Summit silence on key issues

Perhaps it would be wrong to criticise the leaders of the G8 - the seven main industrialised nations, plus Russia - for trying…

Perhaps it would be wrong to criticise the leaders of the G8 - the seven main industrialised nations, plus Russia - for trying to "talk up" the world economy, as they have done in their annual summit. After all, business and consumer confidence badly need a lift.

However, if the summit leaders wanted to have a lasting impact on growth then there are a couple of key issues that they should have tackled; barring some surprise in today's communiqué from the summit, they do not appear to have done so.

Trade, an issue which binds nations together economically, was an obvious area for the leaders to address. The Doha round of talks, being conducted under the aegis of the World Trade Organisation, are stalled, held up by rows about agricultural subsidies, the supply of generic pharmaceuticals to poorer countries and other issues. The success of the round is vital for economic confidence. It could also give developing countries greater opportunities on world markets, which was one of the key goals when the round was launched two years ago.

The leaders did commit themselves to successfully concluding the trade talks. Unfortunately, however, they were unable to signal any of the key compromises that would get the round moving again. Unless progress can be made before a key review meeting in September, there is a risk that the whole round will fall apart, or be seriously delayed. At a time when - post-Iraq - the future of multilateralism is in question, a failure to conclude the Doha round would threaten to damage seriously the global economy, as well as having long-lasting political implications.

READ MORE

In the absence of the breakthrough on trade, much attention was focused on comments on the recent fall of the dollar. The US President, Mr Bush, said his administration still supported a "strong dollar" but this did little to change the view in the markets that the White House is quite content with the currency's recent decline, which could help to boost US growth and exports. However, a sustained decline in the dollar - and rise in the euro - could do serious damage to EU growth prospects, which are already poor. There may be a case for international co-operation through central bank intervention to support the US currency, but for the moment the Bush administration does not support such action.

Given the poor state of the international economies, the statement from the leaders that "all conditions" are in place for recovery is not convincing. They have much to do to try to promote growth in their economies, but the bland statements issued at Évian suggest that little progress has been made over the past few days.

Perhaps this should come as no surprise. Building diplomatic bridges post-Iraq was always going to dominate the summit. But now the time has come for concerted international action to boost a fragile world economy. The European Central Bank should lead the way by announcing a substantial interest rate cut this week.