Print

Mail

wiki links

Tough battles on economy and trade expected at G8 summit

DPA, BRUSSELS
Sunday, Jun 01, 2003, Page 9

Forget the snow-capped Alps, it's the worsening world economy and rising global trade tensions that will form the real -- and grim -- backdrop to the summit of G8 industrial nations opening Sunday in Evian, France.

All eight members of the elite club face big economic challenges, with the US still waiting for a much-anticipated post Iraq-war recovery and Germany, Europe's biggest and one-time economic locomotive, skating on the brink of recession.

Growth in both France and Italy is sputtering while Japan's long-ailing economy has been in stagnation for the past three years.

Leading eurozone experts are urging members of the 12-nation currency bloc -- which includes G8 members Germany, France and Italy -- to move quickly on introducing job-generating reforms and get serious about deregulating their economies.

Both in Germany and France, however, public protests at government reform plans are getting louder.

German Chancellor Gerhard Schroeder will be coming to Evian a day after trade unions plan a "day of action" on May 31 aimed at his labor and welfare liberalization plans. On June 1 the Chancellor has to sell the reforms to his own Social Democratic Party at a special congress in Berlin before rushing off for the summit.

In France, Prime Minister Jean-Pierre Raffarin faces mounting labour protests at long-overdue pension reform plans.

Meanwhile, as the euro surges ahead of the dollar to record values on forex markets, eurozone financial experts say the currency bloc should stop obsessing about inflation and get ready to battle a deadlier threat: deflation.

"Deflation is more undesirable than inflation above 2 percent," European Central Bank vice-president Lucas Papademos admitted recently.

Europe and Japan have accused the US of deliberately allowing the dollar to decline to boost American exports.

After years of fretting over the euro's modest exchange rate, eurozone officials now warn the currency's rapid rise against the dollar will hurt the price competitiveness of European exports -- thus slashing export-led growth prospects.

French President Jacques Chirac -- the G8 summit host -- vows that leaders will use the Evian meeting to send a message of confidence in the world economy.

And one area where they could take immediate action is on global trade.

World economic recovery could be hastened if G8 leaders agree to speed up trade liberalization in the run-up to World Trade Organization (WTO) negotiations this September in Cancun, Mexico.

But here too the picture looks sour, with concerns mounting over whether an end-2004 deadline for a new WTO trade-expanding agreement can be met.

Negotiators at WTO headquarters in Geneva are especially worried about lack of progress on crucial farm trade liberalization, with many accusing the EU -- and especially France -- of holding back on much-needed moves to slash export subsidies and open up markets to foreign competition.

Adding to the gloom at the WTO is rising transatlantic acrimony over a variety of trade issues.

US Trade Representative Robert Zoellick and EU Trade Commissioner Pascal Lamy have said they will not let transatlantic policy differences over Iraq spill over into the economic arena.

But the noble words are not being translated into action. Earlier this month, Zoellick led 12 countries into battle at the WTO in a bid to overturn a European ban on genetically modified foods.

"We could not wait any longer. Our patience has run its course," said Zoellick.

Responding angrily to the US battle cry, Lamy warned that the US move is "unwarranted, economically unfounded and politically unhelpful."

But the EU trade chief has been doing some war-mongering of his own. The 15-nation bloc has readied a US$4 billion list of trade sanctions which it says it will slap on US exports unless Washington meets an autumn deadline to scrap a long-standing tax break scheme for American multinationals.

The presence in Evian of a number of developing country leaders -- including Egypt's Hosni Mubarak, Malaysia's Mohamad Mahatir and Chinese President Hu Jintao (胡錦濤) -- should increase pressure on the two trading giants to kiss and make up -- at least over trade.
This story has been viewed 1781 times.