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G-7 call for a new round, with ‘balanced agenda’

by Chakravarthi Raghavan

Geneva, 22 July 2001 - - The Group of 7 highly industrialized and rich nations at their Genoa summit, in an Economic Statement, have said they would work to launch a new WTO trade round with a balanced agenda, and promising to address the priorities of the developing world.

Meeting under the shadow of massive street protests, and the Italian police’s high-handed tactics, highlighted by the shooting of one demonstrator and the subsequent running over him of the police vehicle, in dealing with what was clearly a very small minority, the summiteers proved that they were not ready to practice what they have been preaching to the developing world to deal with recessions, unilateral liberalisation of goods and service markets.

They spoke of the state of their own economies, mixing some hard reality with claims of progress and policies to overcome current weaknesses. They also spoke of the emerging market economies, prescribing for the latter, as New York Times columnist Paul Krugman wrote (on July 18) “root canal economics” that neither the United States government nor the Wall Street Bankers would tolerate in the US itself.

Writing about the crisis in Argentina, Krugman said:

“What is shocking about the political and economic crisis there is not so much its severity - though it is amazing to see the punishment now being inflicted on a country that just three years ago was the toast of Wall Street - as how gratuitous it is. We are talking about a government whose debt really isn’t very large compared with the size of its national economy, and whose fairly modest budget deficit is entirely the product of an economic slump, forced into drastic spending cuts that will worsen that slump. It wouldn’t be tolerated here - but the bankers in New York tell the Argentines that they have no alternative. And Washington - not the Bush administration which has been eerily silent as Argentina melts down, but the conservative think tanks that helped the country to bind itself in a monetary straitjacket - agrees. Is Keynesianism good only for the US and selected other Western countries, but out of bounds for everyone else? May be. But I suppose that the core of the problem is that small countries, and even big countries like Japan that have lost their self-confidence are too easily bullied by men in suits who give them advice dictated by a hard line ideology that they would never try to impose back home. My advice would be to stop listening to those men in suits, and do as we do, not as we say.”

“The Emerging market economies,” the G-7 summiteers (meeting in luxurious surroundings, but behind steel barricades and the rioting and police’s indiscriminatory violence) said: “are unevenly affected by global economic developments. Growth rates in some countries have slowed towards a more sustainable rate, while in others they have decelerated sharply. We welcome the progress achieved in many countries in increasing their resilience against potential crises and the steps taken over the last year to strengthen the international financial system to better prevent crises. However, recent developments in emerging markets point to the need for further progress in reinforcing domestic financial systems and the underlying fiscal positions.

“Recent measures taken in Argentina and Turkey represent positive steps in this direction. We commend these efforts and encourage the continued implementation of their reform programs in close collaboration with the IMF and other relevant international financial institutions.”

Speaking about the ‘high and volatile’ oil prices of concern to the world economy, and the developing countries, the economic statement calls for increased and diversified energy supplies, improved energy efficiency, expanded infrastructure, and stable oil markets, and for oil producing and consuming countries remaining in close contact. The G-7 then spoke about pursuing, in addition to their present policies, co-operation on three further elements important to a strengthened global economy:

        the launch of a new trade Round,

        action to enhance the stability and integrity of the international financial system, and

        actions to ensure that the poorest countries are not left behind, including the implementation of the Heavily Indebted Poor Countries (1-IIPC) Initiative

On the launching a New Trade Round, the G-7 said that sustained economic growth worldwide requires “a renewed commitment to free trade.”

“Opening markets globally and strengthening the World Trade Organisation (WTO) as the bedrock of the multilateral trading system is therefore an economic imperative. It is for this reason that we pledge today to engage personally and jointly in the launch of a new ambitious Round of global trade negotiations at the Fourth WTO Ministerial Conference in Doha, Qatar this November.

“We are committed to working with developing countries, including the least developed, to ensure that the new Round addresses their priorities through improved market access and sounder, more transparent trade rules. We recognise that there are legitimate concerns in implementing the Uruguay Round Agreements.

“We welcome the steady progress made so far on implementation issues and are ready to examine ways to make further progress in connection with the launch of a new Round. Capacity building is essential to integrate developing countries into the trading system, and we are intensifying our efforts to assist in this area, including with international institutions.

“In the interests of all, the new Round should be based on a balanced agenda, while clarifying, strengthening and extending multilateral rules. An improved dispute settlement mechanism is central to this effort. Increased transparency in the VETO (sic?) itself is also important to strengthen confidence in the global trading system. The WTO should continue to respond to the legitimate expectations of civil society, and ensure that the new Round supports sustainable development.

“We recognise the importance of expanding WTO membership on meaningful economic terms. We welcome the fact that negotiations with China are now almost completed and that progress is being made towards Russia’s accession. We shall strongly support other applicants in their efforts to meet the conditions for an early membership, with a view to making the WTO a truly universal organisation.”

It should be noted however that in the days of their growth and prosperity, the big majors did not reduce or disband their barriers to the exports of the developing world (agriculture, textiles and clothing and other products), but asked them to deal with the structural rigidities by liberalising their own markets. Now, while professing renewed faith in ‘free trade’, they are busy erecting new barriers, including the attempts to create a steel cartel and want a new round to open up the economies of the developing world. – SUNS4942

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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