18 September 2006 Reforms would help reduce imbalances, Paulson tells G7 ministers Washington -- Greater flexibility of global economic polices would help reduce economic imbalances, U.S. Treasury Secretary Henry Paulson says. In a September 16 statement following a meeting in Singapore of finance ministers and central bankers from the seven leading industrialized nations known as the Group of Seven (G7), Paulson called on China to adopt a more flexible currency and to reform its financial sector. He also said oil-exporting countries need to enhance their capacity to absorb investment and, in some cases, to permit greater exchange-rate flexibility. Paulson called on Europe and Japan, which are seeing signs of moderate economic recovery, to implement economic reforms and increase growth by making possible more domestic demand for products and services. The G7 comprises Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. Its meeting preceded the annual meetings of the World Bank and International Monetary Fund September 19-20, also in Singapore. In addition to saying that addressing global imbalances is a "shared responsibility" of the world's economies, Paulson said trade liberalization is important. "Economies that are open to trade and competition benefit greatly, and economies that restrict open trade and competition impose heavy costs on themselves and the overall economy," he said. Paulson added that ensuring the soundness and security of international financial systems, and reforming International Monetary Fund (IMF) governance and the formulas the fund uses to calculate quotas also need global attention. (See related article.) "Reform is long overdue," he said. In a statement following their meeting, the G7 finance ministers and central bankers endorsed making the IMF quota and voting system "more responsive to changes in global economic realities . . . and enhancing the participation and voice for low-income countries." The quota formulas should have a "predominant weight" on countries' gross domestic product, Paulson said. Each IMF-member country is assigned a quota, based broadly on its size in the world economy. Quotas determine a county's maximum financial commitment to the fund and its voting power, and bear on its access to IMF financing. The finance ministers called for a "global common standard for reporting oil reserves" and greater transparency in energy-market data. They also encouraged investment in oil "exploration, production, transportation and refining capacity." The G7 expressed support for Lebanon’s reconstruction and development efforts and for the international Iraq compact, designed to give international political and financial support for the Iraqi government, and agreed to keep under review "economic prospects" in the West Bank and Gaza. G7 members agreed to intensify their efforts to combat money laundering and financing of weapons proliferation and terrorist networks, and urged the IMF and the World Bank to work closely with the inter-governmental Financial Action Task Force (FATF) to implement relevant international financial standards. The full text of Paulson’s statement as prepared for delivery is available on the Treasury Department Web site. The full text September 16 G7 statement is available on the University of Toronto G8 Information Center Web site. (The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)Treasury Secretary Calls for More Flexible Economic Policies
