js-2077: G-7 Statement on Renewal of the Action Plan for Agenda for Growth



	FROM THE OFFICE OF PUBLIC AFFAIRS October 1, 2004 js-2077 G-7 Statement on Renewal of the Action Plan for Agenda for Growth One year ago, at the September 2003 Dubai G-7 meeting, we adopted the *Agenda for Growth* initiative to help promote structural reforms needed to increase flexibility, raise productivity and bolster job creation. This initiative has proven fruitful and become a regular and established part of our surveillance discussions, along with our focus on monetary and fiscal policies. In view of the successful experience over the past year, we agreed to make the Agenda for Growth a regular feature of our work. What Has Been Achieved in the First Year? At the Dubai G-7 meeting, we underscored the importance of focusing on the implementation of structural reforms to strengthen potential growth in the future. To this end, we agreed on the Agenda for Growth initiative and to pursue additional pro-growth policies. We note the following progress has been made in our discussions since Dubai: Most significantly, since the Dubai meeting, the global expansion has been sustained, and our countries have taken specific actions to move the long-term growth process along, for instance through tax reforms, labor market reforms, reduced regulatory burdens, reforms to ensure the long-run viability of health and pension systems and improving financial sectors. In Boca Raton in February 2004, each of our countries discussed its approach to structural reform, and we issued a progress report on accomplishments since the Dubai meeting and upcoming reform plans. In April 2004, we centered our discussion on tax and labor market reforms. In May 2004 at the pre-Summit meeting of Finance Ministers, we discussed the sustainability of health care spending in the major countries and ideas and policies for reform of such spending. Today, we discussed the next steps to be taken in the Agenda for Growth and exchanged views about how to raise productivity. Next Steps The G-7 Agenda for Growth has become a valuable part of our economic work and discussions. It has highlighted that each one of our countries has accomplished much. But there is still much work to be done. Thus, it is important to build on the progress made and embed the Agenda for Growth on a permanent basis into our work. Against this background: We will focus on a few specific structural reform topics at each Ministerial meeting, and we will prepare an Agenda for Growth progress report once a year. We ask our Deputies to prepare for these discussions in much the same way that they prepare for our fiscal and monetary surveillance. We call on the OECD's Working Party 3 to continue to deepen its work on the cross border and current account impacts of changes in structural policy. We ask our Deputies to review the more technical aspects of each topic to lay the groundwork for Ministerial discussion. Launching the Agenda for Growth Initiative September 2003, Dubai We, the G7 Finance Ministers and Central Bank Governors, have today agreed on an Agenda for Growth. This Agenda follows the successful cooperative approach of our two recent G7 Action Plans – the October 2001 Action Plan on Terrorist Financing and the April 2002 Action Plan on Emerging Markets – in which we defined objectives and then reported on progress toward those objectives at subsequent meetings. Higher growth is essential to raise incomes and create more jobs. Without higher growth we will not have the resources to deal with an aging society, provide adequate national security, or, more generally, provide the means for people to pursue a more enjoyable life for themselves and their children. Moreover, higher economic growth in the G7 is one of the most effective ways we can reduce poverty around the world. Higher economic growth throughout the G7 will redress global imbalances that arise inter alia from uneven growth within the G7. Economic growth has been too low for too long in the G7, and while there are notable recent policy changes, it is time to bolster our efforts. Key objectives The reasons for low growth differ from country to country. But as shorter-term demand-side problems are addressed and the global recovery proceeds, longer-term supply-side impediments to higher productivity growth and employment are being revealed in many countries. Our key objectives, therefore, are on the supply-side - structural policies that increase flexibility and raise productivity growth and employment. What have we done recently? Progress achieved so far provides a good foundation to build on. Examples, one for each country, include: reductions in marginal tax rates on dividends and capital gains in the United States; improved incentives to work in the United Kingdom; sustainability of the public pension system along with higher limits on savings in private retirement plans in Canada; pension reform in France; tax reform in Germany; flexibility in labor contracts in Italy; and new R & D tax credit in Japan. What more will we do? Each of our governments intends to pursue additional pro-growth policies. Examples include: tort reform in the United States; a reform agenda 2010 for labor market and the pension system in Germany; public sector reform and further steps in health care reform in France; pension reform in Italy; Basic Policy for Economic and Fiscal Management and Structural Reform 2003 in Japan; measures to improve skills and labor force productivity in the United Kingdom; and full implementation of the five year tax reduction plan announced in 2000 in Canada. In the European Union, investment needs to be revitalized, with a particular emphasis on infrastructure and research and development. Why do this as a Group? These are primarily national responsibilities, but there are spillovers. Higher growth in the United States benefits the other G7 countries; but higher growth in the other G7 countries benefits the United States too. Moreover, many pro-growth polices, such as trade liberalization, involve all of us. Working as a group we intend to do regular supply-side surveillance, benchmarking proposals and reviewing results. This will complement our ongoing demand-side surveillance and mutually encourage progress toward pro-growth policies. First Agenda for Growth Progress Report February 2004, Boca Raton In September 2003, we adopted the Agenda for Growth initiative to focus our efforts on the need to undertake supply-side and structural policy changes to increase flexibility, raise productivity growth and employment, and achieve higher, sustained growth in our countries. Such reforms sometimes may entail short-term costs, but have proven critical to advancing long-term growth. We also committed to experience-sharing, to reviewing our results together, and to reporting on our progress. Our focus is on cooperation. Today, in Boca Raton, we reviewed our accomplishments thus far and outlined our future priorities. In this Progress Report, we list selected accomplishments since September 2003 -- one for each country -- and review upcoming reform plans. *Accomplishments since September.* Germany enacted key elements of the reform Agenda 2010, including labor market measures that improve work incentives and further tax reduction. Canada completed the full implementation of its five-year, $100 billion tax reduction plan. Japan formulated a pension reform plan in December 2003 with a view to securing long-term sustainability of the pension system, and is preparing for legislation to implement the reform. France is implementing key provisions of its pension reform law that significantly improves the sustainability of its public finances. The United Kingdom announced new measures to help small business raise finance and to help promote a culture of enterprise, and to improve access to its R&D tax credit. Tax rate cuts in the United States worked their way through the economy to promote record growth. Italy's recent labor market reforms entered fully into force in October, contributing to the further reduction in the unemployment rate. *Upcoming Reform Plans.* Our governments remain committed to pursuing additional pro-growth policies. The United States plans to spur saving by creating lifetime and retirement savings accounts and reducing the structural budget deficit, and to support job creation by making health care more affordable and pressing for tort reform. In an effort to raise productivity, the United Kingdom is targeting reductions in enterprise regulatory requirements including a collaborative initiative on regulatory reform across the EU over the next two years, establishing a long-term strategy for funding innovation and scientific research, and extended skills training programs. While continuing its steady reduction in the debt-to-GDP ratio, Canada will provide municipalities with the resources they need for infrastructure investment by exempting them from the Goods and Services Tax they now pay (worth $7 billion over the next decade) and examining other fiscal mechanisms to provide further predictable funding. Italy expects to push forward with its pension and corporate tax reform, including tax exemptions on dividends and capital gains, in 2004. France plans to advance health care reforms this year, while continuing to press for fewer labor market constraints. Japan will work on further fiscal expenditure and revenue reforms, including in social security, and will continue to address financial sector reforms. Pension and tax code reform remain key priorities in Germany, combined with further improvements in the framework for innovation.