Bottom line

The coming week is a busy one. First, the Federal Reserve is expected to leave the Fed funds rate at its current 1.75 percent level. As the disparity grows in global interest rates, investors could search elsewhere for better rates of return. Both the Canadian and Australian dollars have benefited from the interest rate differential.

Hard on the heels of the Fed meeting is the Group of Eight summit on June 26^th, to be held at the Canadian resort of Kananaskis, high in the Rockies of Alberta. The main focus for the leaders of the United States, Canada, Britain, France, Germany, Italy, Japan and Russia will be helping the poorest countries become full participants in the global economy. There is obviously one important benefit in bringing the leaders of the world’s most powerful economies together in a quiet setting — it helps them get to know each other. Familiarity can be an important factor at times of crisis as we have learned. But given the disparities on international trade issues between participants, they will probably avoid tackling one of the biggest obstacles to economic progress in the developing world — open markets. The G-8 countries pay lip service to the principles of free trade, but they are a long way from putting it into practice. Europe remains wedded to agricultural protection and so does the United States to judge by the farm subsidy bill recently passed by Congress. Europe and Japan are irate over the decision to impose duties on steel imports by the United States. While they bicker among themselves, rich countries won’t do much for global free trade.