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Academic Symposium G8 2000
New Directions in Global Governance? G8's Okinawa Summit

19 - 20 July, 200, University of the Ryukyus, Okinawa, Japan

Globalization and the Role of the Summits

Shinichiro Uda
G8 Research Group

Summits and Leadership
The Importance of the Summits in the World Governance
Development of the Summits
Nation, Modernization and Globalization
My Proposal to the Current Summits

Summits and Leadership

The most unique characteristic of the summits is that top leaders of eight influential countries exchange views face to face and make proposals on what is important to society. Depending on the leadership of the time, this process offers an opportunity to promote the peace in the world society as well as to develop political, economic and environmental policies.

At the G8 summit in Okinawa, for the first time, the so-called information divide will be addressed in order to correct the gap brought about by the information revolution and to extend the benefit of such technology more widely. However, conventional issues, such as security, the world economy, trade issues and development, will also be addressed, and it appears that the Japanese organizers will emphasize that the Kyushu-Okinawa Summit will focus on connecting to the lives of "ordinary people," touching on such health issues as food safety, HIV/AIDS, malaria, tuberculosis and others, in addition to the issues relating to aging, children in the workplace, crime, the environment and biotechnology.

I recently had the opportunity to participate in a number of symposiums related to the upcoming summit, in order to help my own research efforts as a member of the G8 Research Group. Among the symposiums I attended was the "Okinawa Forum: Asia's New Openness," hosted on June 25 in Naha by the Asahi Shimbun Corp. as a planning session for proposals to be made at the summit. During the symposium's second session—"Globalization and the Asian Economy," Mr. Yen commented that "the influence of the summit has declined." His remarks are perhaps based on the observation that the expansion of the global market economy has been accelerated by the IT revolution as well as the creation of a network society that transcends national borders, culminating in a kind of information capitalism.

A participant at a summit-related international symposium on information technology and development cooperation, held in Tokyo on June 3–4, said that the summit is just an event and not a system. He evidently has no idea that the summit has developed into a consolidation of various permanent conferences on important global issues, attended by different ministers.

Having said all this, we must admit that there are today many conferences where world leaders meet, compared to 1975, when the first G7 summit was held. For example, with the integration of Europe since the 1990s, coinciding with the end of the cold war, there has been increased compatibility of extremely close macroeconomic policies, coordination of social policy, establishment of a central bank and currency unification, with leaders of European countries meeting frequently.

In addition, of the 15 countries in western Europe, 12 have adopted a stance of conducting government from the philosophy called the "Third Way." This is defined as social democracy that takes into consideration social welfare and employment and the like, not simply adopting a total free-market philosophy. In the U.S., the Democratic party's philosophy is closer to this way of thinking. Therefore, along with U.S. president Bill Clinton, the western European social democratic leaders have had many opportunities to meet at international conferences, like the one in 1999 in Florence, Italy. Moreover, since the fall of the Berlin Wall in 1990, world leaders, including those of the U.S. and Russia, have been meeting frequently, including meetings between leaders of the U.S. and Russia, and leaders of the U.S. and China.

A more important reason, however, is that the summit is not a "world government," and thus the influence it exerts on various international organizations is, at present, limited.

The Importance of the Summits in World Governance

Nevertheless, from the perspective of world governance, I believe that the summit is growing in importance. First, however, I would like to point out something with regard to the important potential brought about by the change in quality of the summit, namely that the nature of the summit has slowly changed along with the times, due to the development of a global society and the changing nature of national polity. At its base, the summit's character is one of an economic summit. Naturally, added to its economic agenda, a number of other social policy matters, including the perspectives of politics, employment and the environment, also began to be included as themes. The most important factor above all else, though, was the participation of Russia once the European cold war had ended. By thinking about this from a positive viewpoints the leaders of the G8 countries have created an extremely effective mechanism for maintaining world security.

For example, at the Kyushu-Okinawa Summit, let us propose a joint declaration such as the following:

"We eight countries will not engage in war with each other. Moreover, if an outbreak of instability or conflict appears imminent in any region of the world, we will strive to create stability through a maximum level of cooperation within the limits imposed by the basic laws of each of country. This cooperation shall also be extended in the case of conflicts that, unfortunately, have already arisen."

If such a peace declaration were to be made, it could have a major impact on, for example, the preservation of peace in the Taiwan Straits and on the Korean peninsula, although it also would serve as a general statement applicable to any region in the world.

Development of the Summits

Let us take a very general look back at the development of the summit.

Up until 1975, the year of the first economic summit, it was a rare event when leaders of the world's most influential countries would meet under one roof. French president Valèry Giscard d'Estaing, who first proposed the summit, met with Germany's chancellor Helmut Schmidt, and was told that Japan should be included in the organization. Thus, with the inclusion of Japan and Italy along with Britain, the U.S. and France, the summit started out as a gathering of six nations.

Now, of the summit member countries, those from the European Union comprise over half. Britain joined the European Community, the predecessor to the European Union, in 1973, only two years before that first summit. When I had the opportunity to observe the British Parliament in 1962, British prime minister Harold Macmillan was already proposing EC membership for Britain. Then, the national interest of Britain was balanced on three pillars—Europe, the Commonwealth and the U.S. Just over ten years later, membership in the EC was finally realized. Around that time, even among the countries of western Europe, it was felt that close cooperation was necessary, and amid the bi-polarization created by the cold war there existed the idea of wanting to coordinate global issues together with the U.S., the top leader. With regard to the military, the U.S. presence of the U.S. was prominent in all facets, including NATO. Therefore, in security and military terms, the summit, which centred on the UN and regional security structures, generated leadership from the top countries on world economic issues. For that reason, Japan's presence could not be ignored, as it was in a period of high economic growth and had successfully navigated its way through the first oil crisis.

In this context, in the 1970s, the so-called era of the economic summit, a number of international news-making announcements were made. These included news that the seven countries of the summit, which by now included Canada, had established an international currency regime. The U.S., Japan and Germany were now engines of growth with determined growth rate targets. Furthermore, an agreement was reached to concluded the Tokyo Round of multilateral trade liberalization successfully, and agreements were reached regarding targets for energy consumption and import quantity at the time of the second oil crisis.

With the invasion of Afghanistan by the Soviet Union in 1979, and since the beginning of the 1980s, along with the conventional economic issues, political issues also began to be taken up at the summits. The tense relations that marked the cold war era, such as anti-Soviet declarations, security partnership declarations, democratic declarations, human rights issues and détente, among others, were in evidence at summit meetings. After the conclusion of the cold war, around the time that Russia started attending the summit meetings as an observer nation, the issue of Japan's northern territories was being debated. In addition, the issue of the world's north and south hemispheres started to be taken up at the summit meetings, which then led to the issue of cumulative debts and debt relief for heavily indebted developing countries.

In addition to security issues and global political and economic issues, we now see that the summit also has come to cover most other major problems that greatly affect the internal policies of all countries, such as non-proliferation of nuclear weapons, disarmament, ethnic issues, Kosovo, the safety of nuclear power, employment measures, reform of international organizations, reduction of greenhouse gases, global environment, international financial systems, economic structural policies and education. Hence, many issues regarding globalization have been discussed before or after their actual occurrence.

Nation, Modernization and Globalization

It goes without saying that globalization is having a large impact on the formation, development and changes of nations. So, what happens when we consider this matter from a viewpoint of each nation?

If we look at the history of modernization, we can conclude that events and phenomena that occur in a country are greatly influenced by various conditions regarding that country's specific history, economy, society and culture. However, at the same time those aspects are diminishing in a larger context through the formation of comprehensive global society. This distinguishing feature of modernization was described in my article titled " A Study on the Internationalism of Nations," written in 1958. Now if we replace the term " formation of a comprehensive global society" with "globalization" and look back the situation of Japan after the 19th century, we find that Japan has faced challenges in three different phases. The first phase was the Meiji Restoration in the middle of the 19th century, during which Japan had no choice but to rush into modernization in order to maintain its independence against the overwhelming western powers. It was then that an unprecedented event in the world history took place. Only a several years after the construction of the Suez Canal, approximately 100 Japanese delegates were sent to the U.S. and Europe for three years; on their way back, they travelled to Asian countries via the Suez Canal. Having studied the western civilization and even meeting the president of the U.S. and Queen Victoria of the United Kingdom, these delegates were deeply impressed with Anglo-Saxon-style civilization. Up to that point, they took the same course as the Japanese modern philosopher Yukichi Fukuzawa. However, when the delegates met Germany's Otto von Bismarck, they concluded that becoming " wealthy and militarily powerful" as well as a becoming "bureaucratic nation" would be the only solution for Japan to catch up with these more advanced nations. This philosophy drove the fundamental policies for Japan and remained the driving force until its 1945 defeat at the end of the Second World War. In fact, Japan was able to resist invasion by western countries because this national objective had penetrated, although, in the end, it had led Japan into a military dictatorship and eventual defeat. Even at present, we still see that some countries believe that "development and dictatorship" are more advantageous than being a " democratic nation" for their evolution into a modern country.

The second challenge for globalization began when Japan moved forward onto the path to becoming a " democratic nation" after the defeat in the war. Although the military clique had diminished, a bureaucratic system remained and, in a way, supported the restoration and high growth of Japan. However, at present, the system itself is suffering from system fatigue. Elements in the public and private sectors are out of balance, and Japan is leaning more toward the public sector than are other advanced countries, leaning so far as to lead Mikhail Gorbachev to comment that even with the collapse of the Soviet Union, the ideal of communism still remains in Japan, exaggerated though it may be.

Although such remnants of the past fetter Japan, the country is now facing the third and genuine challenge of globalization— in which the information technology revolution accelerates the drive toward a boarder-free society, global market, changing sovereignty and other changes affecting lifestyles, deregulation and global standardization. This challenge presents a global shift from development and dictatorship to respect for human rights, and a political revolution of conversion to democracy— that is, the process of a full-scale formation of a comprehensive global society. Now at the end of the 20th century, the entire world faces the issue of globalization, but in case of Japan, its formation as modern nation in itself has been a challenge for globalization.

I have taken the situation of Japan as an example because most of the world' s 190 countries have had more or less similar experiences, although depending on varying conditions, there may be a time or cultural lag to a certain extent. To be more specific, some countries face a similar situation to Japan's three globalization challenges.

Globalization and the Summits

Without the presence of a world government or a world central bank, at the G8 summit the leaders must discuss issues that are contemporary and common to all human beings, such as political systems and economic management. They must also address the issues that reflect the needs of nations in the process of developing and modernizing.

Meanwhile, the process of globalization might produce various confederations such as cities (so called city-nations), world enterprises and non-governmental organizations affected by the border-less market, networking society or " information capitalism." On the other hand, there is a tendency in some parts of the world toward the devolution of localism, especially culturally. In other words, a nation-state may be too small to solve world-wide problems by itself and too big for local devolution. Nevertheless, until the advent of a world government, it is up to the nation-state to find an effective solution to the problems inherent in the various stages of globalization.

One possible solution to the global problems is to achieve a level of regional cooperation, confederation or integration among nation-states. For example, the broadcasting industry, with which I am most familiar, has a regional broadcasting union that tackles international issues and coordinates international interests, first at regional level and then internationally.

Developing a regional union of nations such as the European Union is surely one method for solving various problems related to the process of globalization. In the case of EU, the highest per-capita gross domestic product per capita may be two times greater than the lowest, whereas in Asia it may be has great as 18 times. In addition, a country such as Yugoslavia, has a similar culture and religion to the rest of Europe, while Asia has much more varied cultures and religions. Therefore, it has been said that it will be some time before Asian integration similar to the EU could be achieved. However, recently in Asia there are indications of a more consolidated regional cooperation. The ASEAN countries, following the proposed AFTA (ASEAN Free Trade Agreement), are to eliminate tariffs within the region by 2018, with six countries in particular committed to doing so even earlier.

A framework now exists with regional agreements represented by AFTA and with bilateral agreements including Japan. The recent Asian crises had an impact on Asian nations to render more regional cooperation. A currency basket including the dollar, yen and euro is now under consideration as a way to reflect the foreign exchange system that existed before the crisis—de facto pegged to the U.S. dollar— and that resulted in destabilization of trade and excessive capital inflows. The Manila Framework has already established an intra-regional surveillance mechanism as a way to prevent another currency crisis.

In May this year, the framework of the ASEAN + Three (Japan, China and Korea) included an agreement on the Chiang Mai Initiative. This provides for the conclusion of bilateral currency swaps and repurchase agreements among the member countries, and will strengthen self-help and support mechanisms in the region.

The G8 summit should take the initiative that integrating regional nation-states into confederations and seeking regional nation agreements constitute positive and constructive ways to facilitate globalization, preventing the evils of globalization, not to mention the type of economic blocs that led to world war.

International organizations such as the United Nations including those specialized ones such as the World Bank, International Monetary Fund, the International Settlement Bank, World Trade Organization, United Nations Development Programme, and so on, also provide effective solutions. However, a sufficient system has not yet been established in order for those organizations to communicate and cooperate among themselves for the purpose of solving problems. For instance, although the World Forum, a communication liaison secretariat of financial organizations, was established after the Asian economic crisis in 1997, it is not an effective or comprehensive organization.

Countries participating in the summit can wield a great deal of influence over such organizations. Half of the G8 countries are permanent members of the United Nations Security Council. Votes by the G7 countries are crucial enough on decision-making at organizations like the IMF. When full-scale structural or functional changes are attempted in international organizations, G8 countries have the most significant impact. In other words, the G7/G8 are at their most influential and effective when they address critical issues including globalization of society, economy, politics, securities and global environment.

As for the issue of regional security, although NATO initiated the air attack on Kosovo without the approval of the United Nations, it was the G8' s foreign ministers conference that politically settled that attack in the end. Professor James Mayall, now at Cambridge University (and who, several years ago, participated in a forum named " Ethnic Conflicts and the Crisis of the United Nations" co-sponsored by the LSE Forum and the Japan Institute of International Affairs), recently visited Japan to attend the international exchange fund symposium titled " Perspectives of the 21st Century: Beyond the Century of Confrontation" held on June 26th and 27th. In his opinion, the fact that the air attack was made without UN approval was a negative factor for the UN' s authority. I believe, however, that it showed the capability of G8 countries to solve conflicts.

Thus we should not underestimate the influence of the summit. Rather, is it not better to take a more constructive stance and use it for the development of peace process in regional communities? Besides, now we have the G20 Conference of the Ministers of Finance in addition to the G7/G8 Conference of the Ministers of Finance and Conference of Central Bank Presidents. Furthermore, the summit has other supporting conferences of ministers who are responsible for different fields, such as environment, education, employment and international terrorism, and so on. We can see that summits now address topics related to different phases of globalization. Therefore, the summit must play an consolidating role at every phase of the process of globalization. The summit must itself serve as an effective leader of the world and take responsibility for the world governance, with member countries keeping a higher level of compliance— the degree of achievement for what they declared at the each summit. Otherwise, the co-existence of nations in the global society cannot be achieved. If effective, however, each nation will also comply to a higher degree higher to the decisions made at the summit.

My Proposal to the Current Summits

As one of the citizens of the host country for the Okinawa summit, I would like to focus on three objectives that I truly wish to see realized. I have limited myself to only three in order to focus on the issues that are not yet fully under discussion.

1. The first objective I would like to see realized at the Okinawa summit is the declaration of world peace and security that I mentioned above. Ideally, one more clause should be added: "We G8 countries will not sell arms to other countries." This may, however, be stretching to far.

2. Reflecting on the Asian crisis, the G7 finance ministers submitted a report for the Köln summit last year called "Strengthening the International Financial Architecture" that addressed such issues as monitoring capital flows and providing international liquidity. At this year's conference on July 8, the finance ministers drafted a proposal for sustainable world economic growth taking information technology as its principal theme, and also stressing IMF reform and welcoming the regional currency agreement on crisis prevention. This is the right direction and should lead to an improved response by international economic organizations at the time of crisis. The G8 countries should take a step back from that declaration and drive more organizational reform so that decisions agreed upon by international economic organizations will function effectively.

Before the Köln summit last year, I made a presentation on " Managing an Integrated Economy: What Roles can Asia and Europe Play?" at Wilton Park, a think-tank of the British government. I proposed that measures taken by the IMF to save economically collapsed countries in 1960s are not always appropriate for the current circumstances. Because the Asian economy has had a remarkably recovery since last year, we tend not to grasp the true nature of the problem and take necessary action. If we let that happen, it will not be easy to find harmless solutions in the event of a future world economic crisis. In case of the crises in Asia, one of the fundamental causes was the fact that countries had a debt that reached close to 40% of their GDP, and short-term debt accounted for most of that debt at its final stage. Those countries were suffering from neither inflation nor financial deficit, according to IMF standards. The IMF' s evaluation of their economic performance was not necessarily bad . Nevertheless, the outflow of short-term capital triggered and aggravated the imbalance between capital revenue and expense, which led to the loss of international liquidity. Subsequent depreciation of currencies increased the amount of debts. We should not forget the fact that the belt-tightening policy proposed by international organizations, including the IMF, shrunk domestic liquidity of such countries, causing a decrease of their GDP. For instance, on December 24, 1997, emergency funding granted by the IMF to Korea saved that country from the problem of international liquidity. However, in return for that funding, the policy caused a rapid decrease of domestic liquidity in Korea, which resulted in an excessive decrease of its GDP.

In the case of the crisis in Mexico, which is considered to have the same cause as the Asian crisis, more than $50 billion in loans was allocated within a month or so due to the initiative and prompt response of the U.S. However, in the Asian crisis, regardless of the Japanese proposal to establish a fund system to create regional stability, the U.S. was slow to cooperate. In fact, it delayed until the failure of the American Long-Term Capital Management hedge fund, following the crises in Soviet Union and Brazil. Much improvement still remains to be made in creating cooperation and improving the decision-making process among world economic organizations.

With regard to the ordinary current balance crisis, macroeconomic belt-tightening and " supply-side structural adjustments" were appropriate countermeasures. Hence, as we saw in Germany, France and England in 1950s and 1960s, it was a conventional practice for economic organizations to demand a strict tightening policy in return for financial supports. Because the Asian crises occurred when other global financial activities were overwhelming the real economy, the following measures as reported by Asian Development Business Institute were required in the first phase in order to avoid the international liquidity crisis: 1) emergency funding, 2) compulsory rollover of short-term foreign private debt, 3) correction of excessive under-valuation and 4) coordinated demand expansion. Next, in the domestic context, the following policies must be tentatively implemented if necessary: 1) relaxed monetary policy and financial consolidation, 2) unlimited and unconditional provision of domestic liquidity, 3) classifying banks into two categories ("banks that can survive" and " banks that cannot survive" ) with the mandatory condition to restructure in future and to carry out compulsory bank re-capitalization to those survivor banks, 4) temporary suspension of capital adequacy standards, and 5) providing credits through non-market channels. Having implemented such strategies, management of moral hazard and liabilities should be pursued, followed by full-scale restructuring policies.

It will never be easy to reform international economic organizations so that they can achieve such fulfillment. At their conference this year the finance ministers made some progress in the right direction. It appears that there are various ongoing schemes with respect to IMF reform and a system of cooperation with other international economic organizations. The summit shall constantly take the initiative to drive the reform of international organizations and inter-organizational cooperation. Especially with regard to mutual cooperation among international organizations, it might be a good idea to establish a responsible conference within G8 countries.

3. Lastly is information and communications technology. The standardization of the three systems of broadcasting (PAL, NTSC and SECAM) was among the topics at an international conference on broadcasting called "Telecommunication, Information Development and Economics," held by Japan's Ministry of Foreign Affairs in the 1980s. When we think about the cooperation of developing countries in the field of IT, there are strategies that donating countries and international organizations could carry out so as to enable people of all social classes to easily enjoy the benefits of IT. A symposium called " IT and Development Cooperation" was held in Tokyo on July 3-4 in the lead-up to the Okinawa summit, where two critical issues were discussed. The first point is disparity among the levels of information technology in the world. It is well known that the levels of IT development in developing countries is far from equal to those of advanced countries. According to the International Telecommunications Union, 96% of internet Host computers are located in the countries with high per-capita earning income. For instance, there are more computers in Finland than in all the Latin American countries. In addition to such disparity in hardware, there is also a difference in people' s learning abilities of non-native languages. We hear the word " information divide" so often, and we need to develop hardware that will prevent the information divide from widening the literacy gap. We can find a solution to the information divide if we work on hardware development. For example, developing a program similar to " Tron method" together with advanced software capable of immediately translating the original language, whether it is English or not, into another language is one way to preserve local culture. This system was in development in Japan during 1980s, when Japan enjoyed an overwhelming share of semiconductor production. However, when U.S. demands restricted production, development of the Tron method was also suspended. Nonetheless, this method still remains valid, so developing hardware such as this will enable us all to enjoy a global internet society while sustaining cultural values specific to each nation. Furthermore, it will also bring forth IT benefits to business practices without widening the gap between those who have and those who have not. Apart from the IT expansion by means of a free competitive market in relation to international aids for IT development, the use of hardware that preserves local languages should be a world-scale objective, because IT is an international public property.

4. The next issue is that of the "digital divide," which is spreading even among advanced nations. As I mentioned above, standardizing the three broadcasting systems, for example, has been difficult. As digitization advances, we should aim for an integrated multi-faceted system. This would include developing a generic system combining broadcasting, communication, computers, the internet, and databases, as well as the cable, ground and satellite lines necessary for the system. Standardization of the modes for mobile phones and decreased telephone connection fees will facilitate user-friendly utilization of e-commerce (business to business, business to consumer), the internet and databases.

With the digital integration of broadcasting, telecommunication and computer systems, there will likely be more public sector organizations, think-tanks, research organizations and universities, as well as more effective policy-building and increased intellectual creativity and, in the private sector, innovations in production systems and technology in addition to management and marketing. Furthermore, in both the public and private sectors, technology can be used to collect information on a global scale, and, of course, it can be useful for human resource development.Throughout all these efforts, we must make an effort to standardize to avoid widening the digital divide, paying attention to maintaining efficient market competition. The G8 countries must enact domestic laws that combine communication and broadcasting as well as international coordination. There should be some kind of joint council of those responsible for these areas in the G8 countries and a specialized international organization to coordinate legal provisions and create a reasonable international system.In addition, there are many more issues rising to the surface, including the coordination of macroeconomic policy, economic cooperation, trade issues at the World Trade Organization, environmental issues, property rights and patent issues such as World Intellectual Property Organization, all of which require G8 initiatives to find effective solutions and which should be prioritized at the summit. Strong leadership is required for various international organizations such as the United Nations.To sum up, we are now in the end of the 20th century, and the entire world is facing the ongoing challenge of globalization. The Okinawa summit must show strong leadership for the process of globalization to be successfully completed. In terms of world governance, the G8 summit is the most effective framework we have for global co-existence.Last, but not least, this year marks the end of the 20th century. Some say this has been a century of confrontation, conflict and war. Beyond the century of confrontation, it is my desire that the 21st century will be one of hope. I hope the leaders of the eight countries, in their collective will, will make the 21st century peaceful and prosperous, and we will achieve the coexistence of human beings, enjoying interdependence and cooperation, as well as harmony with their global environment. If the G8 leaders could express a declaration such as the peace declaration that I suggested above, I believe it will be the most powerful message to the 21st century from the 20th.

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