The Hindu : Front Page : G8 seeks to draft emerging economies

Online edition of India's National Newspaper
Wednesday, Jun 06, 2007
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G8 seeks to draft emerging economies

K. Venugopal

New Delhi: For ages waves rolling on to the beach have been a sight to soothe, a balm for the stresses of life. But over 200 years ago, the Grand Duke of the northern German province of Mecklenburg was convinced that the sea was even more potent. Prompted by his personal physician, he set up a seaside settlement at Heiligendamm on the shores of the Baltic, convinced of the "indubitably established health-giving effects of sea-bathing in very many weaknesses and diseases of the body."

The resort, which plays host this week to the annual meeting of the G8, the group of the world's industrialised nations, will find its fabled rejuvenation powers on test. Needing help are not just the traditionally poor nations in Africa for which the G8 club will lay out a buffet of aid, debt write-offs and advice to overcome the epidemic of AIDS. The G8 nations, in their high perches in the global economy themselves, now feel threatened by the emerging economies such as China and India. German Chancellor Angela Merkel will be hoping that Heiligendamm's therapeutic seaside air will help generate the ideas and the strategies that would help the G8 hold on to its pre-eminent status in the global economy.

The order, of course, is already beginning to change. China's share of the global output in 1990 was 5.7 per cent; by 2005 it rose past 15 per cent. The world's most populous nation replaced Japan, one of the G8 members, as the world's third largest merchandise exporter. No one is in doubt that China's export machine will see it overtake Germany and the United States in course of time.

Helping the emerging economies grow is the rapid increase in the labour force. A strategy paper prepared by Germany ahead of the G8 summit notes that China and India with a workforce of 1.2 billion will add another 115 million in another three years. The U.S. will in the meantime add just 10 million, the EU less than a million. Governments and legislators in the developed world have been responding to this development with a mixture of anxiety and bewilderment. Clamour for protectionist measures is already loud, but the G8 is not expected to raise the barriers again on trade. As President of the group this year, Chancellor Merkel has expressed herself against any rollback of the freeing of trade.

She told businessmen at Davos earlier this year, "My short answer is "No!" I'm firmly convinced that the process of globalisation is one of liberalisation because, as Benjamin Franklin, one of America's founding fathers, once said, `those who would give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety.'"

By inviting China, India, Brazil, Mexico and South Africa to the summit for the third year running, Ms. Merkel and other G8 leaders have sought to draft these emerging economies in the task of setting right the global economic imbalances such as the bloating current account deficit of the U.S., on the one hand, and China's huge currency reserves that are over one trillion dollars on the other. Petroleum exporting nations are also toting up large current account surpluses with the price of oil staying high.

The industrialised countries are only too aware that their businessmen need to innovate to remain competitive. Yet innovation can help them stay ahead only if there is effective protection for intellectual property, not just in the country where it is created but in all places where it can be sold.

The G8 would like to get the emerging economies involved in policing and stamping out duplicate and fraudulent products.

Protecting the globe against climate change is the other task that the G8 would like countries such as India and China to play a more positive role in. The world already consumes twice as much energy as it did 35 years ago. The projection is that the emerging economies will soon be emitting more carbon dioxide than the rich countries. How to cut back on emissions and how much each country must cut are questions to which there have been widely disparate answers. China is clear that it will not sacrifice growth to cut its energy use. India is also not sure what it can promise saying that even though it accounts for four per cent of the global emissions, the volume per capita is not significant. Germany would like firm commitments from countries on the reduction in emissions. The U.S. does not wish to bind itself to any commitment just yet. The gaps in perception are wide. Harmonising them may take much more than the balmy air of Heiligendamm.

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