With no serious progress possible, the summit has at times deteriorated into silliness…Mr. Obama was busy working the phones from St. Petersburg. He was almost an hour late for the banquet as a result — though not too late to miss Cristina Kirchner, Argentina’s president, deliver a rambling 25-minute diatribe on Argentine history. Mr. Obama should perhaps have stayed on the phone.[1]
How much progress has been made on cooperation on the five dimensions of international economic governance in the last year? The findings of the inaugural CIGI Survey on International Economic Governance released just prior to the St. Petersburg G20 Summit revealed a clear consensus among experts that there is some regression in arrangements for international economic governance, concluding that there is considerable cause for concern. The ratings for international cooperation on both macroeconomic policy and financial regulation came closest to being assessed as having made minimal progress, with more pessimistic results in the areas of development, international trade and climate change. Did the St. Petersburg G20 change this gloomy appraisal?
Was St. Petersburg “sound and fury, signifying nothing?”[2] Or were there sufficient initiatives to revise the unhappy CIGI-survey responses? A classic literary and cinematic technique (for example, the classic Japanese film Rashomon) is to provide an account of the same event from different perspectives to demonstrate the complexity of reality.
Pessimists analyzing the Leaders’ Declaration would have a substantive basis for skepticism. A search for positive reactions from pundits and editorial commentary comes up empty. G20 media coverage was monopolized by the Syrian issue.
One metric by which to judge the substantive content of the 114 paragraphs in the St. Petersburg Leaders’ Declaration[3] is to review how frequently content-free, meaningless words are used as verbs. The vacuous “We welcome” is used 48 times. Regarding existing commitments, “We reiterate” is used 10 times, “We reaffirm” is used in 19 paragraphs and “We renew” three times. One new low for the Leaders’ Declaration was the curious use of “We welcome” to endorse a report from their own finance ministers (Paragraph 92). There was one use of “We strongly welcome,” referring to the efforts of the UN Secretary-General to mobilize political will on a legally binding climate change agreement (Paragraph 101). If this is the best that the G20 can do, it may as well pack up and dissolve.
Optimists can point to evidence that St. Petersburg contributed to progress in all five areas of the CIGI survey — macroeconomic policy coordination, international cooperation on financial regulation, trade, development and climate change.
In the area of macroeconomic policy coordination, the statement: “We refrain from competitive devaluation and will not target our exchange rates for competitive purposes. We will resist all forms of protectionism and keep our markets open.” (Paragraph 17) is helpful — it makes it more likely that egregious measures will not be undertaken. The call on the International Monetary Fund “to carry out further research with a view to develop proposals on how to incorporate global liquidity indicators more broadly into the Fund’s surveillance work” could be a positive future input (Paragraph 58). The request to finance ministers to consider “policy options for designing transitional policies including strengthening social safety nets to ensure access for the most vulnerable” (Paragraph 94) could lead to some surprisingly positive results. Also potentially productive is the “call on our Finance Ministers to identify measures by the next Summit to facilitate domestic capital market development and improve the intermediation of global savings for productive long-term investments” (Paragraph 39). On balance, compared to a counterfactual of no G20 meeting — for instance, relying on the G8 or United Nations, St. Petersburg provided a modest nudge in the right direction.
In the area of international cooperation on financial regulation, the declaration crowed that reforms to financial systems are unprecedented, “but we have more work to do. We are committed to maintain the momentum of reform until the job is done” (Paragraph 61). No new substantive initiatives on Basel III, compensation or derivatives were introduced other than singling out systemically important financial institutions. Two requests could result in substantial progress. The Financial Stability Board was asked to develop proposals by the end of 2014 on the adequacy of global systemically important financial institutions’ loss-absorbing capacity when they fail (Paragraph 68). Finance ministers were asked to provide an update at Brisbane on the steps taken to meet Financial Action Task Force standards regarding the beneficial ownership of companies and other legal arrangements, such as trusts (Paragraph 77).
In the area of trade, even an optimistic proponent must acknowledge the G20’s irrelevance. Lip service was paid to their commitment to multilateral regimes. One interesting remit that may develop into something positive was the call for the Organisation for Economic Co-operation and Development, in cooperation with the World Trade Organization and the UN Conference on Trade and Development, to deliver a report on global value chains in the first half of 2014 (Paragraph 49).
In the area of development, the G20 definitively contributed to the rate of progress. Regarding accountability, the Annex to the “Accountability Report on G20 Development Commitments” shows that many of the commitments made in the G20’s Seoul Action Plan have been completed. The request to the Development Working Group could prove groundbreaking — they were asked to “focus on concrete actions under the core priorities of food security, financial inclusion and remittances, infrastructure, human resource development and domestic resource mobilization, and to deliver specific outcomes at the Brisbane summit” (Paragraph 84; emphasis added). A useful new initiative is the remit to G20 agricultural chief scientists, along with their ongoing work to identify global research priorities and targets, and support results-based agricultural research in 2014 (paragraphs 81 and 36). The commitment to tangibly improve domestic investment environments to be more favourable to long-term investment financing is notable — “identify and start to implement by the Brisbane Summit a set of collective and country-specific actions (Paragraph 36) — in that the pressure of the Brisbane date will help lead to early action.
In the area of climate change, the best face that the mortician’s cosmetician can apply is that finance ministers were asked to report back in one year on the operationalization of the Green Climate Fund (Paragraph 102), and the International Energy Forum was asked to report on progress in these areas — practical steps to increase transparency in international gas and coal markets (Paragraph 91). The G20 call for a dialogue to be launched to discuss barriers to investment in clean and energy-efficient technologies, and to scope possible promotion measures (Paragraph 95) could result in some useful findings.
Before St. Petersburg, the CIGI Survey polled experts using a quintile scale, where grades between 40 percent and 60 percent indicate “minimal progress” — sufficient to inspire confidence in the long term, sustainable balanced growth, but with non-negligible risks to the world economy if confronted by shocks. Grades between 20 percent and 40 percent represent “some regression” — insufficient to be confident that future crises could be avoided, or quarantined, consistent with potentially dramatic vulnerability of the world economy when confronted by shocks. The average score over the five dimensions was 30 percent.
Overall, the St. Petersburg G20 Summit did no harm to progress on international economic governance. If the CIGI survey had been taken after its meeting, it may even have bumped up the survey score a few points.
[2] From Shakespeare’s Macbeth, Act 5, Scene 5.