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Overshadowed by G-20, G-8 Likely to Preserve a Role

Wednesday, 23 June 2010 02:02 PM

The Group of Eight is losing relevance as faster-growing rivals like China and Brazil play a larger role managing the global economy, but it will still endure as a key forum for traditional industrial powers.

Meeting in Huntsville, Canada, on June 24-25, the G-8 might look like a warm-up act for the main event in Toronto, where the G-20 gathers for the weekend, but that's not how the host sees it.

"As Prime Minister I go to a lot of summits. The G-8 discussions are probably some of the best, most useful, informative talks that I'm involved in any single year," Canadian leader Stephen Harper told Reuters in an interview.

The G-20 supplanted the G-8 as the group that manages the world economy during the global credit crisis, when then U.S. President George W. Bush summoned its leaders to Washington to forge a common response that helped to calm financial markets.

But the G-8 still provides a place where its members can, in theory at least, thrash out their differences in advance and muster around a common front at the G-20.

"I think the G-8 will continue to meet. I doubt they will have much significance in the future but it will primarily be a caucus of the rich countries en route to the G-20," said Fred Bergsten, director of the Peterson Institute for International Economics, a Washington-based think tank.

The rise of China to become the world's third-biggest economy and the fast growth of other developing heavyweights such as Brazil has meant older powers can no longer sit on their own at the high table of global policy-making.

Emerging economies served as a vital engine for the world economy during the recession caused by the credit crisis and, in return, earned them more clout at institutions such as the World Bank, as well as the G-20.

The G-20 leaders’ summit was a necessary modernization. The G-8 -- which groups the United States, Japan, Germany, France, Britain, Italy, Canada and Russia -- had no means to formally incorporate China, India, Brazil and other successful emerging economies to discuss key issues like currency misalignment.

Canada and other smaller economies in the G-8 like Italy have most to lose in the bigger group, as they are overshadowed by large emerging economies in the G-20.

Bush's successor Barack Obama says he will continue to use the G-20 as the best place to tackle big economic challenges.

But that does not mean his administration has no use for either the G-8 or the regular Group of Seven meetings of central bank chiefs and finance ministers of all G-8 countries except Russia.

Because of its size, the G-20 is a harder body to manage than the G-7/G-8. More important, the interests of its members are not nearly as closely aligned as the transatlantic bonds binding the United States and post-war Western Europe.

"The G-8 is a much more informal setting of like-minded friends and allies who discuss and exchange views on a range of issues, not necessarily to take a decision today, but to shape attitudes and actions going forward," Harper said.

Washington has a similar attitude to the benefits of a smaller, more manageable discussion forum.

"There is a feeling, including in some parts of the U.S. government, that the G-8, though much diminished, is still useful as a way to talk with the key allies," said Bergsten.

A senior U.S. administration official told reporters the G-8 gave Obama an important forum for tackling issues of mutual concern with allies, and said it had been particularly useful during the recent European sovereign debt crisis.

The G-8 also continues to provide a forum for key leaders to discuss non-economic issues, ranging from security matters to health and poverty reduction, where the G-20 has yet to show it has the appetite for leadership.

"The G-8 isn't withering quite yet. It still has a robust role in security, development assistance, in addition to consolidating the economic part of the agenda," said Heather Conley, senior fellow at the Center for Strategic and International Studies, a Washington think-tank.

The G-8 has led on debt relief for poor countries, most notably at its 2005 summit at Gleneagles, Scotland, and has also played an important role in promoting global health initiatives to tackle HIV/AIDS, tuberculosis and malaria.

But some critics say it is a needless cost of time and money, and note that Canada has been forced to defend the C$930 million price-tag for hosting the combined G-8/G-20 summit.

"The G-8 had its day when it was about moving Russia closer to the West, but that time has past," said Simon Johnson, a former chief economist at the International Monetary Fund who believes the G-8 has been "a waste of time for a long while now."

Formerly communist Russia was invited to join the club in 1997 to form the G-8.

© 2020 Thomson/Reuters. All rights reserved.

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The Group of Eight is losing relevance as faster-growing rivals like China and Brazil play a larger role managing the global economy, but it will still endure as a key forum for traditional industrial powers. Meeting in Huntsville, Canada, on June 24-25, the G-8 might look...
Wednesday, 23 June 2010 02:02 PM
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