Time flies in China – the exception being travel by car anywhere in China – indeed anywhere in Asia pretty much.

In any case time to leave Dalu and return to Canada.  But meanwhile I’ve had meetings with colleagues from the academy and think tanks in Beijing and here in Shanghai and most importantly I joined the Shanghai Conference hosted here by the Shanghai Institutes of International Studies (SIIS) in partnership with the Stanley Foundation (TSF) and my own Munk School of Global Affairs.

This just past Conference was not the first.  Indeed a year ago we worked to bring together experts from all the G20 Asian countries to examine the prospects for collaboration among the G20 Asian countries.  This year we worked to bring together experts from the Asian G20 countries plus now the Pacific G20 countries – the United States, Canada and Mexico. Mexico’s presence in particular was  valuable as Mexico will host the G20 Leaders Summit in June 2012.

This Shanghai meeting was telling.  One, we had historical memory. David Shorr our colleague from TSF was quick to note that there appeared to be maturation in the thinking of experts. A year ago experts from the region were grappling with the emergence of the G20 Leaders Summit. Was this new informal leaders summit legitimate – representative?  What was the place of this summit as opposed to the G8 or the UN or the many regional organizations?  These legitimacy questions were largely absent from this most recent gathering.  Instead there was a serious examination of the transition of the Summit from crisis gathering to permanent summit.  There was serious evaluation of the success in meting the key policy objectives, global financial reform, SSBG – Strong Sustainable and Balanced Growth, or macroeconomic imbalances in the global economy, and several other economic reforms including development and food security and food price volatility.

What were some of the bottom line conclusions? Though these several phrases hardly captures the full discussion and assessment they do help reflect G20 Summit evaluation.  First there was a strong sense among experts that the G20 risked serious underperformance.  There was a near consensus that experts feared little in the way of ‘deliverables’ or even ‘announceables’.  I must admit that I added to that view.  I argued that the G20 currently suffered from a major ‘case of distraction’ both for the French Presidency but also for European G8 members.  The distraction was evident – the European sovereign debt crisis.  This sense of distraction needs some clarification.  The continuing crisis in the Eurozone occupied growing attention for France and indeed all of Europe.  While contagion in the global economy was a real threat from possible disorderly Greek default and continuing and indeed growing volatility in financial markets, my assertion was that the crisis still represented a distraction for the G20. The key source of resolution lay with the primary European actors – France and Germany.  There lack of willingness to take critical decisions and calls for support by the IMF and the G20 kept drawing G20 attention to a serious crisis that principally needed to be addressed by Germany, France and the European Central Bank.

The attention to the sovereign debt crisis seemed to have drained energy from the macroeconomic imbalances focus of the G20.  Now our colleague Dan Drezner who joined us from the Fletcher School – and who has been highly critical – of the results of G20 coordination efforts – concluded that the macroeconomic coordination efforts were ‘Mission Impossible’.  Past macroeconomic coordination efforts had largely come ‘a cropper’ and in some cases had made matters worse than better.  But still he urged that the G20 should in fact do more if not necessarily in the global imbalances policy arena.  Later he even quietly admitted that he was impressed with the Mutual Assistance Process (MAP) efforts but still unclear about the outcomes of the coordinated policy effort.

When examining the coordination efforts of Asian G20 countries, experts still noted the dramatically limited collaboration among the G20 countries in Asia. But the fear of blocs had diminished from a year earlier and our colleague Lee Dong-hwi from IFANS in Korea urged Asian G20 countries to step up their collaboration.  As he put it, Asian countries could usefully increase ‘caucusing but without caucuses.’  In the face of global imbalances and in the light of economic circumstances here in Asia, there was growing support for caucusing without fear of generating blocs.

The Conference realized that there was a growing fear that without deliverables and in the face of the continuing global economic crisis, the G20 needed to show progress or risk being labeled irrelevant.  While many experts looked to move the G20 Leaders Summit to a more crisis prevention stance that the leaders had to balance with the need to show policy progress in a growing crisis atmosphere.  Such balancing was difficult but unavoidable.

Image Credit:  copyright Alan S Alexandroff

Just last month I was lamenting the lack of G20 coordination ( See blog post “Maybe Dan Drezner was Right ….”) and admitting that Dan Drezner might be right when it came to G20 collective action.

This weekend we were witness to continuing lack of coordination in global governance – this the G7 Finance Ministers who just concluded a meeting in Marseilles (see their G7 Statement).

Don’t look for any coordinated efforts – you won’t find them.  The most that they could do was to describe what Europe and the US is doing and then add rhetorical flourishes:

We are committed to a strong and coordinated international response to these challenges.  We are taking strong actions to maintain financial stability, restore confidence and support growth. … Concerns over the pace and future of the recovery underscore the need for a concerted effort at a global level in support of strong, sustainable and balanced growth.  We must all set out and implement ambitious and growth-friendly fiscal consolidation plans rooted within credible fiscal frameworks.  Fiscal policy faces a delicate balancing act.  Given the still fragile nature of the recovery, we must tread the difficult path of achieving fiscal adjustments plans while supporting economic activity, taking into account different national circumstances.

The problem is that officials are urging two different policy directions.  The United States is urging stimulus while in Europe the focus is on debt and the need to support debt ridden countries including Greece but also Portugal Italy and Spain.  In fact a crisis of sorts has presented itself in Europe with the resignation of the German member of the European Central Bank (ECB), Jurgen Stark.  The bond purchasing by the ECB of Italian and Spanish bonds represented a broadening of the ECB mandate that has raised alarm in Germany.  Stark had opposed bond purchasing by the ECB but he had remained loyal to the head of the ECB Jean-Claude Trichet.  His resignation poses a dilemma for Chancellor Merkel.

So the US is pushing for short term stimulus – a la the Obama Jobs Program and Europe is tearing itself apart over how to deal with sovereign debt problems.

Now this brings us back to the issue of whether Europe can overcome the current sovereign debt crisis without ejecting various troublesome euro participants – Greece and possibly Portugal.  Dick Rosecrance has bet on Europe overcoming the crisis and moving therefore to closer fiscal coordination. And Dan Drezner has kinda weighed in with the same view in his blog post  Euro-deja-vu but recognizes that he’s seen this all before:

When I woke up this morning and scanned the headlines, I knew what I was going to blog about — the stories in the press about how the European Union was, after much hemming and hawing, beginning to move towards a closer fiscal union.  I was then going to not-so-humblebrag about my own prediction that this would indeed happen. This was all going to be a great set-up to the last-minute reverse course — i.e., this Financial Times op-ed by German Finance Minister Wolfgang Schäuble in which he declared his “unease when some politicians and economists call on the eurozone to take a sudden leap into fiscal union and joint liability.”

Here’s the thing, however — if you read my eurozone blog post from this past February, you’ll see that almost the exact same dynamic played itself out six months ago.  This time the Germans are pre-emptively balking before the peripheral countries can balk in response to German calls for austerity… but you get the general idea.

So, will it be closer fiscal union in the EU?  Many smart people are betting on it.  I’m not so sure.  But we will come back to it. I generally disagree with Dick Rosecrance that the Europeans have acted before when facing a crisis.  Therefore they will respond here as well.  I am more inclined to accept that closer union is possible – but only after a number of countries are ejected from the eurozone – I think this is the Drezner line – and he may well be correct.

Meanwhile it is evident that there is no consensus on policy direction – at least if you look at the G7 Finance Ministers.  You can imagine what that means for the G20.  Finance Ministers have argued that there are different circumstances that drive policy differences by the G7 countries.  But in reality there is disagreement among the G7 on how to attack the continuing financial crisis.  It is unnerving.

Image Credit: Wikimedia Commons

Back in early April a number of us – Colin Bradford from Brookings, Dan Drezner from foreignpolicy.com and Tufts, myself and Arthur Stein from UCLA  – were ruminating over the effectiveness of the G20 Leaders Summit.  I took Dan to task for criticizing Colin’s attempted paean (see “Seven New Laws of the G-20 Era” ) to the G20 in his blog post “Learning to Embrace the policy deadlocks“.  As I said at the time (see “Punching Below its Weight”  – positively at Colin’s G20 views and critically over Dan’s too negative  perspective:

Now Colin does point out – and I and others have pointed out as well – the persistently negative international financial press – read this as the WSJ, the NYT and the FT at least. Differences are always played up; and agreements are generally characterized as inadequate.  And it is here that Dan and I differ.   Dan insists on adding his own spin – that is he characterizes the efforts of the G20 in 2010 as “a friggin disaster’.  Now talk about spin!

Well that was then and this is now.

It would appear that neither global governance forum whether the G7 (the old guys) or the G20 (the new guys with the old guys) seem to have acquitted themselves particularly well in the recent – and continuing – global economic troubles.  In the midst of the market gyrations and the growing uncertainty over the condition of European debt and US anemic growth and high unemployment – the statements by G7 Finance Ministers and the G20 were issued and then – fizzled.

Now admittedly we are reacting to finance ministers’ statements and not precisely the leaders – but then again the leaders aren’t gathering.  This will have to do.  The statements of the two sets of finance ministers and central bankers oddly released only hours apart on Sunday August 8th appeared to go largely unnoticed.   They expressed the obvious – the commitment to coordination and the willingness to do whatever was required. Here from the G7 ministers the following which said that they:

… affirm our commitment to take all necessary measures to support financial stability and growth in a spirit of close cooperation and confidence.  We are committed to addressing the tensions stemming from the current challenges on our fiscal deficits, debt and growth, and welcome the decisive actions taken in the US and Europe.

In even less detailed terms the G20 ministers repeated the call to commitment and coordination.  Rhetoric but hardly believable as expressing the firm willingness to act in a coordinated fashion.

This may not be disaster but it seems a lot like a damp squib. And global governance leadership and coordination it certainly is not.  There certainly needs to be a lot more doing to accompany the too bland exhortation of the finance ministers.

[Ed. Note – I apologize to all the loyal readers of Rising BRICSAM blog who have noticed the silence.  I think the “well” went a little dry after Deauville and the G8 Summit.  But we are back at it and hopefully such pauses will be few a far between ]

It is frequently forgotten that the Gx system – most notably the G20 Leaders Summit – is not just about leaders.  In fact there is a fair complement of personal representatives, ministers, other officials, IFIs and other IOs plus global regulators that make the Gx system work – or not.  I’ve called this enlarged structural view of global governance “The Iceberg Theory” of Global Governance.  This past week we’ve had two instances of work by these organizations – both reasonable steps forward but continuing alertness to the rhetoric quotient – worry that in the case in particular of the Ministerial Declaration of the G20 Agriculture Ministers, “Action Plan on Food Price Volatility and Agriculture” a product of the  meeting of the G20 Ministers on June 22nd-23rd may prove to produce more rhetoric than action.  Indeed readers are encouraged to review Jennifer Clapp’s and Sarah Martin’s rather more skeptical “Feature of the Week” at the Munk School Portal.

Some time ago we were alerted to the complex structures of global governance by the then Dean of Woodrow Wilson School of Public and International Affairs at Princeton University,  Anne-Marie Slaughter (After a stint in government as the head of policy planning, Anne-Marie has returned recently to Woodrow Wilson).   As she signaled to readers in her 2004 book, A New World Order a new structure of governance was being created in international relations:

Yet to see these networks as they exist, much less to imagine what they could become, requires a deeper conceptual shift.  Stop imagining the international system as a system of states – unitary entities like billiard balls or black boxes – subject to rules created by international institutions created by international institutions that are apart from, “above” these states.  Start thinking about a world of governments, with all the different institutions that perform the basic functions of governments – legislation, adjudication, implementation – interacting both with each other other domestically and also with their foreign and supranational counterparts.  States still exist i this world; indeed, they are crucial actors.  But they are “disaggregated.”

And the meeting – for the first time – of the Ministers of Agriculture of the G20 – is an evident transgovernmental meeting of the sort that Anne-Marie was writing about those years ago.  It also reflects what I have described as the Iceberg Theory of global governance institutions.  So below the Leaders Summit which at the moment is meeting annually only, there is is this enormous – what John Kirton of the G8/G20 Research Group at the Munk School – referred to years ago as the galaxy of global governance institutions hidden away generally below the Leaders Summit.

Now we are already alert to Sherpas and Yaks – the personal representatives of the leaders of the G20 – and  ministers of finance and central bankers.  These ministers meet periodically between summits to prepare policies and recommendations.  And the leaders have working groups that advance the policy work as well.  Leaders have also tasked others – for instance the IMF and the newly created Financial Stability Board (FSB) – to prepare regulatory policies and standards that the G20 leaders can ratify and implement or pass through to other international institutions.  It does appear to be indeed a galaxy of global governance decision making and the Leaders Summit contains a decision-making structure that is barely visible at the Leaders Summits.

One instance.  At the insistence of the host – France and its President Nicholas Sarkozy – put food security and food price volatility  – on the G20 agenda.  And on in a meeting earlier in the week the ministers released an Action Plan identified above.

Among the potential joint advances was an agreement to create an international agricultural market information system to try and deal with a shocking lack of knowledge of output and stocks data.  This lack of information is hypothesized to add to food price volatility.  Further there was agreement to also create a global a agricultural geo-monitoring initiative, an international research initiative for wheat improvement (IRIWI), a rapid response forum and an agriculture and security risk management toolbox.

The devil is of course in the detail and here critics rightly raise concerns over these announced initiatives – the Action Plan will be brought to the Leaders Summit in November.  These ministers left to the finance ministers market regulation.  Also, the key to the policy making is to be found in the annexes.  In these there are numerous invitations to institutions including the private sector actors to join in – read that as not yet agreement to have these entities participate.  And while AMIS is in some ways a key initiative, there is no commitment -unlike the Rapid Response Forum – to include as they put it – senior,  capital-based agricultural policy officials from the major producing, exporting and importing countries – read that as the ministries.  This lack of commitment is serious especially as a number of countries China, Russia and India notably have been reticent in disclosing stocks and output.  This lack of commitment and detail raises concern that the objectives may never be met.  ‘Detail is king’ here just as it is national policy making.

And detail appears to be what we can expect from the Basel Committee on Banking Supervision (BCBS).  It would appear that a consultative paper will be released to the FSB in July to deal with measures for globally systemically important banks, according to a June 25th press release from the Group of Governors and Heads  of Supervision (GHOS) the oversight body for the BCBS.  Thus we are likely to see what measures – additional reserves – systemically significant and globally systemically significant banks will be required to carry.  The measures once agreed upon and issued represent likely the most important banking reform measures since the outbreak of the global financial crisis.

Much good global governance work appears to be underway – largely hidden away.  But the ‘devil is in the detail’.

So Deauville has come to end; on to the G20 in Cannes on November 4th-5th 2011.  But the continuing question here at the International Media Center, and among some of the delegates is – why the G8?  What is the added value and consequences of G8 discussions; what is the relevance and scope of the G8 agenda?  More pointedly – why hold a G8 meeting separate from a meeting of the G20 leaders?

Assessing the Deauville declaration the answer appears evident.  The strongest statement of the G8 leaders  – and critically including the the Russian president – we’ll see if Prime Minister Putin will go along – says:

Qaddafi and the Libyan government have failed to fulfill their responsibility to protect the Libyan population and have lost legitimacy.  He has no future in a free, democratic Libya.  He must go.

This statement could not have been concluded I anticipate at a G20 conclave.  Beyond that the G8 leaders focused on a number of critical peace and security issues including a commitment to the extension of the Global Partnership against the Spread of Weapons and Materials Destruction launched in 2002 – focused on the destruction of nuclear weapons in the former Soviet Union – but now focused on: nuclear  and radiological security, bio-security, scientist engagement, and facilitation of the implementation of UN Security Council Resolution 1540 on the trafficking of WMD by  terrorists  Extension of funding needs still is required along with securing new partners but the commitment is a significant step in the global efforts in anti-proliferation.

These two elements of the peace and security agenda – the accepted mandate of the G8 suggest the dilemma inherent in identifying the areas of G8 competence.  Libya and the democracy process in the Middle East probably could not usefully be addressed in the larger G20 leadership – as noted earlier.  But the proliferation questions could very easily be dealt with in the larger leadership forum.  Many of the near economic issues – like economic promotion in the Middle East etc., probably could also be addressed there.

Then why the split.  Well obviously it is partly historical.  The G8 has existed as a global governance institution for some time.  And international organizations are seldom killed off.  But there is more apparently.  Liz Alderman of the NYT summarized views from some of the  the G8 leaders at Deauville (“Group of 8 Pledges to Aid Egypt and Tunisia”,  NYT May 27, 2011)

But in their closed-door discussions, the G-8 members agreed that while emerging markets, especially China, were beneficial to global growth, they were not ready to take on a leadership role in major global issues, the diplomats said. Indeed, the G-8 members said emerging markets still needed to assume greater discipline and play more by the rules of the international frameworks they wish to influence, the diplomats said.

It is both unclear who said this – and indeed about whom.  We know China is positive about the G20 – and participating there.  We are confident most of the other leaders hold similar views.  But we also know that China, for example, does not want to expand the mandate of the G20.  And I have suggested elsewhere that China is still a part-time global leader. It would seem that other G8 leaders and their officials still question the willingness of G20 leaders to step up to take greater leadership.

For many – leaders included – this confirms the gap and the global governance deficit.