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From G7 To G8:
Evolution, Role and Documentation of a Unique Institution

Peter I. Hajnal

Columbia International Affairs Online

April 1998

 

Connections with Other International Organizations and FORA

The G7/G8 system does not exist in isolation from other international events and organizations. The summits have made it clear from their beginning that "the G7 intends to make use of existing [international organizations] to achieve certain objectives, but absolutely does not intend to replace them. " 37

[t]he G-7 is cautious toward universal lOs [international organizations] (United Nations ..., GATT ..., etc.) in which it has little decisional weight [although s]ince 1989... the G-7 has become much more enterprising, going so far as to urge reforms of the UN charter or parts of it ... . Towards lOs in which it has some weight ... (e.g., in the IMF ... or ... the OECD) ... the G-7 has made precise attempts to orient important decisions and to establish what relations among them should be like ... . The G-7 has an almost hierarchical relationship with ... the OECD, which the G-7 often rather peremptorily asks to carry out certain activities ... . [I]n a very limited number of cases, the G-7 has worked out concrete proposals for the establishment of new international organizations ... 38

Summit documents often refer to the activities of the IMF, the OECD, the GATT and its successor the WTO, the UN Environment Programme (UNEP), and other international institutions, including the EU. Conversely, traditional international organizations sometimes produce official publications instigated by the summit. Two important examples, produced at the direct request of the 1990 Houston summit, are studies on the Soviet economy: one was prepared jointly by the IMF, the World Bank, the OECD and the European Bank for Reconstruction and Development (EBRD), the other by the EC. 39 More recently, the 1993 Tokyo Summit requested the OECD to prepare a "jobs study"; the result was duly released in time for the 1994 Naples Summit. 40 The 1995 Halifax Summit welcomed OECD's initiative to prepare a review of each member country's structural and employment policies. It also asked G7 finance ministers "to commission studies and analysis from the international organizations responsible for banking and securities regulations and to report on the adequacy of current arrangements ... at the next Summit. " 41 Accordingly, at the 1996 Lyon Summit, the G7 finance ministers reported the December 1995 publication of the "Basle Committee capital adequacy standards for banks' exposure to market risk" and welcomed the "Basle and IOSCO [International Organization of Securities Commissions] Committees' reports on prudential regulation and supervisory cooperation" as well as the report of the "G- 10 Working Party on the Resolution of Sovereign Liquidity Crises." 42

The Halifax Summit went further than its predecessors in proposing a number of concrete steps in the review and reform of international institutions. These proposals range from delineating the respective roles of the UN and the Bretton Woods institutions and clarifying the mandates of some UN agencies, through urging IGOs to focus their programs more sharply, eliminate duplication and improve their working methods, to supporting the establishment of new institutions (for example, a new institution and financing mechanism for regional cooperation in the Middle East, and a new emergency financing mechanism within the IMF). In the area of direct G7 relations with international governmental organizations, the Halifax Summit endorsed enhanced consultations of G7 ministers with the IMF 43 Louis W. Pauly notes that "in recent years the [IM F] managing director has been invited to provide finance ministers at G-7 meetings with a summary of the Fund's current views on the condition of the international system and the requirements for stability. Over time, the ministers and their deputies have relied on the senior staff of the Fund for an increasing amount of technical assistance, particularly related to the use of comparable economic indicators to monitor and evaluate policy trends across the G-7. 44

The Halifax Summit also made a commitment that the G7 "will contribute to the OSCE [Organization for Security and Cooperation in Europe] study into a security model for Europe for the 21St century. 45 This serves to illustrate the growing reach of the G7 in the security area.

In this broad program of reforming international institutions, the Halifax Summit concentrated mostly on "international financial issues [emphasis removed], especially the work of the IMF and the World Bank ... and the United Nations family [emphasis removed], especially its humanitarian, development and other related activities. " 46 Bayne comments that in undertaking the institutional review, "[f]or the first time, the leaders decided to work not from outside international institutions but from inside them. 47

The Lyon Summit welcomed the progress in the implementation of the Halifax proposals, noting that the "surveillance capacities of the IMF have been enhanced, standards for the provision of economic and financial information to the markets have been established and an emergency financing mechanism has been created." The Summit also welcomed the agreement on the doubling of IMF resources under the General Arrangements to Borrow (GAB). The G7 leaders at Lyon moved further toward giving direct guidance to IGOs: "[T]he IMF should remain an institution based on quotas providing the [necessary] resources The IMF should continue to reflect on the role of Special Drawing Rights within the international monetary system ... . We strongly urge the OECD to vigorously pursue its work ... aimed at establishing a multilateral approach" in limiting tax competition between States. " 48

The leaders at Lyon noted progress achieved since the Halifax Summit in the reform not only of international financial institutions but also of the UN itself. They commented favorably on the ninth session of UNCTAD which had laid the groundwork for "a thorough reform" of the UN economic and social sector. The Lyon communique' sets out what the G7 leaders see as the UN's priorities: "reduction of poverty, employment, housing, the provision of essential services ... especially those relating to health and education, the advancement of women and protection of children, and humanitarian assistance ... [, the promotion of democracy, human rights and the rule of law, protection of the environment, emergency relief and post-conflict stabilization, and technical assistance to ... the poorest" countries. 49

The Lyon communique' states categorically that the "UN must clarify its role and comparative advantages ... must enhance the efficiency of its Secretariat and operational framework ... [and must] ensure genuine coordination." The communique' then gives detailed guidance on the central points of UN reform efforts, down to the role of ECOSOC and the proposed Under-Secretary-General for Development. 50 information

The Chairman's Statement of the Lyon Summit, issued on behalf of the P8 and thus reflecting the views of the G7 and Russia, includes, as a Halifax Summit follow-up, a review of UN reforms in the economic and social fields. The review deals with:

The leaders at the Denver Summit of the Eight noted progress in economic and social fields since Lyon, welcomed UN Secretary-General Kofi Annan' 5 reform proposals, and expressed continuing commitment to work with all UN members to accomplish these and other proposed UN reforms. The Denver communique' states that "financial reform should proceed together with necessary reform measures in other areas ... the UN system must be placed on a firm financial footing ... [and affirms that] robust oversight mechanisms and sound personnel policies are essential for success." The eight leaders emphasize the need for the UN to streamline its subsidiary bodies and improve its working relationship with international financial institutions and the WTO. The communique' calls for "a thorough and urgent review of the UN's funds and programs, as well as a system-wide review of the roles and mandates of specialized agencies and commissions." It reaffirms the necessity for improving the UN's ability in conflict prevention and resolution. 52

The eight foreign ministers, reporting at the Denver Summit, welcome progress already achieved in UN reform. They "anticipate ... the prompt implementation of responsive measures during ... 1998-99... [to] ensure that the United Nations is fully able to meet the challenges of the new century as the premier international organization responsible for peace, security and the promotion of human welfare and sustainable development in all its aspects." 53

In their statement issued at the G7 rather than G8 level, the leaders reaffirm their support for reform of the international financial institutions, and welcome the IMF 's progress in strengthening surveillance and improving transparency, as well as the World Bank's "Strategic Compact". They call for amending the IMF Articles of Agreement to allow for capital account liberalizations, and "urge the IMF and the World Bank to finalize governance policies, consisting of principles and guidelines on best governance practices." They recognize the G7 's duty to ensure that international financial institutions have the necessary support and resources to fulfill their responsibilities. 54

Notes:

Note 37: Andrea de Guttry, "The Institutional Configuration of the G-7 in the New International Scenario," 73. Back.

Note 38: De Guttry, "The Institutional Configuration of the G-7 in the New International Scenario," 74. Back.

Note 39: The Economy of the USSR: Summary and Recommendations (Washington, D.C.: World Bank, 1990); "Stabilization, Liberalization and Devolution: Assessment of the Economic Situation and Reform Process in the Soviet Union," European Economy, No. 45 (December 1990). Back.

Note 40: Organisation for Economic Co-operation and Development, The OECD Jobs Study, Vol. 1: Facts, Analysis, Strategies; Vol. 2, Evidence and Explanations (Paris: OECD, 1994). Back.

Note 41: Halifax Summit Communique, para. 7, 22. In United States, Department of State, Bureau of Public Affairs, US Department of State Dispatch 6, Supplement No. 4 (July 1995), 6-7. See also URL: www.library.utoronto.ca/www/g7/9sgrow.htm; and www. library. utoronto. ca/www/g7/9smeet.htm. Back.

Note 42: Lyon Summit, Finance Ministers' Report to the Heads of State and Government on International Monetary Stability, 28 June 1996. URL: www.library.utoronto.ca/www/g7/96financ.htm. Back.

Note 43: Halifax Summit Communique, para. 13. In United States, Department of State, Bureau of Public Affairs, US Department of State Dispatch 6, Supplement No. 4 (July 1995), 6. See also URL: www.library.utoronto.ca/www/g7/9smeet.htm. Back.

Note 44: Louis W. Pauly, Who Elected the Bankers? Control in the World Economy (Ithaca; University Press, 1997): 129-30. Surveillance and London: Cornell. Back.

Note 45: Halifax Summit, Chairman's Statement, June 17, 1995, para. 11. In United States, Department of State, Bureau of Public Affairs, US Department of State Dispatch 6, Supplement No. 4 (July 1995), 10. See also URL: www. library. utoronto. ca/www/g7/chair. htm. Back.

Note 46: Nicholas Bayne, "The G7 Summit and the Reform of Global Institutions," 501-2. Back.

Note 47: Ibid.," 508. Back.

Note 48: Lyon Summit, Economic Communique, paras. 12, 13, 16. Lyon, 28 June 1996 URL http//www.library.utoronto.ca/www/g7/96ecol.htm. Back.

Note 49: Ibid, para 5. 40-41 http//www.library.utoronto.ca/www/g7/96ecos.htm. Back.

Note 50: Ibid., paras. 42-43. Back.

Note 51: Lyon Summit, Chairman's Statement. Lyon, 29 June 1996. URL: http//www. library. utoronto. ca/www/g7/96poli.htm. Back.

Note 52: Denver Summit of the Eight, Communique, paras. 49-53. Denver, 22 June 1997 URL: http//www.library.utoronto.ca/www/g7/denver/g8final.htm. Back.

Note 53: Denver Summit of the Eight, Foreign Ministers' Progress Report. Denver, 21 June 1997 URL: http//www. library.utoronto.ca/www/g7/denver/formin.htm. Back.

Note 54: Denver Summit of the Eight, Confronting Global Economic and Financial Challenges: Denver Summit Statement by Seven, Denver, 21 June 1997), paras. 15-19. URL: http//www. library.utoronto.ca/www/g7/denver/confront .htm. Back.