Just as the Korean summit in 2010 was the first time the G20 leaders were hosted by an Asian country, and the 2012 Mexican summit the first time they were hosted by a Latin American nation, this year’s summit in Turkey will be the first held by a Muslim majority country, which reinforces the fact that the greatest opportunity and challenge the G20 faces with its many cultures, religions and political systems is how to make globalization work in a world of differences.
This is the challenge the Turkish government issued when it said that the most pressing need at the present time is for the G20 to ensure “inclusive and robust growth through collective action.”
It is for this reason that the problem the G20 must face is the insidious weakening of the world’s great multilateral institutions, whose fundamental purpose for being is to make that “collective action” as effective as possible.
Now, and over the years to come, the issues the G20 will confront will be as varied as the pebbles on a beach, and while bargaining across countries will inevitably begin on the basis of national self-interest, in the end, success will only be achieved if the member countries grasp the unassailable truth that in today’s interdependent world, the furtherance of a country’s self-interest will depend more and more on the degree to which it furthers the global interest.
The problem is, from the causes and consequences of the 2008 recession through to climate change, from the call for cyber security through to the balkanization of the Internet, the majority of today’s issues show just how unprepared the world’s governments are when faced by a planet whose concerns lie beyond the scope of purely national interests.
There are those who will point out that at the moment, the frontiers of globalization are being rolled back. Indeed, Ukraine, the sectarian conflicts engulfing the Arab world and the rise of European nationalism might suggest that the flip side of globalization — fragmentation — is the strongest force at play today.
However today is not forever, and while the forces of division are real and in turn must be dealt with, ultimately, globalization cannot be pushed back. From increasing economic interdependence to the migration of people, from the spread of disease to threats to food security, for better or for worse, the most pressing realities the world faces are ones no borders can withstand. They are matters that require responses beyond what even the most powerful governments can provide.
In this context, what is the first responsibility of the G20? Quite simply, it begins with the strengthening of the great multilateral institutions whose objective it is to make globalization work on behalf of their universal membership. Indeed, it is upon this that much of the G20’s legitimacy rests.
So, what is the state of the world’s institutions? Let’s look at a thumbnail sketch of some of the most important.
The International Monetary Fund (IMF)
The Fund’s situation could certainly be better. While already weakened by the perception of excessive harshness during the Asian crisis in comparison with its venture into the maelstrom of Greek finances at the behest of the euro zone, the IMF has been badly wounded by the failure of the United States Congress to follow through on its commitment to the IMF’s governance and quota reforms agreed to at the Seoul summit.
The damage from this failure continues to flow. For example, the promises made in Brisbane in November 2014 regarding the G20’s unity of action on the economy are already in jeopardy.
This confirms the view expressed most recently by Turkey, and many times over the years in G20 compliance reports issued by the University of Toronto’s Munk School, that there is an omnipresent need for mutual assessment processes and cross-country monitoring if peer pressure between countries is to work.
Clearly, because of its expertise and reach, and probably as well because of its ability to provide political cover for unpopular but sensible policy changes, the IMF has an essential role to play in this process.
But can it, if the Fund’s impartiality is brought into question when it is held hostage to the whim of its most powerful member? No one wants to find the IMF in the unenviable position of the World Bank, which is now being asked to compete with the nascent Asian Infrastructure Investment Bank (AIIB).
The AIIB was created for many reasons, not the least of which was the United States’ “de facto” veto over the World Bank, an institution that is supposed to serve the interests of all countries. There is no problem with the AIIB. It is a good idea and the World Bank will continue to thrive.
However, there can only be one central anchor of the international monetary system and the pressures weakening it will continue to mount if the US Congress continues to prevent IMF reform.
If the G20 thinks that this is not its problem, it should be reminded that it is not only the credibility of the IMF that is at stake. This is because the inability to reform the IMF violates one of the fundamental tenets underlying the transition from the G7 to the G20 finance ministers 15 years ago, a tenet that argued emerging economies are to take more responsibility for the management of the global economy, while advanced economies will make room in order to provide them with greater voice.
That greater voice starts within the IMF.
Sovereign Debt Restructuring Mechanism (SDRM)
The IMF is not the only matter where the great powers remain frozen in time and where the G20 should act. The issue of sovereign debt vulnerability must also be addressed.
The IMF’s attempt over a decade ago to create an SDRM was frustrated by the opposition of many of the world’s major financial centres. As a consolation prize, and at Canada’s urging, collective action clauses were eventually added to the sovereign debt menu, but one only has to look at Greece and Argentina today to see that the take-up, large as it may have been, was still insufficient.
Even with the improvements agreed to by the IMF and the International Capital Market Association during 2014, the world’s approaches to handling convulsive sovereign debt distress are incomplete and suboptimal.
Most recently, the issue was taken up by the UN General Assembly. A number of countries called for a convention that would provide a predictable and consistent international framework to deal with severe sovereign debt crises. It didn’t pass muster.
This is not sustainable. A statutory framework might not be feasible, but we cannot continue with the status quo, where we lurch from crisis to crisis seeking remedies only when forced to do so by events. The G20, at a minimum, should support the proposal to create a forum that would provide a standing independent venue where creditors and debtors could meet on an ongoing and proactive basis to address sovereign debt problems. It is not up to the G20 to manage sovereign debt resolution, but it can seek to create the vehicle that will ensure the job gets done, much as it did with the Financial Stability Board (FSB).
Financial Action Task Force (FATF)
Similarly, much more forethought must be given to the prevention of terrorist financing. In the aftermath of September 11, 2001, all international meetings were cancelled for security reasons. This lasted three months. It was the G20 finance ministers’ meeting in Ottawa that broke the ice.
That meeting was called because of the urgent need then to deal with terrorist financing. To paraphrase the FATF’s president, ISIS (Islamic State of Iraq and Syria) and Boko Haram speak to that need today, and G20 leaders have called upon the FATF to draft a policy framework on the issue.
This is as it should be. But they must go further than this. Policy is one thing, enforcing it is quite another. To this end, G20 leaders should provide the FATF with the mandate and the resources to allow for more vigorous implementation.
The World Trade Organization (WTO)
The recent Turkish government communiqué spoke of inclusivity. If there is one body where inclusivity is needed, it is the WTO.
There is no doubt that mega regional trade deals such as the Trans-Pacific Partnership are important and very worthwhile for the countries involved, but hopefully they are only the first step. This is because, in the end, agreements that leave out China and India, and even more to the point, agreements that don’t include most developing countries, must be built upon by the WTO, thus resuscitating the organization.
Nor is this the end of the changes that lie ahead. The suggestion has already been made that the WTO incorporate carbon pricing, where carbon content is equalized at the border in a system centred at the WTO. These issues will likely be raised again a year from now in China — in short, the G20 cannot hide forever.
Financial Stability Board (FSB)
This review of institutions is not meant to imply that the G20 has been a simple observer of the passing scene. Indeed, had it not been for the London summit in 2009, protectionist forces might well have turned the 2008 recession into a depression.
The G20’s endorsement of financial safety nets in Korea, green growth and the role of the Business 20 and Think 20 in Mexico were important, as was the creation of the FSB out of the ashes of the Financial Stability Forum. Indeed, if anything has given hope for sanity in the banking system, it is the FSB.
That being said, this is not the time to relax. When you consider the consequences of what some argue are but small bits of sand in the global banking system — the inability of some of Europe’s largest banks to pass reasonable stress tests, the rapid growth of China’s shadow banking system, the constant pushback from the financial industry — it is clear that the FSB should have full treaty status and true universal membership, giving it the weight it requires to be the fourth pillar of the global economic architecture.
True, this means that the G20 will have to release its hold on its “godchild,” but so be it — children do grow up.
The United Nations
The travails of the UN Security Council are well past their due date, and no solutions appear in sight, but there are other issues where G20 leadership could make a significant difference — particularly in terms of the UN’s humanitarian agencies.
As maritime tragedy after maritime tragedy in the Mediterranean and the Andaman Sea condemns countless refugees to a watery grave, the question is: how much longer will the G20 remain mute?
This is an issue where Turkey’s experience is incontrovertible, because few can speak to the subject better than those countries bordering Syria. In Turkey, there are more than two million refugees, in Lebanon 1.2 million and in Jordan 620,000.
The questions to ask here are quite straightforward. Why is the United Nations High Commissioner for Refugees (UNHCR) not being better supported? Why is it that countries close to a conflict bear so much of the cost of sheltering refugees, especially when, compared to the rest of the world, they are already destabilized by the neighbouring unrest?
And finally, what happens to the generations born in refugee camps, who live in inadequate housing with insufficient health care and minimal opportunity for schooling?
Where is the G20 on these questions? Particularly since the pain of untold numbers of young people who are raised in refugee camps — bearing an understandable grudge against an unfair world — will be paid for by our children and grandchildren as the years go by.
No one is saying the solutions are easy — they are not. But unless the world acts to confront the immediate human tragedy while the longer-term geopolitical answers are worked out in a multitude of fragile and failed states, the cost to countless generations to come will make today’s dilemmas look like a picnic. Surely the time has come for the G20 to seek updated mandates and adequate resources for the UNHCR, and indeed for UNICEF and the International Organization for Migration, as both of these agencies share with the UNHCR the burden of dealing with the world’s displaced peoples and none are adequately equipped to do so.
The second issue in the context of the United Nations and globalization arises out of the inability of the World Health Organization (WHO) to react expeditiously early in the Ebola crisis. How is it that Doctors Without Borders was so much more effective than the global organization set up to deal with crises of this scope, especially since the world was told following the SARS outbreak a decade ago that the WHO had learned its lesson? The truth is, while the WHO may bear some of the responsibility for its convoluted structure within Africa, the biggest obstacle it faces is the gross underfunding of the agency itself. This is the fault of UN members who refuse to provide the financial support required, not to mention the world’s medical labs that have failed to carry out the research needed to develop the vaccines for tropical diseases over the last decade.
In this context, G20 leaders should push for greater UN funding, recognizing that much of it will come from their own pockets. One also hopes the G20 countries and the WHO will rise to the need to implement the “Advanced Market Commitments” for vaccines subsidization.
Turning to the United Nations Framework Convention on Climate Change (UNFCCC), rarely has the opportunity for the G20 to act been as promising as it is now, given the US-China climate change agreement and this November’s G20 summit occurring just before the UNFCCC Conference of the Parties meeting in Paris in December 2015. Surely the stars could not be better aligned for the G20 to provide the United Nations with the momentum required for ultimate success, especially since China will be hosting the next G20 summit less than a year later.
What is also important beyond the reduction of greenhouse gas emissions is that certain issues that have not been given much thought need to be given much greater attention — one such area is the global ocean, which provides 50 percent of the world’s oxygen and as the Earth’s largest carbon sink, is being forced to absorb ever-larger quantities of CO2. The detrimental effects of this, from ocean acidification to the collapse of ecosystems and fish stocks, are causing irreversible damage.
The importance of a healthy ocean goes without saying, and given its current state, there is no question that it requires much greater oversight by the United Nations than is currently the case and the G20 should reinforce this.
The last example among many on the need for stronger institutions arises from the problems facing the Internet, which provides a striking instance of a gap in global governance.
The issues are multi-fold, from privacy and free expression of individuals to protection against systemic risks such as cyber-criminal organizations and unlawful surveillance by businesses and governments.
Concerns about the stability, security and resilience of the Internet ecosystem are addressed by a large number of institutions, including the Internet Corporation for Assigned Names and Numbers, the International Telecommunication Union, the Internet Engineering Task Force and the World Intellectual Property Organization, among many others, but their policy organization is fragmented.
Thus, the primary concern is not an absence of agencies to confront the issues, but rather it is an absence of one agency to coordinate the various organizations.
While it is up to governments to collaborate with key stakeholders — businesses, citizens and civil society, law enforcement and intelligence agencies, and the Internet technical community — to take steps to build public confidence in the Internet, what is also required is a multinational organization that can in turn coordinate and mobilize those governments and their organizations.
The United Nations is well equipped to house such a coordinating agency and the G20 should push it to take a leadership role to that end.
Africa and the G20
While the G20 must play a much greater role in strengthening the multilateral institutions, there is one domain where the G20 should strengthen itself.
Currently, South Africa is the only African nation in the G20. This is because of the civil unrest in Nigeria at the time the G20 finance ministers held their first meeting almost a generation ago. This is the reason the G20 consists of only 19 nations. When it comes to the major issues the world faces, the G20 is at an obvious disadvantage without a stronger African voice. For example, nowhere are the threats of famine and malnutrition more acute than in Africa. Hence, to have a discussion on food security without a consistent pan-African voice at the table makes no sense.
The same applies to illicit financial flows, which are a pressing issue facing African development. While the G20 has repeatedly named anti-corruption as one of its priorities, reducing illicit flows of cash is part and parcel of the battle. But unfortunately, Africa has not been a significant player in those discussions.
Until a second African nation becomes a member of the G20, an interim step must be found — a step that provides Africa with much more play in the G20’s deliberations with Sherpas and other government officials on the one hand, and the outreach organizations on the other.
This is important because one of the less visible but extraordinarily valuable components of a G20 summit is its ability to react to the G20’s ongoing policy research agenda, which constitutes much of the work paving the way for the summit discussions. It is here that pan-African experts must participate much more fully than has hitherto been the case. The Turkish outreach has set an important precedent here; however, it should become standard practice.
This long list of issues demonstrates two things.
First, the parameters of change are not limited to finance and economics. G20 leaders do not have the luxury of dealing only with a self-defined portion of globalization. Thus, any charge of “mission creep” levied against the G20 does not hold up in a world where a failed banking system has grave social consequences and climate change will have a devastating economic fallout.
Second, in a world where there will no longer be only one economic superpower setting the course, but three or four giant economies and a host of wealthy countries at the table, the debate will not simply be what should we do, rather, it will be how will we get it done?
The answer to that question, more often than not, will be through the world’s multilateral institutions, most of which are having difficulty rising unsupported to the challenges they face.
The fact is, institutions count. Anyone who doubts this has only to ask whether the euro zone would be going through the troubles it is, had it built the institutions that are required to make a monetary union work from the beginning.
The G20 cannot act alone without the consensus of a multilateral institution’s members, but it can lead by example and it can set the course.
The G20 was brought into being so that international cooperation would reflect the needs of a changing world. That cooperation begins with the strengthening of the existing institutions created to make globalization work. This should be a G20 priority.
The Right Honourable Paul Martin was Prime Minister of Canada from 2003 to 2006 and Minister of Finance from 1993 to 2002.
During his tenure as Minister of Finance, he erased Canada’s deficit, subsequently recording five consecutive budget surpluses while paying down the national debt and setting Canada’s debt-to-GDP ratio on a steady downward track. He was the inaugural chair of the finance ministers’ G20 in 1999. He also introduced the largest tax cuts in Canadian history and the largest increases in the federal government’s support for education, and research and development. In conjunction with his provincial counterparts, he restored the Canada Pension Plan, securing it for future generations. He also strengthened the regulations governing Canada’s financial institutions; with the result that Canada is now viewed as an international model for sound financial regulation.
During his tenure as Prime Minister, Mr. Martin set in place a 10-year, $41 billion plan to improve health care and reduce wait times, signed agreements with the provinces and territories to establish the first national early learning and child care program and created a new financial deal for Canada’s municipalities. Under his leadership the Canadian Government reached an historic deal with Aboriginal people of Canada to eliminate the existing funding gaps in health, education and housing known as the Kelowna Accord.