TOYAKO, Japan (Reuters) - The Group of Eight industrial nations expressed strong concern on Tuesday about sky-high food and oil prices, which they said posed risks for a global economy under serious financial strain.
In a statement released on the second day of the group’s three-day annual summit, the G8 made a veiled call for China to let the yuan’s tightly controlled exchange rate appreciate to help reduce global financial imbalances.
“In some emerging economies with large and growing current account surpluses, it is crucial that their effective exchange rates move so that necessary adjustment will occur,” the G8 said in the statement, without naming any country.
The inclusion of the word “some” marked a subtle difference in wording from last year’s G8 communique, which referred to the need for emerging economies in general to let their effective, or trade-weighted, exchange rates rise in value.
The G8 made no other mention of currencies in its communique, but a senior U.S. official said President George W. Bush restated his support for a strong dollar during the talks.
“The president of course reaffirmed his interest in a strong dollar, and his commitment to a strong dollar,” Dan Price, Bush’s assistant for international economic affairs, told reporters. “There was a general discussion of exchange rates.”
Financial markets, which had low expectations of the G8 meeting, shrugged off the comments.
“As for currencies, there were opinions that cooperation among not only G8 countries but also with emerging economies is needed. But there was no specific talk on foreign exchange market movements,” a Japanese official said.
The leaders of Japan, Britain, Canada, Germany, France, Italy, Russia and the United States said they remained positive about the long-term resilience of their economies and the prospects for global growth.
Emerging markets in particular were still growing strongly.
“However, the world economy is now facing uncertainty and downside risks persist. Among others, we express our strong concern about elevated commodity prices, especially of oil and food, since they pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable and increase global inflationary pressure,” the G8 said.
Oil has retreated below $142 from a record-breaking rally that lifted prices to an all-time high of $145.85 last week, but it is still up almost 50 percent this year.
“Concerted efforts are needed to address the underlying causes for the benefit of all,” the G8 said.
Oil producers needed to boost output and refining capacity in the short term, while joint efforts were necessary to expand upstream and downstream investment in the medium term.
Underlining the shared responsibility of energy-producing and energy-consuming countries, the G8 said it looked forward to a meeting in London later this year that would follow up on talks among producers and consumer states last month in Jeddah.
The G8 said it planned to stage a forum on energy efficiency and new technologies, which would also contribute to enhancing dialogue between the two sides.
One diplomat said this forum would be an opportunity to talk about not just energy security but also oil prices and output.
On the demand side, energy efficiency and energy diversification were priorities, the G8 said.
The G8 said little about the still-unfolding global credit crunch, touched off by a meltdown in the U.S. subprime mortgage market, which has inflicted heavy losses on banks around the world and is dragging down growth in America and Europe.
“Financial market conditions have improved somewhat in the past few months. But serious strains still exist,” the G8 said.
Leaders welcomed a meeting of trade ministers in Geneva on July 21 to seek a breakthrough in the World Trade Organization’s long-running Doha round of market-opening talks.
They vowed to work as a “matter of urgency” at this crucial stage of negotiations to achieve an “ambitious, balanced and comprehensive” agreement that they said was critical for economic growth and development.
Additional reporting by Jeremy Pelofsky; Editing by Rodney Joyce