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Canada, the G7, and the Denver Summit of the Eight:
Implications for Asia and Taiwan

John Kirton

Revised version of a paper prepared for a conference on "Canada-Taiwan Relations in the 1990's," Department of Diplomacy, National Chengchi University, Taiwan, November 13-16, 1997. I am grateful to Gina Stephens, Natalie Armstrong, Michael Youash, Litza Smirnakis, and members of the G8 Research Group for their research assistance.

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Abstract

Since its 1976 admission into the G7 club of major industrialized democracies, Canada has regularly acted as an influential member, and leader in several areas of distinct Canadian national advantage, interest and values. These areas include preserving the G7 as an exclusive, effective forum for global governance, extending it to embrace political- security, and Asian issues, and using it to foster multilateral trade liberalization, north- south development, global environmental protection, arms control, and democracy and human rights (notably in South Africa and in regard to the People's Republic of China over the Tienanmien Square incident).

These historic Canadian emphases have coincided well with the interests of Taiwan. Yet the end of the cold war and advent of globalization in the 1990's brought several challenges. In particular, the admission of Russia as virtually a full member of the G7 at the 1997 "Denver Summit of the Eight" reduced Japan's role as the central power in Asia, encouraged some to point to the eventual admission of the PRC into the G7, appeared to lessen the standards applied by the G7 for Russian membership in the WTO, and restricted the G7's ability to deal with its core economic and trade liberalization agenda (including the launch of a new round of multilateral trade liberalization, and taking anticipatory action to ensure the stability of the international financial system). The US initiative to include Russia to such an extent, as compensation for Russian acquiescence in NATO enlargement, also indicated a prevailing American Eurocentric conception of international order.

Although the Canadian government and Prime Minister Chrétien officially supported this enhanced inclusion of the Russians and the emphases at Denver that flowed from it, Canada's G7 diplomacy displayed an essential continuity. Canada remained committed to the core democratic character of the G7, was a full part of the G7 consensus for a strong statement of support for democracy and human rights in Hong Kong, resisted any weakening of WTO accession criteria, and participated actively in the G7 discussions on Asian security. These core elements of Canada's G7 diplomacy are likely to endure in Canada's approach to the 1998 Birmingham Summit, where the Asian currency crisis of autumn 1997 is giving added emphasis to the G7's role in credibly managing the global financial system.

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Introduction

Since its 1976 admission to the G7 club of major industrial democracies, Canada has regularly played an active, influential role in the forum, using its membership to secure advances on core Canadian interests and values. Above all, as the G7's smallest member and the one with the most open economy, Canada has sought to maintain the G7 as an exclusive forum that can act quickly, cohesively and effectively to respond to crises and provide leadership on the major economic issues of the day. In particular, it has used the G7 to forward the process of multilateral trade liberalization, north-south relations, and more recently the reform of the international financial institutions founded in 1945. At the same time, Canada has long worked to develop the capacity of the G7 to deal with political-security and transnational-global issues, notably in the fields of arms control, regional security and environmental protection. It has also pressed to make the G7 a forum for genuinely global governance, by extending the focus of the G7 beyond the Euro- Atlantic world to embrace Asia. Above all, Canada has been a leading enthusiast of using the G7 to defend and promote the global spread of democratic governance and human rights.

These historic emphases have corresponded to a high degree with the essential interests of Taiwan, a polity which, after its pre-eminent relationship with the United States, looks to the major industrial democracies of the G7 for support in times of difficulty. Building the G7 as an effective center of global governance, composed exclusively of major market democracies, and embracing global security issues, is a preferred alternative to centering management in the United Nations, where the permanent veto seat of the PRC on the Security Council provides Taiwan's rival with status and influence. The emphasis on the G7's economic leadership, with the G7's Pacific powers of the United States, Japan and Canada acting collectively to stabilize and open the world economy, has been of considerable value to a Taiwan whose economic power, a vital aspect of its international survival, depends on stable and open financial, trade and investment exchanges with the outside world, and above all with the G7 power themselves. Canada's use of the G7 to address and engage extraregional major powers in Asian security problems in Cambodia and on the Korean Peninsula induces a stability and deterrence that benefits Taiwan. In this respect, the G7's emphasis on the promotion of democracy and protection of human rights has been essential in affirming the legitimacy of the now democratic Taiwan vis a vis the claims of the still largely closed polity and controlled economy of the PRC.

The end of the European cold war and advent of globalization in the 1990's brought potential challenges to this historic convergence of Canadian G7 and Taiwanese interests. The first transformation threatened to reduce the relevance of Taiwan's status as an anti- Communist ally, and opened the issue of membership for Russia, and potentially other claimants such as the PRC and Indonesia, in such organizations as the G7 and World Trade Organization (WTO). Moreover the widespread trade liberalization brought by globalization, and the ensuing rivalry to secure new export markets among emerging economies, gave the PRC a strong appeal to all members of the G7, and an incentive for G7 members to pursue individual economic advantage at the expense of collective political interests. Adjusting readily to these forces was the Canadian government of Jean Chrétien, which, upon its October 1993 election, looked with sympathy on the inclusion of Russia in the G7, and immediately positioned Canada as the country most sympathetic to the PRC within the west.

These Canadian emphases were evident in Canadian diplomacy at the renamed 1997 "Denver Summit of the Eight." Here Canada readily acquiesced to an American desire to use Denver to highlight the G7's acceptance of Russia as a virtually full member, and to delay any serious engagement on further comprehensive multilateral trade liberalization pending President Clinton's acquisition of "fast track" authority from Congress. Moreover Canada worked to carefully modulate the G7's statement on the need to maintain a vigilant watch on the preservation of democratic freedoms and human rights in Hong Kong.

Yet beneath these adjustments of the moment lay a continuation of Canada's traditional approach in the G7, and thus Canada's support for the essential interests of Taiwan. Canada was a full part of the leaders' vigorous discussion of Hong Kong and the core consensus that the G7 publicly and collectively state the standards that the PRC must meet in the post-transition period. Beyond the greater participation accorded to a now democratic and market-oriented Russia, Canada remained opposed to opening the G7, the WTO and other international economic institutions to countries not yet meeting the normal entry criteria. Moreover Canada's activism in the security field, above all in seeking a ban on landmines, underscored the large differences in interests and values between it and the PRC. Although America's rising power and the self-confidence it gave President Clinton limited Canadian capacity for success at Denver, Canada's influence at the margins was exercised effectively to promote a continuation of the democratic-market transformation globally, stability in Asia, and the essential interests of Taiwan.

To develop these arguments, this paper first reviews Canada's G7 diplomacy from 1976 to 1996, demonstrating Canada's recurrent emphasis on developing the G7 as an exclusive, effective forum to promote the global spread of democracy and human rights and open markets and stability in Asia. It next examines Canada's positions, diplomacy and achievements at the Denver Summit of the Eight, in regard to the core issues of Russian participation, the transition in Hong Kong, trade liberalization, arms control and Asian security. It concludes by briefly considering Canada's G7 diplomacy in the leadup.

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Canada's G7 Diplomacy, 1975-1996: Implications for Taiwan

Since its admission to the G7 in 1976, Canada has traditionally viewed the Summit as a forum whose potential exceeded its initial explicit purpose -- that of fostering economic coordination. Smaller than the UN, with a majority concentration of the world's economic and political power, the G7 was an institution uniquely suited to meet the challenge of global governance. As the G7 empirically embodies the characteristics of a modern concert system, Canadians saw their participation in the G7 as an unequaled opportunity to promote core national interests and values within a global arena.[1] Thus, the G7 was seen as an important institution to foster and promote the spread of democratic governance and human rights. Indeed, this purpose was clearly expressed at the conclusion of the 1976 Puerto Rico Summit, by Prime Minister Pierre Trudeau, who captured the essence of Canadian aspirations with his statement :

This Canadian perception of the purpose and potential of the Summit has clearly shaped the issues that Canada has pursued at the G7. As well, the potential of the G7 to advance national interests and values has increasingly shifted Canadian attention away from the United Nations and Atlantic institutions toward those of the G7 (where the power lies and from where successful issue management has come). Moreover this potential has increased Canada's desire to make the G7 a collective success, especially as the G7 uniquely admits Canada as an equal in its own right to the institution's central management core. Within the G7, the decline of American pre-eminence and emergence of alternative centres of leadership, together with growing institutional capacity, fixed membership, and broadening agendas have enabled Canada to increasingly practice "the diplomacy of concert". More specifically, within the G7 Canada has increasingly succeeded in: securing a presence as a full member of all G7 groups; participating equally to assert Canada's distinctive interest-and- value-based priorities, positions and program initiatives; practicing coalition diplomacy with any member as interests direct; prevailing with these coalitions to produce the Summit's collective results; and doing so in ways that produce acclaim at home and effective implementation and compliance by members and outsiders alike. Its effective equality is evident in its ability to veto items antithetical to its interests, secure Summit endorsement of key interests and initiatives (as on South Africa and high seas overfishing), and be looked to for leadership on areas of comparative national advantage (such as relations with Ukraine).[3]

Yet successful summit diplomacy and the optimal functioning of the G7 as an institution is, in Canadian eyes, based in many ways on the exclusivity of G7 membership. The concentration of power within the Seven as well as its restricted size allows it to act quickly to avert or ameliorate financial or political crises. The restricted size also allows Canada, as the G7's smallest member, to make its voice heard and, by forming coalitions within the G7, to affect the decisional outcome of the Summit at the highest level.

Canada thus resisted a series of attempts to expand the G7 to embrace other middlepowers such as Australia, whose candidacy the Japanese promoted in the 1970's and the Reagan administration in the 1980's. Canada readily accepted a role to mediate differences between the United States and France at the 1989 Summit, and thus to contain the desire of President Mitterrand to involve many developing world leaders in the Summit's deliberations. Canada also did not participate in the immediate pre-Summit meeting which the United States and Japan held with Indonesia, chair of the Non-Aligned Movement, in 1993. Finally, while Prime Minister Chrétien was initially predisposed, along with his French and German counterparts, to favour full Russian participation in the G7, he readily adjusted to the more reserved views of the United States, Britain and Japan.

At the same time, Canada has long sought to increase the global legitimacy and effectiveness of the G7, and the strength of its own voice at it, by systematically consulting with middlepowers and international organizations in advance of, and as a follow-up to, the annual G7 discussions. It did so most extensively when it hosted the 1995 Halifax Summit, in recognition of the fact that its Summit emphases on achieving a broad reform of international financial and other institutions would require the understanding and consent of countries well beyond the G7 and OECD.[4] This was particularly the case for items such as a strengthening of the financial reserves available for an emergency response to currency crisis, where the formidable exchange reserves of the Asian tigers would be required to supplement, through the New Arrangements to Borrow (NAB), the traditional mechanism mounted by the G10 through the General Arrangements to Borrow (GAB).[5]

Throughout the years, Canada has proven to be an unusually active participant in both the preparations for the annual Summit and in the discussions at the leader's table, enjoying increasing success in shaping and setting the Summit's agenda. From the start Canada was allowed to lead among the G7 on issues of importance and particular national interest and capability, beginning with energy and arms control (where Pierre Trudeau broadened the economic topic of energy on which he was assigned the lead in 1976 to include the political-security issues of nuclear energy and nuclear proliferation). Canada has also pressed to broaden the Summit's agenda to embrace political-security and transnational-global issues more generally, and has traditionally pursued initiatives centered around the issues of democracy and human rights, multilateral trade liberalization, international financial system management, north-south relations, the environment, arms control and regional security.

Canada's singular concern with using the G7 to promote the global spread of democracy and human rights was evident in 1987, when Prime Minister Brian Mulroney pushed alone, with ultimate success, for a statement of G7 concern over the rising repression in defence of apartheid in South Africa. At the 1988 Toronto Summit, Mulroney persisted in this goal, highlighting the importance of a concerted G7 effort to put an end to this form of institutionalized racism, and thus associating the United States, Britain, Europe and Japan with a more hard-line approach. Mulroney, along with his foreign minister, Joe Clark, brought this issue to both the ministerial and leader level, creating a strong consensus among the Seven for action, evidenced by a G7 endorsement recommending specific and wide-range reforms to the government of South Africa. This momentum was reinforced the following year at the Paris Summit where strong G7 disapproval of South African policies was registered, exerting concerted pressure on that country's government for reform.

Similarly, at Paris Canada led the Seven in a public condemnation of the PRC's massacre of student protesters in Tienanmien Square. Prime Minister Mulroney combined with host President Mitterrand, against the resistance of Japan and the United States, to achieve an endorsement of high-level sanctions aimed at China, including the suspension of bilateral ministerial contacts, and the suspension of arms-trade and World Bank loans to China. The two continued their emphasis at Houston in 1990, where, despite a relaxation of sanctions, the G7 continued to express collective concern and thus exerted a deterrent effect on future PRC action.

The issue of multilateral trade liberalization is another of Canada's traditional emphasis within the G7. With the most open economy of the G7, with its trade overwhelmingly concentrated on G7 partners, and with a desire to diversify its trade from a pre-eminent United States, Canada has long looked to the G7 and its trade ministerial Quadrilateral (operating since 1982) to prevent protectionist pressures at times of recession in the global economy, to provide impetus to launching and completing rounds of multilateral trade liberalization, and to managing bilateral trade tensions between its two largest trading partners, the United States and Japan.[6] From 1985 onward, Canada, with the co-operation of the United States and the United Kingdom, sought with some success at the Summit to contain the use of agricultural subsidies. Canada has also provided effective leadership in trade over the initial opposition of the United States. In 1993 the United States initially resisted Canada's proposal, advanced at the spring preparatory meeting of personal representatives (or "sherpas") in Hong Kong, to use the Summit to secure and endorse the market access agreement that would lead to the long-awaited conclusion of the Uruguay Round. Nonetheless, by pressing forward with its proposal, and securing an agreement to bring the Quadrilateral trade ministers to Tokyo Summit to conclude such a deal, Canada was able to use the G7 to obtain the completion of the Round in early 1994.[7] As host of the 1995 Halifax Summit, it also organized the process, including the presence of the trade ministers on site, to defuse a looming U.S.-Japan dispute over automotive trade.[8]

Another Canadian emphasis, of growing prominence as the globalization of the 1990's intersected with the openness of the Canadian economy, was financial system management and reform. As an early pioneer of floating exchange rates, Canada has long found the G7 regime of multilateral surveillance and selective intervention in foreign exchange markets superior to the more formal regime and fixed rules of the IMF, especially after Canada's admission to the G7 Finance Minister's group at the Tokyo Summit of 1986. Jean Chrétien, as a former Finance minister who had participated in the 1978 Summit, sought to have the 1995 Halifax Summit he hosted focus on reforming the international financial system created in 1945, and to explore ways to make national currencies and payments balances less subject to the trends of the markets and those who drove them. Against European opposition he persisted with the former emphasis. The Mexican peso crisis of December 20, 1994, which threatened to spread to attack the Canadian dollar and caused Taiwan to hold an emergency cabinet meeting to consider the implications for its currency, catalysed widespread support for this Canadian emphasis.[9] The subsequent collapse of Barings Bank encouraged Canada to add to the G7 agenda the issue of prudential surveillance, and the way in which poor regulation of national banking and securities systems can create financial crises of systemic proportions.

A further Canadian emphasis has been on north-south relations. Beginning in 1988, Canada secured Summit agreement for a one-third reduction of the debt burden of the poorest, and supported British-led efforts to extend the degree of relief in subsequent years. Canada also strongly supported the efforts of France, as host of the 1996 Lyon Summit, to focus the G7 on the development agenda.

Another of Canada's traditional G7 concerns is environmental protection. Beginning in 1985, Canada, along with Germany, advanced environmental initiatives within the Summit forum. At the Canadian-hosted Summit in 1988, Prime Minister Brian Mulroney firmly established the environmental protection and sustainable development agenda that was to dominate the Summit agenda at Paris in 1989 and form a core element in subsequent years. During the 1990's Canada used successive Summits to secure an endorsement for its desire to curtail high seas overfishing off Canada's coasts and elsewhere. It thus secured the international legitimacy that helped its unilateral action in the spring of 1995 conclude a United Nations Convention on High Seas Overfishing and Straddling Stocks.

Canada has worked from the start to give the G7 a political-security agenda, and thus to move the global management of this policy arena away from the United Nations Security Council and the veto powers that control it. The first Summit Canada hosted, in 1981, produced the first freestanding Political Declaration from the G7. It also gave the initial impetus to the Missile Technology Control Regime, which has become a constraint on PRC action and influence. In 1983, Pierre Trudeau, working with François Mitterrand, forwarded Canada's non-proliferation objectives by securing Summit endorsement of the principles that propelled his 1983- 4 peace initiative aimed at superpower arms control. More recently, Canada obtained from the Halifax Summit acceptance of the principle that multilateral development assistance should not be directed at countries which maintain excessive military expenditure.

As a Pacific power, Canada has also worked with Japan and the United States to have the Summit give attention to and assume responsibility for Asian issues, including those of Asian security. It has thus readily endorsed G7 action on Indochinese refugees in 1979, the peace process in Cambodia, and assistance for the Korean peninsula.[10]

These traditional Canadian emphases at the G7 have coincided well with Taiwan's interests. Taiwan shares Canada's interest in having the G7, rather than the United Nations Security Council, serve as the effective centre of global governance, especially in the political-security field. Such an architecture embeds the shared social purpose of democratic values at the core of the governance institution and replaces Japan for the PRC as the voice of the Asian region and the broader non-western world. Moreover, it lessens PRC leverage on the West, as the PRC has skillfully employed its veto power, and ultimate agreement to abstain on UNSC votes (over Haiti, Iraq and Bosnia), in order to extract concessions from other members in other areas.

Moreover, Taiwan has a vital interest in the G7 affirming and extending the principle of democratic governance and human rights on a global basis, and in collectively applying its concern to PRC behaviour in particular. The strategy of the PRC depends critically on its ability to deal with western major powers on an individual basis, by promising them the economic rewards through commercial contracts that are at a premium in the post European Cold War period.[11] The action of the G7 in speaking collectively about human rights concerns, doing so at the highest levels, and in a forum that attracts widespread publicity, represents a setback to this strategy.

In the economic sphere, the openness of the Taiwanese economy and its extensive affiliations with G7 members in finance and trade create a strong Taiwanese interest in stable global economic management through a forum in which the PRC is uninvolved. The G7-incubated creation of the New Arrangements to Borrow provide Taiwan, with its substantial foreign exchange reserves, with a potential source of influence within the G7. At the same time, as the magnitude of the 1997 Asian currency crisis demonstrates, it is to Taiwan's advantage to have a global rather than merely regional mechanism for currency stabilization and one that does not depend unduly on the financial contribution of the PRC. It is thus noteworthy that Canada, along with the US and Japan, was a participant in the November 1997 meeting of Asian deputy ministers of finance that constructed the "Manila mechanism" to support the currencies of and banking system reform of Asian economies in the immediate leadup to the Vancouver APEC leaders meeting. [12] Similarly, as Table A indicates, the prominent place G7 countries occupy as Taiwan's trade partners gives Taiwan a substantial stake in an open, rules-based trading regime constructed and managed on a global rather than merely regional basis.[13]

In the security sphere, Taiwan shares with Canada an interest in using the G7 to contain the vigorous arms race in Asia. To be sure, there has been no action on earlier proposals for G7 military chiefs of staff to meet yet the gathering of G7 policy planning directors during the Gulf War, the role of the G7 in assembling financing to mount the coalition effort, and the widespread expectation that Canada would participate militarily alongside its G7 colleagues in any military effort on the Korean peninsula, all directly support Taiwan's essential security concerns.[14]

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Canada at the Denver Summit of the Eight

This longstanding coincidence of Taiwan's interests and Canada's G7 diplomacy was called into question by the major structural changes in the international system in the 1990's. The end of the European Cold War reduced the relevance of anti-Communist allies in a global containment strategy, and raised the question of membership for Russia, and potentially other claimants such as the PRC and Indonesia, in the G7 and WTO. Moreover globalization lead to a widespread trade liberalization and rivalry to secure new export markets among emerging economies, thus giving the PRC an enhanced ability to appeal to the individual economic interests of G7 members.

These pressures were evident at the "Denver Summit of the Eight". In particular, the admission of Russia as a participant throughout the entire Summit, save for a brief one and a half hour session of the seven leaders devoted to economic affairs, had several consequences.[15] It reduced Japan's influence and role as the only voice of Asia, reinforced calls for the eventual admission of the PRC, promised to lower the G7's standards for Russian membership in the WTO, and effectively eliminated the G7's ability to deal with its core economic agenda and thereby deal proactively with protectionist pressures and the looming Asian currency crisis. More broadly the US decision to include Russia so fully, in return for Russian acquiescence in NATO enlargement, suggested the pre-eminence of a Eurocentric rather than Asian-sensitive conception of international order. Reinforcing these forces were the dynamics of relative capability in the leadup to Denver, as surging American economic strength, combined with stagnation in Japan and slow growth in much of the rest of the G7 provided limited room for other G7 members, including Canada, to temper the American approach.[16]

Canada adjusted readily to these forces, easily welcoming Russian participation, publicly accepting the limited economic discussion among leaders, and quietly working to soften any harsh G7 language over Hong Kong. But beneath these surface adjustments lay a continuity of policy that meant the traditional co-incidence between Canada's G7 diplomacy and Taiwan's interests remained intact.

In the first instance, the treatment of Russia marked an application and affirmation rather than an abandonment of the democratic principles historically at the heart of Canada's G7 diplomacy. Russia was extended virtually full participation only after it had become a certifiably democratic country by virtue of its 1996 Presidential elections. Moreover, the Denver session "at seven", together with the opening night sessions "at seven" on Bosnia and terrorism at Halifax and Lyon respectively, affirmed the G7's residual capacity to act alone in the event of Russian recidivism. With such stark recent reminders of G7 alternatives, the virtually full admission of a now democratic Russia at Denver provided a powerful incentive to the PRC to initiate a meaningful process of democratization should it wish to gain admission to the club that now dominated the post- Cold War era.

The force of this incentive was strengthened by the underlying consensus among G7 members about prospective PRC membership or partial association. Such ideas had become fashionable among retired officials and outside analysts.[17] However no-one in the US Government, or any other G7 government had considered including China in the G7.[18] There was an underlying if largely unarticulated conviction that China did not play by the rules of the game of democracy and free trade, to a degree unlikely to be changed by the APEC logic of ameliorating PRC's attitudes and action through inclusion, or what one official derisively termed "putting cowboy boots on Zemin." At the same time, no-one in the US Government argued that there was a need to create a de facto G8, with Russia included, because China was now a powerful threat that had to be countered.

Nor did Canada abandon its traditional support for forwarding democratic principles and human rights at the G7. In the immediate leadup to Denver, there was much attention across the G7 to issues involving China. Denver took place a mere two weeks before the transition in Hong Kong.[19] There was also an acute debate raging in the United States about American policy toward China, a debate that pitted the business community against those from the liberal-left who were concerned about human rights issues such as Tibet. The geopolitical right also saw China as the emerging threat. The US and Japan tacitly endorsed a gentle version of this view. Responding directly to the Chinese missiles fired at Taiwan the previous year, they issued new defence guidelines allowing military co-operation in the extended maritime reaches off Japan. The Chinese strongly opposed this move, viewing the extension of Japanese support for US military operations as aimed directly at them.

Such an atmosphere heightened the conflict between the G7's historic role as the moral centre for rendering judgments about the practices of non- democratic regimes, including the PRC, and the latter's desire to play to the individual commercial self-interest of G7 members. In preparations for Denver, the US, seeking a Congressional renewal of authority to trade with China on an MFN basis, proposed that the G7 issue a strong statement on Hong Kong. It was supported by Britain. Canada and other G7 members were cautious. However all came to agree that the Denver Summit should issue an extensive statement of support for democratic freedoms in Hong Kong.

In the leadup to Denver, the PRC learned that the draft G7 communiqué included a passage on Hong Kong. In keeping with their general aversion to having the G7 develop a view on China, they protested strongly. Yet none of the G7 suggested altering their proposed passage in response.

At Denver there was much private discussion among the leaders about China's intentions for Hong Kong, as well as an extensive treatment by the foreign ministers. The positions of the G7 members were consistent with those publicly seen in the earlier co-sponsorship of the UN resolution on human rights in Geneva and subsequently G7 members' decision to send representatives to attend the installation of the new legislature in Hong Kong (a ceremony which only the Americans and British ultimately boycotted). The US and the British pushed to have the G7 issue a strong statement of support for the preservation of democratic freedoms in Hong Kong. The Japanese, while quite concerned about the PRC takeover, were more cautious.

Prime Minister Chrétien's and Foreign Minister Axworthy's interventions were consistent with Canada's very strong policy of engaging China. Its fixed axis was a commitment that no country would outflank Canada as a friend of China in the region. It was a policy held in place by sunk political capital, Team Canada visits, the memories of Trudeau in the early 1970's, a judgement that blockades and isolation were ineffective and un- Canadian, and a hope of commercial advantage. In the particular case of Hong Kong, it was complicated by the fact that 500,000 Canadians living in Canada were of Hong Kong origin and that an estimated 100,000 - 200,000 individuals with Canadian passports were currently residing in Hong Kong.[20] A further complication was the fact that the ceremony installing the new Chief Executive was also the one installing the appointed legislature which replaced the democratically- elected one Canada supported. Canada's position on Hong Kong reflected national interests derived from its "constructive engagement" approach to China. However, this approach was not antithetical to Taiwanese interests, as one of its pillars was to induce democratization in China. In this respect, a policy of cooperation and accommodation enabled Canada to further open China's economy and, given China's dislike of international criticism, permitted Canada to engage with China in human rights dialogue and criminal justice reform.

Despite these cautions, Canada fully shared the general anxiety about PRC behaviour, and the conviction that a clear statement of concern was required. At the foreign ministers' discussion Axworthy stressed the importance of human rights and the adoption by the PRC of the two UN covenants on human rights, while noting the large number of Canadians directly connected to Hong Kong. Both he and Chrétien also stressed the importance of holding free elections for a new legislature within a year, a commitment they felt they had successfully recorded in the concluding communiqué.[21]

The leaders agreed that they would co-ordinate their positions on the handover, and specified their core concerns in the Denver communiqué. The extensive communiqué statement on China, employing language the US had been using for months, was noteworthy for its clear call for democratic elections for a new Legislative Council, and respect for the initial British-Sino accord. The G7 statement, included in the Denver communiqué unchanged from the draft of a week earlier, read:


Denver thus contributed to the high degree of international attention over Hong Kong that helped the transition proceed with no overt repression in the ensuing months.

A further area where Canada maintained its consistent G7 position, despite the adjustments of the moment, was accession to the WTO. At the Spring 1997 news conference in Europe announcing NATO's enlargement and Russia's participation in the Denver Summit of the Eight, US Secretary of State Madeline Albright and Treasury Under-Secretary Larry Summers had indicated that the US looked forward to Russia joining the WTO on "commercially acceptable" terms. The Denver Summit of the Eight communiqué, in contrast, noted: "We support the goal of early Russian accession to the WTO on the basis of conditions generally acceptable to newly acceding members." The apparent softening raised the question of whether Russia might be a precursor for an early and special arrangement for the PRC to enter the WTO.

However there was no G7 support for such a relaxation. It was generally felt that Russia would be unable to meet the conditions within the one year that some had earlier envisaged. A Canadian specialist estimated that it might take up to a decade for Russia to do so. The communiqué of the G7, meeting alone, affirmed this strict condition. It read: "We attach a high priority to expanding the membership of the WTO, on the basis of commitments to adhere to WTO rules and to provide commercially meaningful market access." In the case of China, the US in particular, with a major trade deficit with the PRC, remained strongly insistent that China accede to the WTO only when it fulfilled all the normal conditions.[22] Canada's position was broadly similar, although Canada was prepared to support early access once the PRC met basic conditions for financial services liberalization and access for agricultural products.[23]

A third area of Canadian continuity at Denver was in arms control, particularly in Canada's skillful use of the Denver Summit to secure support for the Ottawa Process aimed at outlawing landmines. In the week before the Summit, Prime Minister Blair announced British support for the initiative. At Denver Canada secured the endorsement of French President Jacques Chirac. Indeed, all of the Denver participants agreed with Canada in principle on the initiative, while Russian Foreign Minister Yevgeny Primakov indicated that Russia might move toward an actual ban. Although the United States, in part due to its responsibilities on the Korean peninsula, remained opposed, the move toward G7 unanimity highlighted the differences between the group and a PRC committed to keeping its capacity to manufacture, use and sell landmines.

In the area of regional security, however, Canada did decline an opportunity to move to the forefront of concern for human rights. At Denver, Japan's Hashimoto led off with a call for the G7 to be concerned about the situation in Cambodia. Canada, which placed neither Cambodia nor the Korean peninsula among its Denver priorities, regarded this as an effort to "hijack" the agreed upon agenda. Madeline Albright further pressed for an agreement to have Pol Pot brought to trial for war crimes he had committed in Cambodia, and to create a permanent war crimes tribunal for this purpose. In the interim she asked that Canada, as a country whose law apparently permitted action against genocide anywhere, to charge and extradite Pol Pot so that proceedings against him could commence. In response, Axworthy promised only that Ottawa would consider the request.

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Canada's Approach to Birmingham

Looking ahead, the G7 and Canada's diplomacy in it are likely to exhibit the same underlying continuity that dominated at Denver. British Prime Minister Blair's support for at least as much Russian participation in Birmingham as at Denver, despite the economic difficulties Russia encountered in the autumn of 1997, underscores the strength of the G7's democratic character. This emphasis is endorsed by Prime Minister Chrétien. The Birmingham "Summit of the Eight" is thus likely to welcome Russia as a full participant, with no separate session reserved for G7 leaders to discuss economic and financial matters among themselves.

There remains, however, the question of whether Russia will secure greater participation in the G7 finance ministers forum. This is an issue over which the Canadian government has mixed views. It is one further complicated by the impending introduction of the "Euro", and ensuing speculation that the existing five European members of the G7 may become represented by the European Union alone or that the G7 may contract into a de facto financial G3 composed of the US, Japan and Germany. At stake are such questions as whether Russian reform is best induced by the socialization effect of full membership now or the incentive effect of future participation for already accomplished and irreversible reform, how the inclusion of Russia would help address the systemic challenges of November 1997 and whether the full inclusion of Russia would deter or facilitate any contraction into a G3 that excluded Canada. It is worth noting that while APEC admitted Russia as a member at the November 1997 leaders meeting, Canada opposed Russian inclusion, a stance consistent with Prime Minister Chrétien's view of APEC as an economic club. Early British efforts to make Birmingham a leaders-only summit, and one focused on a few issues - notably employment and crime - point to the continuing character of the G7 as a place for democratically- elected leaders to engage in priority economic issues.

A further complicating factor is the advent of the Asian currency crisis in the summer and autumn of 1997. This issue dominated the meeting of G7 finance ministers at their September 1997 meeting in Hong Kong, generated a broad review of how the G7 should best deal with such crisis and placed issues of international financial system management rather than Russian reform back at the forefront of G7 attention.[24] At Hong Kong the G7 Finance Ministers, meeting both separately and as part of the G7 Board of Governors, made several historic decisions: to increase the IMF quota share by 45%; to amend the IMF Articles of Agreement within the year to make the IMF responsible for capital account liberalization; to strengthen IMF involvement in banking and financial sector reform, to improve national governance by reducing the corruption that comes with crony capitalism; and to increase the allocation of SDR's.[25] On the quota share increase Canada joined with its G7 colleagues to induce a resistant but internally divided US, fearing Congressional opposition, to accede at the last minute to a 45% increase. On capital account liberalization, an issue pioneered by the British and adopted by IMF Managing Director Michel Camdessus as his own, early misgivings within the Canadian Department of Finance about the implications for national pension reform and RRSP foreign asset eligibility were overcome, as Canada became part of the G7 consensus. Canada also joined the initiative of the US and Japan, at the outset of 1997 to emphasize banking and financial sector reform.[26] Canada further supported the very strong US interest in addressing governance issues, which the IMF took up for the first time at Hong Kong.

Such issues highlighted the need for the G7 to remain exclusive forum of like-minded members with advanced economic credentials and understandings to perform the essential task of stabilizing the world economy at a time of incipient crisis. It was a sharply different message than that of the autumn 1997, visit to Washington of Jiang Zemin, and his November 1997 post APEC tour of Canada. As these visits took place largely on the terms demanded by the PRC, they represented an act of normalization after the strained US-China relationship since Tienanmien and a reinforcement of the strengthening Canada-China relationship of the Chrétien years. Still there is now little chance that the US, Canada or other G7 members will carry this new move toward engagement into a role for China in the privileged and powerful forum of the G7 itself.[27] To be sure China (outside Hong Kong) escaped the initial stages of the Asian currency crisis, and moved to provide financial support as part of the Manila mechanism that was devised in response. Yet its earlier devaluation and nonconvertible currency, along with the move of the European G7 members to join the Manila mechanism, underscore how limited the PRC's role as a systemic supporter still is. The time for PRC association with the G7 thus remains for the very distant future.

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Table 1: Commodity Trade with G7 of Taiwan (1996)

Unit: US$ million
Country ExportsShare of Total ExportsImportsShare of Total ImportsBalance.
USA26,86623.2%19,97219.5%6,894
Japan13,659 11.8%27,493 26.9% -13,894
Germany3,644 3.1% 5,023 4.9% -13,894
UK 2,8072.4%1,8051.8%1,002
Canada1,3971.2%1,3571.3% 40
France 1,3061.1%4,0614.0% -2,755
Italy1,0800.9%1,557 1.5% -477
Total from G750,75943.7%61,268 59.8% -10,509
Total of Taiwan115,942100.0% 102,370 100.0% 13,572

Source: Compiled from Taiwan Statistical Data Book, CEPD, 1997.

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Endnotes

1. The G7 embodies the four characteristics of a concert system. The first is concentrated power, embracing both an effective equality of relative capability among members (so no one dominates) and collective control of the international system as a whole. The second is constricted participation (which reduces veto points and transaction costs and increases transparency). The third is common purpose among its members, grounded in their common attributes and values as major industrial democratic powers. The fourth is political control, enabling leaders to transcend bureaucratic and domestic divisions and logjams, create broader coalitions and inject the ultimate political will. For a further elaboration of the G7 as a concert system, see John Kirton, "The Seven Power Summit as a New Security Institution," in David Dewitt et al., Building a New Global Order: Emerging Trends in International Security (Toronto: Oxford University Press, 1993), pp. 335-357.

2. As quoted in John Kirton, "The Diplomacy of Concert: Canada, the G7, and the Halifax Summit", Canadian Foreign Policy (Spring 1995). pp. 63-80. The Canadian emphasis was thus on solving the political "crisis of governability" rather than the economic problem of "stagflation," an understandable emphasis for an oil and commodity rich country which suffered relatively less than its G7 colleagues from the 1973 oil shock.

3. Canada's claim to leadership based on interest and expertise rests on the fact that there are one million Canadians of Ukrainian origin (in an overall population of 30 million), its interest as a civilian nuclear power in the Chernobyl reactors, and the reluctance of many to have Germany as the G7 member taking the lead on Ukrainian concerns.

4. Gordon Smith, "Canada and the Halifax Summit," in Fen Osler Hampson and Maureen Appel Molot, eds., Canada Among Nations 1996: Big Enough to be Heard, (Ottawa: Carleton University Press, 1996), pp. 83-94. See also Nicholas Bayne, "The G7 Summit and the Reform of Global Institutions", Government and Opposition 30 (Autumn 1995): 492-509.

5. John Kirton, "The G-7, the Halifax Summit, and International Financial System Reform," North American Outlook 5 (June 1995):43-66. These "New Arrangements to Borrow", created at Halifax, consist of a US $48 billion dollar reserve provided by 25 nations, available to stabilize currencies in the event of sudden distress posing a systemic threat. Taiwan does not participate. Prompted by the December 20, 1994 Mexican peso devaluation, the NAB shows the preventative capacity of the G7, although as of November 1997, the US had still not secured Congressional authority for its initial US$3.5 billion contribution.

6. As of 1996, exports had grown to constitute 38% of Canada's GDP, or almost half of the 80% of the economy accounted for by non-government spending.

7. Nicholas Bayne, "The G7 Summit and the Reform of Global Institutions," Government and Opposition 30 (Autumn 1995): 492-509.

8. For details of the issue see Sylvia Ostry, The Post-Cold War Trading System: Who's on First, (Chicago: University of Chicago Press, 1976).

9. C. Fred Bergsten and C. Randall Henning, Global Economic leadership and the Group of Seven, (Institute for International Economics: Washington, D.C., 1996).

10. For an analysis of Canadian-Japanese collaboration at the G7 see John Kirton,"The Industrialized Nations G7 Summit - Toward a Pacific Partnership," in Mitsuru Kurosawa and John Kirton, eds., The Triangle of Pacific States: Contemporary United States, Canada, Japan Relations, (Sairyusha Press, Tokyo, 1995), pp. 211-239, and John Kirton, "Towards Trans-Pacific Partnership: Canada and Japan in the G7, 1975-1995," in Michael Fry, John Kirton and Mitsuru Kurosawa, eds., The North Pacific Triangle: United States, Japan and Canada at Century's End, (Toronto: University of Toronto Press, forthcoming 1998). On G7 support for Korean assistance see John Kirton, "Le role du G7 dans le couple integration regionale/securite globale," Etudes Internationales 28 (Juin 1997): 255-270.

11. Divisions also allow the PRC to take advantage of the aversion of many in the region, including the Taiwanese, to Japan's World War Two record.

12. For background on Canada's approach to APEC in its year as host see John Kirton, "Canada and APEC", Asia Pacific Papers 3 (May 1997), Karen Minden, John Kirton and Steve Parker, eds., Linking the APEC Community: Canada's Objectives for APEC 1997 (Vancouver, Asia Pacific Foundation of Canada, April 1997), and John Kirton, Karen Minden, Steve Parker, and Isobel Studer, eds., Canada and the Challenge of APEC: The Road to Vancouver, (Vancouver, The Asia Pacific Foundation of Canada, the University of Toronto's Centre for International Studies, and the Asia Foundation of the United States, August 1997), and James M. Lambert, "Institution-Building in the Pacific - Canada in APEC,", Pacific Affairs 70 (Summer 1997).

13. An alternate set of figures indicates that in 1996 the G7 alone, exclusive of the other EU countries, accounted for US$ 112.06 billion or over 51% of Taiwan's US$218.31 billion in trade. Taiwan's trading partners in 1996 ranked as follows: US (47 US$ billion), Japan (41) Hong Kong (28), Germany 8.6, Singapore 7.4, South Korea 6.8, Malaysia 6.5, France 5.4, Netherlands 5.2, Australia 4.8, Britain 4.6, Thailand 4.5, Indonesia 3.8, Philippines 2.8, Canada 2.76, and Italy 2.6. The 1997 Asian currency crisis substantially raises the position of G7 members in the total and rankings.

14. Group of Thirty, The Summit Process and Collective Security: Future Responsibility Sharing, (Group of Thirty, Washington, D. C., 1991), and William Odum, "How to Create a True World Order: Establish a Concert of Great Powers," Orbis 39, (Spring 1995): 155-172.

15. The decision to hold the brief economic session "at seven" was decided only late in the American preparatory process, and came at the insistence of US Treasury Secretary Rubin.

16. America's capability-driven self confidence was evident in Clinton's pre-Summit public address extolling the virtues of the American model, in his concern with highlighting a portrait of Russian-American equality, and in the final night's preparation of the concluding communiqué, conducted not collectively among the nine sherpas but by the US sherpa, Dan Tarullo, consulting individually with interested parties on problematic passages. There was an objective foundation for such an American self- confidence. In 1996 the US had been second to Japan in GDP growth among the G7 (with Canada fourth) whereas in 1997, IMF estimates placed the US and Canada tied for first (with Japan last). The Japanese yen had also depreciated by 50% against the US dollar in the preceeding two years.

17. The list included Zbigniev Brzezinski in a New York Times article at the time of the Lyon Summit, W. R. Smyser, "Goodbye, G7," Washington Quarterly (Winter 1993): 15-28, and the Commission on Global Governance, Our Global Neighbourhood, (Oxford: Oxford University Press, 1995).

18. There were media reports that the Japanese, angry that the US had invited Yeltsin as a virtually full participant, were asking why China was not invited. Steven Erlanger, "Russia Sits with Big 8, Party Crasher No More," New York Times, Sunday June 22, 1997.

19. For background on Canada's approach see B. Michael Frolic, "Re-engaging China: Striking a Balance between Trade and Human Rights," in Fen Hampson, Maureen Molot and Martin Rudner, eds., Asia-Pacific Face-Off: Canada Among Nations 1997, (Ottawa: Carelton University Press, 1997), pp. 323-348.

20. The magnitude had led Canada's Department of Foreign Affairs and International Trade to engage in contingency planning for a mass evacuation.

21. As Canada felt it had secured such an assurance from the PRC, it decided following Denver to send Axworthy to the installation ceremony.

22. For background see "Barring Entry? China and the WTO," Current History 1997, 274-7.

23.On broader trade issues Canada accepted the American strategy of using the Denver Summit, beginning with President Clinton's pre-summit address in Denver to pave the way for the grant of fast track authority, with collective action, such as moving on Sir Leon Brittan's proposal for a "Millenium Round," coming at a later stage.

24. The Honourable Paul Martin, "Canada and the G7," Notes for Remarks by the Honourable Paul Martin, Minister of Finance to the University of Toronto G7 Research Group, Toronto, Ontario. November 12, 1997.

25. For background see John Stackhouse, "Rich and poor square off over freer capital markets," Globe and Mail, September 26, 1997, "IMF members broaden currency reserves," Globe and Mail, September 22, 1997 and "IMF chief envisions truly global future," Globe and Mail, September 19, 1997.

26. There were some Canada-US differences on the broader issue of responding to financial crisis as Canada did not support US Treasury Secretary Rubin's proposal that private bond rating agencies rather than the IMF be assigned the task of evaluating Asian economies' performance.

27. Contrast with the projection of a G5 (US, Germany, Japan, Russia, China), by David Crane, "Asia crisis brings global powershift," Toronto Star, November 30, 1997, p.D2.

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