The G20 summit -- as held in Washington, DC, on November 14-15 -- deserves some compliments for the signal it sends about the changing global order. But bravos on its actual performance will have to wait until the process proves successful after additional meetings through 2009 or even 2010. It will take some time before its impact on actual delivery will catch up to its importance as a defining moment in a fundamental global re-ordering.
A large source of distraction was the attempt of French President Nicolas Sarkozy to overtly capitalize on the political weakness of the host of the event, President George W. Bush. Whereas Bush was supportive of the event for allowing him a high-profile platform for economic confidence building and rejigging his eroded political legacy, Sarkozy used the summit to push a far more ambitious agenda of global regulation over the financial system. To help tilt the balance towards these goals, Sarkozy manipulated the informal rules of participation by securing seats at the table for Spain and the Netherlands.
In terms of style, it was this older twentieth-century struggle between American and European visions of states and markets that dominated. Bush and Sarkozy held separate media events at the same time on Saturday afternoon, giving very different spins on the summit. Reflecting their different levels of confidence, Bush presented a short prepared statement, whereas Sarkozy held a lengthy press conference listing his successes.
The big substantive story of the summit, however, is not as another chapter of trans-Atlantic tensions but as a coming-out party for the emerging powers of China, India and Brazil. This shift in power is illustrated symbolically by the seating order at the Friday night dinner, with Brazilian President Luiz Inacio Lula da Silva and Chinese President Hu Jintao on either side of President Bush. The European leaders -- including Sarkozy -- were clustered at one side of the table.
These countries have not gained this new status because of some newly found appreciation of global equity. Rather, they have done so because of their material capabilities, most notably their huge exchange reserves (China at a massive $2 trillion and Brazil with $200 million). The club’s entrance requirements for membership explain the absence of an African presence beyond South Africa (with one third of Africa’s GDP but only the twenty-fifth largest economy in the world). Material capabilities also provide the reason that Saudi Arabia gained entrance -- as it has in the G20 Finance -- over other contenders from the Middle East, such as Egypt.
In terms of its general tenor, what is fascinating about the summit’s declaration is the ability of the emerging powers to extract a more collective mea culpa from the North. Instead of simply targeting the US, the statement spreads the blame: “Policy makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets.”
These normative sentiments were supplemented by a number of concrete points in the summit’s action plan, put together following the meeting of the G20 Finance held a week earlier in Sao Paulo Brazil. One point was the call for a college of supervisors for all major cross-border financial institutions. Another was the call for the Financial Stability Forum to be expanded to encompass a broader membership. Still another was the call for the upgrading of the commitment of G20 countries with regard to assessments and reports under the Financial Sector Assessment Program (FSAP).
On top of working out how to move forward with the machinery with regard to these detailed items, bigger questions jump out. The first of these relates to the trade-off between an enhanced voice for the emerging powers versus their responsibilities. China in particular has shown it is willing to act as a pillar of the international system, both by its continued holdings of US treasury bonds and through its enormous ($570 billion) domestic stimulus package announced just prior to the summit. But pressure on this stabilization role has already increased, as witnessed by the call for China to transfer some of its reserves to the IMF, to ensure the adequacy of accessible resources in a time of widespread crisis. With such high stakes, making these trade-offs is not easy. The process will be helped, though, through a boost in the shared ownership of the G20 forum among its members. One significant measure is where the next summit or two will be held.
A second relates to how the G20 at the leaders’ level fits in with the other initiatives relating to either the ongoing G8 dialogue with emerging powers or potential G8 reform. As exhibited by the Washington summit, the G20 has some considerable advantages over other options. Working through this forum -- as an extension of the G20 Finance -- does not attract the same sensitivity as the proposals for an expanded G8 do. Indeed, the country most markedly resistant to G8 expansion -- Japan -- has been among the most active bidders to host another G20 summit. The greatest weakness in all proposals remains the under-representation of Africa, with partial exception of the Sarkozy/Berlusconi plan to include Egypt to the list of new G8 entrants.
The comparative disadvantage of the G20 forum is on efficiency, not legitimacy or political acceptability. What the G20 summit reveals very explicitly is that China, Indian and Brazil form the "big three" among invited countries from the global South. However, Mexico and South Africa have a strong claim to being accepted at the same level, especially as they have cut their diplomatic teeth as equal partners with the big three through the Heiligendamm Process, started at the 2007 G8 summit. Strictly in terms of economic influence, nonetheless there is a clear gulf between China, India and Brazil on one side and Mexico and South Africa on the other. This gulf is widened still further when the big three are compared to additional members of the G20, such as Argentina and Turkey.
A third question relates to the ongoing commitment of the US to the G20 forum. Caught between a Europe that knows how to work the diplomatic rules to its own benefit and a rising tier of emerging powers with material capabilities to match their aspirations, the US will have a major psychological test adjusting to these altered conditions. The fact that President-elect Barack Obama is an instinctive multilateralist -- with an impressive set of like-minded advisors -- helps to smooth this adjustment. Still, the severity of the tensions between older claims of primacy and the new concert of power should not be underestimated.
* The opinions expressed herein are those of the author and do not necessarily reflect the views of The Centre for International Governance Innovation, its Board of Directors and/or its Board of Governors.