G8: Will it meet expectations?

By Steve Schifferes
BBC News economics reporter at the G8 summit

Africa needs aid, investment - and good government

The huge Live 8 concerts round the world over the weekend, and the big demonstration in Edinburgh, have raised hopes of a global deal to help Africa at the G8 summit in Gleneagles in Scotland this week.

But what is likely to be agreed at the G8 summit, and how far will it go to satisfy the global protesters?

Like most summits, most of the negotiations will have already been completed before the leaders meet for their one and a half days of talks.

WHAT IS THE G8? Name Group of eight major industrialised states, inc Russia Members Canada, France, Germany, Italy, Japan, Russia, UK, US Aims Originally set up to discuss trade and economic issues Now leaders discuss global issues of the day 2005 Summit agenda Africa Climate change Read the full profile

With expectations running so high, there were - unusually - last minute negotiations between officials right through last weekend.

And the results so far are mixed.

As far we can tell, there is broad agreement on two key areas - debt relief and increased aid - while there is less progress on trade, and fundamental disagreement on climate change.

But even where deals have been made, they are hedged with conditions that may reduce their effectiveness as far as Africa is concerned.

Nor have the G8 leaders made it clear what real sacrifices might be required to make poverty history.

DEBT

The most clear-cut agreement among the world's richest countries was reached last month on reducing the debt payments made by poor countries, many in Africa, during the G7 finance ministers meeting in London.

The debt issue explored At-a-glance

This has long been a focus of activists, who have been campaigning for debt relief since the last G8 summit in the UK eight years ago.

The deal agreed last month offers debt relief to cover debts owed by poor countries to the World Bank, the African Development Bank, and the International Monetary Fund (IMF). Debt relief had already been offered on a country-to-country basis.

It is worth around $2bn (£1.3bn) yearly to the 18 poor countries (15 in Africa) who currently qualify for it - and who have total debts of around $40bn (£25bn).

But many other countries do not qualify - although deals with another 9 are in the pipeline - and Nigeria, Africa's largest country and biggest debtor, had to negotiate a less favourable deal with its international creditors last week. (Nigeria's debt was $30bn, of which $18bn was written off - but they have to pay off $6bn immediately, and the remaining $6bn will be paid off at a discount - a deal that in total amounts to 60% debt relief).

Western donors have put in strict conditions before countries can qualify for debt relief - which is one reason it has taken so long.

Nor is there full agreement on how to fund this additional debt relief, at least where the IMF is concerned.

Although the deal was officially unanimous, key countries like Germany and Japan are still worried about the problem of "moral hazard" - whether it will encourage irresponsible borrowing in the future.

Some African countries, like Botswana, who have not borrowed much in the past, share these concerns, and say they could now be losing out because of the past prudence..

AID

The world's richest countries seemed to have reached a deal to increase aid to Africa by $25bn (£18bn) by 2010/15.

BUSH DOUBLES AID TO AFRICA Watch Bush's speech

The idea is to make sure that Africa countries meet the UN's Millennium Development Goals of cutting poverty in half by 2015, and improving access to clean water, good sanitation, and education for all.

European countries have also agreed to boost their aid budgets to the UN target of 0.7% of GDP.

But there may be less to these pledges than meets their eye - after all, the world's rich countries have made such pledges before, and aid has actually been falling for a number of years.

The more dramatic British plans - to double aid flows quickly by borrowing money from international financial markets (the so-called International Financing Facility) - have not found much support among other G8 countries.

Meanwhile, there are questions about the quality of the additional aid that may be provided.

Poor countries are worried that it will be hedged with strict conditions, for example, requiring them to open their markets to foreign investment.

And they are worried that much of the aid will be tied to the purchase of goods or services in the country offering the aid.

These two aspects of aid apply particularly to the USA, which has (perhaps surprisingly) pledged to double its aid to Africa to $8bn per year, following another big increase in 2002.

For example, much of US aid is in the form of food aid, which is spent on US farmers.

The US has set up a special body of its own, the Millennium Challenge Corporation (MCC), to administer US aid to Africa.

It has put in place tough conditions, like anti-corruption measures and good governance.

As a result, only $400,000 of US aid has actually reached sub-Saharan Africa so far, and only four countries have qualified at all.

TRADE

Trade is the most important - and most difficult - of all the economic issues to reach agreement.

Trade is the key to economic growth

Many African nations argue that opening Western markets to their products would do them more long-term good than any amount of aid.

However, many African countries lack the capacity to take advantage of any trade deal without years of investment in infrastructure like roads and ports.

Meanwhile, global trade negotiations (which have been going on since December 2001) have been making very slow progress ahead of a key meeting scheduled for Hong Kong in December.

Ironically, just as the G8 leaders will be sitting down in Scotland, trade negotiators are squabbling over agricultural issues in Geneva, with Western nations doing all they can to block progress in areas like sugar and cotton, where huge subsidies undermine attempts by developing countries to export their products.

Eliminating these subsidies is the key to helping African countries grow their way out of poverty, but neither the EU or the US is likely to make any real concessions at this stage of the trade talks - that will come, if at all, in Hong Kong.

Meanwhile, they are arguing that developing countries must fully open their markets to Western products, despite the fact that their own markets were protected for many years while their industries were developing.

CLIMATE CHANGE

Climate change is likely to be the biggest area of disagreement at the summit.

The Bush administration, which has refused to ratify the Kyoto Protocol on curbing greenhouse gas emissions, disputes suggestions that man-made activities are the main drivers behind global temperature rise.

Nor will it accept that emissions targets are necessary to curb that rise.

Since the US is responsible for 25% of the world's greenhouse gases, that makes agreement among the other major countries much less effective.

The US is likely to accept the need for energy conservation - but on the grounds that it will lower US dependence on foreign oil and lower gas (petrol) prices.

The argument is likely to be at its most intense when the US confronts India and China, whose emissions are rising fast but who do not have targets under the Kyoto Protocol.

Mr Bush will be likely to argue that unless they sign up to control their emissions, it would be pointless for the US to do so - an argument they are certain to reject.

That does not bode well for the key negotiations due in December in Montreal over the next steps after the Kyoto Protocol expires in 2012.