Seven Industrial Powers And So Little Power

With America struggling to climb out of recession, and with Germany and Japan tiptoeing along the precipice of their own downturns, you would think the leaders of the world's seven largest industrial nations would have had plenty to do at their July 6-8 economic summit in Munich. Instead, they did almost nothing.

It might seem tempting to scrap the whole process. That would, at least, save the $23 million German Chancellor Helmut Kohl spent to host the Group of Seven. But the meetings don't have to be fruitless: Past summits have been more than photo opportunities for world leaders and showcases for local cuisine.

Take Bonn, 1978. Then, with America's European security umbrella giving it substantial clout, the U.S. pressured Germany into acting to pull an oil-shocked world out of recession. And at Tokyo and Venice in the mid-1980s, the U.S. led a G-7 coalition to rein in a runaway dollar.

MAJOR ACTION. But three years after the end of the cold war--and after two decades of underinvestment and overspending--America's economy is sputtering. That has badly eroded U.S. clout. And while others stepped up to try to lead on particular issues, the results were disappointing. No one, it seems, is ready to assume America's mantle.

The boldest summiteer was undoubtedly British Prime Minister John Major. He came to Germany determined to break a U.S.-European logjam in the six-year-old round of talks to extend the General Agreement on Tariffs & Trade. A GATT deal could spark nearly $200 billion a year in new trade, slash government subsidies in Europe and the U.S., and provide the best possible aid to struggling Third World and former East bloc economies. But GATT is stalled over a narrow dispute about farm trade: Washington wants the European Community to cut its agricultural-export subsidies by 24% over six years, while the EC is offering 20%.

Major, noting the huge payoff, urged the group to set a deadline for a compromise deal. But the British Prime Minister has little at stake in agriculture. And he was shot down by French President Francois Mitterrand, whose farmers threaten to take to the streets over the issue. Mitterrand also faces a contentious Sept. 20 referendum on ratifying the Maastricht Treaty on European unity. Ultimately, most of the summiteers accepted the conclusion of one Japanese official. Trade talks, he said, "are too technical for politicians to deal with, but too political for experts to cope with."

Few other world leaders even attempted to lead the group. Japan, long expected to turn its financial clout into global leadership, brought only a modest agenda to the summit. Prime Minister Kiichi Miyazawa wanted his fellow leaders to endorse Tokyo's bid to reclaim four islands seized by Stalin after World War II. The world's largest capital exporter made it clear that anything beyond their existing pledge of $2.65 billion in aid to the Russians depended on settling the dispute. The G-7 got the message, urging Russian President Boris Yeltsin to wrap up the matter quickly.

On economic matters, Japan had little to say. Despite heavy pressure from the Bush Administration to spend more at home to stimulate global growth, Miyazawa promised only to boost his budget this fall if the Japanese economy doesn't respond to last spring's interest-rate cuts. The Japanese also made it clear they wouldn't reinflate their economy to meet America's demands.

AIMLESSNESS. If Japan, still uncomfortable with its newfound financial and political power, continues to play the role of little brother in world affairs, then the U.S. is suffering from the opposite problem. American leaders still are talking as though summits revolve around Washington's whims.

Take Treasury Secretary Nicholas F. Brady. He insisted that his campaign to bring down foreign interest rates spurred modest growth plans in Germany and Japan. But he overlooked the fact that those plans were crafted in response to domestic slowdowns, not American pressure.

In reality, U.S. leadership was as hard to find as the traveling White House headquarters--located some 20 minutes from the summit's real action. True, President Bush helped shepherd through a tough statement on the Yugoslav crisis. But he couldn't come up with any concrete economic successes to show voters that his foreign expertise is yielding payoffs at home.

A group of seven equally weak powers can't thrive. The U.S., despite its current problems, is still the world's largest economy and best candidate for global leadership. But it can't fill that role unless Washington develops a stronger sense of where it wants the world to go, cultivates persuasion rather than tough talk, and demonstrates its own resolve by reining in its monster budget deficit. As Secretary of State James A. Baker III puts it: "Leadership doesn't mean doing it all by yourself." The shame of it is, no one seems to know how to do it together, either.