Rising Oil Prices, China Trade Policies Worry G-7

Finance ministers of the world’s seven richest democracies expressed concern Saturday that rising oil prices and China’s trade policies could slow their economic growth, but they did little to address protesters’ demands that they help the world’s neediest countries.

“We all agreed that improving growth must be our top priority,” Treasury Secretary John W. Snow said after meeting with his fellow Group of 7 finance ministers, who had come to Washington for the semiannual conference of the World Bank and the International Monetary Fund.

The talks occurred against a backdrop of record oil prices and U.S. stock values at a two-year low, developments that clearly had the finance officials on the defensive and focused on their home fronts.

But just blocks from the White House, several hundred protesters gathered peacefully outside the offices of the bank and the fund to demand action of a different sort: support for the world’s poor countries. In particular, they sought full cancellation of the debts the neediest nations owe the two multinational financial institutions.

However, they came away disappointed.

“How many children will have to die before these seven men in suits develop a sense of urgency?” asked Jonathan Hepburn, policy advisor for Oxfam International.

In addition to the United States, the Group of 7 includes Japan, Germany, France, Britain, Italy and Canada

Snow focused instead on financial systems, insisting that global economic fundamentals remained sound despite the U.S. stock market’s swoon. “The sense is that the global economy will continue to grow at a good clip,” he said.

But he and his counterparts acknowledged several threats, including oil prices and the U.S. budget and trade deficits.

“Higher oil prices are a headwind, and the expansion is less balanced than before,” the seven ministers said in a communique after their deliberations.

“It’s high time that Congress pass the energy bill,” Snow said. Until it does, he said, the United States, which imports more than half its oil, will be vulnerable to “uncertain supplies from faraway places.”

The long-stalled energy bill was also the theme of President Bush’s weekly radio address. He called on Congress to send him legislation that would reward conservation, encourage production, diversify the sources of energy and improve the transportation of energy from its source to the consumer.

The finance ministers noted that the U.S. economy was acting as the engine pulling much of the rest of the world. They suggested, however, that the current situation, marked by the huge U.S. budget and trade deficits, was unsustainable.

Snow said the Bush administration was on target toward cutting the budget deficit in half by 2009, although he made no guarantees regarding the trade imbalance.

Instead, he said Europe and Japan should boost their domestic economies so that they would rely less heavily on the United States for sales. And China, he said, should stop artificially depressing the value of its currency, a policy that gives Chinese products a price advantage against foreign products on global markets.

Snow said China had adopted such modern economic practices as foreign currency trading and stricter bank regulation. “With this groundwork in place,” he said, “China is ready now to adopt a more flexible exchange rate.”

The protests that accompanied Saturday’s meetings of the 184-nation World Bank and the International Monetary Fund were but an echo of those of five years ago, when an estimated 10,000 demonstrators converged on Washington and hundreds were arrested.

The protesters focused on their demand that the bank and the fund cancel the debt owed the two institutions by the poorest countries. Much of those countries’ debts to other nations were forgiven in 1999, but 61 of the countries still owe $154 billion to institutions such as the IMF and World Bank. Interest payments consume substantial shares of the budgets of these struggling nations.

The protest groups, including the Jubilee USA Network, have proposed that the IMF sell some of its gold holdings to compensate for writing off that debt.

The rich countries are concerned that the IMF would disrupt gold markets if it sold much of its 103 million ounces of gold, valued at $45 billion at recent market prices.

“We do not believe ... gold sales are necessary or warranted,” Snow told the IMF Saturday. Rodrigo de Rato, the IMF’s managing director, concluded: “We are far from the necessary support for any agreement on the use of the fund’s gold.”

The anti-globalization activists included Lacy MacAuley, a spokeswoman for the D.C. Resistance Media Collective. “We’re here to tell the World Bank that their policies don’t work,” she said.

Times staff writer Justin Dickerson contributed to this report.