3 June 2003

G-8 Leaders Confident About Growth Potential of Global Economy

Pledge to push WTO talks, structural reforms and development

By Andrzej Zwaniecki
Washington File Staff Correspondent

Evian, France -- Leaders of the major industrialized countries and
Russia have expressed confidence in the growth potential of their
economies, renewing their commitments to trade liberalization and
structural reforms in order to tap this potential.

"Major downside risks have receded and the conditions for a recovery
are in place," the heads of state of the Group of Eight (G-8)
countries said June 3 in a summary statement issued by France at the
conclusion of the G-8 summit in Evian, France.

The host of the 2003 gathering, French President Jacques Chirac, told
reporters that despite mixed economic signals he was impressed with
the optimism expressed by all the leaders during June 2 discussions of
the world economy, according to news reports.

"The situation today seems a little clearer," Chirac said.

In a separate statement on global trade, President Bush and the other
G-8 leaders pledged to "take all decisions necessary" to ensure the
success of World Trade Organization (WTO) trade liberalization talks
by the end of 2004. They said that the current WTO agenda is "central"
to reenergizing the global economy, increasing employment and
stimulating development.

The G-8 comprises Canada, Germany, France, Italy, Japan, Russia, the
United Kingdom and the United States.

Without giving particulars, the leaders promised to pursue "urgently"
with WTO partners actions aimed at reaching an agreed framework for
finalizing the negotiations on trade liberalization in agricultural
and non-agricultural goods before the WTO ministerial meeting in
Cancún, Mexico, in September.

The WTO talks on agricultural trade have stalled over agricultural
subsidy issues.

France announced June 2 that G-8 leaders had also agreed that currency
stability was essential to growth, according to news reports. But the
final summary does not touch on currency policies. Bush said his
administration supports a strong dollar and that U.S. policy had not
changed, according to a senior U.S. official.

The G-8 called for structural reforms, including labor, product and
capital market reforms, and more economic flexibility as a means of
accelerating growth. Bush made the point that the success of
structural reforms in Japan and Europe, where they are most needed, is
also in the United States' interest, according to the U.S. official.

The G-8 leaders urged strengthening corporate governance and
increasing transparency of financial information and vowed to start
negotiations at the WTO meeting in Cancún on a multilateral agreement
on transparency in government procurement. Restoring investor
confidence is "essential" to promoting growth in the world economy,
they said referring to corporate scandals in the United States, which
have created uncertainty over corporate accounting.

In addition the leaders pledged to deny safe haven to corrupt leaders
and their assets, push for accelerated and effective implementation of
existing international anti-bribery rules and launch pilot projects on
public finance and procurement transparency in developing countries
with large extractive industry sectors.

The World Bank has identified corruption as the greatest obstacle to
economic growth and development, and President Bush has made
anti-corruption the cornerstone of his development assistance program
-- the Millennium Challenge Account -- that promises to provide
$15,000 million in development aid to countries that are governed
justly, support economic freedoms and invest in their people.

But all these pledges may be insufficient to reassure investors,
consumers and corporate executives, John Kirton of the University of
Toronto G-8 research group said. He said the industrial powers failed
to address a challenge they have never faced in the 29-year history of
summits -- the threat of global deflation.

"They never asked: When do we act? What do we do if it happens?"
Kirton said.

He said that the Evian record on development is more encouraging.
Chirac invited a record number of leaders from the developing world,
and development received broad support from G-8 leaders. They endorsed
a U.S.-driven action plan on famine that includes a call to rich
countries to respond faster to food emergencies and help developing
nations increase agricultural productivity through improved
technologies, including biotechnology.

The United States views biotechnology as a key element of the fight
against famine and hunger in poor countries. The European Union,
however, has been trying to prevent the spread of biotechnology and
its products due to safety concerns that the Bush administration says
are unjustified. The United States has recently filed a case in the
WTO against the EU moratorium on approvals of genetically modified
foods.

The G-8 leaders also agreed on measures to strengthen the Global Fund
to Fight AIDS, Tuberculosis and Malaria, primarily through "active"
participation in the donors' and supporters' conference to be hosted
in Paris in July. But G-8 countries other than the United States and
France have so far failed to heed Bush's and Chirac's calls to match
the U.S. plan calling for spending $15,000 million over the next five
years to fight the HIV/AIDS epidemic in Africa and the Caribbean.
Chirac praised the U.S. initiative as "historic" and promised to
triple French funding for the fight against the epidemic from the
current $50 million to $150 million.

The G-8 leaders also endorsed a water action plan that promises
support for a number of actions including capacity building and
development of water resources management and water efficiency plans
in developing countries. They also vowed to give high priority in
their official development aid allocations to sound water and
sanitation proposals.

However, the latest G-8 promises are not yet fully supported by
financial pledges, Kirton said. Following the 2002 summit in
Kananaskis, Canada, G-8 governments raised $27,000 million to back
their commitments while the Evian summit is likely to raise no more
than $3,000-5,000 million in "new money on the table," he said.

Nevertheless, Kirton said, the Evian summit made a record number of
concrete commitments on an "unusually wide array" of issues --
commitments that might be supported financially in the future.