Amid World Crises, G8 Summit ends as usual

On July 09, the G8 summit on the northern Japanese island of Hokkaido brought together the leaders of Group of Eight industrialized powers Japan, Britain, Canada, Germany, France, Italy, Russia and the USA. The global econmic club is deeply concerned about phenomena which "pose risks to the global economy" such as rising oil and food prices but remain positive about the outlook for the global economy and seeks the developing world also to help ease the climate and price scenarios.  G8 had also invited, rather summoned, for their role in global warming issue, another 8 developing nations for the summit to make them commit to the decisions of the developed economies. Inflation has been on the rise in Japan, the host of the summit.

The impact on the global economy of price rises and other shocks such as the credit crunch have eclipsed other concerns. China alone accounted for almost half of last year's increase in global enrgy demand. Japanese Prime Minister Yasuo Fukuda said the rising food and oil prices add to inflationary pressures, and will therefore raise serious challenges to growth and would have a serious impact on the most vulnerable.

A potential Israeli attack on Iran has boosted oil rice up. Spiraling oil costs were also high on the agenda. Faultering US dollar and the threat from inflation, which has led to protests worldwide, have also become the top economic concerns for the major industrialized nations. The G-8 has been under pressure to secure commitments by wealthy nations to push forward stalled U.N.-led talks on forging a new accord to battle global warming by the end of next year. While reaffirming its faith in global growth prospects, the G8 said the world economy "is now facing uncertainty and downside risks persist". It warned of the specific danger that high oil and food prices could "increase global inflationary pressure" as well as have "serious ­implications for the most vulnerable". 

It is the very first time ever that leaders of the major economies have got down to vigorous discussions on a broad range of climate-change-related issues. Such shorter-term targets have been much more difficult to reach consensus on. The United States , for instance, has argued that meeting a Europe-supported goal of reducing emissions by between 25 and 40 percent by 2020 is unrealistic. In a nod to such disagreements, Yasuo Fukuda said the G-8 countries would set individual targets. Both Japan and the European Union had been pressing for this year's summit to go beyond usual get-togethers, and Brussels wanted clear interim targets as well. U.S. President George W. Bush has insisted that Washington cannot agree to binding targets unless big polluters such as China and India rein in their emissions as well. The G-8 last year at a summit in Germany pledged to consider the 2050 target, and this year's Japanese hosts had hoped to solidify that commitment at the meeting in Japan.

Climate Challenge  

Climate change has been the most contentious topic at this year's Group of Eight summit in Japan, which the heads of big emerging economies such as China , India and Brazil were invited to join on the third and final day. The Group of Eight leading industrial nations are responsible for 62 percent of the carbon dioxide accumulated in the Earth's atmosphere, which makes them the main culprit of climate change and the biggest part of the problem. Among others, China and India together emit about 25 percent of the total, a proportion that is rising as their coal-fueled economies boom. The trend has been on the rise. The G8 nations endorsed halving world emissions of greenhouse gases by 2050, edging forward in the battle against global warming but stopping short of tough, nearer-term targets. The G-8 countries also called on all major economies to join in the effort to stem the potentially dangerous rise in world temperatures. But Mexico , Brazil , China , India and South Africa challenged developed countries to cut their greenhouse emissions first by more than 80% by 2050.

UN chief Ban Ki-moon has urged world leaders to tackle the "interconnected challenges" of climate change, rising food prices and development. As the meeting began, Ban urged G8 leaders to help tackle the food crisis by delivering "the full range of immediate needs, including food assistance as well as seeds, fertilizer and other inputs for this year's planning cycle". Ban called on G8 leaders to work towards a new agreement on climate change, which he said was already posing major challenges in Africa . Japanese Prime Minister said the G8 leaders had demonstrated they were serious about tackling climate change.

European Commission President Jose Manuel Barroso said the meeting had been constructive and the agreement constituted a "new, shared vision by the major economies" that would support the U.N.-led effort on a new global warming accord. Reports suggest that only Indonesia , Australia and South Korea had supported the G8 call to share their vision of halving global emissions by 2050. The others argued that advanced countries that are responsible for the bulk of historical emissions must act first. The stance of emerging nations is important. 

Environmentalists have argued that the 50 percent reduction target is insufficient, and have clamored for ambitious targets for countries to cut emissions by 2020. Japan itself has set a national target for cutting emissions by between 60 percent and 80 percent by 2050, but has not set a midterm goal. Environmentalists criticized the statement for failing to go beyond the G-8 statement last year. "So little progress after a whole year of Minister meetings and negotiations is not only a wasted opportunity, it falls dangerously short of what is needed to protect people and nature from climate change," said Kim Carstensen, director of the World Wildlife Fund's Global Climate Initiative.

 Food and Oil Cost  

The chief focus of the summit, however, was money matters and prce rise. The price of food and of oil, which hit a record high of $145.85 a barrel last week, is taking a particularly heavy toll on the world's poor. A World Bank study issued last week said up to 105 million more people could drop below the poverty line due to the leap in food prices, including 30 million in Africa . To help cushion the blow, officials said the G8 would unveil a series of measures to help Africa , especially its farmers, and would affirm its commitment to double aid to $50 billion by 2010, with half to go to the world's poorest continent. The relentless rise in oil prices cast a long shadow over the first day of the G8 summit.

The G8 said they remained positive about the long-term resilience of their economies, noting that emerging economies were still growing strongly. But the world economy was "facing uncertainty" and risks to growth remained. They expressed "strong concern" about oil and food prices, which they said "pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable and increase global inflationary pressure." 

Dutch bank ING said that it was not hard to imagine oil at $200 a barrel before the end of the year and could trigger a price plunge in 2009. Italy proposed increasing margin requirements on futures markets to deter speculative buying of oil, which Prime Minister Silvio Berlusconi said could reach $200 a barrel. Most analysts attribute the spike to supply shortages, increased demand and a weaker dollar, the currency in which most oil is traded, but Italian premier Berlusconi said speculative bets on the futures market were also a factor. Stock exchanges should increase margin deposits on the futures market, which now stand at 5 percent; they should be increased to 50 percent but it's still small talk at this stage.

German Chancellor Angela Merkel told a news conference to act against speculation and arrive at a better forecast of oil demand developments and with a better forecast of oil production. Merkel said there was also a need to engage emerging economies that are consuming more and more oil, like China, India, Mexico, Brazil and South Africa. Berlusconi's and Merkel's comments reflect growing pressures on politicians to do something about oil.  

It is known that a weaker dollar is also contributing to surge in oil prices, which are priced in the US currency, partly because investors have been buying oil as a hedge against a slide in the value of the greenback. The statement made no mention of the weakness of the US currency, although US President George W. Bush told fellow G8 leaders that he was committed to "a strong dollar."  

Communiqué: More Production 

The G8 said in a communiqué released that surging oil prices pose a risk to the world economy and they urged that production increase in the short term and refining capacities be increased and that investment be boosted over a longer period. The G8 called for an increase in oil production and refining capacity to help stem soaring crude prices, which have soared five-fold since 2003. The G8's remarks had little immediate impact on oil prices, which were up almost a dollar a barrel in Asian trade as well. The leaders also agreed to bring major oil producers and consumers together in a new forum to discuss energy security.

In a communiqué released during a summit in northern Japan , the Group of Eight leaders agreed that they would need to set mid-term goals to achieve the "shared vision" for 2050, but gave no numerical targets. In another statement released on the second day of the summit, the leaders expressed strong concern about sky-high food and oil prices, which they said posed risks for a global economy under serious financial strain. World's big leaders said it would be "important" to make "further efforts to improve energy efficiency as well as pursue energy diversification".

On the third and final day of the summit, the G8 and eight developing countries issued a statement calling global warming one of the great global challenges of  time". "Leaders of the world's major economies, both developed and developing, commit to combat climate change in accordance with our common but differentiated responsibilities and respective capabilities," it said.

The 16 -"“G8 plus 8 -- countries' leaders agreed major developed economies would set mid-term goals, but set out no specific numbers. The group also said poorer countries would act to rein in rapid growth in their emissions. The G8 "“ which includes Russia - only one big net oil exporter "“ said it would enhance its "partnership" with oil producers and would create an energy forum to focus on energy efficiency and new technologies. They also called for further efforts in improving energy efficiency and diversifying energy sources. "We express our strong concern about elevated commodity prices, especially of oil and food, since they pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and increase global inflationary pressure," the communiqué said.

The G8 communiqué said financial market conditions had "improved somewhat in the past few months" but that serious strains still existed. The group urged banks and regulators to implement quickly all the measures to increase financial resilience set out by the Financial Stability Forum. The communiqué addressed world emissions rather than just those produced by wealthy countries. The G8 said oil production and refining capacity "should be increased in the short term" and steps taken to boost investment in oil over the medium term.

The G8 issued a thinly veiled call on China to allow a stronger yuan, saying it was vital for some emerging economies with large and growing current account surpluses to allow exchange rate flexibility. The rich nations' club said it would resist trade protectionism and called for the urgent conclusion of the stalled World Trade Organisation Doha round of free trade talks. "We will resist protectionist pressures against international trade and investment in all its manifestations," the statement said. "A successful conclusion of an ambitious, balanced and comprehensive WTO Doha agreement is critical to economic growth and development," the G8 said.

The European Union's executive welcomed the communiqué, saying it kept negotiations on track for a global deal in 2009. The United States hailed the agreement, which Washington said fit with its stance that all major economies "” such as China , India and others "” need to participate in reducing emissions. Major developing nations have urged wealthy countries to take the first step in cutting greenhouse gases. South African Environment Minister Marthinus van Schalkwyk said he feared this year's communiqué was actually a step backward.

An Observation:  Call to Polluters and Others

The world's biggest polluters agreed on the need for "deep cuts" in greenhouse gas emissions, but differences between developed and emerging economies kept them from setting specific targets.  World leaders have proclaimed a "shared vision" on climate change, but failed to bridge differences between rich and emerging nations on curbing emissions. The (8+8)16 countries' leaders agreed that the major economies would set mid-term goals, but set out no specific numbers. The G-8 will implement aggressive midterm total emission reduction targets on a country by country basis. The group also said poorer countries would act to rein in rapid growth in their emissions. The G8 "“ which includes only one big net oil exporter, Russia "“ said it would enhance its "partnership" with oil producers and would create an energy forum to focus on energy efficiency and new technologies.  The environmentalists and climate experts are skeptical that any significant advance on steps to combat global warming can be made until a new U.S. president comes to office in January 2009.

The leaders of G-8 ( plus8) nations which met in Japan to take stock of the world's economy, global warming, soaring global oil prices and energy security, food inflation and the state of global financial institutions, and expressed deep concern at the sharp rise in oil prices that pose significant risks to global growth. However, the G8 was focused more on oil prices and climate thatn food prices as the D-8 did in its sumit in Malaysia recently. The G8 summit wrapped up with a Major Economies Meeting comprising the G8 and eight other big greenhouse gas-emitting countries, including India, China, USA and Australia. The presidents of oil producers Nigeria and Algeria were among seven African leaders who joined the G8 for talks, and they acknowledged the need to take account of the fallout from sky-high prices.

G8 leaders did not comment on on the dollar and Bush's remarks. The economic declaration "not contain per se any specific commitments. But the fact that the G8 had set out an agreed approach to tackling high oil prices, including by reaching out to other nations, was "itself a very significant step". They made a further attempt to revive the Doha round of trade talks, calling on all countries to "work as a matter of urgency toward the conclusion of the ­negotiations". But the leaders of the world's wealthiest economies did not come up with any tangible solutions to solve the problem other than suggesting an increase in the production and refining capacities in the short term, and urging oil producers to ensure a transparent and stable investment environment conducive to increasing the production capacity needed to meet the burgeoning global demand. They also said that it was important to make further efforts to improve energy efficiency as well as pursue energy diversification.

Nor did these main industrialized economies take any concrete steps to try to moderate the oil price in the near term. Instead, the group called for concerted efforts to address underlying supply and demand pressures. Saying that surging oil prices pose a risk to the world economy, the G-8 leaders urged that production increase in the short term and refining capacities be increased and that investment be boosted over a longer period. They remained positive about the long-term resilience of the world's economies.

They also called for further efforts in improving energy efficiency and diversifying energy sources. The G8 leaders are set to meet with the leaders of India, China, Brazil, Mexico and South Africa periodically to discuss global economy, food and oil prices, climate change, globalization and trade and investment issues. The leaders pledged that the G-8 is determined to continuously take appropriate actions, individually and collectively, to ensure stability and growth in our economies. They agreed that elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide and have serious implications for the impoverished, and increase global inflationary pressure.

G-8 leaders said that greater transparency would lead to better-functioning energy markets and would thus better create balance between supply and demand, and therefore it was necessary to improve collection and timely reporting of market data on oil and develop shared analysis of oil market trends and outlook. The G-8 has strongly supported the Joint Oil Data Initiative as a significant contribution in the efforts for information sharing including on oil stocks among energy producers and consumers.

G8 nations, papering over deep differences on how to set goals to combat global warming, said they would work toward a target of at least halving greenhouse gas emissions by 2050 with other participants in U.N. talks. The U.N. talks are set to conclude in Copenhagen in December 2009. US officials said a deal would require significant movement on all three fronts "“ agriculture, goods and services. They said this could not be achieved by the G8 alone and would need concessions by the big emerging markets.

The statement puts the focus of fighting global warming on U.N.-led talks to create a new framework for when the Kyoto Protocol expires in 2012. It is important to remember that as the survival and health of millions of children will depend on the outcomes of this week's G8 meeting in Japan and to sticking to past promises made. The response of the world's richest nations to rising food prices, heath care and HIV/AIDS is of direct importance to the 28 percent of Asia 's population who are children aged under-15. In 2005 the G8 announced - after some 200,000 had marched for increased aid and debt relief in host nation Scotland- that annual overseas aid would increase by US$50 billion a year to US$130 billion a year up until 2010.

Many feel that G8 nations do not have the right to undemocratically decide the policies of the world. The G8 talks about poverty and food shortages but they are simply talking about business, only interested in more and more reckless privatization and profits and expoitation of weaker sections. The summit has become a magnet for protesters, although Japan has been effective at cracking down on any demonstrations. A group of demonstrators marched to the sound of music and drums, holding signs saying "Smash the G8 summit" and "Free G8 political prisoners."   

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