Five economic issues at Scotland G8 summit

PARIS – Following is a guide to some economic issues which will be prominent at a Group of Eight summit at the luxury golf resort of Gleneagles, Scotland, which begins tomorrow with dinner and ends on Friday.

In addition to G8 members the United States, Japan, Germany, Britain, France, Italy, Canada and Russia, leaders of China, India, Brazil, South Africa and Mexico have been invited, as have African leaders because of a focus on development aid. OIL * World oil price hit a record of US$60,95 a barrel on June 27, prompting France, Germany and others to say the G8 summit must tackle the issue.Prices have eased a little since then.* G8 finance ministers have repeatedly raised the alarm over the past 2 years, calling for a better “dialogue” with Opec oil producing nations, more investment in capacity and refining and a better flow of information on oil stocks to limit speculation.* Several facets to the debate: risks of inflation, damage to corporate profits, confidence and economic growth; also linked to climate change, efficient use of energy and demand for oil, with China now the world’s second biggest consumer.* Oil prices roughly three times higher than a lowpoint struck in 2001 but would have to rise to US$90-95 to match in real terms the levels that sparked two recessions in quick succession at the end of the 1970s and early 1980s.TRADE * Officials say efforts are afoot to renew commitment in the G8 communique to speedy conclusion of the Doha round of world free trade talks, which were to have been wrapped up in 2004 but got bogged down in disagreement over farm aid and other issues.* G8 president Britain wants a commitment from the United States and the European Union to phase out export subsidies for farm produce by 2010, saying this helps open markets to Africa.* Tensions exist over Chinese textiles exports, state aid for Airbus/Boeing and farm subsidies.African states want fairer play in markets for goods such as sugar and cotton.CURRENCIES * The big question for financial markets is if and when China may reform a system of currency control that has pegged the yuan rigidly to the US dollar for a decade.* With China now in the WTO and a major trade force, others are demanding that it heeds their calls for change to a system which they say keeps its currency artificially low, making its low-cost exports even cheaper.* Beijing says it will only move when it sees fit and markets are keeping an eye out but not expecting anything to happen at the summit attended by Chinese President Hu Jintao.HEDGE FUNDS * Germany’s Gerhard Schroeder wants more control of the way hedge funds operate and says he wants the G8 summit to act.* Little happened after the 1999 scare caused by the collapse of LTCM although some national regulators say they are moving.* German politicians have compared hedge funds to “locusts” after a shareholder revolt by UK hedge fund TCI against Deutsche Boerse’s attempted bid for the London Stock Exchange, a revolt that led to the ousting of top Boerse management.GROWTH AND IMBALANCES * The G8 communique will also include leaders’ assessments of the global economic climate and risks to growth, but may well stick to the diplomatic phrasing it often uses to say there is a risk to stability from record US deficits, something it refers to as an “imbalance”.* IMF in April predicted 4,3 per cent global economic growth in 2005, a little less than growth of 5,1 per cent last year, the best in three decades despite slow growth in Europe and Japan.- Nampa-ReutersOIL * World oil price hit a record of US$60,95 a barrel on June 27, prompting France, Germany and others to say the G8 summit must tackle the issue.Prices have eased a little since then.* G8 finance ministers have repeatedly raised the alarm over the past 2 years, calling for a better “dialogue” with Opec oil producing nations, more investment in capacity and refining and a better flow of information on oil stocks to limit speculation.* Several facets to the debate: risks of inflation, damage to corporate profits, confidence and economic growth; also linked to climate change, efficient use of energy and demand for oil, with China now the world’s second biggest consumer.* Oil prices roughly three times higher than a lowpoint struck in 2001 but would have to rise to US$90-95 to match in real terms the levels that sparked two recessions in quick succession at the end of the 1970s and early 1980s.TRADE * Officials say efforts are afoot to renew commitment in the G8 communique to speedy conclusion of the Doha round of world free trade talks, which were to have been wrapped up in 2004 but got bogged down in disagreement over farm aid and other issues.* G8 president Britain wants a commitment from the United States and the European Union to phase out export subsidies for farm produce by 2010, saying this helps open markets to Africa.* Tensions exist over Chinese textiles exports, state aid for Airbus/Boeing and farm subsidies.African states want fairer play in markets for goods such as sugar and cotton.CURRENCIES * The big question for financial markets is if and when China may reform a system of currency control that has pegged the yuan rigidly to the US dollar for a decade.* With China now in the WTO and a major trade force, others are demanding that it heeds their calls for change to a system which they say keeps its currency artificially low, making its low-cost exports even cheaper.* Beijing says it will only move when it sees fit and markets are keeping an eye out but not expecting anything to happen at the summit attended by Chinese President Hu Jintao.HEDGE FUNDS * Germany’s Gerhard Schroeder wants more control of the way hedge funds operate and says he wants the G8 summit to act.* Little happened after the 1999 scare caused by the collapse of LTCM although some national regulators say they are moving.* German politicians have compared hedge funds to “locusts” after a shareholder revolt by UK hedge fund TCI against Deutsche Boerse’s attempted bid for the London Stock Exchange, a revolt that led to the ousting of top Boerse management.GROWTH AND IMBALANCES * The G8 communique will also include leaders’ assessments of the global economic climate and risks to growth, but may well stick to the diplomatic phrasing it often uses to say there is a risk to stability from record US deficits, something it refers to as an “imbalance”.* IMF in April predicted 4,3 per cent global economic growth in 2005, a little less than growth of 5,1 per cent last year, the best in three decades despite slow growth in Europe and Japan.- Nampa-Reuters