Financial Post Articles
The 24th annual summit of the world's seven major industrial democracies, scheduled for next weekend in Birmingham, Britain, is getting a facelift.
The G7 will formally be rebranded as the G8, with Russia now included as a full member. The leaders will meet alone, both with Russia's ailing President Boris Yeltsin in the G8, but also in advance by themselves for a serious G7 discussion of the Asian financial crisis, the Japanese and American economies, and financial and political stability in Ukraine and Russia. G7 finance and foreign ministers will gather in London the previous weekend to help prepare the Summit and to dispose of a lengthening array of more routine issues. At Birmingham the leaders themselves will address a few pressing political issues, but will focus, largely in a freewheeling Saturday retreat, on three core economic questions: world economic growth in light of the Asian financial crisis and other developments; employment; and international crime and drugs.
These changes are more than merely cosmetic. The agenda highlights how subjects long dealt with domestically have risen to the highest reaches of international attention. It also points to how the globalization which has propelled them there is arousing widespread anxieties among citizens across the G7. Last years' Summit in Denver, where President Clinton preached the triumph of American capitalism and lavished attention on Russia's Boris Yeltsin while the Asian financial crisis was erupting, was a distraction from these central concerns. Birmingham is bound to do better, if only because these leaders, all meeting again together for their second encounter, know that their hard won efforts to open the world economy are now in peril. Despite America's soaring prosperity and nonexistant inflation and joblessness, Congress has denied its President fast track authority for further trade liberalization and for the funds the IMF needs to contain the next financial crisis. Meanwhile, the effort at the OECD to create a common set of rigorous rules to regulate investment has just been condemned to indefinite negotiation, in part because many mistakenly fear that international agreements and more open capital flows cause unemployment, pollution and cultural homogenization at home.
The leaders at Birmingham will have convincingly to show their increasingly insecure publics that governments are genuinely in control of globalization, and can shape it to the benefit of the many without the means to buy mutual funds or vacation at Club Med. They will thus collectively vow to keep their markets open, and not look to the American trade deficit or treasury alone to bear the burden of restoring growth in Asia and Japan. They will identify and pledge to adopt the best economic and social practices to assist those displaced by globalization reap its rewards by finding better jobs. They will promise the world's twenty most heavily indebted poorest countries, mostly in Africa, that their crippling debt burden will be relieved in the foreseeable future, but only if and as they change their policies to permit their new prosperity to endure. They will create the collective G8 SWAT teams that give transnational criminal organizations nowhere to hide their members or their ill-gotten gains, and that can respond to infectious diseases as quickly as the bacteria which cause them now cross frontiers.
Above all the leaders at Birmingham will define the shape of the new international financial architecture that is now being constructed in the wake of the Asian crisis. Building on the reforms of international financial institutions begun at Halifax in 1995, and sobered by the US$ 112 billion already spent to contain the Asian financial crisis, G8 leaders will call for better financial supervision, more accurate and open economic data, and stricter surveillance of the policies of all IMF members, developing, transition and developed alike. Although there is no enthusiasm to create new international institutions of a Bretton Woods variety, the leaders will approach the task in broader terms than their finance ministers, who have served as the leading architects to date. Leaders have far less faith in the ability of transparency alone, backed by free markets and Moody's bond raters to offer a solution, and a strong sense of the necessary role that co-ordinated government regulation can play.
To this array of accomplishment, constructed largely by a Blair and Clinton who see themselves radiantly reflected in each other, Canada will make a modest but meaningful contribution. Crafted by dedicated officials and executed by a Summit-savvy leader, Canada will seek and probably secure endorsement for Paul Martin's well conceived and timely proposal for a new peer review process among supervisors of financial institutions, centered in a "supervisor of supervisors" who can assure markets this critical task is being performed well. Canada will be equally concerned with the social dimensions and human face of the Asian crisis, with bolstering the resolve of all to avoid the tempting but addictive path of trade protectionism, and with cracking down on trafficking in firearms. It will push, along with its Commonwealth and francophonie partners Britain and France and an open-minded America for a far-reaching program for the poorests' debt relief. It will join with the United States and Japan to see how the G8 can get major developing countries to make the real reductions in their greenhouse gas emissions required if the world is to cope with climate change. It will also encourage its partners to look ahead and act now to prevent the real but poorly recognized coming crises caused by the year 2000 computer bug, and unsafe nuclear reactors in Russia.
In doing so Canada will not only earn its keep at the Summit table. It will, more importantly, help make the G7/G8 a genuine centre of global governance in a world where globalization requires one, but where an inward looking United States, Europe and Japan find it difficult to construct and operate one on their own.
John Kirton is an Associate Professor of Political Science and Director of the G8 Research Group at the University of Toronto, whose work on the G7 is available at www.g7.utoronto.ca
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