Letter to Prime Minister Martin Re: Innovative finance - March 7, 2005

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March 7, 2005

The Right Honourable Paul Martin
Prime Minister of Canada
80 Wellington Street
Ottawa, Ontario
K1A 0A2

Dear Mr. Prime Minister,

On behalf of the Halifax Initiative Coalition, I write to seek clarification on Canada's position on the use of innovative financial measures to generate new and additional revenue for development assistance.

The permanent resolution of the debt crisis requires not only the unconditional cancellation of 100% of the multilateral debts owed by impoverished countries, but the provision of additional Official Development Assistance (ODA) to enable them to meet and exceed the United Nations Millennium Development Goals (MDGs). It is widely recognized that a significant increase in official transfers is a precondition for meeting the target of halving extreme world poverty by 2015.

It is clear, however, that even with substantial increases in official development assistance, donors, including Canada, will fall dramatically short of meeting the estimated annual cost of US$ 50 billion required to achieve the MDGs. While the 2005 Budget affirms an 8% aid budget increase to 2010, there is no mention of a timetable that would realize the widely recognized UN target of each donor's "fair share" of development assistance, established at 0.7% of Gross National Income (GNI) by 2015.  The Canadian Council for International Co-operation estimates that, by 2010, Canada's performance will remain at 0.33% of GNI - less than half our fair share of the commitment necessary to achieve the MDG goals.

In response to this most certain global development assistance shortfall, discussions on the need for innovative new mechanisms to help "fund the gap" to meet the MDGs and make foreign aid more predictable and stable are essential.

Canada, however, has been surprisingly silent in these discussions, which have been ongoing since the Financing for Development process of 2001. Canada did not sign the September 20, 2004 United Nation's New York Declaration on the Action Against Hunger and Poverty, which arose from the first global intergovernmental conference on innovative means of financing development. This declaration highlights the need to raise development assistance levels and to give further attention to innovative mechanisms of financing in order to meet the Millennium Development Goals. Over 111 countries signed the declaration including France, Germany, the Nordic countries and the United Kingdom.

Further, Canada has offered no comment on French President Jacques Chirac's speech to the World Economic Forum in January 2005, in which Mr. Chirac proposed the use of very small taxes including levies on cross-border financial transactions, taxing aviation and shipping fuel, and environmental taxes.

Canada's silence in the debate on the use of innovative sources of funding for development comes as a surprise. It was your personal leadership that resulted, in the March 23, 1999 passage of the motion, "that in the opinion of the House, the government should enact a tax on financial transactions in concert with the international community." The motion received all party support and passed by a resounding margin of 164- 83. Canada became the first country in the world to declare its intention to work towards the adoption of an innovative tax measure with the potential to both curb both international currency speculation and generate much needed revenue for development.

Canada's support for a currency transactions tax is widely credited with catalyzing a global debate in support of taxes on currency speculation. Since the passage of the motion, political and public support for the taxation of currencies has grown. On July 1, 2004, Belgium became the first country in the world to pass currency transaction tax legislation.  In November 2001, France amended its Finance Law to adopt a tax on currency transactions in concert with the European Union. Germany and India have also indicated an interest in "domestically applied and internationally coordinated taxes" on international financial transactions. Brazil, France, Chile and Spain led the UN conference noted above.

Canadians want to know where Canada stands in the current debate. We would, therefore, respectfully request that you respond to the following:

What is Canada's position on the use of financial transactions taxes, notably on currency, to both reduce destabilizing currency speculation and generate revenue for development

Which aspects of Mr. Chirac's proposal on cross border financial transactions taxes ("market solidarity levy") does Canada support or reject, and why?

How does Canada propose to "fund the gap" between current development assistance levels and its fair share of financial commitments to achieve the MDGs?  CCIC calculates that increasing Canadian aid by 15% in the next 10 years will permit Canadian aid to achieve the 0.7% target by 2015.

New, additional and stable resources for development are an essential complement to debt cancellation. Canada's failure to engage on the use of innovative instruments to achieve these goals is inconsistent with a previous commitment passed in the House.  When coupled with an insufficient commitment to increase Canadian aid to 0.7% by 2015, Canada's achievement of its MDG commitments appears unlikely.

When the world gathers in September 2005 to review progress made towards the achievement of the Millennium Development Goals on the occasion of the 60th anniversary of the United Nations, how will Canada explain its inability to contribute its fair share?

We look forward to your response and a continuing dialogue with Finance Minister Goodale on the steps necessary to achieve a permanent resolution of the debt crisis.



John Mihevc, Chair
Halifax Initiative Coalition

Hon. Ralph Goodale, Minister of Finance
Hon. Pierre Pettigrew, Minister for Foreign Affairs
Hon. Aileen Carroll, Minister of International Cooperation
Jack Layton, Leader of the New Democratic Party
Gilles Duceppe, Leader of the Bloc Quebecois
Stephen Harper, Leader of the Conservative Party

Halifax Initiative Coalition members:

Canadian Catholic Organization for Development and Peace
Canadian Conference of Catholic Bishops, Social Affairs Office
Canadian Council for International Co-operation (CCIC)
Canadian Friends of Burma
Canadian Labour Congress (CLC)
Canadian Lawyers for International Human Rights (CLAIHR)
CAW - Canada
CoDevelopment Canada
Democracy Watch
Falls Brook Centre
Friends of the Earth Canada
KAIROS: Canadian Ecumenical Justice Initiatives
MiningWatch Canada
North-South Institute
Oxfam Canada
Rights & Democracy
Sierra Club of Canada Nuclear Campaign
Social Justice Committee
Steelworkers Humanity Fund
Toronto Environmental Alliance
World Interaction Mondiale