Financial Post Articles
(Ed. note) John Kirton is director of the University of Toronto's G8 Research Group and the co-developer, with Peter Hajnal, of the G8 Information Centre at http://www.g7.utoronto.ca
This weekend, amidst the thin air and spectacular scenery of Denver, U.S. President Bill Clinton will host the leaders of the world's leading market democracies for their 23rd annual G7 summit. The surroundings are well suited to the occasion, for the event is likely to be long on photo-ops that elevate political spirits and short on solid results that confront the many problems the world economy contains.
Clinton has devoted his G7 summit -- the only one any Democratic president has hosted in the U.S. -- to the cause of making Russia appear to be a full, market-oriented, democratic power, thus helping it swallow its great pride as NATO makes its long-awaited enlargement to the east. The geopolitical payoff the U.S. and the alliance receive for this accommodating attitude will probably last no longer than the weekend. Russia will continue to demand a place in the hitherto sacrosanct G7 finance ministers' forum and will continue to renege on international commitments to ratify arms control agreements or return stolen art. But the immediate price paid by the G7 is substantial indeed.
The need to visually bolster Russia has filled the shortened, newly named ``Denver Summit of the Eight'' with arrival ceremonies, an opening reception and lavish banquets, and thus squeezed the seven core members into a semi-secret meeting of no more than two hours to discuss the world's many pressing economic concerns.
These begin with the need for a frank dialogue with the European Union, whose plans for monetary union are visibly fraying in ways that could trigger global exchange rate volatility and require the U.S., Japan and Canada to ride to the rescue of beleaguered European currencies.
Another intimate discussion is needed with Japan, burdened by precarious financial institutions, which has chosen to stimulate its stagnant economy through increased exports to the U.S. rather than aggressively deregulating an ossified economic structure.
G7 leaders also face the challenge of deciding how best to strengthen prudential surveillance over financial institutions, by choosing either intensified co-operation among national regulatory authorities or creating an international institution devoted to this purpose.
And beneath all lies the need to inject direction into a new round of multilateral trade liberalization, a full three years after the Uruguay Round was completed and at a time when regional free trade areas are running far ahead of the integrating global framework. Here the U.S. hosts, ashamed of their lack of fast-track authority for further trade liberalization and afraid of criticism for their extraterritorial Helms-Burton legislation, are discouraging any initiatives.
Russia's presence precludes a serious engagement and timely preventative action on these issues. Its ruble, which has plunged from 0.6 rubles to the US$ seven years ago to 5,700 rubles to the US$, is unable to assist western currencies under assault from speculators. Its economy, projected to shrink another 2% this year, is afflicted by a tax system unable to collect the revenue needed to service its mounting debt to international financial institutions. Moreover, experts estimate it will take a decade before Russia becomes eligible to join the World Trade Organization -- by implementing measures to ensure importers pay the same tariff at all Russian customs posts and introducing a set of trade rules that do not change by the day.
The danger at Denver is that a well-meaning Clinton will give in to Russian demands to participate in the G7's core economic discussions and to join the finance ministers' forum. Such moves would transform the G7 into a vacuous political talk shop at the very moment a globalizing world economy needs professional, decisive collective leadership.
To be sure, there are several areas where Russia can contribute at Denver -- assisting G7 members overcome Clinton's singular resistance to securing a global forestry convention and paying its fair share to the G7's collective fund to close the leaking Russian-designed nuclear reactors at Chernobyl. But only after Russia has proved it can responsibly participate in such areas should the G7 move to consider whether it can, and should, be given an expanded role.
NATO enlargement will proceed satisfactorily within Europe with or without a G8 that includes the Russians. But now, more than ever, an intimately interconnected and fragile world economy needs an effective G7 to benefit the global community as a whole.
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