Interview: Under Secretary of State Larson Says Trade, Poverty Major G-8 Summit Themes

The lead issues at the Group of Eight (G-8) Summit, set for July 20-22 in Genoa, will be trade and poverty alleviation -- which will include a new fund for the fight against infectious diseases, says Alan Larson, U.S. Under Secretary of State for Economic, Business and Agricultural Affairs.

Larson said he hopes to see a strong "political commitment" among the G-8 nations on free trade and on the importance of launching a new round of multilateral negotiations to reduce trade and investment barriers worldwide. In a July 16 interview with the Washington File, Larson said he thinks there will be a "clear appreciation" that free trade is central to reducing poverty. Most of the world's poorest people live in so-called "lower middle income" nations such as Brazil, China, India and Egypt, he noted. "These countries could use trade to help generate the growth they need to really make a dent in poverty."

The G-8 members are the Group of Seven (G-7) major industrialized countries -- Britain, Canada, France, Germany, Italy, Japan and the United States which together account for about two-thirds of global output -- and Russia.

This is the 27th annual summit, the location of which rotates among the G-7. At the Summit, Larson said the United States also hopes to solidify political support and a sense of financial commitment for the new fund to fight the infectious diseases of HIV/AIDS, malaria and tuberculosis. President Bush has already pledged a U.S. contribution of $200 million to this fund, he said. The fund would finance programs for prevention and for the treatment and care of those afflicted with the diseases.

Other issues the United States wants to discuss at the Summit include food security, with an emphasis how new technologies -- including biotechnology -- can help developing countries increase agricultural productivity and a reaffirmation of the G-8's commitment to require their export credit agencies to set high environmental standards for the projects they finance, Larson said.

The following interview was conducted by Washington File writer Warner Rose.

Note: In the text, billion equals 1,000 million.

Question: What will be the main issues at the G-8 Summit?

Larson: I see two lead issues at the Summit. The first would be trade, the importance of launching a new trade round as a way of bolstering confidence in the international economy and as a mechanism for fostering the growth and development of the developing countries.

The second major issue will be a strategic approach to development and poverty alleviation, with a particular emphasis on the launching of a new fund to combat infectious diseases like HIV/AIDS, malaria, tuberculosis.

Q: What does the United States hope to see come out of the meeting on trade?

Larson: I hope and expect that we will see a strong sense of political commitment to free trade and to the importance of moving forward with a new round of multilateral trade negotiations. I think that there will be a clear appreciation that free trade and opening of markets is a central, indispensable part of an effective strategy to reduce poverty in the world, and I think that's a very important message.

On a global basis, the majority of the poorest people in the world live in countries like China, India, Brazil and Egypt, which are considered lower middle income countries. These countries don't typically benefit from trade preference programs.

So if there is a new round of global trade negotiations that lowers barriers across the board, including in developing countries themselves, these countries could use trade to help generate the growth they need to really make a dent in poverty.

Q: Is this part of the preparations for the World Trade Organization Ministerial Meeting in Doha, Qatar, in November?

Larson: By indicating their strong political support for trade liberalization, I think the leaders will be adding important positive momentum for the launch of a new round.

Q: Can you explain more about the fund to combat infectious diseases?

Larson: This is an international fund that President Bush committed $200 million to in a meeting with UN [United Nations] Secretary-General Kofi Annan and President Olusegun Obasanjo of Nigeria in May. The President has provided a great international impetus to this since his announcement of our financial commitment. There has been great progress on shaping this fund and giving broader commitment to it.

The fund would focus on disease prevention as part of a continuum, including treatment and care. There will be funding to provide treatment to people who already are infected with HIV/AIDS or other infectious diseases. It's less clear to me that there is a significant research role for this fund, but I should note the United States already spends at least $3 billion on our own in the area of research. Other countries are involved in research as well.

Q: Would the fund's resources be focused geographically?

Larson: It will be open. The main idea is that it has a mission to try to stop these three devastating infectious diseases, so they're going to have to operate where: (a) there is a problem; (b) there is a political will to address that problem; and (c) there are workable projects that are being put forward for funding.

The details about where it will be headquartered and the governance structure are still being worked out. The World Bank will be involved in some way. The UN and its agencies may also play a very important role. We also see it as an institution that will be a public-private partnership and there may be an important role for foundations and for other private corporations that are involved in the fight against infectious diseases.

Q: Do you expect to reach some conclusions at the Summit concerning the fund?

Larson: I think we'll get a strong sense of financial commitment to the fund by the G-8, as well as political support, and a sense of how the months ahead will be used to turn this from an idea into an operating organization.

Q: What other issues do you hope to see come up?

Larson: One is food security. The follow-up meeting to the UN World Food Summit will be held in November in Rome. We have drawn attention to the fact that there is still a lot to do to combat malnutrition in the world. Some 800 million people are malnourished, and 250 million of those are children. In many cases, victims of malnourishment suffer irreparable damage.

We want to see a much greater emphasis on programs to address this problem, including increased agricultural research and development and efforts to promote agriculture productivity in developing countries. A very important part of this is the application in developing countries of new technologies, including biotechnology. It's very heartening that the UN Development Program came forward with a report last week that highlighted the enormous potential of biotechnology to include food security in developing countries.

The United States wants to get the G-8 countries to support programs and activities that would build capacity in developing countries and will allow them to expand the use of these technologies to address development needs, including biotechnology.

Q: And other issues?

Larson: We would like to see a reaffirmation of the G-8 countries' commitments to setting for their export credit agencies high standards for the environmental reviews of the projects they finance. We want environmental guidelines modeled on those already in place in the World Bank Group. These export credit agencies finance five times the value of projects around the world that the multilateral development banks do, so the environmental standards that they have are terribly important. So far, the United States is the only G-8 country that has for its export credit agency standards that are as high as the World Bank standards. We have been negotiating in the Organization for Economic Cooperation and Development to try to get all the major export credit agencies to adopt this type of high World Bank standards for projects that they finance, and we hope other countries will set that goal.

Q: What about the Heavily Indebted Poor Countries (HIPC) debt relief initiative, which attracted such attention at recent summits?

Larson: On HIPC, the countries that followed through very energetically and responsibly on their commitments for economic reforms have move forward to get debt reduction. There are now 23 countries that have gone through the process of receiving debt forgiveness under the HIPC program. Collectively, we have forgiven through the HIPC program some $50,000 million worth of debt.

The important thing now is to make sure that the debt forgiveness is used to permit increases in investments in education and health so that the highly debt-impacted countries can get back on a growth and development trajectory.

We also want to make sure that countries that have had debt forgiven don't fall into a debt trap again. We are working with them to ensure that the support that they get from abroad, as much as possible, comes in the form of grants rather than in the form of loans.

Q: Is the U.S. calling for grants instead of loans for the poorest countries?

Larson: I think it needs to be an issue that we address in the future. It would be very unfortunate if after such an important effort at reduction of debt to the very poor, very debt-impacted countries, there was a very rapid buildup of new debt, and in particular if there was non-concessional debt from export credit agencies.

Q: Will the G-8 leaders be meeting with developing country leaders?

Larson: There is an "outreach" event that the Italian presidency has organized for July 20 in cooperation with the other G-8 countries, and it will include the President of El Salvador, Francisco Flores, Nigeria President Obasanjo, Thabo Mbeki of South Africa, President Konare of Mali, and President Bouteflika of Algeria.

The meeting will be a chance for the G-8 countries to be in dialogue with representatives of developing countries about the development challenges that we face together and talk about our respective responsibilities.

The meeting will also be attended by a number of international organizations, including UN Secretary-General Kofi Annan, World Bank President Jim Wolfensohn, and a number of others.