G20 needs new blood, sense of mission

The Hill Times  OPINION

by John Sinclair. 

PUBLISHED : Wednesday, Aug. 31, 2016

G20 needs new blood, sense of mission

Trudeau might suggest a tighter-knit forum for decisions on core global issues, starting with climate change.

As China prepares to host the G20 leaders’ summit for the first time this week, it is promising a different kind of summit, one focused on global development and the challenges of implementing the pro-poor goals of the UN’s new Agenda 2030.

But China seems fated to do little better than past chairs. The G20 is starting to look as tired as the G7. It needs new blood and a new sense of mission. Perhaps there are too many Europeans; certainly there is no voice at the table for the poorest nations.

The G20 started in 1999 as a club of finance ministers mainly G7 but augmented by the BRICS and a few other friendly minor countries, including some middle-income developing countries. The goal was to make symbolic amends for an ineffective International Monetary Fund response to the recent Asian financial crisis.

The world has avoided a new depression in 2008 via massive stimulus packages implemented by a G20, upgraded to a Leaders’ Summit. However, the regulatory reform of the flawed global financial systems that triggered the crisis is still unfinished. Indeed, the situation has been compounded by the ripple effect of recent European financial disorder. As for the upcoming United States election, it is being fought over who can most forcefully say globalization is the cause of all our social ills, including growing inequality and underemployment.

The global financial crisis continues into its eighth year. And it is in the second year of a refugee crisis, as Europe copes badly with the flow of battered humanity escaping the conflict in Syria. The Brexit referendum bombshell, driven by the UK’s own distinct crisis of unwanted migrants from inside the European Union, has stunned an already stalled Europe. Deep depression describes the mood in the very dis-united United Kingdom. Meanwhile many countries, rich and poor, are struggling with trade losses due to China’s policy of a calculated slowdown to 6.5 per cent growth.

China has perhaps over-invited developing countries as summit guests since there will be no big news, no bold new G20 action, no new aid pledges for the least developed or fragile states. Everybody is waiting for a breakthrough in the gloomy economic news.

But the latest IMF forecasts are all about shrinking growth. Global growth is down to 3.1 per cent for 2016, with most of that coming from emerging economies. They’re led by India, moving slightly ahead of China. The growth forecast for so-called advanced economies is just 1.8 per cent. All this is conveniently blamed upon Brexit. It means a major G20 preoccupation this weekend will be how to help the UK and EU find a soft landing after the folly of that referendum.

So what might we see out of Hangzhou? The working agenda is dominated by work by  finance ministers and central bank governors. There is again a pre-negotiated communiqué. The Leaders appear somewhat bystanders.

Once more there will be “almost completed” deals on structural reform, tougher regulation of footloose bankers and this year’s special innovation: promises of more infrastructure spending. Talk about reformed international financial architecture is promised, but the horse is already out of the stable, symbolized by China’s new $50-billion-plus Asian Infrastructure Investment Bank. [Canada announced plans to finally join just days before the G20 meeting.]

Another round of technical debate is needed to forge a broad consensus around so-called tax fairness reform. The present package is essentially designed for large/high-income economies.  In many European countries public pressure insists governments stop tax-avoiding, profit-shifting companies like Starbucks or Google. But the same OECD countries are home to multinational giants seeking every way of avoiding paying taxes. The weakest victims, poorer developing countries, are essentially excluded from both the design and benefits of new OECD/G20 anti-tax-evasion measures. They are to be denied access to key data on taxes evasion by multinational giants.

What key innovations for an enhanced G20 might Prime Minister Justin Trudeau press? He has gone to China a few days early to “reset” the bilateral relationship. He might use that access and Chinese respect for his prime ministerial father’s boldness to get China’s sympathetic ear for an effort to transform the G20 into strictly a leaders’ dialogue.

They need to break the common image of the G20 as a vehicle used by a tired G7 to try to get the BRICS (Brazil, Russia, India, China, and South Africa) to align with their worldview. Mr. Trudeau might suggest that leaders act more boldly to revamp the G20 as a tighter-knit forum for debate and decisions on core global issues, economic and political, starting with climate change. An encouraging precedent is that reportedly the United States and China plan to jointly announce their ratification of the Paris climate agreement on the eve of the summit.

Another G20 initiative could be a new Marshall Plan designed to assure financing, public and private, for the poorest countries in implementing the UN’s Agenda 2030.

And why not encourage the 2017 G20, under German leadership, to target a lasting peace for the Middle East?

G20 finance ministers and central bankers would still have their own high-level meetings on topics like upgraded financial regulation. They could simply mandate a small delegation to report at one session of an otherwise leaders-only G20 meeting.

Acting together, G20 leaders could mobilize the resources and political willpower to counter the economic pessimism reflected in Trumpism and the rise of the radical conservative right in Europe. They should also show the driving spirit to ensure the UN Agenda 2030 is not a fanciful dream, but something realizable.

The G20 needs a more compact forum, but one with the inclusiveness of the UN. It could start by adding a permanent seat for least-developed and fragile states, perhaps by reducing the disproportionate European presence.

John Sinclair is a Cambridge-educated economics graduate formerly with the Canadian International Development Agency and the World Bank. He comments on international development with the McLeod Group, teaches, and writes.




Poverty lose out to ‘shirt-fronting’ at Brisbane G20

Published in EMBASSY, Wednesday, November 12, 2014—16 Opinion

Climate change, poverty lose out to ‘shirt-fronting’ at G20

It is becoming harder each year to see anything new and bold, anything that speaks to a better global future, from the G20. The 20 most powerful global leaders will gather this weekend in Brisbane, Australia, talk in private, have their photo-ops, then issue a pre-packaged communiqué that has been endlessly fine-tuned over several months to the point of tedium by twenty anonymous bureaucrats, the sherpas.

We won’t even get to see the big fight: ‘shirt-fronting’ host Tony Abbott versa black-belt holder, Vladimir Putin. (Some well-informed punters suggested 10-1 odds on a Putin win.)

Meanwhile the world outside, our world, stumbles on into another year of under-performing economies and a billion plus global citizens still living on less than $1.25 per day. This year’s rotating chair, Australia, almost succeeded in removing the existential topic of climate change from the agenda as mere ‘clutter’, until a last minute reprieve under pressure from the US and EU.

It is not clear if we are dealing with incompetence or indifference, but I fear the latter.

Of course the sherpas, respecting PM Abbott’s goals, have put together a busy but dull agenda, much of it is unfinished work from previous summits. Timely effective implementation does not seem to be a G20 strong point. Too many ‘decisions’ becomes subject to further studies. Maybe it needs a better accountability framework, one that is public and independently assessed.

Under the heading ‘a more resilient global economy’ the leaders will sign off on further regulations for those ‘too-big-to-fail’ banks that led us into the global financial crisis back in 2008. However past G20 decisions have done little for a struggling Europe. And now the German powerhouse is stalled and China admits to planning for slower growth.

PM Abbott’s favourite is a largely private sector-driven G20 push on infrastructure, to be supported by a newly created knowledge ‘Hub’ for those who don’t know quite what to do.

Meanwhile an impatient China has simply set up its own $100 billion Asian Infrastructure Bank.

There is more on the agenda – after all they have to touch at least lightly upon everything in the draft communiqué. They say they will discuss reforming global institutions – but, blocked by the US Congress, the very modest 2010 IMF reform package is still not implemented and the BRICS, in frustration at this inaction, have now announced their own IMF clone. The G20 plans to talk about ‘modernising international taxation’, a polite way of saying stopping the tax avoidance activities of companies such as Starbucks and Apple as they shuffle huge worldwide profits into countries such as Ireland and Luxembourg where very low taxes need to be paid. Will they remember to include the idea of a financial transactions tax to create new funds for climate action and development?

The meeting will plead for progress on the work of the WTO (World Trade Organisation) but the same reform package was rejected last year by veto-holding developing countries, notably India, since it failed to include any action to reduce huge US and EU agricultural subsidies that undermine the efforts of low-income country farmers. And those same G20 member industrialised countries, with Canada to the fore, are busy cooking up trade side-deals that undermine the WTO mandate for multilateralism. Sadly, the big fix idea for burgeoning unemployment, especially of the young, is discredited trickle-down economics. The G20 will call upon themselves to speed-up (+2%) growth, itself dependent on that plan for a surge in private investment on infrastructure.

All this suggests some holes in the master-plan for Brisbane. But it also points to serious structural flaws in the G20. Most fundamental is inadequately engaged leadership. There is too little focus on fundamental global challenges; too much technical clutter that should be left to others. The G20 is also institutionally weak. It has no secretariat. Its leaders probably rely too much on advice from IMF and OECD officials plus international bankers. It has no leadership continuity beyond the flimsy idea of the troika in which a team of ‘volunteers’, mainly bureaucrats seconded by the next chairman’s country, takes over afresh.

Moreover, despite being much more inclusive than the old elitist G7, the G20 needs to gain a permanent voice for the most vulnerable of low-income countries, the fragiles, known now as the ‘g7+’. Not unlike the IMF, the main problem is over-representation by Europe with 5/20 formal seats plus Spain with a permanent guest ticket. Any volunteers?

A by now perennial criticism is that the G20, both Leaders and Finance Ministers, have obsessed about mending Humpty after the global financial crisis at the expense of everything else we expect to concern global leaders. This is the last G20 before the UN membership at a summit next September sets in place a very ambitious global development agenda for the next 15 years, one set to eliminate extreme poverty by 2030. One might think the G20 would be devoting at least half of its time to this topic (and at least a sold chunk of the other half to Climate Change) leaving topics like the minutiae of new banking rules and efforts to resuscitate the WTO to technocrats. In practice the words ‘Post-2015 Agenda’ do not even appear once in the baseline framework posted on its Australian-managed website. How many lines will it merit in the Brisbane Action Plan? Perhaps a few passing words of moral support? Certainly expect no promises of aggressive unified G20 leadership at the critical Financing for Development conference next July in Ethiopia.

Intriguingly yesterday’s de facto summit of the G2 – USA and China – saw public pledges by Presidents Obama and Xi to work more closely on global issues, including specifically climate change. Is this a new opening for G20 leadership?

Is Canada a party to all this? Yes. We certainly had our sherpa at all the planning meetings. Moreover as Australia’s special ‘mate’ we have had privileged opportunities to influence them, beyond the idea of excluding Russia (something a BRICS’ public statement saying ‘hands off our G20’ quickly squelched). We probably support the incrementalist economics – but so far the Harper government has been dismissive of Opposition calls for a big infrastructure program using our new-found budget surplus. The government more broadly probably dislikes the idea of any action that challenges their dated view that the G7 is still the right place for serious global leadership. Overall we are happy to have had the Australians talking our party line, thus saving us from always being the spoiler.

John Sinclair, a Cambridge-educated economist, worked as a development practitioner at CIDA and the World Bank. He is a member of the McLeod Group. He is also a Distinguished Associate of the former North-South Institute.