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Tipsheet: IU experts look ahead to the Sea Island G8 Summit

Editors: Next Thursday and Friday (June 3-4) Indiana University's Kelley School of Business will host a major conference in Bloomington in advance of the 2004 gathering of the Group of Eight (G8) nations in Sea Island, Ga. Below are summaries of research being presented by IU faculty members at the conference, "Security, Prosperity and Freedom: Why America Needs the G8." Direct links to their papers and contact information are included below. The conference agenda and links to these and other papers are available online at:

International business, including oil markets, is regional, not global, according to Alan Rugman, the L. Leslie Waters Chair in international business and director of the IU Center for International Business Education and Research. The majority of international business is conducted within the regional blocks of North America, Asia and the European Union. "Approximately 60 percent of world trade is intra-regional, and the world's 500 largest firms average over 70 percent of their sales in their home region," Rugman wrote in his paper "U.S. Energy Security and Regional Business." "In terms of energy, the picture is also regional. Indeed, the United States relies on oil produced in all of the Persian Gulf for only 12 percent of its entire oil consumption. The United States obtains nearly 60 percent of its oil from NAFTA. Clearly, the United States can develop a strategy of energy self-sufficiency if it wishes. If it does so, responsibility for the Middle East would need to shift to other G8 members who have a greater long-term energy dependency on Middle Eastern oil." Rugman can be reached at 812-855-5415 or at His paper is available online.

One less recognized cost of attaining homeland security is the reduced flow of intellectual capital across borders, according to David Audretsch, director of the Institute for Development Strategies and the Ameritech Chair of Economic Development in IU's School of Public and Environmental Affairs. "Sept. 11 changed the growing consensus among the G-8 that mobility of knowledge workers across national boundaries was essential to generate economic growth," wrote Audretsch, also director of the IU Institute for West European Studies, in his paper "Economic Growth and National Security: The View from Europe." "The demand for homeland security has impeded the trans-border flows of knowledge workers, resulting in a tradeoff between homeland security, on the one hand, and economic growth on the other hand. Homeland security may have not only a direct cost, but also an indirect cost in terms of lower rates of economic growth. By working towards a common goal, the G-8 can address this tradeoff, enabling the attainment of homeland security at the lowest possible cost in terms of foregone economic growth." Audretsch's paper is available online. He can be reached at 812-855-6766 at

Current U.S. unilateral policy towards fighting terrorism ultimately will be too costly in terms of reduced transnational flows of trade, physical capital and human capital, according to Michele Fratianni and Heejoon Kang, professors of business economics and public policy in IU's Kelley School of Business. "We predict that unilateralism cannot last," Fratianni and Kang wrote in their paper "Borders and International Terrorism." "In addition to not being in the interest of the United States, the search for softer targets on the part of terrorists will yield ultimately a multilateral solution to terrorism, at least within the confines of the largest industrial democracies. Unlike a pure public good, counterterrorism generates large private benefits and mitigates free riding." Over time other industrial economies will have incentives to stop free riding on U.S. actions and adopt similar border security. The multilateral approach to counterterrorism, while appearing to be a cooperative solution, will in fact emerge because private costs of international terrorism will progressively shift from the United States to the other G8 nations. "In an attempt to minimize the cost of hardened borders, some regional trade agreements may experiment with common security perimeters. This will lead to a deeper regional trade bias." Fratianni, chair of business economics and public policy and the W. George Pinnell Professor in the Kelley School, can be reached at 812-855-9219 or at Kang, professor of business economics and public policy, can be reached at 812-855-9219 or at Their paper can be read online.

There is potential for G8 countries to bridge the global digital divide between them and developing countries, based on the brief history of the Digital Opportunities Task Force (DOT), according to Jeffrey A. Hart, IU professor of political science. During the past decade, G8 countries have discussed a number of issues related to the governance of cyberspace. "While these discussions were initiated by the U.S. government, they moved over time in a direction not anticipated by any of the G-8 governments," Hart wrote in the introduction to his paper "The Digital Opportunities Task Force: The G8's Effort to Bridge the Global Digital Divide." "The DOT Force demonstrates the potential effectiveness of the G8, especially relative to other international regimes, in creating solutions to collective problems. The main problem that the DOT Force has solved to date is providing an answer to critics of the tendency of intergovernmental organizations like the G8 to exclude participants from 'civil society' -- that is, private firms, nongovernmental organizations and other social groups." He said the collaborative approach should be more successful than the intergovernmental approach, because it permits the G8 to tap directly some of the best ideas of participants in international counter terrorism markets and of potential aid recipients. Hart presented an earlier version of the paper at the annual convention of the International Studies Association this spring in Montreal, Canada. Hart can be reached at 812-855-9002 or at His paper can be read online.