By Katinka Barysch
George W Bush convened the first G20 summit in Washington in November 2008, at the height of the global financial and economic crisis. At two further summits in 2009, G20 leaders pledged to co-ordinate their economic stimulus packages (as well as exit strategies), avoid protectionism, address global imbalances, triple the resources of the IMF, and work out stricter rules for banks, hedge funds and other financial players.
The G20 was hailed as the body that would prevent the global economy from hurtling into another great depression. It would also allow the world's top economies, including for the first time the big emerging markets, to co-ordinate their policies in such a way as to make future crises less likely.
"Whatever happens, the G20 is already a winner", wrote Martin Wolf in the Financial Times at the time of the G20 Pittsburgh summit in September 2009. "The fact that it has become central to global policymaking may prove a more important legacy of this crisis than any specific agreements it reaches."
Less than 18 months after the initial Washington summit, however, the G20 has almost disappeared from public view. As growth has returned in most countries, the sense of urgency to 'fix' the world economy has started to fade. The new body's legitimacy is already being questioned. That is unfortunate because the G20 still has a daunting to-do list. The risk now is that the debate about what the G20 should do is superseded by one about what it should look like.
Critics are right that the G20 is unwieldy. Once the representatives from international organisations such as the IMF and the WTO, as well as regional groupings such as ASEAN, are added, the total number of leaders and top officials at G20 summits is closer to 30. The easiest way to cut the G20 down to size would be to reduce Europe's over-representation: France, Germany, Italy and the UK are members. Spain, which holds the rotating EU presidency, will once again attend the next G20 summit. So will the presidents of the European Commission, the European Council and the European Central Bank (and now Jean-Claude Juncker, who heads the eurogroup, wants to come, too). The fact that one third of G20 participants hail from Europe and only two from Africa reduces the legitimacy of this body in the eyes of many poorer countries.
The Europeans will one day have to streamline their representation. (Meanwhile, Pascal Lamy suggests how the Europeans can make less of a nuisance of themselves, see 'Too many Europeans in G20: If you must hog the seats, could you at least talk less?'.) Perhaps other emerging economies will be added instead. But this is not the time to open the Pandora's box of who should be allowed to attend G20 summits. If the group is to regain momentum and authority, it needs to first and foremost deliver on its promises.
On trade, G20 governments have not fully lived up to their pledge to refrain from protectionism. In the 12 months following the Washington summit, the countries represented there adopted 179 policies that harmed foreign trade, investment or workers, according to Global Trade Alert. The overall damage, however, has been limited and the pace with which G20 countries have imposed new tariffs and anti-dumping actions has slowed in the last six months. World leaders had also instructed their trade negotiators to finish the WTO's Doha round by the end of 2009. But multilateral trade talks remain stuck.
The G20's report card is similarly mixed when it comes to re-regulating financial markets. Despite the promise to work out new rules together, several G20 members have announced measures without consulting their partners, for example the US administration's Volcker rule or the EU’s alternative investment directive. Nevertheless, the newly established Financial Stability Board (consisting of G20 finance ministers, central bankers and regulators) has helped to forge a broad consensus on what needs to be done in terms of capital and liquidity ratios, bankers' pay and so on. At the next G20 summit in June in Toronto, governments are likely to back plans for a new levy on banks.
Least progress has been achieved on global imbalances. The G20 has been sidelined, while the real discussions about exchange rate policies and trade balances have taken place between Washington and Beijing. Whether the Americans manage to put global imbalances on the Toronto agenda despite Chinese opposition is a serious test for the new forum.
To achieve results, the G20 leaders need to do two things. First, they need to concentrate on unfinished business and resist the temptation, or the pressure, to take on new tasks. The G20 has rightly rejected suggestions that it should discuss geo-political issues, such as Iran's nuclear programme. It should avoid being saddled with global climate change discussions. South Korea's idea of adding development and poverty reduction to the agenda of the G20 summit in Seoul in November is harder to dismiss. Such a broadening of the agenda would keep emerging economies interested and show that the G20 agenda does not merely reflect rich countries' interests.
Second, for the G20 to make a difference, leaders need to focus on the urgent but unexciting task of integrating the G20 into the existing systems of global governance. The G20, like the G7/8 before it, is a process, not an organisation. It cannot take legally binding decisions. It does not have a permanent secretariat. But it does have a signalling function that can galvanise governments and other international organisations to act. It did so, for example, by adopting a strong stance on tax havens at the London summit in April 2009. In March 2010, Angel Gurria, secretary-general of the OECD, said (at the GMF Brussels Forum) that on taxation and transparency, there has been "more progress in the last 12 months than in the previous 12 years, because of a clear mandate from the G20". But not all institutional links function that smoothly. Officials in the UN and other venerable bodies resent that the G20 is hogging the limelight. Yet it is these bodies that will have to implement G20 decisions.
Katinka Barysch is deputy director of the Centre for European Reform.
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