Jul 10, 1992

GROUP OF SEVEN: HAVE THEY OUTLIVED THEIR UTILITY?

GENEVA, JULY 8 (TWN/CHAKRAVARTHI RAGHAVAN) – As the Group of 7 met and dispersed from Munich, the question uppermost in their own countries as elsewhere is whether the G7 have outlived not only their original purpose but their utility, even as a cosy club to exchange views in depth without having to take any decisions.

The Munich summit is estimated to have cost the Germans about 24 minion dollars. Perhaps an equivalent amount has been spent by the member-countries in the preparations and preparatory meetings, and by the media representatives and others who flocked to Munich - perhaps enough money to deal with problems of several countries in the South.

The declaration that the Seven issued Wednesday at the end of their meeting began with the words:

"We the Heads of State and Government of seven major industrial nations and the President of the Commission of the European Community, have met in Munich for our eighteenth annual Summit".

If they and their advisers had not been so intent on preserving the myth of their common purpose and unity, their final communique would have been worded differently - using the language of joint communiqués when leaders of countries meet but are unable to accept each other's views or agree on specifics.

A communique so worded would have said: "We the .... have met in Munich ... and have had free and frank exchange of views ... We have agreed to remain in touch and meet from time to time as appropriate...".

The Seven came though close to this and, for perhaps the first time in their annual spectacle, outlined their differences and helplessness if one read between the lines of their communique.

There was the usual rhetoric about "free markets", "free trade" in the communique and in their post-communique press conferences and briefings to their newsmen.

But in all the words used one failed to discern one policy action on which they were agreed - even if by now everyone is reconciled to the fact of the vast gaps between such promises and their implementation.

A basic fact apparent to everyone, but which the Seven are unable to acknowledge, is that none of the Seven are in control of affairs in their own countries, and face some serious challenges and alienation of their public. Nor are they or their advisers clear on what needs to be done globally and by each of them to get out of the economic stagnation and the economic problems that the people in their own countries and in the world generally face.

All of them have economies that are "stagnating" or teetering in and out of "recession", even if in recent years they have redefined this term to eschew its use. They also face mounting problems of unemployment. And the world economy itself is still threatened by prospects of deflation - thanks to the unresolved debt crisis of the Third World coupled with that of Russia and their own internal debt problems, in the private and public sectors.

In this situation, all that the Seven could do has been to say that they "pledge to adopt policies aimed at creating jobs and growth" and that they would "seek to take the appropriate steps" recognising their "individual circumstances".

In the context of the inability of each of them to take any actions domestically to reduce their public deficits, or increasing public and private savings, the agreed guidelines spelt out almost sound esoteric.

There is no mention of the "exchange rates".

The U.S. dollar has slipped down, because of lowering of short term interest rates by the monetary stance of the U.S. Federal Reserve (to the point where it is just above the inflation rates, depending on how this is calculated). It may help U.S. exports and affect the exports of Japan, France or Germany, but other elements reduce its benefit for the U.S. itself.

And the benefits that the lower value of the dollar brings to the other members of the G7, through lower import costs of commodities and products designated in dollar values, is such that the others do not feel any need to intervene and lower their own interest rates.

Nothing illustrates the failure of the Seven or their helplessness more than the paragraph on the Uruguay Round (where, there is no reference to the other major sticky issues) but only to the agriculture issue that divides them:

"Progress has been made on the issue of internal support in a way which is consistent with the reform of the Common Agricultural Policy, on dealing with the volume of subsidised exports and on avoiding future disputes. These topics require further work. In addition, parties still have concerns in the areas of market access and trade in cereal substitutes that they seek to address".

In plain language, this refers to the U.S.-EC talks and the various compromise ideas on the table but on which no agreement seems possible at least until after the September referendum in France over the Maastricht treaty and the U.S. Presidential elections in November, and that too if Bush wins.

After the French referendum, there would probably a spurt of show of activity in the GATT - with its Director-General helping the process through another flurry of activity and attempts at managing information - in an effort to help Bush's re-election against his two adversaries neither of whom is liked by the other seven because of the possible protectionist tendencies.

But nothing substantial in the way of conclusion is easy - simply because the Bush administration would not be in a position to be seen openly as having yielded in some matters to the Europeans - whether in services, like maritime transport, or even in agriculture or other areas.

Even if Bush wins, there is also the prospect that the Senate and the House, can through change of the rules of business could in effect counter the "fast track" authority in the trade law, under which trade agreements would be subject to an "up or down" vote within a time-period of three months.

In the U.S.-EC talks, translating the EC's new method of domestic support into Uruguay Round discipline hinges on the idea of a "special green box" for specifying such support measures and the so called "peace clause" keeping them beyond challenge in the GATT either in terms of the agriculture accord. or under general subsidy disciplines.

There are also the issues of "rebalancing" of border protection and market access and talk of voluntary restraints by the U.S. over cereal substitute exports (which will be contrary to the rules against "grey area" measures) - referred to as "concerns in the areas of market access and trade in cereal substitutes".

In this context, the statement of the Seven reaffirming that negotiations "should" lead to a globally balanced result, and that the accord "must create" more open markets for goods and services and "will require comparable efforts from all negotiating partners", and that "on this basis, we expect that an agreement can be reached before the end of 1992" means less than what it says.

It also implies that when they reach a modus vivendi (to sweep their differences under the carpet), they would expect the others - the developing world - to compensate them for what they were unable to gain from each other.

The Seven, in their efforts to present a "green" face to their public, also made references to the outcome of the "Earth Summit".

And what they mean about "environment" is brought out in the priorities they have listed there: "commitments on climate change" (when in fact the framework convention has no commitments), protection of forests and oceans, preserving marine resources and bio-diversity.

These are at best a narrow set of issues of concern to them and the priorities they want to push, and not those agreed in the Rio Declaration or the entire range of Agenda 21 programmes and the priorities set there.

In the context of the continued pressure on the developing countries, through the World Bank and the IMF and their "conditionalities" (which have put on the head the old talk of the 60’s and 70’s about "trade not aid"), and their failures to open up their own markets to the exports of the Third World countries, the communiqué’s statement - "we underline the importance for developing countries of trade, foreign direct investment and an active private sector" - seem to be no more than rhetoric.

The communique has spoken of the Seven being "committed to dialogue and partnership founded on shared responsibility and a growing consensus on fundamental political and economic principles". But the dialogue and global partnership, is not what is envisaged in the Rio Declaration or that sought by the G77 or the Group of 15, but a dialogue with the South which will be confined to "population growth and environment" and not of global macro-economic policies.

The G7, rather the G5 as they were then, began their Summits at the instance of then French President Giscard d'Estang, who tried to prevent a confrontation with the South and the oil-exporting countries in the seventies - in the aftermath of the OPEC induced rise in price of oil and the UN General Assembly declaration on New International Economic Order and Charter of Rights and Duties of States.

But that purpose was never served and, for a while when East-West confrontation remained, the seven used their annual meetings for a wide range of other non-economic issues.

Even that purpose has now ceased. And while some outside - among other industrialised countries or some of the international organisations and Third World governments might think that the Seven could still decide on the course of world events, the reality is proving to be different - a fact that some among the seven appear to recognise but are unable to act upon.

An Associated Press report, quoting U.S. treasury officials, said that Bush had privately suggested to the other leaders that they consider changing the format of their annual meetings and even skipping a year, while a Washington Post story quoted a British official as saying that all the seven were "jockeying for leadership ... or at least the appearance of leadership".

If the Seven continue their present mores - of an annual meeting before which they build up expectations of their ability and capacity and determination to "manage" the world's security, polity and the world economy, but end up not only with inability to agree and implement but not even a common view - they might find themselves pushed off the stage by the public in their own countries and in the world at large.