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Last Updated: Friday, 4 February, 2005, 19:58 GMT
US rejects UK plan to boost aid
UK Chancellor of the Exchequer Gordon Brown at the G7 meeting in London
The US rejection is a blow to Mr Brown's global vision
The US remains opposed to a UK proposal to boost aid for the world's poorest countries, saying it is unnecessary.

Chancellor Gordon Brown is using the G7 meeting of finance ministers and central bankers to call for the $100bn International Financing Facility (IFF).

Before the meeting, US Treasury Under-Secretary John Taylor dismissed the plan outright, saying the US wanted to switch money from loans to grants.

The UK, which has support from other G7 countries, is trying to get US support.

The G7 ministers will discuss the proposals at the two-day London meeting, due to conclude on Saturday.

On Friday night, former South African president Nelson Mandela backed Mr Brown's plan when he urged the finance chiefs to write-off African debt and provide an extra $50bn a year in aid for the next decade.

Mr Mandela, who on Thursday addressed an anti-poverty rally in Trafalgar Square, was a guest at a working dinner attended by the ministers.

In his opening speech, Mr Brown also called on the world's seven richest nations to remove barriers to global trade, and to promote global stability and growth.

Ahead of the G7 meeting in London, which kicks off the UK's one-year presidency of the G7 club, he called on them to "rise to the global challenge".

In other developments:

  • Ministers want to use the meeting to tackle the issue of the Chinese yuan, which is pegged to the dollar, and is seen by some as forcing other currencies - particularly the euro - to bear the brunt of the falling dollar

  • Ministers not only from China but also from India, Brazil and South Africa are at the meeting in order to ensure that the biggest non-industrialised economies are also represented

  • The US wants to stress its view that the other six G7 countries need to loosen regulations so as to encourage faster growth

  • The UK is calling for an increased pace of debt relief for poorer countries

  • In a keynote speech, US Federal Reserve chairman Alan Greenspan said the US is on track to stabilise its massive trade deficit

  • Parallel discussions - organised by the UK Treasury - on advancing enterprise are also taking place.

  • EU trade commissioner Peter Mandelson urges ministers to put trade on an equal footing with aid and debt relief in their bid to tackle poverty in Africa.

Cold water

Mr Taylor - deputising for Treasury Secretary John Snow, who is unwell - has been particularly vocal in the past in dismissing the IFF.

Nelson Mandela

"Not only does the IFF not work for the US, we don't need the IFF," he told reporters while heading for the meeting on Friday morning.

He also poured cold water on another UK idea: to fund debt relief by revaluing and selling part of the International Monetary Fund's gold reserves.

And he reiterated his own preferred option, of switching international aid from loans to grants. The US argues this will prevent countries becoming burdened with new debts, while critics say it will rapidly drain available aid coffers.

Non-governmental groups were unsurprised by the response.

"This is what we expected from the US," said charity ActionAid's policy officer, Romilly Greenhill.

Oxfam Senior Policy Advisor Max Lawson said: "By throwing down his cards before the G7 meeting has even started, US Treasury Under-Secretary John Taylor has shown a dangerous unwillingness to compromise. If a deal on debt is not reached here, it is the world's poorest who will suffer."

Imbalance

On China, Mr Taylor said he was looking forward to a "candid" discussion about the yuan and wanted Beijing to "move as quickly as possible to a flexible exchange rate".

US Federal Reserve chairman Alan Greenspan
Mr Greenspan said the US is on track to stabilise the trade deficit

China, for its part, showed little sign of budging.

Chinese newspapers have suggested that there is a "mature" consensus for "fine-tuning" the yuan's dollar peg.

But the governor of China's central bank gave away no clues on future exchange rates at a press conference on Friday, which he used to reiterate China's willingness to work with international bodies like the G7 to "keep the global economy more balanced".

The meeting concludes on Saturday.


BBC NEWS: VIDEO AND AUDIO
Gordon Brown's reasons for lifting trade barriers




SEE ALSO:
Trade gap may narrow - Greenspan
04 Feb 05 |  Business
Brown urges G7 to free up trade
04 Feb 05 |  Business
Mandela calls for poverty action
03 Feb 05 |  Politics
Blair launches appeal for Africa
27 Jan 05 |  Business


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