Impressions of the Birmingham Summit

Nicholas Bayne, 19 May 1998

The New Format

Birmingham was an innovative and experimental summit. It was the first G8 summit, with the Russians as full members; this completes a process of assimilation, which began in earnest at Naples 1994 and in fact goes back to Paris 1989, when Gorbachev first wrote to the G7 seeking entry. It was the first where leaders met alone, without their ministers, fulfilling the aspiration of Giscard and Schmidt, the summit founders, which had never been achieved before. The summit had a limited agenda of items publicly identified in advance, with most other subjects delegated to other G7 or G8 ministerial groups.

This does not mean G8 activity is reduced or simplified; quite the opposite. Birmingham was preceded by more intense preparations than ever, in the sherpa network, in specialist groups and in other ministerial meetings. Employment was prepared by a meeting of employment and finance ministers in London in February; crime by interior ministers in Washington in December 1997. Environment ministers met in Leed's Castle, England, in April, and energy ministers in Moscow, in March. A major innovation was the series of meetings of foreign and finance ministers in London on 8-9 May, a week before the summit, to prepare some items for Birmingham and dispose of others which did not need the leaders' attention.

These ministers met in four combinations: G7 finance ministers; G8 finance ministers (only briefly); G8 foreign ministers; and G8 foreign and finance ministers jointly. They issued documents totalling 41 pages in length. The G7 finance ministers did the groundwork for the summit on the world economy; the new financial architecture (with a detailed report on supervision); and financial crime; plus work of their own on tax competition. The G8 finance ministers issued national employment plans. The G8 joint foreign and finance ministers disposed of development (leaving debt for the poorest for the summit) and electronic commerce. The G8 foreign ministers dealt with environment, issuing a separate paper on forests, but reserving climate change for the leaders. They also disposed of UN issues, nuclear safety and non-proliferation, land-mines, human rights, terrorism and 17 regional issues, only two of which (Kosovo and Middle East) were picked up again by the leaders. A full assessment of the G7/G8 achievements in 1998 should take account of all this work. But the present note concentrates on Birmingham itself.

The British preparations were purposeful, well-organised and effective, both as regards the preliminary meetings and the summit itself. (This was in contrast to the confusion in the run-up to Denver 1997.)

They prevented extra items from cluttering up the summit agenda, though two political crises, which had blown up in the last week — Indonesia and Indian nuclear tests — were naturally added. The leaders could thus have an extended discussion of a few items. They appreciated this freedom and got through their agenda fast, leaving time for bilaterals and other contacts. It is clear that the Germans will adopt the same format in 1999.

This format does focus attention on the leaders themselves and their personal contribution to the outcome. This naturally varied, as the rest of this note will show. There was substantial discussion of crime and debt, which led to some real advances. But other items were treated more summarily; employability, for example, was taken over lunch, without officials present. On this item, as with the G7 work on the new financial architecture, the main contribution of the leaders was to add their authority and their impetus to the work being done at lower levels. This is likely to be a feature of heads-only summits and may increase the scepticism about the summits of those in the media who expect the leaders to change the world over a weekend.

[back to top]

G7 and G8: The Role of Russia

Denver 1997 was the 'Summit of the Eight'; Birmingham was the first G8 summit. The immediate consequence was Yeltsin's conclusion that Russia was now eligible to host a future summit. He bid to do this in 2000, taking over Japan's turn that year. Hashimoto refused this; but Yeltsin pressed his point, saying that he wanted to host a summit no later than 2000, when his presidential term expired. A rather tense discussion on the last morning was concluded by Clinton saying that he had an idea, which he would send round to his colleagues later. He did not elaborate; but one way out would be for the G8 leaders to meet twice in 2000, once in Japan and once in Russia.

Russian integration into the G8 makes progress; they made real contributions to the discussions on crime and employability and even on debt, as they are now in the Paris Club. But this process is still incomplete. During the preparations, there were occasions when the Russians tried to water down economic commitments which the other seven could accept; though this has not visibly weakened the summit documents. As in the past, Yeltsin sought to make Russia more involved in the G8 by proposing meetings to be held in Moscow. Over the next year there will be such meetings on crime and the millennium bug, following the energy ministers meeting of 1998 and the nuclear summit of 1996.

The G7 remains vigorous and necessary, at the level of heads as well as finance ministers. The G7 were in fact more active at Birmingham than at Denver the year before. The Russians do not like it, but are obliged to accept it; and the G7 have not been deterred by the risk of Russian displeasure.

[back to top]

Other Participants

Blair had a good summit. His new format worked well and found general favour. He got most of what he wanted on employment, crime and debt, though not enough on debt to satisfy those demonstrating in the favour of debt forgiveness — see below. He also had a bonus in a supporting statement on Northern Ireland.

There was a better balance and more harmony this year between Europe and the US than at Denver 1997. Though the US economy is still very strong, Clinton has lost ground; he was unable to get Congress to agree on 'fast-track' authority for trade negotiations or on the release of new money for the IMF. The continental Europeans have gained ground; their economies are in better shape; and the good progress to EMU has given them a political boost. Negotiations took place on the margins of Birmingham to resolve the outstanding EU/US disputes over Cuba (Helms-Burton) and Iran/Libya (D'Amato), leading to a formal agreement at the EU/US summit on 18 May. Chretien meanwhile had a good EU/Canada summit on 14 May.

Japan's position looked vulnerable, with the economy depressed and Hashimoto's stimulus package getting a sceptical reception. But Japan was active in the two new political subjects — Indonesia and Indian nuclear tests. This gave a general Asian slant to the summit: Japan had a chance to shine and Clinton an incentive to be helpful to Japan.

[back to top]

The Content — General

The choice of themes for Birmingham identified this as the first summit which would address directly popular anxieties about globalisation: about loss of jobs and job security; about international crime; about panic and instability in the financial markets; and about the world's poorest countries falling further behind. On the last issue, Birmingham was the scene of a massive demonstration, when some 50,000 people walked round the conference site urging complete debt forgiveness for poor countries by 2000.

Birmingham also marked a further move towards a post-Cold War world in political terms. Super-power rivalry, while it lasted, had the effect of smothering lower-level conflicts. As it recedes into the past, its restraints on regional tensions have been eroded. Previous summits had been preoccupied by the consequences of this in Europe, notably in Bosnia. This year the focus shifted to Asia, with the turmoil in Indonesia provoked by the financial crisis and the Indian decision to resume nuclear tests.

[back to top]

Foreign Policy Issues

The summit had to deal with two unexpected crises — India and Indonesia — but still managed to dispose of all the foreign policy issues before it during the first G8 dinner on 15 May. A three page statement covered Northern Ireland, Indonesia, FRY/Kosovo, Bosnia, the Middle East and Indian nuclear tests.

INDONESIA. The outbreak of serious rioting in Jakarta obliged the leaders to make a statement about political as well as economic problems in Indonesia. This was important for Japan, whose banks are heavily exposed in Indonesia. The leaders could agree without difficulty to endorse the IMF-supported economic reforms and to call for political reforms as well. But they were careful to stop short of urging Suharto to stand down.

INDIA. The Indian nuclear tests had taken all G8 countries by surprise and their reactions diverged. US legislation obliged Clinton to introduce economic sanctions. Japan did the same, because of its horror of nuclear war — and this made Clinton and Hashimoto allies. Canada was also in this camp. But the Europeans traditionally dislike sanctions; Blair wanted to try persuasion first; and Chirac could hardly punish India for doing what France itself had done in 1995. The leaders did not allow these differences to turn into the sort of dispute they have had over sanctions in the past, eg at Versailles 1982. Clinton made no real effort to get the Europeans to impose sanctions. Instead the leaders focused on what should happen next and — after condemning the Indian tests — put all their weight behind getting India to sign up to the CTBT and the NPT. A phone contact between Blair and the Indian prime minister on 15 May offered some hope of this.

The leaders also urged restraint on Pakistan. Chretien had spoken to the Pakistan prime minister in this sense and there had also been high level American approaches. (The Blair/ India, Chretien/Pakistan contacts suggest the value of the Commonwealth network.) Even so, the summit's last morning was disturbed by rumours that Pakistan had also conducted a nuclear test — how should they react if this were true? The rumours were not confirmed, but the summit dispersed with Pakistan's intentions still unclear.

[back to top]

G7 Issues

The G7 leaders met for two hours on 15 May. They issued a 4 page Chairman's statement, which was supported by a detailed report from the G7 finance ministers on the new financial architecture (8 pages).

Economic Policies. Birmingham continued the practice launched at Denver of short recommendations on national economic policies, largely reflecting what countries were doing already. The passages covering the US, Canada, UK and the rest of Europe were uncontroversial. But there was a risk of friction over Japan, if the US pressed Hashimoto too hard on measures to stimulate the economy. In the event, the other participants decided to give a message of confidence in Japanese policy. This was helped by Hashimoto's readiness to promise actions on the bad debts of Japanese banks (disguised in summit-speak as 'non-performing asset problems').

New Financial Architecture. The leaders endorsed the detailed report of their finance ministers on proposed reforms of the IMF, World Bank and other institutions in response to the Asian financial crisis. This focused on getting better economic data; on closer and more transparent policy surveillance; and on better standards and more cooperation in financial supervision. This was all solid, sensible work, which reveals close advance consultation with the Fund and Bank. The strong endorsement from the summit should ensure that things happen over the months ahead.

But when these measures are compared with the summit's last set of recommendations in this field, at Halifax 1995, there must be doubt how far this new set of measures will be effective in preventing financial crises. Some of the recommendations on surveillance reinforce what was said at Halifax, but do not remove the danger of governments making the wrong policy choices, or the incentive for them to conceal things when a crisis looms. All the very detailed work on supervision has yet to resolve how this work will be organised — who will do what. In short, these precautions may limit future outbreaks of financial panic, but are unlikely to prevent them altogether. The summit documents seem to recognise this.

[back to top]

G8 Issues

The G8 leaders spent 16 May 'in retreat', discussing their main agenda. On 17 May they issued a 10 page declaration, half the usual length. In their discussions they spent most time on international crime and debt relief for low-income countries. Other items, including the main item of employability, were taken more rapidly.

Crime. The leaders began on 16 May with a briefing from the head of the UK National Crime Squad, supported by videos. They responded well to this original approach and agreed without difficulty a series of points focusing on hi-tech crime, money laundering and other financial crime, trafficking in persons and illegal manufacture and smuggling of firearms. They undertook to support current UN work on drugs and on drawing up a convention on transnational organised crime.

This was the first time the leaders have had a well-prepared discussion on this theme. It should prove influential and may be what Birmingham 1998 is best remembered for. Cooperation among the G8 is already quite far advanced. But even here, it is clear that cooperation between law-enforcement agencies has gone further than judicial cooperation; it is easier to catch the criminals than to bring them to justice. In the wider, UN context there is still a long way to go before the G8 leaders can think they are winning the war against international crime.

Debt and Development. The summit made some significant advances in getting better debt relief for low-income countries. The aim is to have all eligible countries engaged in the Highly Indebted Poor Countries (HIPC) scheme by the year 2000. When countries have the necessary track record in IMF-approved policies, they should get the relief they need for 'a lasting exit' from their debt problems. Interim debt relief should be available to them if needed; and accelerated measures are offered for African countries emerging from conflict. This agreement gives G8 endorsement to part of the proposals launched by the British finance minister Gordon Brown at the IMF meeting at Hong Kong, after being agreed in the Commonwealth and called the 'Mauritius mandate'.

This is intended to accelerate the HIPC process, which was flagging. Sadly, there is still plenty of scope for foot-dragging. The Germans remain unenthusiastic about the process 7md this emerged clearly from briefings by Kohl and his officials. The issue of IMF gold sales (raised at Lyon back in 1996) is still unresolved, so that the financing of the IMF share of the HIPC process is yet to be decided. While the UK deserves credit for pushing this debt issue, year after year, the sums available for low-income countries, whether in debt relief or from other sources, look mean when compared the huge rescue packages assembled for Thailand, Korea and Indonesia. The organizers of the big demonstration sounded very disappointed.

There are some other measures in the Communique of benefit to poor countries. The leaders endorsed the OECD's 21st Century Strategy for economic and social development; they promised work on untying of aid; they supported the WHO's campaign against malaria and other campaigns against AIDS; and they offered some trade and investment measures for least-developed countries. All these are welcome confirmations of support, at summit level, of international work in hand. But they fall short of the expectations raised at Denver, especially on help for Africa. The Americans' difficulties in getting aid funds out of Congress are a persistent constraint.

Employability. The discussion on employment issues was harmonious, with none of the transatlantic clashes of earlier years; but it was apparently brief and general. The Declaration endorses the substantial work accomplished by employment and finance ministers during the year, but adds nothing new. The main achievement of the summit in this field has been to give impetus to work at lower levels, in an atmosphere of greater readiness to learn from the experience of others.

In addition to these main themes, there were briefer exchanges on economic policy; trade; energy; climate change; and the millennium bug.

Economic Policy. While the G7 looked at new financial architecture, the G8 considered the wider implications of the Asian crisis. The Communique contains a useful warning against a reveval of protectionist pressures. At a late stage — too late for the Communiqué — the leaders decided to commend China for its responsible role in the Asian financial crisis.

Trade. There was a short exchange only, looking forward to the next series of WTO negotiations, due to begin in 2000. Santer argued the EU case in favour of a comprehensive Millennium round, but he did not convince the US, as was clear from Clinton's speech at the WTO on 18 May. Canada, too, has yet to decide on this. This was a wasted opportunity for a serious discussion on trade and investment and the protectionist pressures unleashed by globalisation. Clinton's failure to get fast-track authority puts him in a weak position. Even so, it will be essential to have a thorough treatment of this theme in Germany in 1999.

Energy. The relevant passages of the Communique hark back to the Energy Ministerial in Moscow in March, and the Nuclear Safety Summit of 1996. At first sight, their aim is to ensure the Russians live up to the undertakings made there, both on general energy policy and on nuclear energy.

Climate Change. The British had allowed plenty of time for this topic, expecting a difficult exchange as at Denver in 1997. But no one was in the mood for this; and agreement was easily reached on exhortations to all to sign the Kyoto Protocol within the next year, to bring in the necessary domestic measures to meet their commitments, and to work together with developing countries.

[back to top]

Conclusions

This was a harmonious summit, with no open clashes. Even where the leaders could not agree on everything, as on the response to India, they kept the peace. The new format worked well and will be repeated. The heads have gained a freedom of action at their level which they never had before. The price is an ever-expanding G8 apparatus, with more expert groups and special meetings of G8 (or G7) ministers.

Birmingham made no great breakthroughs, but a number of useful advances across a wide field. There was clear progress on crime and debt; and impetus to work at lower levels on employability and the new financial architecture. As usual with the summits, the real test of its success will emerge over the months ahead, which will test whether the G8 live up to their summit commitments and whether they have a real impact on others. For example: will India (and Pakistan) sign the CTBT? Will there be a real acceleration of the HIPC process? Will the new financial architecture be agreed promptly, with clear decisions on how to organise financial supervision — and will it deter further crises? Will there be visible improvements in levels of employment and cross-border crime?

The 1999 summit will be in Cologne on 18-20 June. Apart from this date and place and confirmation that the Germans will stick to the new format, nothing is known of their plans. (This is in contrast to Birmingham, where the crime and employment themes were known a year ahead.) But elections are due in Germany later in 1998, so that serious planning may only begin after the result is known.

In sum, the new, experimental format was successful at Birmingham and will be repeated. But did it improve the summit's performance? Here the record is mixed:

On this basis Birmingham, without being outstanding, was a summit of respectable achievement.