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Thursday, June 13, 2024

G-8 2010: Resisting protectionist pressures

By Pierre Snyder

Special to CSMS Magazine

The G-8 is an unofficial forum made up of the heads of the richest industrialized countries. These countries are France, Germany, Italy, Japan, the United States, the United Kingdom, Canada and Russia. Originally, the club contained countries when it was founded in 1976. Russia was added in 1997 in an attempt to contain Russia’s growing impatience with western industrialized countries. Also, since 1981, the President of the European Commission has been formally included.

            The club was first engineered by France’s president Valéry Giscard d’ Estaing and Germany’s Chancellor Helmut Schmidt in 1975 in a summit in Château de Rambouillet near Paris. At first, they were 6 of them minus Canada, which was invited the next year in 1976 at the request of Germany and the United States. At the beginning, the summits were not meant to be linked formally with wider international institutions; and in fact, a mild rebellion against the stiff formality of other international meetings was a part of the genesis of cooperation between France and Germany—the excusable catalyst for the creation of G-6.

            Over the years, the G-8 summits have inspired widespread debates, protests and demonstrations; and the two- or three-day event becomes more than the sum of its parts, elevating the participants, the issues and the venue as focal points for activist pressure. Many international organizations have complained that the summit is usually a forum for super power dominance and a raw disrespect for the developing world. The current form of the G-8 is being reevaluated. But smaller powers like Great Britain, Canada and Japan have been quite resistant to change, for they perceive a dilution of their global stature. Not surprisingly, countries like China and Brazil would stand tall against some of the traditional G-8 countries. However, knowing the current world order, a larger forum for global governance may be more reflective of the present multi-polar world.

            This has parked internal tensions among the G-8 members, but one wonders how long can they resist what is globally obvious. Among the advocates for extension is France, which anticipates enlarging the G8 to the G14, which would include the current G-8 plus G5 comprising of Brazil, India, China, South Africa and Mexico in addition to one still unidentified Muslim country.

            The G-8 summit is an opportunity for a wide variety of non-governmental organizations, activists and civic groups to congregate and discuss a multitude of issues. Among the traditional G-8 nations, several other countries and international organizations were also invited in the 2010 G-8. Africa bore the largest number of invitees. They were 7 of them to participate. They were Algeria, Egypt, Ethiopia, Malawi, Nigeria, Senegal, and South Africa. The Caribbean and South America were also invited. Haiti, Colombia and Jamaica took part of the summit.

            The African Union, the Common Wealth of Independent States, the U.N., UNESCO, World Health Organization, World Trade Organization, International Atomic Agency, International Energy Agency, the World Bank, and New Partnership for Africa Development (NEPAD) also took part in the summit.

European countries are reluctant

 This year’s summit is the 36th one since its creation. This one is being held in Huntsville, Ontario. It is the fifth such event hosted by Canada.  Many observers questioned this year’s theme, which is Recovery and New Beginning. The allegiance put behind this year’s theme is highly questionable. The biggest issue is how to resist protectionist policies in favor of global recovery.  

            The summit immediately preceded a gathering in Toronto of the G-20, which includes the leaders of other important emerging economies, most importantly China, Brazil, Chile, India etc. In an attempt to assume global leadership leading up to the G-20 gathering, President Obama had placed great emphasis on the need to keep economic stimulus measures in place in order to prevent further global economic slowdown. Obama’s urge may encounter stiff resistance from European nations that have been battling a persistent debt crisis, which forces them to adopt more conservative fiscal policies. Many European countries have been cutting back on public spending while raising taxes to fight off budget deficits.    

            Earlier in the week, Obama sent an urgent letter to the G-20 leaders in which he explained that “safeguarding and strengthening the economic recovery should be “our highest priority in Toronto…In fact, should confidence in the strength of our recoveries diminish, we should be prepared to respond again as quickly and as forcefully as needed to avert a slowdown in economic activity,” he wrote.

            Some European leaders like German Chancellor Angela Merkel seemed to have paid heed to Obama’s appeal but at the same time the German Chancellor has been calling a budget cuts “urgently necessary,” and European Central Bank President Jean-Claude Trichet said stronger public finances are part of a “policy which we would call confidence-building.”  This assertion is also felt deep within the Obama’s Administration, and in a statement released Saturday, U.S. Treasury Secretary Tim Geithner conceded the differences, even as he continues to preach the need for pro-growth policies. “We all need to act to strengthen the prospects for growth. This will require different strategies in different countries. We are coming out of the crisis at different speeds.” Geithner went on to add, “We need to act together to strengthen the recovery and finish the job of repairing the damage of the crisis.”

            So more and more, the G-8 summit has been taking a ceremonial role in global economic policies. The G-20 is being perceived as more reliable forum to discuss and perhaps dictate all courses for world economic affairs. It is not surprisingly that China’s yuan, the country’s currency, was the subject of major debates during the G-20 forum.  Two weeks ago in a move to preempt debates against China’s protectionist policies, 0:00 /2:24Will this G-20 be remembered?

the country started to let its yuan trade freely against the U.S. dollar. Many economists, however, viewed this latest move as just a token designed to simply head off debate. Since 2008, China had been using a pegged exchange rate to the US dollar, something that was harshly criticized by policy makers in Washington.  Still, Geithner could only hail praises for China’s move. “China is acting to allow its exchange rate to appreciate in response to market forces. This is an important step toward helping China better meet its own challenges and providing a more level playing field for all its trading partners,” confirmed Geithner.

Note: Pierre Snyder is economist. He lives in Ottawa, Canada. He wrote this piece for CSMS Magazine.

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