The Institutional Review

The G-7 summits have reached their twenty-first year at a time when the open, market-based strategies which they advocate are universally accepted. But the capacity of the summit leaders to influence events is changing. The G-7 can no longer aspire much more widely based international system. The control of national governments over their economic policies is weakening. It must be asked what the G-7 leaders should be doing now to exert a positive impact on the world.

At the Halifax Summit, the leaders aim to inaugurate a review of the international system and its institutions. This agenda was decided at Naples in 1994, where the leaders recorded in the summit's economic declaration that in Halifax they would foc

1. How can we assure that the global economy of the twenty-first century will provide sustainable development with good prosperity and well-being of the people of our nations and the world?

2. What institutional changes may be needed to meet those challenges and ensure the future prosperity and security of our people?

This will be the first time the summits have explicitly addressed international institutions and their reform. Harold Wilson, British Prime Minister at the time, tried to interest the Rambouillet Summit of 1975 in the subject, but it was not taken u many specific issues being discussed in the institutions and sought to influence their treatment, but they have not addressed the scope or functions of the international institutions themselves. This is not surprising, since heads of government, despite institutions and rarely attend their meetings.

The choice of an institutional review is timely. It might be wise to make this a recurrent focus of the summits' work. An open international system such as now exists, with near-universal membership and a large number of active players, needs an ef and multilateral procedures for settling disputes. This is even more necessary as external influences penetrate deeper into national economies and the tension between domestic political pressures and global economic trends increases the scope for interna

The G-7 countries would greatly strengthen the system if they identified themselves with drawing up multilateral rules and implementing them effectively. They could commit themselves to observe the rules strictly and to cooperate in their enforcemen settlement mechanisms to resolve any disputes among themselves, to abide by the judgements and to work to create such mechanisms where they do not yet exist. Such an approach would set a strong positive example and influence others to keep the rules also

The Halifax Summit will be the first examination of institutional issues, although it is unlikely that all the outstanding questions will be settled at this time. The issues are expected to include:

• reform of the international financial institutions, notably the IMF, World Bank and OECD. The Mexican financial crisis, both the massive support package required and the repercussions on other currencies, has made this very topical. It h incentives to make timely policy changes and the scope for new facilities.
• in international trade, the World Trade Organization is now in place. But there is still some unfinished business from the Uruguay Round and the WTO's new structures need firm foundations. It is necessary to keep up the momentum of trade investment flows, for example -- to be brought under multilateral discipline.
• while many countries prosper in the open trade and financial system, others remain in chronic poverty. The principles for helping countries escape from poverty and the international institutions charged with this task need a thorough ov
• global environmental issues have to be addressed in a way which makes them an integral part of national policy. There is a good legal framework of treaties, but implementation is falling behind and the responsibilities of the UN bodies i
• organized crime is increasingly an international problem. In the past, the summits have taken action on drug smuggling and money laundering. The concern are now wider and the instruments for effective cooperation and legal action are ins

In all these areas, the G-7 Summit leaders will focus on changes and innovations which could make the network of international institutions work better. But the G-7 cannot impose its findings; the other members of the international institutions will want tactfully to promote their ideas, exerting influence rather than imposing their authority.

Their first task should be to ensure that they agree among themselves and meet their own standards, so as to set and example which others will be encouraged to follow. This is a more modest approach than in the past, but it is fitting for the change complements the intention to regain an informal, unpretentious format, with more spontaneous discussions, simpler preparations and shorter declarations.

In the complex Darwin cycle of international institutions, only those which successfully evolve to fit changing circumstances will flourish. Those which fail to adapt will survive only as fossilised reminders of an older epoch. The global environme United Nations and the Bretton Woods institutions were founded -- and in the two decades since the G-7 summit was born. The G-7 leaders are considering ways of adapting and invigorating the older institutions. In so doing, however, the summit itself mus economic globalization and the end of the Cold War, the need for close cooperation among the top political leaders of the major industrial democracies is as great today as in the mid-1970s. We believe that the new approaches suggested here will help to e the years ahead.