At the 2004 Sea Island Summit of the G8, the policies you implemented as Canadian Finance Minister were cited as a model for reforms in other G8 countries. What is the core principle behind these policies? Are they applicable to other G8 nations?

Intergenerational equity dictates that a government should not go into debt to pay for its current expenses. That is why we eliminated the deficit, why we had the objective of getting our debt-to-GDP ratio down to 20 percent within a decade, and why we hold the conviction that that we will not go back into deficit in Canada. The basis for this is threefold. First, sound governance requires sound financial management. Second, the G8 countries have aging populations. Deficit reduction is essential if the state is to assume its responsibilities in terms of healthcare, education, and pensions. Third, in a world in which emerging markets are rapidly becoming major economic powers, the resulting competition means the unexpected has to be expected.

Sound financial management enables governments to deal with unanticipated economic upheaval and downturns. A sound balance sheet should be a given, and targets should be in the areas of universal education and investments in medical and other areas of research.

The G8 has specifically advocated microfinance as a route to development. What do you believe to be the most effective means by which the G8 may promote development?

Good governance, and the transparency and openness that follow from good governance, is the answer. Microfinance is important, but so is achieving international standards in primary and secondary school education. Investment in infrastructure is absolutely essential, as is the presence of a growing indigenous private sector. Indeed the dynamism created by indigenous entrepreneurs, a direct result of microfinance, must be extended through any developing economy if it is to succeed. For example, the private sector has to expand into the mid-market opportunities, like retail distribution and higher-value-added agriculture, because that is how a growing middle class will be developed.

The other area in need of focus is the dilemma that Hernando De Soto and C.K. Prahalad have written about, which is the recognition that huge wealth lies untapped in the assets that are owned by the poor. Giving them title and the ability to borrow against their assets and providing regulation that will benefit rather than oppress the poor is vital. G8 nations like Canada, in working with domestic institutions like the African Development Bank, can do a great deal to facilitate these legal reforms and can provide the capital to see their potential realized.

What steps must the G8 take toward trade liberalization and economic openness?

We must do more than talk about open economies or trade liberalization. In more cases than not, what the developing economies face is the closing of the developed world’s markets because of global distribution networks, which are the means by which a product gets to its final consumer, and hidden tariff barriers.

The current distribution networks in rich countries militate against higher-value-added agricultural products from the poorest countries. What is required is for the G8 to recognize that the developing countries of the world must be allowed to move up the economic chain in areas that reflect the capabilities of their local economies.

As Prime Minister, you proclaimed a strategic partnership with China in September 2005 with the goal of strengthening bilateral ties and trade. What do you see as the future of Sino-Canadian relations?

Sino-Canadian relations have always been important for Canada and are increasingly so today. We no longer talk about the importance of China to come but of the importance of China today as an economic power and as a major power in all of its facets.

What is true for China is also true for India. China and India graduate more engineers each year than we have in all of Canada, perhaps more there are in North America. The opportunities for Canada, a highly productive and highly educated country of huge wealth with only 32 million people, to work in conjunction with the rising technological capacities and consumer needs of countries like China or India are limitless. The strategic partnership agreement we signed with China and the science and technology agreement we signed with India are going to be very important for Canada.

You were instrumental to the development of the G20, a gathering of 20 major finance ministers. What role does this group fill in international relations?

The creation of the G20 followed the Mexican Peso Crisis and the East Asian Financial Crisis. A number of major steps had to be taken toward openness, transparency, and regulation of the international financial architecture. The major emerging economies had to be at the table along with the G7. This was the achievement of the G20. Its even greater accomplishment was in spurring the international recognition that emerging economies had to continue to participate in discussions with the G7 if global economic progress was to be realized.

In 2000 you advanced a proposal for the L20, a group of 20 world leaders from not only the G8 countries but rising regional powers. Six years later, in 2006, is such a group still necessary?

A forum for reaching consensus, as in the G20, is all the more vital for the wider aspects of world leadership. What we are talking about is rounding out the hard edges of globalization. Huge global interactions among financial, judicial, and bureaucratic actors take place, but the political realities represented by the leaders of the major countries have all too often been absent from the debate.

Bureaucrats can deal with process, but bureaucrats cannot create new precedent. Only heads of state, who are politically accountable to their constituents, have that capacity. It is the role of the national leader to break with precedent and to take a leap of faith when circumstances call for it. That is the reason for creating the L20, a gathering of the people who hold the ultimate responsibility for governance and progress within their countries.

At most international meetings, extensive bureaucratic work is done beforehand. Bureaucrats design and negotiate a communiqué that is virtually a fait accompli before leaders even sit down to begin their meeting. Bureaucratic exhaustion sets in, and the ability of the leaders present to deal with real issues is circumscribed. What is needed is real dialogue in an informal setting among a group of leaders large enough to be inclusive of the major regions of the world but small enough to avoid the formality that brings with it the set speeches that preclude real interactive discourse. Making sure these meetings occur on a regular basis furthers the informal atmosphere and allows leaders deal with one another openly, giving them the ability to address priorities as they see them rather than as bureaucracy sees them. That would be the great advantage of the L20, and that is why the G20 has succeeded. That is why the G8 succeeds on its better days.