(Turkey, represented by Prime Minister Recep Tayyip Erdoğan, was invited as a special guest for the summit's last day.) The issues covered ranged from Iran's nuclear program to world climate change (global warming), with the economic issues, particularly the global financial and economic crisis, sharing the spotlight with several diplomatic, scientific and security issues. In this column, I will focus on the major economic issues, centering on the global financial and economic crisis.
The G-8 (Canada, France, Germany, Italy, Japan, Russia, the US and the UK) has lost its monopoly of global economic governance as a self-appointed elite and exclusive club of developed countries, its origins dating to 1975 (with the dubious membership of Russia since 1997). It has been gradually compelled to share its power with other countries, especially big emerging economies, such as China and India. The recent emergence of the G-20 as the dominant global forum for summitry will eventually relegate the G-8 to virtual irrelevance, as I argued in earlier columns on the first two G-20 summits. The decision by the G-8 to invite almost all the other countries in the G-20 as guests to its summit reflects the acceptance of this eventuality as well as its identity crisis.
During the three-day summit, more than the usual number of statements and declarations on various issues surfaced. At the end of the first day, July 8, the G-8 issued the 40-page “G-8 Leaders Declaration: Responsible Leadership for a Sustainable Future,” with an annex "G-8 Preliminary Accountability Report,” along with a “Political Issues” declaration, “L'Aquila Statement on Non-Proliferation” and the “G-8 Declaration on Counter-Terrorism.” The G-5 (Brazil, China, India, Mexico and South Africa), a group of major emerging economies which have participated in the G-8 summits since 2005, with Egypt invited as special guest, joined the G-8 on the summit's second day to issue “Joint Statement: Promoting the Global Agenda,” with two annexes. On the same day, the Major Economies Forum (G-8 and G-5 joined by Australia, Indonesia, South Korea and the EU) issued the “Declaration of the Leaders: The Major Economies Forum on Energy and Climate.” The summit's last day was devoted to the G-8 -- Africa dialogue, with Algeria, Angola, Egypt, Nigeria, Senegal and South Africa, along with the heads of several pan-African organizations, joining the G-8 to discuss various issues of mutual interest. This dialogue resulted in the “Statement: A Stronger G-8-Africa Partnership on Water and Sanitation” and the “L'Aquila Joint Statement on Global Food Security.” Besides all these declarations, the summit deluged us with 10 Expert Groups Reports on various topics, ranging from intellectual property to anti-corruption commitments. The summit's bloated agenda and overcrowded three-day long meetings, with dozens of nations and international organizations in attendance, spewed several hundreds of pages of documents, filled with platitudes, with little, if any, substance that will affect one way or another the state of the global financial system and the course of the global economy.
The 40-page “G-8 Leaders Declaration: Responsible Leadership for a Sustainable Future” is the document that directly and extensively dealt with the global financial and economic crisis as well as with all the other issues covered during the entire summit. The same acrimonious debates between the US and the UK on the one hand, and Germany and France on the other, that had made the news before and during last April's G-20 summit in London, on the state of the global financial system and the course of the global economy, resurfaced before and during this summit. They resulted in conflicting proposals to deal with the global crisis, preventing this summit from reaching a consensus with concrete commitments to specific courses of action. No clear resolution emerged from the opposing views regarding the type and amount of current and further fiscal and monetary stimuli to fight the global recession versus the exit strategies required to curb the widening budget deficits and inflationary pressures resulting from the existing fiscal and monetary stimulus packages.
The emergence of cautious optimism about the global crisis, which I discussed in two recent columns, has also lessened the emergency for action. More evidence for such optimism emerged during the summit. Last Wednesday, the IMF released updates to its April World Economic Outlook and Global Financial Stability Report (GFSR). The IMF believes that the global economy -- with the easing of the financial crisis evidenced by various indicators, including the lower financial stress indices in the GFSR update -- is starting to get out of the worst recession since the end of World War II, as the rate of decline in economic activity slows down. But the stabilization is found to be uneven across regions and countries, with the recovery expected to be sluggish. The IMF now forecasts global real gross domestic product (GDP) to contract by 1.4 percent year-over-year in 2009, which is 0.1 percent higher than the April forecast, and to expand by 2.5 percent in 2010, which is 0.6 percent higher than the April forecast. Last Friday, the Organization for Economic Cooperation and Development (OECD) released its composite leading indicators (CLIs) for May 2009, which show encouraging improvement in the outlook for most OECD economies, including Turkey. The CLIs for Turkey show a tangible sign of improvement in the outlook since last January, providing additional support for the argument of my last two columns.
But the picture for world trade still looks very grim. The IMF now projects world trade volume to contract by 12.2 percent in 2009, 1.2 percent higher than the April forecast, and to grow by only 1.0 percent in 2010, 0.6 percent higher than the April forecast. Creeping protectionism fueled by the global recession, as documented recently by the World Trade Organization (WTO) and the World Bank, has increased the urgency for the successful conclusion of the eight-year-old Doha Round. We should welcome the G-8 plus G-5 pledge to conclude the Doha Round in 2010 but remain skeptical that it would have any more effect than the previous pledges made, as ritualistic incantations, at earlier summits. The further liberalization of world trade would do much more for the poor countries than promises, often broken, of foreign aid by the G-8 made at this and previous summits.
With the insignificance if not irrelevance of the G-8 summit for the global economic and financial crisis now behind us, we will have to wait until the G-20 third summit, scheduled to meet in Pittsburgh, Pennsylvania, on Sept. 24-25 for the possibility of any serious discussions and concrete measures regarding the global economy and financial system.
