On eve of summit, G-8's relevance is unclear

This week's gathering of the world's major developed nations in Japan will probably be overshadowed by worries about the global economy and soaring oil and food prices.

By Don Lee
Los Angeles Times Staff Writer

July 6, 2008

SHANGHAI — As leaders of the world's major developed nations meet this week in a tranquil mountain resort in Japan, their gathering probably will be overshadowed by the turbulent global economy and deepening unrest over soaring oil and food prices.

And the question on many minds is whether the Group of 8 leaders will be able to do anything about it.

"This is going to be one of those events that shift people's thinking about the world," said Tim Condon, chief Asia economist for ING Financial Markets in Singapore.

For the G-8 and other groups led by traditional Western powers, he said, "their relative position is shrinking to the rest of the world. . . . The relevance of this meeting is questionable. It's not clear what they can do."

Shi Yinghong, director of American Studies at People's University in Beijing, said, "Honestly, there's no one who can give a global solution. Many countries don't even have a solution for their own domestic problems."

Even G-8 members have downplayed expectations of breakthroughs or agreements on major issues.

For President Bush, this G-8 summit will be the last. In a briefing last week, administration officials indicated that the president would seek to enhance G-8 accountability and ensure that past commitments are met, including programs for fighting malaria, HIV/AIDS and other infectious diseases. He probably also will push for policies supporting open markets and international trade.

But the American position has been weakened by its own faltering policies that many blame for the global economic malaise, particularly credit troubles after the blowup of the subprime mortgage industry.

Even as many analysts have lowered expectations for the summit, which starts Monday, protesters were mobilizing Saturday on the northern island of Hokkaido, where the leaders will meet for three days.

About 21,000 police officers have sealed off the area, and Japanese immigration officers were reported to have barred some South Korean farmers who were planning to take part in demonstrations.

Protests at such international meetings have become routine, but the tensions at this year's summit reflect what some view as the worst economic global state since the 1997-98 Asian financial crisis.

At the G-8 summit last year in Germany, officials declared the world economy to be in "good condition." But since then, companies, and consumers in particular, have faced hard times amid rising inflation, triggering rioting in some countries.

In a letter last week to the G-8, World Bank President Robert B. Zoellick called on leaders to act immediately to deal with surging energy and food prices, which he said threatened to push more than 100 million people into extreme poverty and reverse gains made in previous years.

The world is "entering a danger zone," he said.

Japan has pledged $50 million in food aid over the next three months, on top of about $200 million it had committed earlier to help developing nations with rising prices for rice and other foods.

G-8 members, which also include Germany, France, Italy, Britain, Canada and Russia, are expected to set up a new system of "food reserves," much like strategic oil reserves.

But the World Bank estimates that short-term food needs exceed $10 billion.

The G-8 will probably have even less ability to bring about significant relief from global oil prices, which have doubled in the last year.

Part of the G-8's weakness is that the members are themselves struggling economically. The United States is showing little or no growth, joblessness is rising and stock markets are falling. Japan and most of the other G-8 members aren't faring much better.

The other factor: Nations such as Saudi Arabia, a key player in controlling crude supplies, and China, which is driving some of the increased demand for fuel, aren't part of the G-8 and won't be at the table, though Chinese officials will take part in some discussions as guests, including one-on-one sessions with Bush.

As host, Japan has made global warming a top priority, but it remains to be seen whether the gathering will be able to reach an accord on reduction of greenhouse gas emissions.

Japanese political advisors agree that nations such as China and India, where demand for resources is increasing, and big suppliers, such as Brazil, should be included in the debate.

In discussions of energy, the U.S. and others in the G-8 have tended to cite rising demand from fast-growing countries, particularly China, whereas the Chinese and some others have blamed the weak dollar and speculation for the price increases.

"Why can't the U.S. take responsibility to supervise those who are manipulating the global oil prices?" asked Yi Xianrong of the Research Center for International Finance at the Chinese Academy of Social Sciences.

"And second, what about the depreciating dollar and its impact to the international market? It is the dollar's depreciation that caused hot money fleeing . . . all over the world and led to a series of global economic problems."