Dáil Éireann - Volume 666 - 05 November, 2008

Priority Questions. - International Agreements.

Deputy Michael D. Higginsasked the Minister for Foreign Affairs his views on the proposals for a new institution at United Nations level to deal with international monetary transfers and trade which would report through the Economic and Social Committee to the Secretary General of the UN. [38564/08]

  Deputy Micheál Martin: The current global economic crisis presents us with major challenges which require a global response. We are working with our EU partners to contribute to a comprehensive and genuine reform of the global financial system, on the principles of transparency, banking stability, integrity and improved economic governance. In doing so, it is important to maintain a spirit of co-operation and openness.

Following discussions with President Sarkozy, the European Commission President, José Manuel Barroso, and US President George Bush, a number of international meetings was agreed. The US will host the first of these in Washington DC on 15 November, with the participation of the G20. The EU will be represented by the Presidency and by President Barroso. The European Central Bank will also be present.

As part of the process, the workings of the existing global institutions, in particular, the International Monetary Fund, IMF, and the World Bank, will be examined. Given the inevitable diversity of views, it is probably too early to take definitive positions on any issue at this time. However, we will continue to work with our partners in the European Union to define a Common Position and to safeguard the leading role the EU has so far developed. The French Presidency has convened a summit in Brussels this Friday with a view to developing a common EU position.

On 20 October, the President of the United Nations General Assembly proposed the establishment of a task force to consider how the United Nations could contribute to addressing the global economic crisis. The first meeting of this task force is scheduled to take place later in November, under the chairmanship of Professor Joseph Stiglitz.

  Deputy Michael D. Higgins: It is very interesting that the reference to the task force under Professor Stiglitz is at the end of the answer.

[43] Before I ask a supplementary question, and lest any other impression be created, I will say that many people around the world have welcomed the election of a US President who believes in multi-lateralism, the role of diplomacy and a greater commitment to the international institutions.

My question concerns a third institution that was originally drafted, voted on and agreed in 1946, at the same time as the World Bank and the IMF. The reason I asked this question is that I do not believe that the Minister must make a choice and I put this to him. If he accepts that the current financial problems are global in nature and predatory hedge funds and virtual financial instruments created havoc and destruction in the United States before spreading globally, he will agree the appropriate place to start is at the level of the United Nations. The UN arrived at a similar point in 1946. Is it the Government’s intention to return to that point?

On the meetings to which the Minister refers, the thinking of President Sarkozy is such as not to dislodge the disease that caused the current international currency crisis. An approach generated through the G8 and G20 or even through the former informing the latter amounts to more of the same and does not deal with the virtual cancer caused by predatory funds dislodging investment from the real economy. For these reasons, the appropriate position for the Government is to approach the issues through the United Nations and try to recover a moment rather similar to that of the Bretton Woods institutions.

  Deputy Micheál Martin: I am not entirely convinced by the Deputy’s argument. It is much to early to rush into a definitive position on the best international mechanism to deal with the present circumstances. My understanding of the historical background of this issue is that the relationship between the International Monetary Fund and United Nations was governed by a broad framework agreement entered into in November 1947. There has been a relationship between these two organisations in so far as the IMF and World Bank are specialised agencies in which the UN Secretary General is involved although they remain autonomous.

While new mechanisms are clearly required, we must be careful not to have a knee-jerk response to the current problem. In the first instance, we must analyse more deeply what has gone wrong. It is only through such analysis that one develops an appropriate international regulatory response. We must avoid duplication and overlap and, above all, ensure coherence in whatever emerges in what is potentially a new order in terms of the organisation and regulation of global financial systems. This is an issue for debate. Reverting to a position in which this matter comes entirely within the UN General Assembly, as the Deputy appears to propose, raises questions regarding the effectiveness of any such system.

  Deputy Michael D. Higgins: My appeal is not so much addressed to the General Assembly. The General Agreement on Tariffs and Trade emerged as an alternative to what had been agreed already, namely, the International Trade Organisation. It had been envisaged that the new body would report to the Secretary General of the United Nations through the UN Economic and Social Commission. I favour this mechanism on the basis that I am concerned, in the context of the international response, that the source of the fire sweeping through the international institutions is not being identified.

I specifically referred to hedge funds which, by purchasing in a particular manner, can depress the price of shares before purchasing these same shares and, through mergers and acquisitions, destroy companies, jobs and so forth. This is the forest fire which has swept across from the United States. While the Minister need not agree with my analysis, the appropriate starting point for addressing the problem is the UN Economic and Social Commission. The adjustments arising from the Sarkozy suggestions and made through the G8 effectively amount to more of the same.

[44]   Deputy Micheál Martin: It is not a correct analysis of the Sarkozy position to state it does not amount to more than the making of adjustments. The French President would not agree with that perspective.

  Deputy Michael D. Higgins: Of course he would not agree with it.

  Deputy Micheál Martin: As I stated, these are still early days and I am not convinced by the Deputy’s argument on what is the most effective international institution to address the issue. Without doubt, the existing institutions require fundamental reform as they are outdated in terms of membership, composition and so forth. The United Nations also requires significant reform to deal with modern global realities. I hope the G20 summit commencing on 15 November will mark the beginning of a substantive reform of global financial systems. The United Nations Secretary General will attend the meeting.

Human behaviour governs much of what is taking place. While I may be facing into the prevailing wind on this issue, in my view we must analyse the problem, even if we believe we know what are all the issues.

  Deputy Michael D. Higgins: The unregulated market has failed.

  Deputy Micheál Martin: Hedge funds are not the only fire to have spread from America. We also have problems arising from the sub-prime mortgage market.