G8 still a key forum for rich nations

The Group of Eight is losing relevance as faster-growing rivals such as China and Brazil play a larger role managing the global economy, but it will still endure as a key forum for traditional industrial powers.

Meeting in Huntsville, Canada on June 24 and 25, the G8 might look like a warm-up act for the main event in Toronto, where the G20 gathers for the weekend, but that is not how the host sees it.

"As Prime Minister I go to a lot of summits. The G8 discussions are probably some of the best, most useful, informative talks that I'm involved in any single year," Canadian leader Stephen Harper said in an interview.

The G20 supplanted the G8 as the group that manages the world economy during the global credit crisis, when then US president George W Bush summoned its leaders to Washington to forge a common response that helped to calm financial markets. But the G8 still provides a place where its members can, in theory at least, thrash out their differences in advance and muster around a common front at the G20.

"I think the G8 will continue to meet. I doubt they will have much significance in the future but it will primarily be a caucus of the rich countries en route to the G20," said Fred Bergsten, Director of the Peterson Institute for International Economics, a Washington-based think tank.

The rise of China to become the world's third-biggest economy and the fast growth of other developing heavyweights such as Brazil has meant older powers can no longer sit on their own at the high table of global policy-making. Emerging economies served as a vital engine for the world economy during the recession caused by the credit crisis and, in return, earned them more clout at institutions such as the World Bank, as well as the G20.

The G20 leaders summit was a necessary modernisation. The G8 – which groups the United States, Japan, Germany, France, Britain, Italy, Canada and Russia – had no means to formally incorporate China, India, Brazil and other successful emerging economies to discuss key issues like currency misalignment.

Canada and other smaller economies in the G8 such as Italy have most to lose in the bigger group, as they are overshadowed by large emerging economies in the G20. Bush's successor Barack Obama says he will continue to use the G20 as the best place to tackle big economic challenges. But that does not mean his administration has no use for either the G8 or the regular Group of Seven meetings of central bank chiefs.

Because of its size, the G20 is a harder body to manage than the G7/G8. More important, the interests of its members are not nearly as closely aligned as the trans-Atlantic bonds binding the United States and post-war Western Europe.

"The G8 is a much more informal setting of like-minded friends and allies who discuss and exchange views on a range of issues, not necessarily to take a decision today, but to shape attitudes and actions going forward," Harper said.