Perspectives on the G20: The Los Cabos Summit

About the series

Leaders seated for the G20 foreign ministers family photo in Los Cabos, Mexico, Monday, Feb. 20, 2012. (AP Photo/Charles Dharapak, Pool)

The Mexico G20 Summit in Los Cabos on June 18-19, 2012, will mark the seventh time the G20 heads of government have met. The summit will bring together the leaders of the world's major advanced and emerging economies, providing an opportunity for international cooperation on the most important issues on the global agenda.  CIGI experts present their perspectives and policy analysis on the most critical issues facing the G20 at Los Cabos, such as strengthening the architecture of the global financial system, food security, climate change, green growth, global imbalances, and employment and growth.

Access the full report on this series, Perspectives on the G20: The Los Cabos Summit and Beyond 

In the Series

Much attention of late has been focused on the underdeveloped governance structure for managing the euro zone, which has been trapped in an ongoing economic and financial crisis for some time. This attention is deserved, as good governance establishes clear delineation of responsibilities and accountabilities and provides for clear decision-making rules. Europe’s failure in recent years to address its governance gaps has significantly contributed to its inability to come to grips with the economic challenges it faces today. It provides the world with a painful example of the costs associated with neglect and inaction.
The G20 leaders’ communiqué from the Pittsburgh meeting in September 2009 commits the G20 countries to a “framework for strong, sustainable and balanced growth.” Underlying this communiqué is the commonly shared position, enunciated further in subsequent meetings, that global imbalances accumulated over the years were a central element in precipitating the crisis, and the belief that correcting them is necessary to achieve strong, sustainable and balanced growth. Before the crisis, attention focused on the large surpluses run by China and the resulting substantial reserve accumulation. The problem of imbalances has subsequently achieved renewed salience with the emergence of imbalances among the countries of the euro zone and the lack of an adjustment mechanism to deal with them.
Through its Mutual Assessment Process (MAP), the G20 is seeking to address macroeconomic imbalances that pose the risk of globally significant misallocation of capital, thereby threatening global growth prospects. But the “sustainability reports” produced by the International Monetary Fund on G20 economies flagged by indicators of imbalance agreed upon under the MAP, are replete with descriptions of structural factors in each economy that are at the root of macroeconomic imbalances.
A key challenge at Los Cabos will be articulating a vision for green growth that is focused and feasible, yet integrates with other economic, development and multilateral governance reform initiatives already undertaken. The danger is that otherwise, especially at Rio+20 later the same week, green growth will mean everything and nothing — wish lists will prevail over strategic leadership. By putting energy and economics at the centre of the definition of green growth, the G20 could make a major contribution to the global understanding of what green growth means.
On the surface, the global push to implement measures to stem future systemic crises like the one that first gripped the global economy in 2007 has made considerable progress. In a letter released on April 20, 2012, Bank of Canada Governor and Chair of the Financial Stability Board (FSB) Mark Carney summarizes the progress made since the November 2011 Cannes summit. The letter emphasizes the fact that agreement has been reached on general principles to strengthen the resilience of the global financial system, to properly regulate and supervise systemically important financial institutions, and develop the necessary oversight of the shadow banking system. Nevertheless, the continuing crisis in Europe, the recurring worries over whether existing financial “firewalls” are large enough to forestall another global financial crisis and the weakness of the global recovery, suggest that, almost five years since the start of the “global” financial crisis, a safer and stronger global financial system has not yet been achieved.
When the G20 meets in June, many of its members will still be looking for a way out of the economic crisis of 2008. After four years of economic uncertainty, high unemployment and dismal prospects, industrialized countries in particular also find themselves divided over what strategies to try now. More austerity and belt-tightening? Another shot of stimulus? Whichever path they choose, they should not ignore the opportunity to move towards a green economy.
Since the international financial crisis of 2008, the G20 has devoted extensive attention to the improvement of international financial regulatory standards. Having agreed on a wide range of new standards, the G20 is now facing growing questions about whether these will actually be implemented at the national level in a consistent manner. In addition to recommitting themselves to adopt these standards, the G20 leaders should use the 2012 Mexican summit to strengthen the capacity of the Financial Stability Board (FSB) to address this issue.