It's Back to the 1970s As Economy Grabs Limelight

Thirty-three years after the French president Valéry Giscard d'Estaing invited fellow world leaders to Rambouillet to discuss the west's economic crisis, the G8 will be working to a similar agenda when it meets in Japan.

Harold Wilson was prime minister when the G6 - as it then was - met in the midst of a global downturn prompted by the fourfold increase in the price of oil triggered by the 1973 Yom Kippur war.

Gordon Brown will attend his first summit as prime minister against a backdrop of crude closing in on $150 a barrel and developed economies facing a mild dose of the economic disease that afflicted the 1970s: stagflation.

The main topics that will dominate the summit are:

World economy

Last year's summit took place before the onset of the global credit crunch, caused initially by badly performing sub-prime mortgages in the US.

Western economies have seen their banking systems freeze up, credit more stringently rationed and - in the US, Britain and other parts of the European Union - falling house prices. Many Wall Street analysts believe the US is already in recession, with Britain heading in the same direction with a six-month time lag.

The US central bank, the Federal Reserve, has cut rates aggressively to 2% but similar action in other parts of the world has been dogged by fears of rising inflation, caused by sharp increases in the cost of fuel and food. Europe's central bank, the ECB, raised interest rates to 4.25% last week while the Bank of England has called a halt to cuts in borrowing costs after three quarter-point reductions in bank rate between December and April.

Discussion in Japan will centre on ways of reducing oil prices, with Brown urging more pressure on the oil cartel Opec and Germany and France wanting tougher action against speculators. Brown and Bush will be urging the G8 to give a push to global trade talks, which reach a crucial stage in Geneva later this month.

Climate change

The G8 and the five major developing countries at the summit aim to agree a plan to halve worldwide emissions by 2050 and may also - in principle - accept the need for some interim targets. The summit is also likely to announce a major fund to sponsor research into carbon capture storage and other green technologies.

These are the most optimistic outcomes for the summit and would mark a step forward from last year when Tony Blair managed to persuade Bush to commit the US to "seriously consider" a 50% cut.

World leaders are battling to agree a strategy for a major conference in Copenhagen at the end of 2009. The conference is seen as the moment when the world agrees a climate change plan to succeed the Kyoto protocol, which expires in 2012. Negotiations have been stalled partly by US unwillingness to sign up to anything that gives rapidly developing countries such as China and India a free pass. Progress has been also hampered by suspicion of one another's motives and the sheer technical difficulty of reaching a worldwide agreement.

The Japanese, one of the most energy efficient of the G8 countries, is proposing a sector-based approach to new targets for reductions in greenhouse gas emissions. This requires setting the same numerical goals for all companies in an industry, regardless of location. The Kyoto Protocol was based on national binding limits.

Food crisis

The Japanese prime minister, Yasuo Fukuda, will be among those arguing that biofuel production is in competition with food supply. He will call for a speeding up of research and the introduction of second generation biofuels, which can make fuel out of various plants and not just food crops.

Brown will try to inject what he regards as some balance in the food crisis by publishing on the eve of the summit the best British scientific assessment of the value, and pitfalls, of biofuels. He believes the debate has swung from regarding biofuels as the solution to all our carbon ills to becoming the source of all our food shortages. He wants EU backing of biofuels to be more selective.

He will also publish a Cabinet Office report showing that UK food prices are rising faster than those of most other EU countries. The big issue is what to do to slow the rise in the cost of the food import basket for the least developed countries - up 90% since 2000, as against 22% in developed countries.

A large "aid for trade" package will be crucial but the UN food summit in Rome in June made only limited progress. The World Bank said $10bn was needed for emergency food aid and another $3.5bn for social and agricultural programmes to respond to the current crisis.

Africa

Japan has never had Africa at the top of its agenda, and the deteriorating state of the global economy has meant development campaigners now face an even tougher task. Even so, Downing Street sources say that the summit is an important staging post in a "make or break year" for the fight against poverty, which Brown hopes will culminate in action at a special UN summit in New York in September.

In addition to a trade deal, Britain is urging action in three areas: increasing the number of health workers in poor countries; providing an extra $1bn to put more children into school; and a package to boost agriculture in poor countries.