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G7 leaders to debate world economy, worries over peace

Paul Taylor Financial Times

Financial Post, Daily edition, Thu 27 Jun 96

The relentless march of the global economy, with its impact on jobs, markets, welfare and the Third World, will be high on the agenda of the world's big seven industrial powers at their annual summit that opens today.

In the absence of election-bound Russian President Boris Yeltsin, the leaders of the U.S., Japan, Canada, France, Germany, Britain and Italy will also express their hopes for continued economic reform in Russia and for peace in Bosnia and the Middle East.

U.S. President Bill Clinton, running for re-election in November, plans to make the three-day Group of Seven summit here a showcase for the U.S. economic achievement of creating nearly 10 million jobs since he took office in 1993.

"The largest seven economies in the world have created a total of 10 million jobs in the last 3 1/2 years, 9.7 million of them in the U.S.," he said last week. "That's something you can be proud of."

While keen to help Clinton, French President Jacques Chirac, this year's host and chairman, plans to focus the summit on two of Washington's vulnerable points -- aid to developing countries and respect for the multilateral rules of world trade.

He has invited the heads of the United Nations, World Bank, International Monetary Fund and World Trade Organization to an unprecedented session on development on Saturday and hopes to achieve a major agreement on debt relief for poor nations.

"The current tendency for the big nations, notably the United States, to disengage [from aid] is unacceptable," the French leader told the Lyon daily Le Progres.

The success of the aid package may hinge on whether Germany is prepared to ease its opposition to the IMF using a small part of its gold reserves to underwrite a debt-relief fund.

European leaders also plan to tell Clinton that recent U.S. legislation to punish foreign firms that trade with Cuba -- which may be followed by similar laws on Iran and Libya -- violates world trade rules and that they would have to retaliate if he tried to enforce it.

For the first time in the G7's 21-year history, the leaders will focus on the effects of globalization -- a buzzword for the opening of world markets and technology that has boosted trade and brought powerful new players into the global economy but threatens well-paid jobs and welfare systems in the West.

France has dubbed Friday's macroeconomic policy session: Making globalization work for the benefit of all.

French officials hope it will go beyond sterile debate between advocates of total deregulation and unbridled world competition and supporters of setting minimum standards for financial markets, welfare and workers' rights.

The G7 nations account for two-thirds of the world's gross domestic product and half of all trade, but their economies are growing more slowly than the world average -- 2% in 1995, compared with 3.5% across the globe.

The booming Asian Tigers, China and Latin America all boast growth rates to make the G7 leaders, who between them preside over 23 million unemployed, green with envy.

On currencies, the leaders are expected to welcome the "orderly reversal" of the decline of the US$ in the last 15 months.

On jobs, they will review a report from labor ministers, who met in Lille, France, earlier this year, recommending a range of measures from job training and re-training to flexible working hours, and from promoting employment in services to removing the burden of welfare costs from payroll taxes.

Their 30-page economic communique, to be issued Friday afternoon, and a 15-page political declaration to be read by the French president Saturday morning, may look more like a laundry list of pious wishes than a recipe for world order.

Tuesday's huge truck bomb attack on a Saudi military base, in which at least 23 Americans were killed and some 250 people injured, was a devastating reminder to the summit of the dangers lurking in unresolved Middle East conflicts.

British officials said it would also prompt intensified G7 efforts to co-ordinate the fight against terrorism.

U.S. Secretary of State Warren Christopher will arrive directly from the Middle East after hearing at first hand new Israeli Prime Minister Benjamin Netanyahu's hardline stance on peace with the Palestinians and Arab states.

U.N. Secretary-General Boutros Boutros-Ghali and the international community's civilian mediator, Carl Bildt, will join the summit discussion on Bosnia, expected to reaffirm the need to stick to the timetable set in the Dayton peace agreement and express determination to bring wanted war criminals, including Bosnian Serb leader Radovan Karadzic, to trial.

This information is provided by the Financial Post.

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