This year’s G20 summit is set to end on November 16 after two days of talks in Brisbane, Australia. The next day, Xi Jinping, leader of the fastest growing major economy, will address the Australian parliament in Canberra. On November 18, Narendra Modi, who has inspired a nation of more than 1.2 billion people that it can rival China as an economic power, is scheduled to become the first Indian prime minister ever to speak to a full assembly of Australian lawmakers.
Those could be three fascinating days. By the time Modi makes it to Canberra, UK prime minister David Cameron’s speech to parliament on November 14 likely will have been forgotten. And sadly, based on its recent track record, the G20 will have been forgotten too. The post-crisis period has come to be characterized by bilateral trade negotiations, an uncomfortable rise in border scuffling and resurgent Islamic terrorism. With that backdrop, except Xi and Modi to steal the stage from the G20.
That’s a sad statement on the group that anointed itself the “premier” body for global economic cooperation. The G20 emerged as a leaders forum five years ago with such promise. The world’s most important countries said they would arrest the economic meltdown and they did. The massive expense of summitry suddenly seemed worth it.
But the list of subsequent disappointments has grown too long to assume the G20’s early success was anything more than a fluke. Mike Callahan, the head of the G20 Studies Centre at the Lowy Institute who served as the Australian Treasury’s top international official from 2008 to 2012, identified six broad failures in a paper last month. The most fundamental is the lack of momentum in the global economy. The headline agenda item for the Brisbane G20 is securing agreement on a promise to lift global gross domestic product by 2 percentage points from its 2013 level over five years. The International Monetary Fund has cut it forecast for global growth twice since then, making the commitment that much harder to meet.
It was President Barack Obama in Pittsburgh in 2010 who declared that G20 would henceforth be the global community’s economic steering committee. Yet the US and its allies carry on meeting under the umbrella of the Group of Seven. The US, Canada, Australia and the European members of the G20 have sanctioned Russia, a G20 ally, and vice versa. Argentina defaulted on its debt for a second time in 13 years and India scuttled the first truly global trade agreement since the World Trade Organization was established in 1995. The US still is blocking an overhaul of IMF voting shares that was agreed to in 2010 and the G20 has shown little resolve to get seriously involved in climate change.
The growth commitment is Australia’s idea of giving the G20 the kick it so badly needs. The initiative has an echo of the G20’s use coordinated fiscal stimulus measures in 2009 to boost global demand. Patrick Suckling, Australia’s high commissioner to India, wrote this week that there are more than 900 measures in place to meet the 2-per-cent growth target. The figure is meant to impress. It reads instead like resume padding. The G20 inspired confidence in 2009 because it made simple promises over a short time horizon. The 2014 growth initiative is too complex and too opaque. There also are too many elections between now and 2018 to allow the G20 to credibly say it will deliver.
Despite the dim outlook, there are two simple things that Australian Prime Minister Tony Abbott can do to save his presidency of the G20 and inspire confidence.
The first is to implement a credible mechanism for making countries accountable for their growth pledges. The IMF and the Organization for Economic Co-operation and Development should report quarterly on what each member of the G20 is doing to keep its promises. The data should be public and easily accessible so investors and voters have an opportunity to assist in the accountability exercise. The Alliance for Financial Inclusion urges its members forward not by seeking a vague consensus, but by posting the steps each member is taking to reach the organization’s goals. The group’s leaders have found the approach breeds competition. The G20 should do the same and make sure the public and financial markets know who in the group is most committed to good economic policy.
The other thing Abbott could do is intervene to end the WTO standoff over the Bali agreement of 2013. Earlier this week, the leaders of the Asia Pacific Economic Cooperation (APEC) expressed their “grave concern” over India’s flip from supporter to opponent in July and pledged to be “creative” in saving the Bali effort. There are eight members of APEC in the G20. Modi will be in Brisbane, as will the leaders of Brazil and the European Union.
These are the power brokers at the WTO. Abbott should lock the door until they resolve their differences over Bali. Anything less than a convincing statement from the G20 that it has salvaged the Doha Round of global trade talks will be a failure. If such a statement is missing, discard the G20 communique and wait to hear what Xi and Modi have to say about reviving the global economy.