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~ Analytical Studies ~
~ Country Objectives for the 1999 Köln G8 Summit ~

An Assessment of the
1999 Cologne G7/G8 Summit
By Issue Area

Professor John Kirton
As assisted by the G8 Research Group
June 20, 1999

Overall Assessment: A-
1. Russia: A
2. Peace in Kosovo: A
3. Reconstruction in the Balkans: A-
4. International Financial Architecture: A-
5. Debt Relief for the Poorest: B+
6. Trade Liberalization: A
7. Environmental Issues: C+
8. Education and Human Capital: B-
9. Transnational Issues: C
10. Political Issues: B-

Overall Assessment (A-)

Cologne 1999 has proven to be a summit of very significant achievements. Seldom before has a G7 Summit, now the G8, been forced to address -- and asked to resolve -- the largest issues facing the world in the political security and economic domains, while simultaneously dealing with the many issues, once domestic, that are now a routine part of G7/G8 governance in the 1990s. Yet Cologne featured an unusually comprehensive and demanding agenda. It was the first time the preparation for the G7 Summit occurred while most of its members were at war, and it was the first to open when the G8 had to conclude the peace and to plan and finance a postwar reconstruction effort. At the same time, it took place as a still fragile global economy was emerging from a two-year steady succession of financial crises that threatened at one point to engulf even the vibrant U.S. economy. As a result, the international community had to make critical decisions on the shape of an international financial system appropriate to the needs of a increasingly globalized world and its anxious citizens. Yet Cologne managed to resolve both these central challenges, and to do so in ways that strengthened its mission of forwarding the principles of democratic governance, market-oriented economies and now social protection in a rapidly changing world.

1. Russia (A)

The crowning overall achievement of Cologne, seen across several areas, was the inclusion of Russia as a full member of the G8, in terms of psychological self-definition as well as of formal status. Having participated in bringing an end to the war in Kosovo and pledging to help in the task of reconstruction, Russia asked to become a full member of the G7 at the opening dinner, which was attended by Prime Minister Stepashin, thereby showing that it saw where its future lay and that it was at one with its seven colleagues. They in turn responded with signals that they would individually provide further financial support to Russia and seek ways to include it in the WTO. For a Russia whose Prime Minister had turned his plane away from the IMF and Washington as the war to liberate Kosovo began, it was striking that both Prime Minister Stepashin and the ailing President Yeltsin flew to the G8 in Germany to join in the task of ending the war and start the reconstruction. A Russia that found it easy to be a member of an emerging G8 when the big issue was securing money for itself from its G7 partners now proved it was a full member when it was called on to take the political lead in getting Serbia to end the war on the G7's terms.

2. Peace in Kosovo (A)

The spirit of solidarity was evident in the conclusion of the final details of the peace plan in Kosovo in the hours following the opening dinner of the Summit on Friday night. The deal itself, in terms of the command and control structure and the deployment of Russian troops in various zones, was done by ministers in other European capitals. But it was clearly the pull of the Cologne Summit that produced the final result, which affirmed the core G7 desires -- integrated NATO-based command and control, and no separate zone for the Russians in which Serbian Kosovars might congregate and harm the process of producing a flourishing democratic multi-ethnic polity in the wake of the war. But it was a result that showed sensitivity to Russia's great-power status, internal political difficulties and right to play a full part as a G8 member in the Kosovo operation.

3. Reconstruction in the Balkans (A-)

Russia was also an active participant in the Friday night discussion on how to shape and fund a relief and reconstruction effort for Kosovo itself, for the rest of the former Yugoslavia and its neighbours, and for South and Eastern Europe as a whole. Russia stood with the G8 in sending a clear message that there would be no funds offered to reconstruct Serbia itself while Milosevic remained in power and the ideal of a fully democratic Serbia -- and thus Europe -- remained unfulfilled. For Kosovo itself, a framework and funding level were established to encourage the Kosovars to return home and rebuild their society as soon as possible. In an example of balanced G8 burden sharing, the European Union and World Bank agreed to lead in the effort, with all G8 members making their contribution in support. While many countries would be asked to contribute, the G8 would serve as the steering committee to guide the effort. The precise level of the effort still remained elusive as Cologne concluded, but with teams for damage assessment now entering the region, such figures were expected to come relatively soon.

4. International Financial Architecture (A-)

In the economic domain, G7 leaders, meeting on Friday afternoon, built on the work of their Finance Ministers and gave high-level confirmation of several new principles and processes in the shaping of a new financial architecture for the 21st century. G7 leaders affirmed the principle of private-sector participation in response to future financial crises. No longer would private investors be allowed to reap the gains while times were good but rely on governments and their taxpayers to bail them out and foot the bill when crisis erupted. A second core principle was the need to build a financial architecture and introduce crisis-response programs that gave priority attention to the social impact of the crisis, and the need to protect ordinary citizens in afflicted societies from the ravages of forces not of their own making. In the realm of process, G7 leaders expanded the membership of the recently created a forum for financial stability to include emerging countries. Perhaps most importantly, they declared that the centre of the new system would not only be the IMF of 1945 with an improved Interim Committee, but would also be a new forum with the forward-looking flexibility and membership more appropriate to the 21st century. As the leaders left Cologne, however, they still faced the challenge of how to translate the principle of private-sector burden sharing into practice, through such tools as an emergency standstill mechanism or other means. They also confronted the formidable task of how to convince the private sector to play its part, how to stop the flight of capital from domestic investors when crises erupted, and how finally to stop the financial hemorrhaging in Russia. Obvious solutions, notably the relaunch of negotiations for a Multilateral Agreement on Investment to encourage the flow of long-term, patient capital and the management, technology, distribution systems and markets that came with it, remained largely off the agenda.

5. Debt Relief for the Poorest (B+)

The Cologne debt initiative had long been the centrepiece of the Summit. The only question was how large the package would be. In the end, the leaders at Cologne delivered enough to write off half of the debt of the poorest and hasten their return to a sustainable growth track. Equally importantly, the money would flow with strong conditionality, so that the new funds would not be wasted on military spending and other excesses but would be devoted to education, social infrastructure, the health of women and children, and the other programs required generate real growth. Led by Britain's Tony Blair, the G7 leaders sought to involve the private sector in the effort. But despite the importance of this advance at Cologne, the leaders missed an opportunity to go even further. Some countries were prepared to grant even more funds to the relief effort if other G7 partners would do more. But those partners proved reluctant, and the high-level bargain slipped away. Moreover, the pace was not as rapid as many had hoped, and the process was handed back to the International Financial Institutions before the G7 would return to it in the fall.

6. Trade Liberalization (A)

G7 Summits have been at their best when launching and concluding rounds of multilateral trade liberalization, and Cologne had the chance to keep this tradition alive. Here it not only lived up to expectations but also set a new standard. Urged on by U.S. President Bill Clinton at the G8's opening dinner, the leaders at Cologne endorsed the launch of a Millennium Round of negotiations for multilateral trade liberalization. This round would have a comprehensive agenda and be concluded quickly -- within three years. Most importantly, it would come with social protections and democratic participation built in from the start. A regime to incorporate labour and environmental standards would be included and civil society groups would be given their chance to participate and improve the result. In the past it has taken about eight years to launch a new round and eight years to conclude it, and several summits have failed in getting the job done. Cologne did not, however, launching a new round after only five years from the previous one and specifying that it would be concluded three years hence.

7. Environmental Issues (C+)

Somewhat surprisingly for a German-hosted Summit, environmental issues received little attention and not much of global significance was done. The leaders did agree that the potentially deadly Chernobyl nuclear reactors would be finally closed -- a full 14 years after the 1986 explosion -- by the year 2000 and that host Chancellor Schroeder would be dispatched to Ukraine to get the job done. But the G8 passed on a French proposal to deal with the critical emerging issue of biosafety. There was little more than lip service on the key global issues of climate change, biodiversity, oceans and forests.

8. Education and Human Capital (B-)

The microeconomic agenda of the Summit had a new twist on a subject with an old Summit pedigree. The leaders issued a separate statement on education, underscoring the need for international exchanges, high standards and innovation, including the use of electronic means. This was the Cologne equivalent of the emphasis that Birmingham 1998 had placed on employment -- with life-long learning and the formation of human capital identified as the keys to employability and growth. The statement contained meaningful principles that extended into the difficult domains of domestic politics and areas where subnational governments within federal systems usually jealously guard their prerogatives. But there was little concrete on new programs or processes.

9. Transnational Issues (C)

Crime had been a central subject at Birmingham. But it virtually disappeared at Cologne, giving ammunition to G7/G8 critics who would point to the episodic nature of the leaders' attention span. The Finance Ministers did some useful yeoman-like work on financial crime. But the leaders added little, even on key subjects such as the way organized crime in Russia was preventing the advent of financial stability and sustainable growth in an economy on G7 and IMF life support.

10. Political Issues (B-)

Cologne's contribution to the political agenda came largely on the week before the Summit when the G8 Foreign Ministers met in the city. They made important advances regarding conflict prevention and human security, and agreed to meet again in December to continue their work. But even as the conflict between India and Pakistan escalated, there was little that the leaders themselves did to address the pressing issue of weapons proliferation or regional instability beyond the Balkans.

~ Issue Objectives for the 1999 Köln G8 Summit ~

 

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