Paul Rochon, Canada’s lead negotiator at Group of 20 finance ministers’ meetings, shares something with the snowy owl: rarely do either venture outside their natural habitat.
The natural habitat for Mr. Rochon and other senior deputies who serve Prime Minister Stephen Harper and Finance Minister Jim Flaherty is safely behind the scenes. Back in the time of Jean Chrétien and Paul Martin, senior public servants were participants in the public discourse. Not these days. Mr. Harper prefers to have the politicians do the talking.
So just as bird watchers go out of their way to record significant avian sightings, it seems appropriate to make note of a public appearance by Mr. Rochon – and quote him at length.
He was in Washington Friday, participating in a seminar at the International Monetary Fund on current-account imbalances. It was a wonkish affair, attended by only the most dedicated academics, IMF officials and think tankers who spend the bulk of their time thinking about how to smooth global flows of trade and investment.
At the end of 2010, The Globe and Mail included Mr. Rochon among a group of Canadians who would make a difference in the world in 2011. (Mr. Rochon, through a Finance spokesman, declined a request for an interview for that story.) He made the list because of his central role in sorting out the mechanics of how the G20 would achieve its commitment to finally deal with global imbalances – economists’ shorthand for the massive trade deficit of the United States and the similarly dramatic trade surpluses in countries such as China and Germany.
There has been little talk of imbalances lately. That’s mostly because the G20 agenda has been swamped by the European debt crisis. At the November summit in Cannes, France, little else was discussed, despite dozens of policy commitments, including a series of specific pledges by each G20 country that would ease the threat posed by global imbalances – if implemented.
Some blame global imbalances for the global financial meltdown in 2008; Mr. Rochon isn’t one of them. “In terms of whether imbalances matter, yes, I think they do, but I think it would be a stretch to say they caused the crisis,” he said. “You have to screw a lot of things up for a long time to find ourselves in this situation that we’re in now. You’ve seen the list. You’ve got to not regulate your financial sector, run huge fiscal deficits, have a tax system that encourages debt, global imbalances and have them all come together at the same time and explode. That’s the recipe for a major, major crisis.”
Global imbalances mostly are issues of political economy. International Monetary Fund chief economist Olivier Blanchard and other researchers are spending considerable effort on measuring trade flows and explaining the economic impact of big deficits and surpluses. But left alone, most economists could easily solve the problem: stoke more household spending in China and Germany, and cut budget deficits in the United States. Doing so is a political minefield. Ending Chinese policies that benefit China because they are bad for the U.S. will fall on deaf ears in Beijing. The G20 exists to overcome short-sighted domestic political considerations by forging a co-operative approach to economic policy in an intensely globalized economy.
All the big economies that are responsible for lopsided trade flows are sitting at the G20 table, so there is no one else to blame if the threat persists. John Lipsky, the former No. 2 at the IMF, said it is “crucial” that imbalances once again become a major topic at this year’s summit in Los Cabos, Mexico. “If it doesn’t, you have to ask what the G20 is for,” he said at the seminar.
