Britain, US put focus on trade at G7
(AP)
Updated: 2005-12-02 14:16

Britain and the United States are pressing finance ministers and central bankers from the world's seven wealthiest nations to make paving the way for a deal on global trade their priority when they meet Friday.

Economic policy makers from the Group of Seven nations also are expected to discuss interest rates, high energy prices and lopsided trade flows.

The finance ministers and bankers are meeting just two weeks before crucial World Trade Organization talks in Hong Kong, where trade ministers had hoped to find broad agreement on trade liberalization.

However, expectations for the Hong Kong meeting have been scaled back amid disputes over lowering agriculture tariffs despite four years of negotiations since the talks were launched in Doha, Qatar.

"We're just days ahead of the Hong Kong ministerial and progress is slow, so we hope to give negotiations a much-needed shot in the arm, an adrenaline punch," U.S. Treasury Undersecretary for International Affairs Tim Adams said on the eve of the talks.

Adams said that time is running out for ministers to have an agreement completed in time to push it through the U.S. Congress before President George W. Bush's negotiating authority expires in mid-2007 and warned that everyone will suffer the consequences via slower growth if no deal emerges.

Britain's Treasury chief Gordon Brown, who is hosting the meeting as the last under the nation's G-7 leadership, has also stressed the importance of seizing the moment on trade.

"We must take the opportunity in the next few days as president of the G-7, opportunities which may not come again for many years, to achieve in Hong Kong a new trade deal that will reverse what is a recent retreat into protectionism," he said this week.

Britain has invited ministers from fast-developing economies including India, Brazil, China, South Africa and Russia to join the talks of the formal G-7 group — the United States, Britain, Canada, France, Germany, Italy and Japan.

The extra guests at the negotiating table have been pushing for cuts in the protective tariffs maintained by richer countries like the United States.

"We now need progress in trade that allows countries like Brazil and India to positively support the liberalization of services and greater market access for them and the key to unlocking that door as everybody knows, is Europe and America making further reforms to address the protectionism of agriculture," Brown said.

However, Razeen Sally, an economist at the London School of Economics, said that it was unlikely the finance ministers would make any real progress on trade issues.

"The track record of G-7 giving a push to WTO rounds is very bad. It doesn't happen," Sally said.

The G-7 has been warning of the dangers of skewed trade and investment since 2003 and the hefty U.S. trade deficits are likely to figure in discussions.

Outgoing Federal Reserve Chairman Alan Greenspan is scheduled to speak about imbalances Friday at a conference sponsored by the British government ahead of the opening of official G-7 talks. It will be Greenspan's last appearance as Fed chairman at a G-7 meeting.

Alan Wilde, director of fixed income and currency at Baring Asset Management in London, said ministers were also unlikely to pass up the opportunity again to discuss China's currency.

Following U.S.-led pressure at previous G-7 meetings, China announced in July that it was letting its currency, which had been pegged tightly to the dollar, to rise in value by 2.1 percent.

The Chinese said they would let the currency fluctuate by as much as 0.3 percent on a daily basis. However, over the past four months, the Chinese yuan has risen by only an additional 0.3 percent and there is speculation of another yuan revaluation.

"I think it would be a surprise if there wasn't further pressure involved," said Wilde.