G8 Summit: Leaders are tested by turmoil in the Far East

Rupert Cornwell examines the main issues on the table at weekend summit

India

THE eight are united in outrage at the n nuclear tests this week but divided in their response. While the US and Japan have imposed sanctions and Canada is of a similar mind, Russia and France are opposed. Britain will not bring in unilateral sanctions. As host, it will seek "maximum level of agreement" during last night's summit inaugural dinner, at which was heading the agenda. Measures include the recall of ambassadors, as Britain has done. The leaders, however, are concentrating at least as much on preventing Pakistan from matching 's tests. The Eight will be combining incentives for Pakistan with warnings that if it defies world opinion it will pay the same price as .

INDONESIA

There is little the Eight can do about the chaos other than urge restraint by all sides. Any public pressure on President Suharto to step down could be counter-productive and might be overtaken by events. The G8 will merely reiterate the needthat political and social reform must accompany economic reform. The main concern is to promote dialogue and avert a total collapse of public order, which could trigger a fresh, devastating loss of international confidence in Asian markets.

THIRD WORLD DEBT

Tony Blair has promised "concrete measures" to reduce the debt burden on the poorest countries. These, however, are unlikely to be anywhere near as ambitious as demanded by aid agencies and the Third World countries involved. The most likely step is a promise to help all highly indebted poor countries (HIPCs) to become part of the HIPC initiative agreed at the Lyon G7 summit of 1996, with a focus on countries trying to rebuild after war, and on ensuring aid and export credits are used "productively". Thus far, Burkina Faso, Bolivia, Ivory Coast, Mozambique, Guyana, and Uganda have secured firm commitments for relief under the programme. The hope is to extend it to everyone by 2000. Germany is unhappy with more generalised debt relief and there are deep differences between "hawks", who believe debt assistance will do nothing to encourage profligate and corrupt countries to mend their ways, and "doves", for whom the moral imperative of debt relief overrides all else. The G8 decisions will not be binding. But, given the weight it wields within the IMF, its views will carry enormous weight.

EMPLOYMENT

This, with international financial crime, is one of the "big- picture" issues. The challenge is immense, to ensure stable and more numerous jobs in an era of globalisation and ever- expanding information technology. The goal is disputed by no one - but the means are. Discussion of the topic in a "fireside" format should keep the lid on outright disagreement. But the philosophical divide remains between the the Anglo-Saxon emphasis on flexibility and competition, and the more statist, interventionist policies favoured by Japan and most West European countries. The American economy is performing, if anything, even better, while French and German unemployment, despite improving domestic economies, is still about double the level of Britain. The final communique is likely to stress agreement on unexceptionable aims such as the improvement of education and skills training, aid for small and start-up businesses, and sound macro-economic policies that encourage non- inflationary growth.

INTERNATIONAL AND COMPUTER CRIME

So important is the issue considered by Britain that police experts will make a presentation to the leaders today. The problem is twofold: "traditional" cross-border crimes like drug-racketeering, and the growing menace of electronic financial fraud and theft. There are no significant differences among the G8 on the urgency of the matter, now that 96 per cent of bank transactions are electronic. Their key recommendation will be that enhanced policing will only work with the support of all major financial powers and not just G8.

ASIAN FINANCIAL CRISIS

This was a main topic at last night's dinner, where Japan's Prime Minister, Ryutaro Hashimoto, was chairing discussion. The sense is that, apart from Indonesia, the situation is improving. The G8 was likely to give a formal welcome to Japan's $120bn package of last 24 April. Though some countries may have doubts over whether Tokyo has done enough, the "ganging-up" on Japan that seemed likely even a fortnight ago will not happen.

Faith & Reason, page 20

Letters, page 22

Trevor Phillips, page 23

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