China should be included in the group of nations
Interview: Goldman Sachs Intl---Hormats, Robert---Vice Chairman
>>ac centur may lose a $10 billion contract to work on border security under legislation approved by a house committee. accenture is bateds in―based if bermuda. accenture said was never an american company, but a series of international partnerships operating through a swiss entity. new zealand’s central bank and% its governor, alan bollard, raised interest rates for the third time this year and signaled further increases to curb inflation. bollard raised the official cash rate, the overnight lending target rate for banks by a quarter of a point to 5.75%. g-8 leaders reported progress today at the summit. they agreed to set a july deadline to jump-start global trade negotiations. robert hormats, vice chairman of goldman sachs international, joins us to share his unique perspective and speaks about why china should be included in the group of nations. you called the group outdated and badly in need of an update and have gone as far as to rename the g-8 to the f-8, adding china?
>> there is now a financial group called the 2k3w67 -- g-7. we think that because china is more important in the global financial system than many of the other countries in that group, china ought to be added so its finance minister and central bank governor should be invited to the g-7 and call it the f-8, the financial eight. and the other thing is the summit’s consult, the russian head of state was added in the 1990’s and we think over the course of the next several years, we think they ought to bring china in.
>> i was reading the report in terms of the percentage of world trade in 1975, china indicating% -at 1%, today at 5%. russia, in the group, is today at 1% of world trade and going forward i thought this was particularly telling, you’re estimating that by the year 2050 china will be the largest economy in the world followed by the u.s. and india. so clearly there will be economic evolution, if you will. this is a group that’s been around since gerald ford in 1975.
>> and we think the world economy has changed and the groups like the summit ought to change with it if it’s going to reflect the actual economic power structure in the world today. and that means china and indian. there’s also the so-called group of plenty, finance ministers of emerging and industrial country countries. i think the g-7, g-8 summits ought to be preserved by expanded.%
>> it’s got to be a tough sell to tell the canadians, we appreciate your advice or the individual e.u. member countries like germany and france, sorry, but you’re going to have to pick a delegate to represent you.
>> i don’t think we ought to be in the business of telling these countries not to attend. i think canada was there in part because the united states thought canada was important, important to us and important to the world and balanced off some of the european considerations. whether europe, which is consolidateing, whether they want to consolidate, that’s up to them. i don’t think the united states should be dictating. we made the suggestion but it is up to the europeans, not us.
>> in the past you’ve been critical of the g-8 making statements about oil production, something they have little control over. that said, do you expect a collective statement from the% -g-8 given the price of oil?
>> i think they almost have to. their people back home will say, look, oil prices are a problem here. europe, the price of gasoline is double, more than double what it is here largely because of taxes not so much because of opec. but everyone is feeling the pressure from higher oil prices and some general reminder to opec that higher oil prices over a period of time weaken the world economy and therefore weaken demand for their product probably will occur.
>> could you quantify that pressure people are feeling in terms of economic growth?
>> it’s hard to measure in terms of economic growth. it might take off .2% or .3% growth. you recall several years ago in europe, there were boycotts and blockades by french farmers and the europeans and president bush will want to demonstrate they’re encouraging price moderation by opec but there are no opec countries in the group so this group is calling for these things but the opec countries aren’t at the table.
>> only 30 seconds left here, can you talk to me about the other big story of the day and it’s not fair to do it, but your thoughts on ronald reagan.
>> ironically, speaking of summits, i was his summit planner for the first summit he participated in in versailles. he really believed in free markets , lowering taxes. he lowered taxes and later on he actually participated in increases in taxes to make the tax system fairer. so he really had an economic philosophy, market -oriented, deregulation and liked lower taxes.
>> thank you very much, robert hormats from goldman sachs.
