G8 Preview

Leaders of the world's wealthiest industrialized nations -- the United States, Japan, Britain, France, Germany, Canada, Italy and Russia -- will converge on the northern Japanese island of Hokkaido from July 7-9. They'll be joined this year by delegates from Australia, Brazil, China, India, Indonesia, Mexico, South Korea and South Africa.

Climate change, the globe's weakening economy and rising food and oil costs will top the agenda.

It's an ambitious undertaking for a three-day summit and already there are signs that the Group of Eight (G8) may not be able to accomplish much.

Profound disagreements between several of the nations combined with the political weakness of some participants means that few expect the G8 meetings to go beyond a series of well-intentioned statements on some of the world's most pressing topics.

Climate change remains on the agenda

Ahead of the conference, diplomats around the world have been debating a replacement for the Kyoto Protocol on climate change, which expires in 2012. But Japanese Prime Minister Yasuo Fukuda said on June 17 that no agreement on medium-term goals for reducing greenhouse gas emissions would be reached at the G8. Efforts to get member countries to agree on a next step have long been hindered by a clash between the world's biggest polluters.

Four members -- European Union heavyweights Germany, Britain, France and Italy -- have already pledged to cut their emissions of carbon dioxide by 20 percent of 1990 levels no matter what the world does, and 30 percent if other major powers do the same.

But the United States, which has refused to ratify Kyoto out of fears that it could harm its economy, says a new deal would be ineffective if rapidly developing countries -- and potential rivals such as India and China -- were not held to the same standards.

"Unless China and India are at the table and unless they agree to the goal ... then I don't see how any international agreement can be effective," US President George W Bush told EU officials at an EU-US summit in Slovenia earlier this month.

Who should lead the way?

Those developing economies hit back, arguing that it is unfair to ask them to make expensive changes to their industrial models if the West is not going to do the same. And those western countries which have signed on are struggling to fulfill the terms of the pact.

The most recent figures from the EU's emissions-monitoring scheme, released on April 2, showed that in 2007 the industrial plants and power stations of Germany and Britain not only failed to cut emissions: they boosted them, by 1.88 and 2.16 percent respectively.

France and Italy, the other EU members of the G8, only managed negligible cuts -- 0.27 percent and 0.47 percent respectively.

That failure by Germany and Britain -- two of the most vocal advocates for international deals to cut emissions -- could well end up as their Achilles heel in climate talks.

It also leaves Russia holding the cards, as analysts are unsure how new President Dmitry Medvedev will react. Moscow's belated support tipped the balance to bring the Kyoto Protocol into effect in 2005. Others warn, however, that the resurgent state could say its reviving industrial base should not be hampered by Western-imposed emissions caps.

A weakened world economy should be top priority

Though environmentalists might like to see climate change at the top of the agenda at this year's meeting as it was at last year's, the Japanese summit is set against the backdrop of growing fears worldwide about rising interest rates and resurgent inflation. Climate change may have to take a backseat to the globe's weakening economy.

At a pre-summit meeting on June 14, G8 finance ministers warned that the international economy faces headwinds amid concerns that contracting growth and rising inflation means that the specter of 1970's-style stagflation could be on the horizon.

"A benign outcome does not look very likely," Kenneth Wattret, BNP Paribas' chief eurozone economist told the DPA news agency.

Annual inflation in the EU's 15-member eurozone surged to a 16-year high of 3.7 percent in May, largely due to rising food and oil prices. To ward off these inflationary pressures triggered by spiraling oil and food prices, the European Central Bank is expected to hike interest rates in the days leading up to the summit.

Bleak prospects

While inflation in China eased to a still high 7.7 percent in May, prices in India jumped to a 13-year high of 11.05 percent for the week ending June 7. In parts of central Europe, inflation tops 17 percent. Meanwhile, hundreds of millions of poor people around the world face a bleak prospect as the most basic commodities become more and more expensive.

Such an uncertain economic environment is hardly conducive to the world's leading trade powers reaching a conclusion in the so-called Doha Round on agricultural subsidies.

G8 finance ministers expressed concern at the growth of consumer prices, but disagreed over its root causes. Italy's Giulio Tremonti was among those pointing a finger at speculators, while US Treasury Secretary Henry Paulson said the influence of speculation was negligible.

"It is a complicated issue which cannot be solved in the short term," Japanese Prime Minister Yasuo Fukuda said of rising food and oil prices, adding that the G8 planned to "set the direction by sending a message."