TONY BLAIR does not want to give up his office before he has left a permanent mark on the world. This is understandable. But the two international issues that he has chosen to define his legacy — African poverty and climate change — only remind us of the Prime Minister’s besetting sin of self-delusion, for which he suffered so grievously at the polls. If Mr Blair sincerely wants to pull Africa out of poverty and ward off the threat of global warming, he had better secure his position in Downing Street not just for the next five years, but the next five decades.

But Mr Blair is remarkably well placed to leave an important international legacy in weeks, even days. He could make a breakthrough which consolidates free trade, reduces friction between the world’s superpowers and helps a properly managed process of globalisation to improve living standards for billions of the world’s poorest people (including most Africans).

Mr Blair enjoys this opportunity because of a coincidence of events whose connections he is surely unaware of. The one he certainly knows about is his impending chairmanship of the G7 economic summit in Scotland in July. The second is the threat to jobs in America and Europe posed by Asian competition. The third is the protectionist backlash that this Asian competition has triggered in the US and Europe. The fourth is the link between protectionism and the misalignment of currencies, especially in Asia. The fifth, which Mr Blair can scarcely have noticed, is Tuesday’s US Treasury report on currency management, in which the Bush Administration effectively presented the Chinese Government with a six-month ultimatum to revalue its exchange rate or face a trade war. The sixth event, of which I am sure the Prime Minister is blissfully unaware, is an unpublicised bureaucratic gathering in London today and tomorrow of the G7 finance deputies, known as the sherpas, since their job is to prepare the agenda for the summits of G7 finance ministers and heads of government in June and July.

The connection between all these events is the fact that the G7 summit, effectively the directors’ meeting of the global monetary system, gives Mr Blair a once-in-a-lifetime opportunity to act as an honest broker in all the currency and trade disputes between Asia and the West.

Britain is uniquely qualified to mediate in these issues because of its financial and diplomatic expertise, because it is trusted by the United States and because it has been directly threatened by Asian competition, more than any other Western country.

Moreover, the best way to avert a looming confrontation between the United States and China, and more generally between West and East, would be to use all the hallmark techniques of Blairite politics — compromise, triangulation and the balancing of “rights and responsibilities”. And best of all, this solution could leave all parties diplomatically satisfied, as well as economically better off.

The solution would be to bring China into the G7. In exchange for the right to be recognised as an equal partner by today’s G7 — the US, Japan, Germany, Britain, France, Italy and Canada — China would be asked to accept the responsibilities that go with full membership of the global monetary system, above all full co-operation in the management of a global system of floating exchange rates. This is the sort of quid pro quo that the Chinese would probably find acceptable, to judge by the precedent set when China negotiated its admission to the World Trade Organisation. Inviting China to join the G7 would certainly be more diplomatic — and therefore more likely to succeed in winning Chinese acquiescence — than the bullying now attempted by Washington in its currency manipulation paper and the EU in its talks on textile trade.

Moreover, Chinese membership would be a huge boon to the G7 itself, potentially restoring this informal gathering to the enormous power and relevance it enjoyed when it was first set up in the late 1970s. China is now the sixth largest economy in the world (just ahead of Italy) in terms of total output, the fourth largest trader (after America, Germany and Japan) and the second largest owner of international currencies (after Japan). Without China, the G7 can scarcely claim any longer to be the world’s economic and monetary directorate.

The present associate status, whereby Chinese ministers are periodically invited to special sessions of the G7 in order to be read the riot act or to be instructed on how to run their economy by the likes of the Italian Finance Minister or the Prime Minister of Luxembourg (speaking on behalf of the EU) is not just politically humiliating but dysfunctional. China is now a key player in all the currency and financial issues which the G7 created to manage. For today’s G7 members to discuss global trade imbalances or currency movements without a Chinese minister in the room is simply a waste of time.

Why, if it has all these advantages, is Chinese membership not already on the G7 agenda? The main objection seems to be that admission to the G7 (or G8) would imply an endorsement of China’s undemocratic political arrangements. This is nothing more than a pretext, since Russia’s admission to some G8 summits but not others has already set the precedent for a strict separation of political and economic issues. The real reason seems simply to be that a lack of communication between foreign and finance ministries in all the G7 countries has led to a breakdown in strategic thinking about China’s significance.

Mr Blair, working hand in glove with Gordon Brown, now has a perfect opportunity to redress this strategic error by putting into practice another of his favourite slogans, “joined-up government”. He could start today by telling the G7 deputies meeting in London to put Chinese membership at the top of their agenda.

Times Recommends

• Fundamentalist brew: faith and power
• Big guns wheeled out for the marginals
• Wanted: new merchants of light