The Making of Summitry

A rare interview with Sylvia Ostry about the creation of the G7 and the future of global economic governance.
By: /
January 10, 2014
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In the foreword to the book The Sterling Public Servant, David A. Dodge writes, “Perhaps no Canadian economist’s contributions to public policy have been as wide-ranging as Sylvia Ostry’s.” Sylvia’s long and storied career took her from academia to Statistics Canada to the Economic Council of Canada to the Organisation for Economic Co-operation and Development to the Department of External Affairs and many other positions besides. Five times she served as Canada’s sherpa – the personal representative of the prime minister – at the G7 summits. OpenCanada sat down with Sylvia to talk about the creation of that institution, Canada’s place within it, and the future of global economic governance.

Could you first tell us about how you ended up at the OECD?

Well, I was originally an academic. I was born in Winnipeg, I took pre-med and a year of medicine, although my intention was not to be a doctor but to prepare for a doctorate in bioscience and a life in a research lab. But that’s a long story. I left and I came to McGill and I got my BA and then I won a Commonwealth fellowship. I went to Cambridge to do the basic work for a PhD and I came back into academia. But by then I was married and my husband was in Ottawa and so I went into the government.  My focus in the government was on research, on policy making and on the generation of ideas, new ideas.

I was lucky. I worked at Statistics Canada in the research section. I worked on the Economic Council in the research section. On the domestic front I was Deputy Minister of Consumer and Corporate Affairs. On the international front I was made Deputy Minister of Trade,  and I went to many conferences in Europe.

When I came back from one of these conferences, I went back to my office and my secretary said there was a phone call from Paris. It was the chief advisor to Emile van Lennep, the head of the OECD, and he said, would I please come to Paris on Friday? This was Wednesday. And I said, “I’ll call you back.”

I came home for dinner that night and told my husband, and I burst out laughing. He asked, “Why are you laughing?” I said, “What do you mean, why am I laughing? I’m not going to Paris on Friday.” And he said, “Yes you are. That’s the best job offer you could ever have.” That’s how I got to the OECD.

What were your impressions of the OECD?

The OECD is the centre of the analysis of economic policy. That’s how it was started. You learned an enormous amount for one important reason – there were no rules being debated. If there are rules, I find people will not talk openly. Because, in theory, the OECD didn’t affect rules, you’d see an enormous difference between how the deputy ministers of finance or trade talked at an OECD seminar and what you heard at the WTO meetings.

The OECD was then – not any more – a collection of the countries that governed the global society, and of people who knew what was important.  This is where van Lennep played an important role. Half the time, he was on the phone to Washington. It’s one thing to have the debating and the ideas and theory, but you’ve got to then get in touch with power.

You also have to deal with other institutions. So if it’s on the macro economic side, it’s no good just to have a debate in the OECD; you also have to consult with the IMF. If it’s development, you have to consult with the World Bank. But because you’re not pretending that you can make the policy, you have much more access, I found, than when you were in a position where you were reporting to your government.

So your experience at the OECD helped prepare you for the G7?

Yes, the OECD gave me insight into the value of what the French conceived when they set up the first summit at Rambouillet. It is very important that France was not the hegemon. It was a middle-sized power. They got some support from the Germans, but it was all secret.

That first summit became the G7. The best story is that the Italians came running to the French and said, “If you don’t invite us, we’re having an election and the Communist Party will take power.” And the French said, “What are you talking about?” And they said, “Here are the figures. This is the position of the Communist Party in Italy.” So the French said “Ok, you can come to Rambouillet.”  And in a way, it was the Italian Communist Party that was responsible for the G5 becoming the G7. Because when the Italians were invited, the Canadians were outraged and they went to see the Americans.  and they said, “With Italy, there are now more Europeans. You’ll have no ability to do anything. Get us to join.” And that’s how we got to the G7. So it was the Italian Communist party that got us in.

Can you tell us more about the international context for that first summit in 1975? What were some of the global, political, economic issues at the time?

You can read some of the history the French wrote on Rambouillet. I think in the end, one of the factors was the concern that Europe would not be very relevant, that there was one hegemon. And remember, whatever you say, there was a difference between the American viewpoint and Europe’s. The Europeans created the post-war welfare state. They had the idea that government would play a role, an important role in macro and micro issues.

The Americans — and they were, I suppose, Keynesian. They didn’t have to debate views, they knew about economics through Keynes. They didn’t have a post-war welfare state. Lyndon Johnson tried but he failed. There were various other efforts, but they, look, it’s the 21st century and they are still debating whether they can have food stamps, let alone healthcare. So there is a big difference.

Canada, in a way, is interesting. We borrowed from both. We have some of the American ideas, particularly the legal system, common law, etc. But also, we did have a post-war welfare state.

And that allowed us to bridge the gap between the two sides?

We were often accepted where other middle-sized countries weren’t because our experience and knowledge was unique. We were founded by the French and the British, but we also brought in an enormous number of immigrants from Eastern Europe and Asia. This was the only way we could survive. So we had multiculturalism – that was uniquely Canadian. That allowed us to debate and discuss in a way other countries didn’t.

So Canada was able to maintain influence despite its relatively small size?

In a summit, there was a hegemon. There’s no debating that. So we spent a fair amount of time ensuring that we had good relations with the United States – that goes without saying.

The important thing as a middle power is to have close relations with the other members. I had very close relations with the Germans, with the Italians, because Renato Ruggiero (who became a minister) was a good friend of mine. It wasn’t because they were very important but Renato was very brilliant. And we had strong relations with the Japanese. I thought, “Oh my God, it’s impossible. They don’t accept women.” And to my astonishment, I got on better with the Japanese than anybody could imagine. Because they fought so much, the Ministry of Finance fought with the Ministry of Economics, I was the person in between. I talked to the Ministry of Finance and then I would talk to the Ministry of Economics.

I think a middle power doesn’t threaten but also has contact and ideas. Well, that’s how summitry started, with middle powers.

What about our relationship with the British?

The role of the U.K. was dominated of course by Margaret Thatcher. When we did the communiqué drafting, we would start on the last night before the final session. We would start around 6:00, and by 9:00 o’clock, Margaret Thatcher was there. And she was there until  midnight or one or two in the morning. She didn’t interrupt, she was very careful, she just sat there and she took notes. But you knew darn well that if you were Robert Armstrong (her Sherpa) that she was listening. And the thing was that she not only listened, but she also studied. Nobody had ever met a Prime Minister who had that much interest and knowledge.

Was there that kind of engagement from the Canadian leadership?

In my experience as Sherpa, Canadian members were highly regarded. Prime Minister Mulroney had real skill pushing for consensus. Michael Wilson and Joe Clark were also liked and respected. But there was no other leader like Thatcher.

Sherpas worked on the communiqués, drafting and drafting. And when you’re drafting a communiqué, the only thing that matters in the end is what we call ‘square brackets’. That’s where you can’t get agreement, and it must be debated the next morning by the leaders. So it was a very time-consuming and agonizing thing. You are up all night and get an hour’s sleep, if you are lucky.

One of the issues with the summits was that the communiqués were too long. If a communiqué is too long people won’t read it. My most important summit was the one in Toronto in 1988. I wanted a short communiqué with the key issues in it and that’s what we got in Toronto.

At the end of the summit I got a call from Lord Armstrong, who said, “Mrs. Thatcher wants me to tell you that she has read all the communiqués at summits so far, and you’ve done the best communiqué.” You may think I should not say that, but I’ve never forgotten it because whatever you say about Margaret Thatcher, she didn’t often say things like that. And she knew about communiqués.

How important was the 1988 G7 Summit in Toronto?

This Toronto meeting was for a number of reasons a very important summit, particularly because we dealt with trade in some detail, two kinds. We talked about multilateral trade– there’s a section on the Uruguay round. And there was the bilateral trade agreement between Canada and the United States.  That was an important issue for the Canadian government, which wanted it highlighted in the communiqué.

You were really encouraged to make that happen.

I wasn’t just encouraged. I was told there had to be a section on it in the communiqué and I went to my colleagues and said, “Come on, we need something about it.” And they said, “Oh, ok, but we’re not going to deal with bilateral summitry.” So I said, “I know but I want to get notice of it.” And what I got was “We welcomed the news of the Canada-U.S. trade agreement, etc.” But I was told at seven o’clock in the morning that the Canadian government wanted something different. I asked, “What?” They said, “Well, at least strongly welcome.” And I said, “I couldn’t get any more than I got.” They said, “You’re not to come to the press conference.” I said, “OK.”

So you got strongly?

I didn’t. I was told that there was a meeting between our Prime Minister and the British Prime Minister and our Prime Minister got “strongly.” And I had already left town and gone to a meeting. I said, “Thank you very much,” and left the Canadian government, I went to work at the Council on Foreign Relations in New York for a year before I came here.

Why do you think there was that reluctance to mention the Canada-U.S. free trade agreement?

They were very concerned with the idea that the hegemon was now interested in bilateral rather than multilateral agreements. And so where it says “We strongly welcome the free trade agreement between Canada and the USA,” in the same sentence it says, “and the steady progress towards the target of the European Community to complete the internal market by 1992. It is our policy that these developments, together other moves toward regional co-operation in which our countries are involved, should support the open multilateral trading system and catalyze and liberalizing impact of the Uruguayan round.” So what difference did “strongly” make?

When I left, I had a party at my office, and I said, “I want you to know, I strongly enjoyed working here.” And everyone understood the importance of that word. There was much laughter and a few grim faces.

But a lot of policy issues were covered in that communiqué, and it was a very small communiqué.

We’ve been talking about this tension between bilateral and multilateral agreements. That’s something we’re seeing today. There’s a trend towards more bilateral trade agreements.

Oh, no question.

What is your take on more recent developments? How do you see the landscape today changing?

I didn’t fully understand the implications to the Uruguay round, even though I was heavily involved in it. I didn’t realize, and I should have, the important role of American multinationals. It wasn’t the American government in charge – it was the major multinationals. They laid out what they wanted in this round, and what they wanted was trade facilitation, intellectual property (TRIPS), trade related international investment (TRIMs), and services – the biggest issue.

That’s all fine with me. But all the other side – the South – got, and ultimately they didn’t even get that, was agricultural and the lowering of tariffs on products like textiles and clothing that they were producing.

Agriculture is still an issue that hasn’t been agreed to. So in fact, as I’ve said in my writing, it was a grand bargain that turned out to be a bum deal.

There are more and more global supply chains.

The work on supply chains is really just beginning – and I should say, by the way, one of the issues is that we do not have the statistics to examine supply chains. They have grown enormously over the past twenty years. The process of production is now fragmented with companies in many different countries contributing to the final product. This is happening to an extent that never existed before. A mix of bilateral agreements, often with differing provisions, does not fit well with what is really needed to accommodate this new world. It needs multilateral integration.   

Is there a need for new thinking about the trade regime?

Yes. And this leads me back to my idea that middle powers are very important.

I think that there should be an Eminent Persons Group from the middle powers. Canada could set this up. It should include some government, some businesses, and NGOs.

This group wouldn’t be doing research. It would deal with agendas – the proposed agendas for summitry, what is the framework, what are the ideas for the next five years. This would include the key issues that should be debated, the key policy proposals, and the key structural changes for governments and relevant international institutions.

One of the issues with the WTO is that it has been juridified. It has a very strong legal basis. When we decided we were going to have a dispute settlement system the Americans said, “Come on, you don’t have any good lawyers. We’re going to have to have an appellant board. You’ll have to bring outstanding lawyers.” They juridified the system. I’m not surprised, that’s what the Americans like. But that creates an asymmetrical institution. It doesn’t have a legislature; it doesn’t have executive power. So there should be an examination of that.

And that’s what this committee could look at?

Absolutely.

At the GATT, there used to be the Consultative Group of 18. We discussed all sorts of things we couldn’t discuss in the committees of the WTO. The eminent person’s group would similarly be outside the system, containing important people with different ideas dealing with the agendas.

And this is something you think Canada should do?

And Canada could lead. We’ve done it before. We played an important role in the GATT after the war. That’s why I go back to the middle powers. There might not be summitry if the French hadn’t decided it was important.  So this eminent person’s group would be my proposal.

Do you want to share with us any favourite memories from any of the summits you attended?

I liked Ronald Reagan very much. At one meeting, he said, “I’ve just read the International Herald Tribune about the fact that now in Europe there are small cows, small cattle. It is going to make a big difference if you have little cows and little pigs.” I was taking notes. And then when I got out I said to my Prime Minister, “I have to go to a meeting in Geneva, but I think it’d like to go earlier and maybe we could discuss the small cows and the small cattle.” You’re laughing. There apparently was an article and there was some development, which then failed, of producing little cows. The reason I’m telling this story, if you thought Margaret Thatcher was interested in intellectual ideas you should spend more time with Ronald Reagan.

When we had the second oil shock in the early 80’s, there were a whole series of meetings – meetings of cabinet ministers. We weren’t allowed in until after they finished the meeting and then we had to come in because we had done the research. And I would sit there waiting and the other person I was sitting with was from the International Energy Agency.

And the guy from the IEA said, “Sylvia, do you know what the FBI call you?” And I said, “FBI?” He said, “Yes, there’s a lot on you in the FBI. They call you pussycat.” It’s a wonderful story. And I said, “Pussycat? I’m the chief economist of the OECD.” And then I calmed down and said, “We have the best econometric model in the world on the impact of the oil shock. We have the best econometrician. If those FBI people who are following me want access to it, get a pencil and paper and I’ll tell you to write down now, A-R-M-A-N-I. Armani. They can have the econometric model if they’ll give me the right to get some Armani.” And I never got the request. It’s a wonderful story but that’s typical of the American FBI. Pussycat!!