Hanging in There: The G7 and G8 Summit in Maturity and Renewal

The G7 and G8 Summit in Maturity and Renewal

Nicholas Bayne

• Publisher: Taylor & Francis
• Year: 2018
• Print ISBN: 9781138701311
• eBook ISBN: 9781351790253
• Edition: 1
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

This title was first published in 2000: This inside look at the G7/G8 summits is from an author who combines personal experience of the summit process with academic analysis. It weaves together a critical narrative of the annual summits with essays on their interaction with contemporary trends - interdependence, globalization and the end of the Cold War - and with key international institutions. the summits are judged against their original objectives: reconciling domestic and external pressures, mobilizing collective management and providing political leadership. Readers should take away an understanding of how the leaders of the major industrial democracies have responded to the transformation of the world economy during the late 20th century and how far they have succeeded in reforming the international economic system to meet the next millennium.

Part I
Innovation and Establishment

2 Getting Started: The First and Second Summit Series, 1975–82

Summits-that is, multilateral meetings of heads of state and government-were rare events in the first three-quarters of the 20th century. Those that did happen had deep historical roots. One series derived from gatherings of kings and chieftains to plan warlike campaigns or share out the spoils. Thus summits of the North Atlantic Treaty Organisation (NATO) were derived not just from the wartime meetings of Western leaders, at Tehran, Yalta and Potsdam, but far beyond them from the Councils of Greek heroes before Troy recorded in Homer's Iliad. A second type evolved from meetings of lesser monarchs to render homage to their overlord. So the Commonwealth Heads of Government Meetings held every second year descended directly from the Imperial Conferences of the 1920s and 1930s. But their origins went much further back, for example to the occasion when King Edgar of the West Saxons was rowed up the River Dee at Chester by four tributary kings in 973.

The last quarter of the 20th century gave birth to a new type of summit meeting, unknown to history. These are the meetings of the leaders of the United States, Japan, Germany, France, Britain, Italy and Canada, plus the European Commission and Presidency, which have been held every year from Rambouillet in 1975 to consider mainly economic subjects. The origins of these summits and the first two series of meetings, from 1975 to 1982, are described in detail in Chapters 2-6 of Hanging Together (Putnam and Bayne 1987). This chapter gives only an overview of the rationale for the summits and their early achievements. It establishes from the outset the three distinctive objectives and roles for the summits: reconciling interdependence, collective management and political leadership.¹

Origins of the Summits

Three reasons, each of a different kind, contributed to the genesis of the summits in 1975.

Reconciling Interdependence. One reason derived from the tensions of economic interdependence. During the 1950s and 1960s the Western economies expanded very rapidly. International activity grew faster than domestic, whether it was trade, investment or financial flows. So governments found that the price of rising prosperity was a loss of national autonomy in domestic decision-making, which now depended far more on what others were doing. This interdependence was acceptable as long as things went well. But in the early 1970s, things began to go badly, with confusion on the monetary scene, the first oil crisis and the recession which followed. Now there was tension between economic interdependence and national sovereignty, which only heads of government seemed likely to resolve.

Collective Management. A second reason flowed from shifts in relative power between the United States, Europe and Japan. In the 1950s and 1960s, the United States was so much stronger than all other countries that it could provide, on its own, leadership for the international economic system. But Japan and the European countries were growing faster than the United States. The accession of Britain made the European Community into a unit comparable to the United States in terms of GNP, with a far larger share of world trade. So, by the early 1970s, the Americans became neither able nor willing to exercise sole leadership. Some new arrangements were needed which would associate the Europeans and Japan with the United States, to undertake together the role which hitherto the Americans had played alone.

Political Leadership. A third reason stemmed simply from the personal inclinations of a new set of Western leaders, particularly French President Giscard and German Chancellor Schmidt. They were both finance ministers in the early 1970s and, with their US and British colleagues, George Shultz and Anthony Barber, they created what was originally called the Library Group. Later, when Japan joined, it became the Group of Five (G5). They met in a very informal and relaxed way on the fringes of wider international meetings and relished their direct exchanges in the small group by contrast with the formal proceedings in the larger conferences. Thus, when Giscard and Schmidt gamed supreme office, they were attracted by this format for exchanges at their own level. When President Giscard launched the idea of a limited economic summit in 1975, he had solid backing from Chancellor Schmidt and encouragement from Shultz and Henry Kissinger (then US Secretary of State), who together persuaded President Gerald Ford to join in. By the third summit in 1977, no fewer than six out of the eight leaders-Giscard, Schmidt, Fukuda (Japan), Callaghan (UK), Andreotti (Italy) and Jenkins (European Commission)-were former finance ministers.

The essential feature of these summits was that they should be small, select and personal. They should bring together those directly responsible for policy in a context where they could talk together frankly and without inhibitions. They should be prepared by personal representatives, later to be called 'Sherpas', whose links with the head of government were more important than their place in the hierarchy. Schmidt said: "We want a private, informal meeting of those who really matter in the world".² Giscard originally envisaged only four participants, or five at the most, and he resisted for a long time the summit's enlargement to include Italy, then Canada, then the European Community. Even thus extended, the summits were the only series of heads of government meetings to be both selective and free-standing, in the sense that they were detached from any other organisation at lower levels. All other recurrent summits, whether of the Commonwealth, the Non-Aligned Movement, NATO or the European Council for the EC, brought together the leaders of all participating countries, as the apex of an institutional pyramid.

Giscard, Schmidt and the others were convinced that heads of government could bring a unique and essential contribution beyond the capacities of officials and other ministers. This unique contribution could be broken down into three components. First, the heads of government could integrate policies normally treated separately by ministers or departments with specific responsibilities. Second, they were best placed to reconcile the various demands of foreign policy and domestic policy and to work out lines of action where domestic and external considerations could reinforce each other rather than conflict. Third, they carried an authority which other ministers did not have. This authority was constrained in various ways in the different countries-less in France than elsewhere-but it was still real. They guaranteed what was called the 'Rambouillet effect' which enabled international bargaining 'to be prodded forward at intervals by political decisions taken at a high level'.³

The First Summit Series: 1975–8

When the leaders first met in November 1975, the recession induced by the first oil crisis had already passed its trough. The concern of the Rambouillet summit and its three successors-Puerto Rico in 1976, London 1 in 1977, Bonn 1 in 1978-was to sustain economic recovery. The summits became the focus of the 'locomotive' controversy, on whether the United States, Germany and Japan could properly stimulate their strong economies to encourage recovery in the weaker ones. The leaders moved from simple statements of intent at first to set growth targets at London and to make commitments on policy measures at Bonn-a progression much encouraged by the arrival of President Jimmy Carter, who favoured a highly organised summit process in which meticulous preparation would enable the leaders, when they assembled, to make specific commitments.

Three lessons emerged clearly from the way this quartet of early summits tackled macro-economic policy. The first lesson was that if all the summit countries adopted the same sort of policies together, the cumulative effect was far stronger than each component country intended. When all decided, at the 1976 summit, to adopt restrictive policies, there was a pause in the recovery which none of them had wanted. Second, it became clear that no single country could successfully maintain a policy against the trend of the others. Even the United States in 1977/8 saw its attempts to act as a locomotive, unsupported by Germany and Japan, frustrated by a widening deficit, a felling dollar and mounting inflation.

Coordination of economic policy thus required the participants concerned to act in harmony, but with different countries doing different things according to their situation and capacities. Even this would not work if the other policies of the participants, e.g. on energy or trade, were inconsistent; this was the third lesson. On the one hand, therefore, the summits from the start helped the participating governments to resist the pressure for inward-looking policies. On the other hand, they gave powerful impulses to wider international negotiations. Rambouillet in 1975 produced the breakthrough which enabled the negotiations on reform of the international monetary system to be completed. London and Bonn in 1977 and 1978 exerted crucial pressure on the Tokyo Round of multilateral trade negotiations in the GATT, to bring these to a substantial conclusion.

The Bonn summit of July 1978 knit together many different strands and used the full potential of the summit process.⁴ There was a package of commitments which balanced one field against another: economic stimulus by Germany and Japan; energy saving measures by the United States; forward movement in the Tokyo Round by all, but especially France; and supporting undertakings by the other participants to complete the pattern. However, when the leaders met at Tokyo one year later, the economic environment, and their own attitudes to it, had fundamentally changed. The onset of the second oil crisis meant that the next quartet of summits would take place in much more difficult conditions. Tokyo I in 1979, Venice in 1980, Ottawa in 1981 and Versailles in 1982, instead of promoting recovery, had to concentrate on coping with the immediate oil crisis and bringing inflation under control.

In retrospect, it appeared that the earlier summits had not done enough to keep inflation in check. This became the first priority of all or nearly all the summit governments. At the same time, a reaction set in against the meticulous preparation and specific commitments favoured by Carter, on the grounds that these made the summit process too bureaucratic and stifled the personal contributions of the leaders. This reaction gathered strength once Carter had left office, though it proved very hard to reverse the trend.

The Second Summit Series: 1979–82

Because of all this, the treatment of macro-economic policy in the second series of summits changed fundamentally,⁵ The conclusions were simpler and the prescriptions-on checking monetary growth and reducing budget deficits-became more uniform; and this was not all. The first four summits had looked for ways in which the actions of some participants would promote recovery not only for themselves but for others, as growth in domestic demand in the strong economies might encourage export-led growth in the weaker ones. However, the control of inflation required painful measures which each country must take for itself. It was helpful for governments to point to other countries making the same sacrifice; but the actions of others to check inflation could not substitute for the decisions each government must take at home. At times, indeed, others could make these decisions more difficult; if one country drove up its interest rates or exchange rate so as to check inflation, others had to follow suit or they would suffer by comparison. This accounted for the persistent dispute over American interest rates at Ottawa and Versailles.

The lessons of the first series of summits, however, still held good in the second. First, the French tried to go it alone in economic policy in 1981, suffered the same consequences as the United States had done earlier and had to go into reverse. Second, the simultaneous pursuit of restrictive policies to check inflation, calculated in each country on domestic criteria to produce a certain impact, generated a much stronger effect when all put together, so that the recession lasted much longer than anyone had envisaged. Third, the macro-economic strategy and the policies pursued in other areas still needed to be compatible with each other. The oil import targets and other energy measures adopted at Tokyo 1 in 1979 and Venice I in 1980 assumed an early recovery, which would mean steady pressure on oil supplies and prices throughout the 1980s. In fact, the prolonged recession upset these calculations, so that the energy commitments had a good short-term effect, but proved inappropriate over the longer term.

The first series of summits had done well in giving impulses which brought existing international negotiations to their conclusion, but they did not launch any new ones to take their place. The later summits faced the problem of keeping the international system in good order in much less favourable conditions, without any negotiations already in progress which could serve as the antidote to economic nationalism. The leaders feared that any new process of negotiation, if launched in such conditions, would not get into orbit. They preferred instead to promote single events, like the 1982 ministerial meeting of GATT or the Cancún summit on North-South issues in 1981. As a sort of surrogate for wider negotiations, the summits began to set up their own groups of officials or ministers on particular issues, such as monitoring energy commitments, exchange market intervention or technology. But this tended to clutter up the summit process and to worry non-participating countries and established institutions like the OECD-see Chapter 4 below.

Meanwhile, the summits began to give more attention to noneconomic, foreign policy issues, which hitherto they had only discussed on the side. There were two reasons for this. First, the international political context took a sharp turn for the worse in 1979, beginning with the troubles in Iran and ending with the Soviet invasion of Afghanistan, Second, the political summit of four powers (US, Germany, France, UK) called by Giscard at Guadeloupe in January of that year provoked a strong reaction from the countries not invited to it. Japan, Italy and Canada now had an interest in seeing the seven-power summits used for foreign policy exchanges so as to forestall any repetition of Guadeloupe. The Japanese, originally very reluctant to discuss political issues in any formal way, became much keener and only the French continued to resist the idea. The Venice I summit of June 1980 provided an obvious and welcome opportunity for the US and its allies to close ranks over Afghanistan. For the first time, the summit issued a substantial foreign policy declaration, prepared shortly in advance by a special group of officials. The process was repeated in Ottawa in 1981. The French continued to oppose formal sessions on foreign policy issues. There were none at Versailles in 1982, though East-West economic relations-essentially a political subject-dominated much of the proceedings. But Versailles was the last of the summits dedicated wholly to an economic agenda.

The Early Summits: Achievements and Prospects

The first eight summits provided examples of what the heads of government could achieve when working together. But they also illustrated sharp shifts in approaches to policy-making and examples of unfinished business, which would need attention in subsequent summits. The economic conditions confronting the summits from 1983 onwards resembled closely those which faced the earliest meetings. The Rambouillet summit of 1975 took place just as recovery began from the recession following the first oil crisis, with the United States well ahead of Europe. The 1983 Williamsburg summit was held at the corresponding point in the cycle following the second oil crisis. The summits were able once again to concentrate on assuring economic recovery and giving impulses in trade and monetary matters rather than on the austere policies necessary in the early 1980s.

A striking contrast with the earlier meetings was the disappearance of former finance ministers. In 1977 and 1978, as noted, they had provided six out of the eight leaders present. By 1982 there were no former finance ministers among the leaders and none waiting in the wings. The leaders then in office brought political experience, judgement and authority to economic discussions. But they were more likely to look to their fellow ministers and advisers for technical expertise or originality.

The summit leaders had come to draw negative conclusions from their attempts at coordinated economic stimulus. The British, German and Japanese governments of 1982 regarded this as an 'intellectual trap'.⁶ On the other hand, discussion of money supply, interest rates and budgetary policy had become rather unrewarding at summit level, because of unresolved differences with the United States. These subjects were being shifted into the more technical and less public discussions among finance ministers, plus the Managing Director of the IMF, which were set up at Versailles in 1982. It was suggested that the summit itself might turn instead to considering the structural changes needed to sustain economic recovery, looking, for example, at obstacles to competition, the shape of the labour market o...

Table of contents

• Cover
• Half Title
• Dedication
• Title
• Copyright
• Contents
• List of Tables
• Foreword
• Preface and Acknowledgements
• List of Abbreviations
• INTRODUCTION
• PART I: INNOVATION AND ESTABLISHMENT
• PART II: THE MATURE SUMMIT
• PART III: THE RENEWAL OF THE SUMMIT
• CONCLUSION
• Bibliography
• Index