Like many others, I was down on the Group of 20 on the eve of the Brisbane summit. After a few pleasant surprises on the weekend, the group has earned a reprieve from questions about its relevancy. However, leaders did less than they could have on trade and economic growth, setting up 2015 as a defining year in the G20’s ability to deliver.
The G20’s greatest strength is to inspire confidence. In 2009, leaders did this by rapidly using fiscal policy to avoid a global depression. In 2014, they were faced with a global economy that stubbornly refuses to accelerate. Companies are profitable, yet executives are reluctant to invest. The onus was on the G20 to give private capital a reason to come off the sidelines.
US President Barack Obama and Prime Minister Narendra Modi did that a couple of days before the summit by resolving their differences over the Bali agreement on trade facilitation. True, the bilateral compromise came outside the G20, and was in fact done on the sidelines of a separate summit. But let’s assume the two leaders were motivated by the Brisbane agenda. The G20 includes all the power brokers at the World Trade Organization and the group rallied around the “breakthrough,” promising “full and prompt” implementation of the Trade Facilitation Agreement. They also said they would “swiftly” define a new work programme at the WTO to get the star-crossed Doha Round back on track.
This was the most optimistic language around multilateral trade in some time. The break from boilerplate endorsements of the WTO to specific pledges on revitalizing the process was positive, as so many of the G20’s members have prioritized trade-diverting bilateral and regional trade agreements. The cutting of red tape envisioned by the Bali agreement could reduce the cost of moving goods around the world by as much as 15 percent. That’s a tangible result from Brisbane and a nice win for the G20.
The line story in India’s press from the G20 on Monday was how Modi had used the summit to get firm backing for his efforts to repatriate “black money.” The G20 said it would begin automatically sharing tax information with each other by the end of 2018, at the latest. The communique also stated definitively that profits should be taxed “where economic activities deriving the profits are performed and where value is created.” Again, positive: international tax dodgers, you’ve been warned.
The headline from Brisbane was the official endorsement of the pledge to raise gross domestic product by 2.1 per cent, or more than US$2 trillion, by 2018. Mike Callahan, a former G20 negotiator from Australia, said in his analysis of the weekend's events that the Brisbane Action Plan is a “more substantive document” than previous ones of its kind. That may be so, but it still is flawed, and perhaps fatally so.
The issue is accountability. The G20’s peer review process is translucent when it should be transparent. A citizen of the G20 must dig to find the 2014 economic growth plans submitted by his or her government. The plans should be front and centre on the G20 webpage. Such transparency could invite derision, of course. For example, among Obama's commitments to his G20 counterparts is “comprehensive immigration reform,” a pledge that surely would amuse US House Speaker John Boehner.
Leaders said they would adjust their accountability exercise to reflect the specific targets agreed in Brisbane. “We will only achieve our collective ambition of lifting G20 GDP by more than 2 per cent once all of our reforms are fully implemented,” they said in the action plan. “Therefore, we will monitor and hold each other to account for the implementation of our comprehensive growth strategies.”
In this age of crowdsourcing, it’s not enough for the G20 to say it will police itself. An internal peer review is compromised by the fact that countries have no real incentive to comply. The incentive would be different if each country’s growth plans were advertised for the world to see alongside the internal evaluations and assessments of the International Monetary Fund and Organization for Economic Co-operation and Development. That kind of transparency would invite review by voters, opposition parties, NGOs, think tanks and investors.
The G20’s growth commitments will lack credibility until it opens the vetting process to more participants. By failing to do so, we have nothing to go by but its word. Therefore failure to deliver in the year ahead can only bring a new round of questions about the group’s relevancy.