Summits that produce handsome photos and minor agreements aren’t unusual. But this isn’t your typical year. For one thing, this is President Bill Clinton’s first trip to Asia, where questions about the economic future of China, and its booming neighbors, loom large (page 40). But there are other worries, too. The Group of Seven seems to fumble every big issue from the killing in Bosnia to jump-starting their own tepid economies. Japan, for instance, remains unwilling to open its markets (page 41), and the economies of the G-7 countries are limping along at half speed or sunk in outright recession. Fundamental reforms that would shrink swollen governments, balance budgets and cure the G-7’s persistently high unemployment rates are just beginning to be addressed. Even free trade-the one great engine fueling world prosperity-is under attack (page 42). There was one bright note last week: after months of prompting from President Clinton and other leaders, the German central bank lowered two key interest rates.
The malaise has left the summit leaders crippled by their public-opinion polls. A mere 19 percent of voters in Britain approve of Prime Minister John Major’s performance, and only 27 percent of the German public supports Chancellor Helmut Kohl. Japan wins the prize for sheer embarrassment; Prime Minister Kiichi Miyazawa, who’d hoped that hosting this summit would crown his political career, will have to welcome visitors to a country shattered by political crisis. With thin margins of support at home, political leaders journeying to Tokyo have little stomach for bold initiatives.
The disarray means that Clinton arrived in Tokyo carrying the biggest stick, even if it isn’t as big as it could be. Clinton can answer longtime G-7 demands for at least some deficit reduction with his newly minted budget plan. And he has picked up some public support since his decision to bomb Baghdad. In a recent NEWSWEEK Poll, Clinton had a 38 percent approval rating, up from 36 percent in May. Still, the administration has so far shown little ability to bring U.S. allies together on any issue. Clinton can’t even boast of trade progress at home; a federal judge last week put the brakes on the North American Free Trade Agreement-at least for now-by ruling that it can’t be implemented without an exhaustive environmental study.
_B_Left hanging:_b_Unfortunately, a disappointing summit isn’t bad news only for poll-conscious politicians. The G-7 is wrestling with the kind of economic issues that, if resolved, could jump-start the world economy but, if left hanging, could deepen the current malaise. Lack of a comprehensive new agreement on trade is especially serious. At best, it means the proliferation of regional deals that threaten to Balkanize trade. At worst, it encourages outright protectionism.
For years the Group of Seven hasn’t been able to move beyond a limited set of multilateral trade agreements covering manufactured products and raw materials. In the current round of talks-known as the Uruguay Round, after the country in which they began in 1986-the G-7 has been trying to expand multilateral agreements to address a wider variety of issues, from banking to high-tech patents, and, most sensitive of all, agriculture.
An agreement could eventually lead to more jobs, which are desperately sought as all members face unprecedented erosion of job security. Treasury Secretary Lloyd Bentsen claims that 1.4 million jobs worldwide could be created in the year following the successful resolution of the Uruguay Round. And an agreement could help developing nations, East and West, in ways that would soften political conflicts and reduce immigration pressures.
What makes all this so difficult is that on every trade issue, leaders must force some groups to absorb immediate pain, while the benefits come more slowly to the general population. The obvious costs are economic; if France and Japan open their agricultural markets, for example, farmers used to powerful protections will be suddenly exposed. But the nerves go even deeper. Most of the French public supports French farmers who routinely block roads and destroy imports, because it sees a threat to the nation’s pastoral heritage. Kohl has adopted the slogan “Standort Deutschland,” or “Germany as Industrial Site” to suggest that he won’t let Germany’s postwar industrial might be ruined by competition from low-wage competitors, such as the Czech Republic or Malaysia. Each G-7 country is struggling with the legacies of big government spending programs that are proving impossible to maintain in an increasingly competitive environment. One Clinton administration official involved in presummit negotiations said the leaders will have to attack “structural rigidities” such as “welfare systems, minimum-wage laws and unemployment benefits” that distort the labor picture.
Recent crises have shrunk political wiggle room even further. In the past few weeks, Japan’s government has disintegrated, leaving Miyazawa the lamest of ducks. The defectors from his party include Ichiro Ozawa, seen as the most persuasive and effective in international trade talks. While Ozawa may get a chance to help create a new reform government, for now he is out of the picture. This puts the trade talks in the hands of the bureaucracy, which is taking a stance of “aggressive defense” likely to yield very little.
_B_Saying no:_b_France’s hard line on agriculture has already made it a major obstacle to progress. But Prime Minister Balladur, whose party recently won control of the government from Mitterrand’s Socialists, has struck a new note of intransigence. “We have decided definitively not to accept the agricultural accord of the Uruguay Round,” said Foreign Affairs Minister Alain Juppe, who has helped give Mitterrand his marching orders and will accompany him to Tokyo. As Balladur’s party faces presidential elections in 1995, he is most interested in protecting his flank from protectionist rivals in his own coalition.
As at most summits, a few small deals will be struck and hailed as great victories. Russia will officially get about $2 billion (down from the promised $20 billion) to finance privatization of state-owned enterprises. An agreement may be struck to write off up to a third of the debt long owed by the poorest African nations. And as they have done at each summit since 1990, the leaders are sure to pledge completion of the Uruguay Round. The flow of rhetoric is already thick. “At this moment,” said Britain’s Major, “when the thing the world economy most needs is confidence and the growth of trade, it would be folly for us not to bend every wit and will we have to try and find a settlement. People will have to take a long-term view and be willing to face difficulties in their own countries.” You said it, Mr. Major. Do we see any hands?
