The 20-strong group of finance ministers from the leading industrial and developing economies was an initiative launched jointly by Canada's Finance Minister Paul Martin and US Treasury Secretary Lawrence Summers.

When Martin became prime minister, emboldened by the success of the G20 for tackling common financial problems besetting the world, he floated the idea of upgrading the forum to a leaders' level meeting. His party lost power; there was not much enthusiasm within the bureaucratic establishment for Canada moving from one of eight to one of 20 participants at a top table of global governance, and it was left to think tanks such as mine to study the desirability and feasibility of the idea. Come the systemic financial crisis roiling the world last year and, lo and behold, the scheduled finance ministers' G20 meeting in Washington last November was dramatically upgraded to a summit conference.

Brought into existence by exogenous shock rather than compelling logic, the new grouping is likely to be with us for some time yet, with a broadened agenda, even after its second meeting in London on April 2.

This may be bad news for the G7-G8 and the UN Security Council, but it is good news for beginning to address some of the accumulating global deadlocks. It is also good news for Australia. Martin must have the rare satisfaction of being proved a visionary prophet in his lifetime.

The challenge of global governance is fivefold:

* The evolution of international institutions to facilitate co-operation and mute conflict lags behind the rise ofcollective problems with cross-border dimensions.

* The most pressing problems - nuclear weapons proliferation and disarmament, international terrorism (we cannot even agree on a definition), global pandemics, critical food scarcity and rising food and fuel prices, the Doha Round of trade talks, climate change - are global in scope and require global solutions. But the policy authority and resources for tackling them remains vested in states.

* There is a disconnect between the distribution of authority in existing international institutions and the distribution of military and economic power in the real world. Many Asian governments questioned the World Bank and International Monetary Fund-based financial governance structure after the Asian financial crisis of 1997-98. Nothing in the intervening decade has lessened the governance challenge. India and Japan are out of UN Security Council permanent membership; China and India are outside the G8. No important Asian and few global issues can be resolved effectively without involving all three.

* There is a mutually undermining gap between legitimacy and efficiency. The UN's unique legitimacy flows from its universality, which also makes it a terribly inefficient and frustrating body for making, implementing and enforcing collective decisions. Conversely, the small size of the G7-G8 forum was meant to facilitate easy and highly personalised decision-making but renders its outcomes deeply unrepresentative of population, economic, military and diplomatic power and influence, and therefore lacking in legitimacy and effectiveness.

* During the Cold War, the main axis around which world affairs rotated was East-West. Since the end of the Cold War, this has morphed into a North-South axis.

The poison of mutual mistrust rooted in the history of their encounter from opposite sides of the colonial divide and their differing everyday reality today continues to infect some of the most critical items on the agenda of international public policy, from war, terrorism and nuclear weapons to human rights, the protection of civilians across borders, free trade in agriculture and climate change. So we must ask, what is the best global leadership grouping that can strike deals through a process of North-South bargaining and accommodation?

On climate change as much as on the financial crisis, industrial and emerging market economies need to acknowledge their common but differentiated responsibilities, accept an equivalence of burden-sharing, see that all countries take national action andnegotiate effective regulatory regimes aimed at stabilising financial markets as well as global levels of carbon emissions.

For this they need to come together within a common forum on a regular basis at the highest levels of leaders. Germany semi-formalised the G8+5 (Brazil, China, India, Mexico, and South Africa) in the Heiligendamm formula. The Outreach 5 made clear their opposition to being invited only to share coffee and dessert as guests at the table after the main banquet was finished. It is insulting to have the likes of President Hu Jintao and Prime Minister Manmohan Singh waiting in an anteroom until summoned by the G8 leaders to join them briefly around the table.

Australia has shown in recent years, under John Howard and Kevin Rudd, that it can contribute to global debates and solutions on the normative, policy development, financial and operational fronts. Indeed Australia, Canada and India are among a handful of countries that refused to abandon "strong oversight and commonsense rules", in the recent words of President Barack Obama, for regulating their financial and banking institutions.

No forum can guarantee resolution of clashing interests but an intimate yet representative group whose members get to know, understand and trust one another is likelier to succeed than the G8 or the UN. The G20 should replace the G8 as the grouping that counts, with the UN serving as a universal validating rather than a credible negotiating forum.

The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.