GATA chairman is speaker at Vancouver conference June 8 and 9


Full agenda confronts G-8 summiteers;
Bush reiterates adherence to 'strong dollar' policy

By William L. Watts
Sunday, June 1, 2003

WASHINGTON -- To no great surprise, there was much to
talk about regarding the global economy as President
Bush sat down Sunday with fellow leaders of world's
seven biggest economic powers -- plus Russia -- to
begin their latest summit.

Persistently slow economic growth, after all, is a problem
that's plagued most of the advanced industrialized countries
of late. But just as predictably, little concrete action is
expected to come out of the three-day summit taking
place this year in Evian, France.

Overshadowing the economic discussions -- including
what, if anything, to do about the U.S. dollar's recent
weakness -- will be, among other things, efforts to
repair trans-Atlantic relations frayed by the U.S.-led
war in Iraq.

Summit participants said the greenback's retreat
against the other major global currencies is on Monday's
agenda, according to media reports.

Sunday was given over to discussionof problems facing
the developing world, including AIDS, hunger and debt
relief. Leaders from majordeveloping nations such as
China, Brazil, and India were invited to participate in the
talks, held under sunny skies at a resort on the shores
of Lake Geneva.

Meanwhile, anti-globalization protesters numbering in
the thousands were kept well away from the summit site.

"Our policy is a strong dollar," Bush was quoted as
saying in an interview on Russian television before
heading to the G-8 summit. "And we believe that good
fiscal and monetary policy will cause our economy to
grow and that the marketplace will see a growing
economy and therefore strengthen the dollar."

Indeed, talk about the dollar began before the leaders
even made it to Evian. The dollar rose Friday as currency
traders began to factor in a possible statement from the
leaders mentioning the dollar's ongoing slide.

In his interview with Russia's RTR TV, Bush also said:
"The market, at this point in time, has devalued the
dollar, which is contrary to our policy."

The president is expected to cut short his participation
in the Evian summit, as he heads to the Middle East for
talks on the much-ballyhooed "road map" designed to
foster peace between Israel and the Palestinians.

German Chancellor Gerhard Schroeder told a Russian
news agency that the euro's sharp gains against the
dollar were slowing his country's growth, while Japanese
Prime Minister Junichiro Koizumi told parliament he would
argue that the yen was too strong.

That might mean a group statement including some
mention of foreign exchange rates.

But there's little reason to believe leaders will come up
with anything akin to an agreement aimed at halting or
reversing the dollar's downtrend, said Alex Beuzelin,
senior market analyst at Washington, D.C.-based
Ruesch International.

"I don't think at this point that anybody expects that
the G-8 summit is going to produce any kind of
coordinated action to support the dollar," he said. The
group includes the U.S., Canada, Japan, the United
Kingdom, France, Italy, Germany, plus Russia.

"But I think just the fact that you have these leaders
mention exchange rates, which typically doesn't happen,
that has sparked market uncertainty that they might
discuss it," Beuzelin said.

Dollar probably won't dominate

There are several reasons to doubt the strength of any
currency-related comments this weekend, analysts said.

For one, G-7 finance ministers, who met earlier this
month on the groundwork for this weekend's summit,
offered no signal that a currency statement or plan for
coordinated intervention was in the offing.

In fact, they offered little evidence that much will be
accomplished on the economic front at all, said Lael
Brainard, a senior fellow at the Brookings Institution,
who served as President Clinton's G-7 envoy.

It's clear the Bush administration isn't so very unhappy
with the dollar's slide, which has tickled U.S. exporters.
Treasury Secretary John Snow has made a habit of
mentioning his faith in the "strong dollar policy," while
making clear that the "policy" consists of efforts to
strengthen economic fundamentals, not intervention nor
even consistent dollar-supportive jawboning.

In fact, it was after the meeting of finance ministers that
Snow told reporters currency moves had been "fairly
modest," which in the nuance-sensitive currency markets
was taken as another signal to short the buck.

Only Japan has actively, and somewhat successfully,
moved to dampen the dollar's slide, intervening regularly
in the currency markets to hold down the value of the yen.

"And as far as the euro zone is concerned, for the most
part, European officials have downplayed the significance
of the euro's appreciation," Beuzelin said. That could
change if the euro continues to appreciate against the
dollar at its recent pace, he added.

Claude Barfield, a resident scholar at the American
Enterprise Institute, questioned whether G-8 leaders could
do much to boost the dollar, even if they wanted to.

"My hope would be that rather than have the hubris of
thinking somehow that the political leaders can change
what are economic fundamentals, there will just be the
statement that there will be intervention only to stop some
sort of precipitous fall in the dollar or some sort of
unregulated or out-of-control change in currency," Barfield
said at an AEI panel discussion.

'Full discussion' promised on trade

The dollar isn't the only economic issue on the agenda.
Trade will also loom large. The G-7 finance ministers
warned at their meeting earlier this month that trade talks
were reaching a crucial stage.

On Wednesday, negotiators from around the world failed to
meet another key deadline in the current Doha round of World
Trade Organization talks. They failed to reach an agreement
on cutting tariffs on industrial goods. The Doha round is
scheduled to conclude by January 2005.

U.S. Secretary of State Colin Powell last week said there
would be "full discussion" of trade issues at this weekend's

But observers weren't expecting any breakthroughs, especially
on the crucial issue of agricultural subsidies. The U.S. had led
a charge to eliminate subsidies, which has met stiff resistance
from the European Union, particularly France.

The G-8 leaders will no doubt endorse a call for a successful
conclusion to the Doha round, Barfield said.

But there's "no sign ...that the underlying conflicts ...
between the United States and EU are about to be resolved as
a result of this" meeting, he said.