Protests as G8 gathers for diplomacy

By Linda Sieg

TOYAKO, Japan (Reuters) - Leaders of the Group of Eight rich nations meet this week in northern Japan to grapple with a raft of problems from soaring food and fuel prices to African poverty and global warming amid doubts about how much the annual diplomatic pageant can achieve.

Britain, France, Germany, Italy, Japan, Russia, Canada and the United States will be joined during the July 7-9 meetings at a luxury hotel in the lakeside resort of Toyako by heads of seven African states and major economies including China and India.

That makes this the largest such gathering since the event began more than three decades ago when a cozier club of the United States, Japan, Germany, France, Britain and Italy met at the Chateau de Rambouillet outside Paris in November 1975 to discuss the oil crisis and a world recession.

The themes sound familiar, but the scale of the summitry, which draw huge media coverage, countless activists and sometimes violent protests, has some charging that the event has got out of hand.

"The first summit was a very small affair. They got in a room, said they were facing a crisis, did a little horse trading and came up with a plan," said Robert Feldman, chief economist at Morgan Stanley in Tokyo.

"It has become something of a carnival ... and got away from the original intent, which was to sit in a room together -- the human side of negotiating and getting things done," Feldman said.

"It's unwieldy and it's not leading to a lot of results."

At the same time, the relative clout of the core group has shrunk. The G6 accounted for about 48 percent of the world's gross domestic product (GDP) in 1975, but by 2006 the G8's share had slipped to around 43 percent.

Over the same period, the share of five big emerging economies that call themselves the Group of Five -- China, India, Brazil, Mexico and South Africa -- grew to 27 percent from 12 percent, measured by the purchasing power of their currencies.

PROBLEMS INTERTWINED

One reason for higher food and fuel prices is growing demand from such emerging economies, making it hard for the G8 alone to come up with solutions.

"The emerging markets have become a much more important part of total economic activity, but the monetary policies they are running are too easy. That is spurring inflation in these countries and that tends to push up commodities prices," said Peter Morgan, chief Asian economist at HSBC in Hong Kong.

"In the 1970s it was the developed economies that were running too easy monetary policies, so they could address it. But now they are passive receptors of the inflation burst from emerging markets."

A Major Economies Meeting on Wednesday will bring together the G8, the G5 and Indonesia, South Korea and Australia -- a group that accounts for about 80 percent of the C02 emissions that cause global warming.

President George W. Bush is reluctant to sign on to targets to cut emissions without big developing countries on board.