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UN WATCH! Helping YOU to Connect the Global to the Local

The Women's International Media Group, Inc.
P. O. Box 77 Middletown, MD 21769-0077
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Vol. 5, Issue 4 July-August, 2003 Published March, 2004

June 30, 2003

EDITOR’S NOTE: The Bank for International Settlement-BIS represents the brains of how the world monetary system is managed. All of the world’s central banks meet at the BIS, which decides global monetary policy. Federal Reserve Chairman Alan Greenspan meets with the G10 counterparts to establish monetary policy on a monthly basis. When I covered the 2003 Annual Meeting of the Bank for International Settlements-BIS, I was asked to do an exclusive interview with the new managing director. To prepare for this important one hour interview, I spent 30 hours reading key BIS speeches, G7 Finance Ministers speeches, Alan Greenspan speeches and Dr. Carroll Quigley’s writings about the central bank and global economic structure in his book, Tragedy and Hope.

Several weeks earlier I covered the G8 meeting in Evian, France. I have provided you with one article written for worldnetdaily.com which describes the meeting, an interview and the final press briefing with President Jacques Chirac.
Dr. Knight was formerly a Senior Deputy Governor of the Bank of Canada which he joined in 1999 after 24 years at the IMF as Deputy Director. Dr. Knight holds a Bachelor’s degree in economics and political science from the University of Toronto and a Masters and PhD degree in economics from the London School of Economics and Political Science-LSE. He has taught at the University of Toronto and the LSE.

VEON: You are an apex power-that is what Carroll Quigley called the Bank. As such, I sort of think of you-maybe I am wrong-as running the monetary systems of the world.
KNIGHT-actually we don’t do that. The world monetary system is controlled in two ways: first of all it is controlled by the policies of the central banks of the systemically important countries-the big countries -both industrial countries and emerging market countries and in recent years, those central banks have operated policies of maintaining low-predictable and stable inflation and that over time does contribute to financial stability in the world and also to better long-term real performance of the world economy so I think that it is really the fact that the central banks come to Basel and we provide a lot of economic analysis for their discussions. But it is really the dialogue that takes place around the tables here in Basel among the central bank governors and with the financial regulators, which are what I think, contributes to the stability of the international monetary and financial system. We are facilitators.

VEON: As such, being facilitators, when you take a look at the world economy which has been adequately set forth in the Annual Report and the press briefing, what do you see given the current trends in the next 5 - 10 years and what kind of other systems or committees or policies will the BIS have to put in place to meet some of the very apparent changes today.
KNIGHT-I think you are right in putting it in a 5-year context. First of all we have to achieve a set of policies which over time will assure us, steady, sustainable non-inflationary long term growth and I think over the past 5 years or so, central banks have established a good record in maintaining inflation-low, stable and predictable. But that is a necessary condition for insuring good growth performance but it is not a sufficient condition. Over the past year and a half with the sharp decline in equity markets two years ago and with all of the geo-political uncertainties associated with Iraq there has been a weakening of demand in a number of countries and it is primarily because in times of uncertainty business firms are more reluctant to invest and to engage in major projects.

Some of those uncertainties are starting to dissipate. We are seeing better financial - better profit performance in the business sector in several countries: the U.S., Canada and other countries. We are seeing corporate spreads between risky corporate interest rates and Treasury bills come down. Interest rates are at very low levels and these are factors with the return of confidence should help to restore and strengthen growth over the period you are talking about. Beyond that is what you alluded to in the question in terms of maintaining solid macro-economic performance in the world is to continue to implement standards of good financial behavior. One element of that are the Basel II proposals for a new set of rules regarding the capital requirements for banks. Over the next period to 2006, there will be discussions on how to implement that in individual nations, there will be legislation and regulations passed to implement those capital risks and that will contribute to better financial stability in the banking system and the financial system in general. Beyond that there are other committees here that make sure the systems that transfer very large financial values among financial institutions in different countries operate in a risk-effective way. There are committees that are concerned with looking out over the horizon to see what the risks are in the financial area and all of this feeds into the deliberations of the governors and the financial authorities.

VEON: With regard to the geo-political, Bush is now looking at Iran and everybody knows about his Roadmap to re-arrange the Middle East. There are some concerns that the U.S. is looking to reconstruct the Middle East, are there any thoughts of further wars and their affect on the global economy.
KNIGHT-I am not in a position to talk about the kinds of political developments that you are interested in but the one thing I would say that in order to encourage the kind of global stability that I am talking about, it is necessary to foster better more stable systems all over world. One of the things that we learned from the crises in Asia, Latin America in the late 1990s and the Russian federation is that a problem in one country can be rapidly transferred to another country. So it is important to build financial systems that are strong. It is also important to build systems that are transparent and open and I think that those kinds of relationships form the glue that produce better economic and political relations in the world as well. There is a lot of work to do in some reasons-notably in the African Continent and for that matter in the Middle East, but I think with good will and a lot of regional cooperation, there is every prospect that that can go forward.

VEON: With low interest rates in the US economy-being a homeowner, I view low interest rates as great-if I can finance my home for 15 years at 4 ½% that’s great, but there are a lot of people who are borrowing out unrealized capital gains and they are adding to their level of debt. It appears that a stimulus of new money can only work for so long or am I wrong. What happens when a nation becomes saturated with money and it does not work-what tools does the central bank have to protect?
KNIGHT: I think that actually over the last year a half the reduction of interest rates has helped to underpin demand as you have said and to make this period of weakness less severe than it otherwise would have been. So monetary policy has really been very effective. Now as you suggest, it has tended, because it has created an environment of very low interest rates and has tended to concentrate demand more in certain areas that would have been the case-the purchase of consumer durables and automobiles-and of housing have been higher than they would have. You made a specific reference to the household sector. In the U.S. it is true that the ratio of debt to disposable income has risen but you also have to recognize that the counterpart of that is higher home ownership and higher ownership of consumer durables and replacement of the car. These are assets on the other side of the balance sheet so when I worry about how sustainable debt levels are, I worry about it in terms of the amount of money you have to pay in debt service relative to total income-this is the debt-serve ratio. This is lower in the US now than it was in the 1990s. Now interest rates are low and if they rise, they will rise because the economy is strengthening and disposable income is strengthening so there is no reason why we can’t have rising interest rates in conditions where people still have quite sustainable debt service ratios. So this is something that needs to be watched and something that is moving up. I don’t think you should over accentuate the risks.

VEON: There was some discussion in the Annual Report about the problems with liquidity-Andrew Crockett specifically referred to a time after the LTCM when there was no liquidity in the system. What are some of the new structural increases in liquidity?
KNIGHT: That is a very important point. At the time of the Russian crisis, concerns about Latin American countries in September/October and the LTCM problem there was a drying up of liquidity in the financial markets all over the world. That essentially means that a lot of institutions wanted to sell assets but no one wants to buy them. Everyone was hanging on to their most liquid assets and that was creating problems in the markets. What this pointed out was how important it was to ensure that financial markets for government securities and foreign exchange work efficiently. There are a number of aspects to efficient markets, one is good corporate disclosure, and another is a clear understanding by the public at large that the central bank is committed to stable markets because that is what keeps long-term interest rates low. Beyond that, it is very important to ensure that the markets are functioning well and they are maintained in a state where it is possible at any time for an institution to enter the market and get the liquidity it needs.

In the period since 1998, certain types of markets have become more developed than they were at the time. Some of these markets are derivates markets which allow banks and other financial institutions to adjust the risks on their balance sheet more flexible than in the past.

These are new over the counter markets and they have to be watched to ensure that the risk is not getting concentrated too much in one place but as a general rule, they held to increase market liquidity and operate more efficiently so this is what Andrew Crockett was talking about.

A lot of work is done here in Basel to ensure markets work effectively: we have the Committee on Payment and Settlement Systems-CPSS which worries about large value transfers, we have the Markets Committee which looks at the functioning of the fixed income and foreign exchange markets and we have the Committee on the Global Financial System-CGFS which sort of looks at the major issues that relate to market functions in generally. Then the BIS also provides the Secretariat for the Financial Stability Forum-FSF which was set up by the G7 to assess the risks in the world economy and to make sure that in areas where there are vulnerabilities that there is work being done to see how it could be improved.

VEON: With regard to the Financial Stability Forum-FSF, I have interviewed Swein Andressen on several occasions and I am very interested in the FSF because it represents greater cohesiveness, harmonization among countries-G7 Finance Ministers and Central Bankers and regulators. What other actors do you envision becoming part of it in the future?
KNIGHT: I think the important thing about the FSF is that it includes not only the large industrial countries but representatives of the large systemically important emerging market countries and as I said before, we live in a world where a financial problem in an emerging market country can have contagion to developed country financial markets and visa versa so the representatives of both the developing and developed countries have a strong interest in getting together to discern where the vulnerabilities are and to do something about it. From the beginning, one of the things the FSF did was to look more at certain financial centers which did not have strict criteria for their financial systems as was general in other areas or where there was not transparency and legal frameworks. These were financial centers where a lot of hot money could be placed. The FSF interest and concern about these centers has led to implementation of rules on financial behavior all over the world [Off shore financial centers].

So I think the FSF is very important in pointing out where risks may lie and to help mitigate these risks.

VEON: Yes-I think it is in the last year, that the other emerging market countries were added.
KNIGHT: No-it was an initiative of the G7 but the emerging market countries were in the group from the beginning because the FSF came at the time of the G22 and at the time of the Asian Currency Crisis in 1998. It was about this time that there was recognition of this fact that we had to get developing emerging markets.

VEON: I was just at the G8 meeting and as you know 11 emerging market countries were invited for the first time to attend and I am sure you know that they will probably be invited every year. In speaking of the G8, in my prepared questions that you receive, the G8 presidents and prime ministers, “We support the FSF….” I asked Jacques Chirac the same question I am going to ask you and that is, “Is the G8 signaling that the FSF should help with the oversight of the global financial markets that the G8 originally began with in 1975.”
KNIGHT: (Pause) - I am not sure I understand this question. If you go back to Rambouillet, the issue was the exchange rates between the countries which were the establishment of the G7. The G7 was the first consistent attempt. The G7 met specifically with an economic agenda and specific concern about what economic policies should be used within this group of countries to improve macro-economic performance. Over the years, the G7, now the G8 has come to have both economic and broader political agenda. I think on the economic side the G7 has come more and more to be concerned with the development and implementation and monitoring of standards and norms.
VEON: Obviously that backs into the FSF which they began. In order to pursue a mandate for financial stability, what kind of autonomy does a central bank need and is it more than what they already have?
KNIGHT: As a general rule what central banks need to operate well is to have independence and accountability. Those two aspects go hand in hand. In independence it means that the CB has functional autonomy. That means that once its primary goal is set which is the goal of maintaining low-predictable and stable inflation. Once that goal has been established the CB must have the autonomy to undertake the monetary operations necessary to achieve that goal. It has the responsibility of getting to the goal that has been specified. That is the operational autonomy.

I think there also has to be autonomy in the sense that people who are managing the central bank should have an established term of office, whoever is responsible for making monetary policy should not be removable except in the case where the central bank is not meeting its basic objectives. So that means that it is important for central bank ministers to have fixed renewable terms. If you look around the world and there are 180 countries, --Veon: We are not talking about the BIS-Knight: We are not a central bank, we are the bank for the central bankers* but we are also doing a lot to increase the transparency of the Bank. We have made our accounting rules clearer, the unit of account by which we measure our balance sheet clearer. We are going to publish our staff code of conduct on our website-we want everyone to know what it is. We have a clear statement of the goals and objectives of the institution. We also have some financial independence because we have a banking operation that provides the resources that allow us to do our work with central banks.
* Carroll Quigley stated in Tragedy and Hope

Owned by the chief central banks of the world and holding accounts for each of them, the Bank for International Settlements was to serve as ‘a Central Bankers’ Bank’ and allow international payments to be made by merely shifting credits from one country’s account to another on the books of the bank.

T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences.

VEON: How much is a special drawing right-SDR? I understand that it is backed by a basket of currencies-is there any gold to it?
KNIGHT: No gold in the basket. The basket is a basket of currencies, of major currencies weighted according to their importance in the world economy. The current exchange rate of the SDR to the USR is in the area of $1.40.

VEON: If you were based on the gold franc and now have gone to the currency, is that not a very, very major transfer in your operations?
KNIGHT: Yes, I think it makes our financial statements much more transparent and clearer.

VEON: That means you are not backed by gold, right? Don’t you have gold in savings?
KNIGHT: The BIS is a holder of substantial quantities of gold but the main element of our business is two-fold: first, many central banks place on deposit with us a portion of their foreign exchange reserves and we invest that money and make a small return. Then we have our own funds which, by they way, does include our gold but also our holdings of financial investments and we make a return on that and that is how we are funded to finance the work our staff does to cooperate with central banks.

VEON: Two years ago at the World Economic Forum, I interviewed Dr. Jacob Frankel and asked him if it was time to harmonize world currencies because at that time harmonization and integration were the buzzwords. He said to me, “Before we have currency harmonization, what we first need is economic harmonization.” When we look at financial stability on a global level and money flows back and forth as to where the best return can be made for the day, hour or what have you, is harmonization of the currencies a reasonable thing to project in the future?
KNIGHT: Pause-it is really not that simple. What I would say is that I think the fact that there has been harmonization in recent years if you want to call it that, or consistence of objectives among a lot of central banks in both developing and developed worlds in the sense that they operate their policies to prevent inflation from becoming too high and to prevent it from fluctuating a lot. If you call that harmonization, I think that has been important in improving macro-economic performance.

But if you are talking about harmonizing currencies in former larger currency unions, that depends on many factors. In the EU, the countries that have formed the EMU have done that because they see the benefits of forming-having a single currency which reduces transactions costs. You can now go all over Europe and only use euros and has already resulted in an increased harmonization and integration of financial markets in Europe and that will be very important because it makes those markets more efficient and that is a good thing for the savings and investment process. That does not mean that every country could peg its currency to a large monetary zone. The US/Canada currencies are very, very integrated, for example. Canada produces somewhat different products than the US, so the economic shocks that come from the world economy affect the Canadian and US economies somewhat differently, therefore, even though they are closely integrated-40% of Canada’s GDP is exports of which 80% go to the US, similar imports comes form the US. The shocks are different when prices go up-the floating exchange rate functions as a very flexible price that adjusts to it. We have two economies that are harmonized in terms of trade policies and in terms of their relationship and we still have a floating exchange rate. What makes this work is that both countries have been able to maintain low inflation.

The other area that I think is important in terms of harmonization which the BIS has tried to foster is the harmonization of standards for financial behavior. The Basle Committee regulations are a classic example. The Capital rules have worked very well for a long period of time in providing the same capital regime for banks all over the world. We found some inadequacies in those old rules and the Basle Committee has worked very hard to establish new standards, once they are out there it is important that behavior of financial systems conforms to the new standards and that is true whether we talk about the standards of capital requirements for banks or payment systems are risked proof or the standards for fixed income markets or whatever. This kind of framework of rules/regulations in which the financial system operates needs to be consistent.

VEON: That was very helpful. I am not an economics major but I was very interested that you graduated from the LSE. Do you see Hayek’s work as being timely in light of the fact that liberalization has created financial imbalances around the world? Are we moving in or are we in Fabian Socialism or are we moving elsewhere?

KNIGHT: Both the Webb’s and von Hayek were at the LSE (laughing) not at the same time. I did my graduate work at the LSE at the time when the Bretton Woods system of fixed exchange rates was breaking down, at a time where there were a large number of currencies in Europe, where there were wide-spread capital controls and frequent exchange crises. Now we live in a world where we have open markets. We have in the advanced countries essentially no exchange restrictions and if we look at-we are all concerned about the weakness of the world economy-but if we look at the terms of output compared to where we were in the 1960’s, there is obviously been tremendous progress. Markets work much more efficiently than in those days-more open and more transparent and that means that monetary authorities and financial regulators also have a responsibility which they recognize to be transparent, and to communicate their goals very clearly to the public. That is an environment in which the markets work pretty well. I think that the opening up of markets has been very important in the huge generation of wealth that has occurred since I was a graduate student at the LSE and the development of our economies. At the same time, those markets absolutely must function in a clearly defined legal framework with clear understandings about what the contracts are what the responsibilities are, and so on and those elements do come from this older tradition that we were talking about with the Webb’s.

VEON: In that case then what has transpired with the deregulation and the privatization is the system that the BIS is involved in right now.
KNIGHT: That is EXACTLY what the BIS are involved in.

End of Interview - Group of Eight follows

Joan Veon

A greatly expanded Group of Eight-G8 opened Sunday in Evian, France. The G8 began in 1975 with six countries, meeting with the purpose of guiding the world’s economies in a post-gold world as a result of President Nixon taking the dollar off the gold standard in 1971. Twenty-seven years later it has eight members: the United States, Canada, Great Britain, France, Germany, Japan, Russia and Italy. Russia just became a full member at this meeting. During the last quarter century, the functions and oversight of the Group of Eight Heads of State have come to function like that of a “Global Board of Directors” for the world.

Furthermore, the Group of Eight has added a ministerial level or “global cabinet”. Each member of President Bush’s Cabinet now meets with their G8 counterparts. They work along side each other helping to carry out the directives of the Heads of State and to form their own areas of oversight. For example, leading up to this meeting, the G8 Foreign Ministers, the G7 Finance Ministers, the G8 Justice and Interior Ministers as well as the G8 Ministers of Justice and Home Affairs all met at various times during the month of May. Each issued their own statement of their meeting that reflected current and future goals and objectives.

In an interview with Dr. John Kirton who heads up the unofficial secretariat of the G8 at the University of Toronto, he explained that there is a new G8 structure that is evolving in the 21st Century. One of the questions which I asked in the French press briefing, had to do with the fact that for the first time in G8 history all five of the permanent members of the Security Council are in Evian and therefore, is the veto going to be changed to a vote among members. The French spokeswoman for President Chirac assured me that it would probably come up and that the decision would not be made at the G8 level.

Dr. Kirton has another view. He told me, “It is the Group of Eight that is replacing the Security Council as the center of global governance.” Pointing to the ministerial level or as I call it the “Global Cabinet.” He said that they began in the 1980s as stand alone ministries, and then because there were no global organizations in the areas of environment, employment and terrorism, the G8 added those ministries. In the 21st century, the G8 further expanded the ministerial level by adding one for development. Obviously, you don’t need to worry about a veto in the G8 because everyone votes! This then explains what we saw within the Security Council with regard to Iraq. Britain and the United States went to war as sovereign countries while Russia sided with France against going to war. Thus global democracy at its finest!

This year with the French G8 presidency, a number of other lesser developed countries were invited in an effort for the rich developed countries to reach out to the poorer, lesser developed countries: Egypt, Algeria, Nigeria, South Africa, Morocco, Saudi Arabia, Mexico, Brazil, China, India and Malaysia. In addition, UN Secretary-General Kofi Annan and the heads of the World Bank, World Trade Organization and International Monetary Fund were also present.

Last year was the first year for Egypt, Nigeria, South Africa, Senegal and Algeria. They now are part of the New Economic Partnership for African Development-NEPAD begun in 1999 by President Clinton who also passed legislation to help develop trade in Africa. These countries have volunteered to be accountable to the G8 in order to obtain economic help and revitalization for their countries. It is anticipated that there will be greater G8 inclusion of lesser-developed countries. Possible new members may include Brazil, Mexico, Saudi Arabia and India. While China is an important player, it does not appear that it will be a G8 candidate soon since they still openly embrace communism.

Another observer is Sir Nicholas Baynes who has a long and involved history with the Group of Eight, having been responsible in the 1980s for the preparation of several meetings that England hosted. Sir Nicholas explained that the main focus of the G8 has been moving away “the mainstream economic issues that were the original rationale-macro-economics and the international monetary system.” He said that the G8 is “focusing more on international policy where politics and economics are closely bound together.”

To try and understand how broad and deep the agenda of the Group of Eight has become, all one has to do is understand that the goals and objectives of the United Nations at the 1992 Earth Summit, the 1994 Social Summit and the Fourth Women’s Conference, the 1996 Habitat II Conference and the World Food Summit, the 2000 Millennium Summit, and the 2002 Financing for Development and the World Summit for Sustainable Development are the goals of the Group of Eight.

The G8 is also concerned about threats from Al Qaeda. As a result, the G8 Ministers of Justice and Home Affairs have been implementing a number of measures to exchange information between specialized intelligence services and the strengthening of political cooperation around the world. In addition, they have been able to set up an around the clock network to cooperate globally in high-tech criminal and terrorism investigations, a goal that dates back to the 1996 G8 meeting in Lyon, France. They are also working to develop a common framework and standards within the International Civil Aviation Organization on Biometric Applications for International Travel. In conjunction with this, the US sponsored the 2003 Government Biometrics Workshop in Arlington Virginia in February, 2003.

In 2002, the Group of Eight established the Global Partnership against the Spread of Weapons and Materials of Mass Destruction-to keep nuclear, chemical, biological or radiological weapons out of the hands of terrorists. While I could add many more items, organizations, groups and mandates, one can clearly see that there is a new evolving G8 structure. Is there a deeper integration between the nation-states of the world? Yes. Call it globalization, interdependence or integration-the bottom line is the Group of Eight is taking up where the UN and Security Council have left off.

Dr. John Kirton heads up the unofficial G8 secretariat at the University of Toronto. I fondly remember the young men and women who intern with John from my first G8 meeting in 1996 in Lyon, France. I did not know to reserve a “spot” and did not have one. They gave me a place to sit at their table. I realized the vast wealth of information they bring and have interviewed John every chance I get. Obviously, he is a flaming globalist but we have fun. To them, I am a “philosophical purist.”

I believe that what we are seeing is a new “Security Council” configuration. Interestingly enough, the G8 originally began with three of the UN Security Council members--the U.S., Great Britain and France. In 2000, Russia was admitted as a full partner and they are a permanent member of the UN Security Council. This year China received an invitation to participate.

Furthermore, there is pressure on China to float their currency, the RMB. I believe it is very safe to say that U.S. Treasury Secretary John Snow has dangled the G8 carrot in China’s face. If they devalue their currency, they get to join this prestigious club. So then what does that make the UN? What kind of “power” will they have?

Veon: Do you see China becoming a G8 member?

Kirton: The Security Council is the OLD world and not an important institution for the 21st century. The G8 is replacing the UN as a whole, including the Security Council as the center of global governance.

Veon: How is the G8 replacing the old world Security Council?

Kirton: Institutions fade away. September 11 prompted Homeland Security so the Security Council will take care of smaller issues. Look at SARS. Why does it matter internationally? Peace and Security. Why should the S/C deal with it? What happened is that the Chinese did not allow the World Health Organization into China to stop the spread of the disease. It was due to a lack of transparency in domestic governance over SARS which has become a matter of international peace and security because it could spread. The Foreign Ministers and the Ministerial level have flexibility and don’t fall into the veto.

Veon: Has the G8 become a two-headed beast?
Kirton: The UN is a debating society and it will fad away. The G8 Ministerial level [JV: Global Cabinet level] began as a stand alone in the 1980s with Foreign, Trade, Health, etc. In the 1990s the Environmental ministers are new because there was no UN body or global organization, and then employment was added because there was no employment body. Then terrorism was added because there was no UN institution for terrorism.

In the 21st Century what is new: Labor, health and development. From the beginning the UN had long established institutions like the International Labor Organization. In health we thought the World Health Organization created in the 1940’s was a better UN agency but then it failed to cope with AIDS/SARS.

We developed the IMF/World Bank to do development. As we moved into the 21st century, the G8 created the ministerial institutions like the 90’s but the UN is not able to deal adequately with North-South issues, health and labor. As a result, we have moved to new institutions to deal with domestic issues. The G8 HAS BECOME THE GLOBAL CENTER OF DOMESTIC GOVENANCE IN THE AREAS WHERE THE UN CANNOT.

THE UN CHARTER: NOTHING JUSTIFIES INTERNAL AFFAIRS OF THE SOVEREIGN STATE. AT THE FIRST G8 MEETING IN RAMBOULLETTE, they pledged to “Create new institutions to affirm open democracy, individual liberty and social democracy.” The G8 will act where the UN does not.

Veon: Do you see China becoming a member of the G8?

Kirton: China will go the way of Russia and will become a G8 member. If China does not go G8, then it will go the way of North Korea. There is a new form of global democracy. The G8 is moving OUT to embrace other democratic powers. What China needs to do is to renounce the Chinese communist party and embrace open democracy.

Jacques Chirac Final Press Briefing
June 3, 2003

JV: The following is the statement made by President Jacques Chirac in the final press briefing. Because of the translation from French, sometimes the wording does not flow as smooth as it should. While you may not be able to follow all of what he is saying, let me interject that all of the different subjects he touches upon is an overview of the totality of how the G8 “rules” the world. They affirm and re-affirm the United Nations, its Charter, all of its endeavors and its goals for the world.

Chirac: The summit is over. It can be said that this summit was held under the hallmarks of responsibility, solidarity and action. Such international solidarity is very often necessary (emphasis mine). I will highlight a number of key points.

The central theme of this summit appeared to be how to re-inject growth into the world economy for years to come. It is through a message of solidarity, of cohesion, and of joint action aimed at ensuring growth, because of course, economic growth is required for social progress. We hope the difficult negotiations of Cancun will come off in the best way possible, these negotiations will be difficult. We have reaffirmed the principle of a responsible market economy* with all of what implies.

This is the first time at a G8 conference that we are making a [distinction] and all that it implies for companies that have economic as well as social and environmental responsibilities. This is the first time--let me repeat, this is the first time the G8 summit has a made a clear statement on that subject (emphasis mine).
These key points in the action plan will make it better for us to take advantage of the growth* potential that is out there in the world, as I explained yesterday.

*JV: Please refer to the January/February 2004 UN Watch which explains what the “market-based economy” is.

We have also tried to give new impetus to implementation to the World Summit for Sustainable Development goals at Johannesburg and the UN Millennium objectives with respect to water. France will double their contribution to those particular actions and a collective commitment has been made by the G8 in this regard, with the respective of the Jo-burg objectives one of which is to reduce by 50% the number of inhabitants who do not have access to clean drinking water and proper sewerage systems. That is a major commitment that we have made.

We have reached a turning point with regard to health, another UN Millennium goal. Some progress has been achieved in the area of access to medicine for poor countries. We also took a significant step in that we impose this upon ourselves regarding this before the WTO meeting in Cancun.

Significant progress in the areas of AIDS and other pandemics by means of new resources for the combating of aids and new resources available to the Global Fund has made. So far as France is concerned, we have decided to triple our contribution from 150E, other members have taken other decisions of a similar nature. At the next European council in Thessalonica, the EU made contributions in the areas of combating childhood diseases and combating polio. In the area of famine, which is a severe threat for Africa? We took action.

We also opened up new doors in dealing with excessive burdens of debt. In particular the British and the International Financing Facility is concerned, I think it is an intelligent idea and appropriate for the modern world and should be a good way of bringing together the funds required to support sustainable development. And in that regard, we have given our ministers of Finance at most one month to come up with an Assistance and Solidarity Medium-term Plan beyond humanitarian assistance that is already being provided for Algeria.

In so far as the environment is concerned, we talked about intensification of combating climate change and in the final declaration reserved several points to bring the Kyoto Protocol and ratify it into force. We have taken other decisions the protection of the oceans, forest and biodiversity and also nuclear safety.

With regard to the environment, there was an important commitment made by the prime minister of Japan. We also strengthened our efforts to combat terrorism through all of the means available to us, through very close cooperation among our different secret and law and order services and also with respect to some delicate issues, such as controlling the sale of man pads or man portable defense system which will now be controlled in a more closers and effective way.

We talked about those who have access to weapons of mass destruction-particularly north Korea and Iran.

We also had dialogue with other counties that don’t traditionally meet with us. I think my successors will continue this general principle. I think this Summit was held under the hallmark of mutual trust amongst us and we really had the sense of coming all together in order to bear weighty, significant responsibilities in a world where social progress must be achieved so it was in that general atmosphere-spirit of mutual trust that we came up with these coherent recommendations that were accepted by all.

End of Chirac remarks. It was then opened for questions.

JV Question: Yesterday [in response to my first question] you said the G8 was not an authority or institution, yet the world has followed your mandates for the past 28 years. You give your blessing to all UN treaties and conventions and you have issued more statements and mandates this year than in other years and you also spend the tax money of the G8 countries. Is the G8 a Global Board of Directors with a Global Cabinet, are you a new kind of UN or are you a new Super-charged Security Council?

Well that’s a question which people have been asking for the last 30 years and I don’t know why. We are not the UN. We are not a Board of Directors because we don’t have any power and we are not asking people for it. We are people with a positive resolve who are aware that our actions for the world can be inconsistent or consistent, if they are consistent. It will be to everyone’s benefit so our aim is to ensure that our actions are consistent. We don’t have any specific legitimacy.

JV Note: Would you like to buy the Eiffel Tower?