This demotion could have serious implications for Britain's role in international economic institutions such as the Group of Seven, the International Monetary Fund and the World Trade Organisation. The bigger its economy, the more weight a country carries in these organisations.
The leaked Treasury paper, Strategic Considerations for the Treasury 2000 to 2005, suggests that in order for the UK to retain its influence in future, it should back reform of the international organisations.
The document also assesses the department's long-term requirements for personnel and resources. Where the potential export sales lie, there Treasury officials will follow to smooth the way for businessmen.
For example, the Treasury - which currently sends officials to Washington and Brussels - might introduce postings in Delhi, Tokyo and Peking.
The document extrapolates current growth rates to predict which countries might be Britain's most important export markets in 20 years' time. Current UK export markets are predicted to grow more slowly than world trade.
Rapidly growing, big developing countries such as China, India, Brazil and Indonesia, are projected to burst into the international top 10, at least by sheer size as opposed to income per head. France, the UK and Italy would lose their current place among the seven biggest countries that currently make up the Group of Seven.
China would head the league, pushing the US and Japan into second and third place. India would pip Germany for fourth place, with Brazil, Indonesia, France and Thailand then coming in ahead of the UK at No 10.
Most economists would agree that Asia will become the world's most dynamic region next century. The most successful Asian economies are already taking a more prominent role in the international organisations. For example, Korea has applied to join the Organisation for Economic Co- operation and Development and has agreed to contribute funds to the International Monetary Fund for emergency financial packages like the Mexican rescue.