TCS Daily

Evian ... Without Bubbles

By Hans H.J. Labohm - June 10, 2003 12:00 AM

One of the most important goals of the G-8 Summit, which has recently taken place in Evian, France, was undoubtedly to mend the Transatlantic rift, caused by European disapproval of the American/British military intervention in Iraq. Most European countries could have acquiesced in it, although they would have preferred endorsement by the U.N. Security Council. Some even actively participated in the military intervention. But two major European countries, France and Germany, remained stubbornly opposed.

On his way to the festivities in St. Petersburg, on the occasion of the 300th anniversary of the city, which took place on the eve of Evian, President Bush failed to pay a courtesy visit to German Chancellor Schröder. Instead he visited a former Polish concentration camp. The message was clear: 'The Nazi regime has been responsible for the gas chambers and we, Americans, have closed them, as we did with the torture chambers in Iraq. In the mean time, you, Germans, stood by doing nothing.'

The U.S. could have lived with German aloofness, but not with the fact that Schröder - in defiance of his previous promise - has actively played upon anti-American sentiments in Germany and has exploited the Iraq issue to secure his re-election. The U.S. could even have accepted the French objections, but not the proactive French diplomacy to obstruct the American/British policy, for instance, by threatening to block the entry into the European Union of Central European countries which chose to side with the Anglo-Saxons. And to add insult to injury, the French Minister of Foreign Affairs, de Villepin, declared that it was only because President Chirac and Pope John Paul II opposed the American war in Iraq that the world was able to avoid a "clash of civilization" between Christians and Muslims.

But despite wound licking on either side, parties preferred to look forward in order to work for "a positive transatlantic relationship." It is like a marital quarrel that has to be made up by subsequent reconciliation. But the process may last some time and often entails loss of love.

The European G-8 partners showed themselves obliging in endorsing American priorities, supporting the view that weapons of mass destruction and terrorism represent today's most imminent threats to international security. In this context they joined the U.S. in expressing concern about the Iranian weapons program, accompanied by a tough warning.

As regards the relationship with the developing world, Evian produced many nice promises, many of which echoed earlier commitments that so far have not, or only very modestly, materialized, confirming once again that, on the international level, there is a persistent gap between rhetoric and actual policy implementation. The Summit's host, President Chirac, showed himself eager to grandstand and cater to the Third World. He had invited leaders from eleven developing countries, including South Africa, Senegal, Nigeria and Algeria. This was undoubtedly a sympathetic gesture, but, as some of the more respectable anti-globalist groupings (or "alternative globalists," as they prefer to call themselves) rightly pointed out, the Third World would have benefited more from a discontinuation of French (thus European) resistance against the liberalization of world trade, especially in agriculture, which has a paralyzing impact on the Doha Trade Round.

Remember, the G-7 started in the seventies as an economic summit. It was only much later that high politics were added to its agenda. Although economics may have been relegated to the backseat in the discussions today, it still occupies a prominent place in the communiqué. And rightly so, because economic recovery is probably the most important contribution that the G-7 could make to improve the international situation. Unfortunately, however, the economy is not like a circus dog that can be ordered to jump through a hoop. It requires painful adjustments that are often fiercely resisted by vested interests.

In the current land of the blind, the U.S. economy is the one-eyed king. The Japanese economy remains stalled. It is laboring under high deficits that keep propelling its public debt to record heights. Nobody seems to know how Japan could be saved from its quagmire. In the mean time, things will run their course, but then there will be a high price to pay.

The European economic landscape is also depressing, although less so than Japan's. Growth has come to a halt, while employment is rising. Budget deficits are increasing again, thus pushing public debts upwards once again. For many years, Europe has failed to come to grips with its "Eurosclerosis." It particularly manifests itself in the malfunctioning of labor markets, which has led to high structural unemployment and permanent social exclusion of vast numbers of job seekers. Germany offers perhaps the most notorious case in point. The suffocating embrace between its Social Democratic Party and the trade unions has blocked any labor market reform to date. The recent proposals by Chancellor Schröder to change this situation were long overdue. Experience in other European countries with similar reform packages show, however, that it may take many years before they will show any effect.

Many advocate lower interest rates by the European Central Bank. If this kind of macroeconomic demand boosting would be effective, Japan would have lived in an economic paradise. Since this is clearly not the case, the conclusion seems warranted that only microeconomic (or structural) reform aimed at a better functioning of markets can offer relief. But, so far, political support for it has been deficient.

In the margin of the Evian Summit the anti- or alternative globalists have once again succeeded in catching some media headlines. They comprise birds of many feathers. Apart from respectable organizations, such as Oxfam, they also include groupings, which by some mysterious line of reasoning, believe that roadblocks and destruction of private and public property may lead to a better world.

Finally, President Bush's offer to spend $15 billion on the fight against AIDS is certainly good news. But as long as promiscuity remains a favorite pastime in the countries most inflicted by this disease, it will be beating one's head against a brick wall. After all, money can't be a substitute for values and norms.

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