provincial Relations Division, CHT/CST and Northern Policy, Department of Finance
John Davies  Director General, National Security Policy, Department of Public Safety
Darryl Hirsch  Senior Policy Analyst, Intelligence Policy and Coordination, Department of Public Safety
Nigel Harrison  Manager, Legislative and Parliamentary Affairs, Department of Fisheries and Oceans
David Gillis  Director General, Ecosystems and Oceans Science Sector, Department of Fisheries and Oceans
David Lee  Director, Office of Legislative and Regulatory Modernization; Policy, Planning and International Affairs Directorate, Health Products and Food Branch, Department of Health
Samuel Godefroy  Director General, Food Directorate, Health Products and Food Branch, Department of Health
Alwyn Child  Director General, Program Development and Guidance Directorate, Department of Human Resources and Skills Development
Annette Nicholson  Secretary and General Counsel, International Development Research Centre (IDRC)
Lenore Duff  Senior Director, Strategic Policy and Legislative Reform, Department of Human Resources and Skills Development
Dominique La Salle  Director General, Seniors and Pensions Policy Secretariat, Department of Human Resources and Skills Development
Nathalie Martel  Director, Old Age Security Policy, Department of Human Resources and Skills Development
Bruno Rodrigue  Chief, Social policy, Income Security, Department of Finance
Annette Vermaeten  Director, Task Force, Special Projects, Department of Human Resources and Skills Development
Eileen Boyd  Assistant Secretary to the Cabinet, Senior Personnel, Privy Council Office
Neil Bouwer  Vice-President, Policy and Programs, Canadian Food Inspection Agency
Lynn Tassé  Director, Canada Gazette, Department of Public Works and Government Services
Gerard Peets  Senior Director, Strategy and Planning Directorate, Department of Industry
Patricia Brady  Director, Investment, Insolvency, Competition and Corporate Policy Directorate, Department of Industry
Andy Lalonde  Manager, Preclearance, Canada Border Services Agency, Department of Public Safety
Lynn Hemmings  Senior Chief, Payments, Payments and Pensions, Financial Sector Policy Branch, Department of Finance

3:30 p.m.

Conservative

The Chair Conservative James Rajotte

I call this meeting to order. This is the 61st meeting of the Standing Committee on Finance. We are televised today. Our orders of the day are pursuant to the order of reference of Monday, May 14, 2012. We are studying Bill C-38, an act to implement certain provisions of the budget tabled in Parliament on March 29, 2012, and other measures.

Colleagues, we are on part 4, division 13, which deals with the Bretton Woods and Related Agreements Act.

We have with us Mr. Campbell, from the Department of Finance.

Mr. Campbell, I'll let you give an overview of this division, and then we'll have questions from members.

3:30 p.m.

Glenn Campbell Director, International Policy and Analysis Division , Department of Finance

Thank you.

Division 13 pertains to strengthening the legitimacy and effectiveness of the International Monetary Fund. The IMF is a key global institution in assisting the international community through economic, financial, and monetary crises. The fund is referred to as a Bretton Woods Institution, along with the World Bank, due to their origins under the 1944 agreement.

The legislative provision relates to the ratification of the 2010 quota and governance reform agreement among 187 countries, in particular to double all countries’ quota share in the international financial institution and to allow for more voice and representation of emerging market and developing economies. The agreement stems from the IMF resources agreement following the G-20, and the IMFC following the 2008–09 financial crisis. Each member country is assigned a quota share, based broadly on its relative position in the global economy as determined by a formula. A member's quota determines its voting power as well as its financial commitment to the IMF.

Clause 375 amends section 7 of the Bretton Woods and Related Agreements Act to reflect an increase in Canada's quota subscription from roughly $6.3 billion special drawing rights, SDRs, to $11 billion. An SDR is the unit of account at the IMF and is worth approximately 1.5 Canadian dollars at the current exchange rate. Canada's quota--i.e., potential financial commitment--will therefore increase to approximately $17 billion Canadian from $10 billion. This is a non-budgetary item, in which it has no direct fiscal impact. Any lending under the IMF is paid interest and is treated as an asset under Canada's foreign exchange reserves.

Clause 376 is a housekeeping measure that amends section 13 of the Bretton Woods Act to change the date of the annual report to Parliament under the act from March 31 to September 30. This will align the date of the government's annual report on the operations of the IMF and the World Bank with the annual report on development assistance.

Aside from the quota doubling included in this bill, there is a treaty amendment before Parliament that pertains to amendments of the article agreement to reflect modest changes to the governance structure of the IMF. That's sitting before Parliament now.

I am willing to take questions, Mr. Chairman.

3:30 p.m.

Conservative

The Chair Conservative James Rajotte

Thank you very much, Mr. Campbell.

We will begin with Mr. Caron.

You have the floor.

May 17th, 2012 / 3:30 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

Thank you.

I would like to know whether you think the special drawing rights and general resources of the International Monetary Fund are currently at a sufficient level to protect Canada, the United States and the European nations from a potential default on Greece's debt.

3:30 p.m.

Director, International Policy and Analysis Division , Department of Finance

Glenn Campbell

Rather than speculate on any particular event, I would say that the government's position is that with the conclusion of this agreement with the IMF having roughly $1 trillion, at present, of what we call forward commitment capacity--available lending resources—Canada's view is that the IMF, after this agreement, has sufficient resources to deal with any imminent threats and risks. At the present time, the IMF has $400 billion U.S. worth of available lending capacity at its disposal. It also has commitments from all the member countries that if it were to need additional resources, they would be there in a time of need. The view of the Government of Canada is that following the ratification of the 2010 agreement, there is sufficient quota, and there are sufficient resources commitment behind the IMF at the present time. The IMF is already engaged in a program to support Greece at the present time.

3:35 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

I assume you base your projections on various scenarios, but do you have an idea of the impact a potential default on Greece's debt would have on Canada's economic growth?

3:35 p.m.

Director, International Policy and Analysis Division , Department of Finance

Glenn Campbell

I'm not prepared to answer that at the present time. However, I believe the minister has stated that Canada is not immune from international crisis, and that's why we're following the issue in Europe very closely.

3:35 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

Thank you.

I am going to keep my subsequent questions for the witnesses who speak later.

3:35 p.m.

Conservative

The Chair Conservative James Rajotte

Merci.

3:35 p.m.

NDP

Paul Dewar NDP Ottawa Centre, ON

I'd like to--

3:35 p.m.

Conservative

The Chair Conservative James Rajotte

There are three minutes left.

3:35 p.m.

NDP

Paul Dewar NDP Ottawa Centre, ON

I have a question about the World Bank. Who's our representative right now at the World Bank?

3:35 p.m.

Director, International Policy and Analysis Division , Department of Finance

Glenn Campbell

Canada has appointed an executive director who leads the Canadian constituency, along with a number of Caribbean countries and Ireland, and that person's name is Marie-Lucie Morin.

3:35 p.m.

NDP

Paul Dewar NDP Ottawa Centre, ON

Are you aware whether they have ever been present at a committee of Parliament?

3:35 p.m.

Director, International Policy and Analysis Division , Department of Finance

Glenn Campbell

I look after the IMF, not the World Bank, but I can certainly get back to the committee on that question.

3:35 p.m.

NDP

Paul Dewar NDP Ottawa Centre, ON

For the record, Chair, I think you'll find we haven't had a presentation—unless I'm wrong—at the foreign affairs committee. I'm wondering if you've recently had a presentation from our representative to the World Bank at the finance committee.

3:35 p.m.

Conservative

The Chair Conservative James Rajotte

We haven't, but for clarification, what does this have to do with the budget act?

3:35 p.m.

NDP

Paul Dewar NDP Ottawa Centre, ON

What was referenced are changes to Bretton Woods, which is touched by the World Bank. If we're going to be looking at this in a fulsome way at some point, I was wondering if you would contemplate having representatives from the institutions that are being touched on.

3:35 p.m.

Conservative

The Chair Conservative James Rajotte

For clarification, do these amendments touch on the World Bank at all?

3:35 p.m.

Director, International Policy and Analysis Division , Department of Finance

Glenn Campbell

No, they do not.

3:35 p.m.

Conservative

The Chair Conservative James Rajotte

Okay.

We can certainly take it under advisement.

3:35 p.m.

NDP

Paul Dewar NDP Ottawa Centre, ON

It was just a point of clarity. Thank you.

3:35 p.m.

Conservative

The Chair Conservative James Rajotte

Okay, great. Thank you.

I'm going to go to Mr. Brison.

3:35 p.m.

Liberal

Scott Brison Liberal Kings—Hants, NS

Thank you, Chair.

Thank you for being before us today.

Given the current turmoil and challenges, we understand the rationale for increasing our commitment, and other countries' IMF partners are doing the same. Are we doing so with our other partners proportionally?

Has there been some analysis, or do you have some analysis or insight on the impact on what the prudential strength of the IMF would be if the euro were threatened by a Greek departure and the contagion that would lead to others with similar fiscal challenges potentially doing the same? What would be the potential threats to the prudential strength of the IMF in that sort of event?

3:35 p.m.

Director, International Policy and Analysis Division , Department of Finance

Glenn Campbell

That's a very good question.

On the first one, the agreement pertaining to quota, Canada is participating with its proportional share. The quota determines what our financial contribution is, and a quota system determines the size of our economy and a degree of openness. Roughly speaking, the size of one's economy leads to the amount you must contribute as a commitment to the IMF pending an agreement, and that also translates into voting rights, which you're able to use and exercise when managing the fund.

The basic tenet of the International Monetary Fund, first and foremost, is that it has primary creditor status. It means that whenever it engages in any entity—a sovereignty entity—everything else is subordinated. Whatever happens when the IMF is involved, part of the conditions are that the IMF always gets paid back. That has been the case through the history. When it's been involved, particularly in emerging market crises and Asian crises in the past, agreements under which the IMF lends its balance sheet are always according to very strict stringent conditionality, to which the receiving sovereign must abide in terms of what structuring it needs to make. Then, it's usually monitored very closely by the IMF such that it does in the end get paid back.

The concept of the IMF is that you take a country off borrowing from sovereign markets, you get a lower borrowing rate, and you force it to make structural change such that it's in a position to repay all other countries. At present the IMF has 50 years of experience and a lot of resources at its disposal to withstand any major shock.