Category Archives: Global Governance for G20/G8

The ‘Hare and the Tortoise’ – Global Media and their Continuing Harsh Assessment of the G20

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Now I think it was my colleague Dan Drezner over at Foreign Policy who spent some time – at the moment I am at a loss to remember the exact piece – defending the G20 against the dismissive attacks that members of the media are so fond of producing following a G20 meeting.

Well our friends – in this case Chris Giles and Robin Harding at FT – were hard at it at the G20 finance ministers’ and central bank governors’ meeting during the just recently concluded ‘Spring Meetings’.

Here is a gem of a comment from these two media souls:

Since 2010, it has turned from being a cohesive group of te world’s most important economies, ensuring they took collective decisions to solve difficult problems, into a body that spends hours negotiating the punctuation in a communiqué that adds little.  … Countries still value the G20 greatly as a forum for dialogue, but complain that too many nations sit round the table and make unnecessary interventions, with little genuine discussion.  It has turned into a talking shop without much bureaucracy or idea of its role.  Outside a crisis, when nations want to solve problems and are willing to make sacrifices, the G20s relevance to people and companies is diminishing rapidly.

Mean spirited at least.  But are the two right?  Their judgment seems to me to ignore again,  the “incremental” but necessary efforts of contemporary global summitry decision-making.  The contrasting views expressed are bit like a “hare and tortoise” assessment of the G20.  Media looks for the success of the hare and is continually disappointed; for some of us this is about the tortoise and we remain patient.

Look it would be great to have this grand bargain-style G20 – the kind these two media folk and other media types seem to crave but that is not what the G20 offers – nor indeed do many other global summitry settings.  These summits are iterative and depend on the hard work of working groups, ministerial gatherings, sherpa meetings, secretariat work and the work of developed transgovernmental regulatory networks.  The constant reference by media and experts to the actions of the G20 at the abyss in 2008 and 2009 hardly defines the manner in which the G20 acts.  The current efforts on financial reform and SSBG – strong sustainable and balanced growth – are difficult policy developments.  So a quick look at the boring communiqué is required.  Some takeaways:

  • advanced economies will develop medium-term fiscal strategies by the St. Petersburg G20;
  • setting a global standard for public debt management – the IMF and the World Bank will consult with members on implementation and review of “Guidelines for Public Debt Management.” A progress report will be made to the Leaders Summit;
  • The possibility of providing additional policy recommendations to the Leaders Summit on regional financing arrangements (RFAs) and strengthening cooperation between the IMF and RFAs;
  • The efforts to mobilize long-term financing that includes adoption of the Terms of Reference of the new new G20 Study Group with input from the IFIs, OECD, FSB UN and UNCTAD with possible recommendations for the finance ministers and central bank governors later in the year;
  • assessments from the Basel Committee on Bank Supervision (BCBS) on the compatibility of Basel III and the BCBS regulations including a report in July on risk-weighted assets;
  • the FSB will report to the Leaders Summit on the efforts to identify the policies on how resolve financial institutions in an orderly manner – the “too big to fail” issue;
  • FSB concluding the legislative and regulatory reforms for OTC derivatives reforms;
  • The FSB providing to finance ministers and central bank governors the macroeconomic impact study of OTC regulatory reforms;
  • Policy recommendations for the Leaders Summit on oversight and regulation of the shadow banking sector;
  • A call from the finance ministers and central bank governors to the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) US  to conclude by 2013 the work of achieving a single set of high-quality accounting standards;
  • Recommendations from the Bank of International Settlements (BIS) and the International Organization of Securities Commissions (IOSCO) on short-term interest rate benchmarks with recommendations for reform by July and in turn oversight and governance frameworks for financial benchmark reform to be presented to the Leaders Summit;
  • the launching by the FSB of a peer review of national authorities’ steps to reduce reliance on credit rating agencies’ ratings – with a status report to be provided to the Leaders Summit;
  • a report from the OECD on progress toward countries signing or expressing interest in signing the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and a report back from the OECD -following work with the G20 – on new multilateral standard on automatic exchange of information; and
  • a July report from the OECD with comprehensive proposals to the finance ministers and central bank governors on tax base erosion and profit shifting.

Worthy of headlines from the media – probably not.  To the extent that these actions and reports don’t lead to key national commitments – meaning regulations and laws – then our media friends may be right.  But progress in some or all of these many initiatives warrant some attention.  And it is all this work that media folk are quick to just ignore.

I would also say that collective discussion – contentious though it may be – over Japan’s quantitative easing policies – is important.  For the moment,  it would appear that most of the G20 are prepared to accept that these Japanese actions are not steps in competitive devaluation, which might, if so described, lead to national responses that could harm many.   We will have to see, however,  the impacts on some of the large emerging market countries and then their responses.

Finally, on the economic growth front it is evident that the G20 believes that not enough is being done to counter global economic weakness.  Clearly a key culprit in this is the EU and in particular the eurozone, though the UK figures in as well.  This of course appears to be a continuing drama from the close to irresponsible actions in the eurozone.  I have consistently argued that the G20 has little role here – but  to urge a change of course which it appears now to be doing.  But the G20 is constantly being dragged into this European drama.

The bottom line is that the media misses the work in progress – and announces failure.  I think that is going too far at this point.

Image Credits:  logo – www.pnswb.org and picture – www.nannewsngr.com

Where To? – Russia at the Helm of the G20

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So a quick trip to Moscow!  Moscow you say – in December?  Yes indeed.  Russia took over hosting of the G20 Leaders Summit on December 1, 2012 and decided to declare a kind of G20 ‘Party’ of sorts.  To initiate Russia’s leadership in organizing the agenda for the G20 and to then actually host the G20 Leaders Summit in September in St. Petersburg, the Russian President and Russian officials called for a Sherpa meeting for December 11th but added additionally a B20 meeting, a Think20 meeting and a civil society.  There was much ‘hustle and bustle’ of the G20 sort.

And of course lot’s of thinking!  This from all the gatherings including the G20 business, civil society groups now identified as the C20 and experts from the G20 think tanks.  I couldn’t resist, therefore, picturing all that thinking.  So there I am on the official Russian website – presumably thinking quite a bit.

Now the Russian President in his first remarks as G20 Host struck this very broad consultative cord – which G20 leader hasn’t – but here is President Putin:

Russia is ready for the broadest possible cooperation on reaching the G20’s objectives.  In order to make the G20’s work more effective and transparent and increase trust in what it is doing, we will hold the broadest consultations with all interested parties, with countries not part of the G20, and also with international, expert and trade union organisations, and business community, civil society and youth representatives.  Practice shows that global measures are only effective when they are based on the views and take into account the interests of different groups.

All right so broad consultation it is.  But where are the Russians hoping to take the agenda for the G20 leaders summit?  In his remarks President Putin identified Russia’s G20 priorities:

  • Growth through Quality Jobs and Investment;
  • Growth through Effective Regulation; and
  • Growth through Trust and Transparency in Markets

With these priorities, so the President claims, G20 policy progress will occur with further efforts on:

  • A framework for strong, sustainable and balanced growth;
  • Jobs and employment;
  • International financial architectural reform;
  • Reforming the currency and financial regulation and supervision systems;
  • Energy sustainability;
  • Development for all;
  • Enhancing multilateral trade; and
  • Fighting corruption.

And the President identified two additional issues on the financial agenda:

  • Financing investment as a basis for economic growth and job creation; and
  • Modernizing national public borrowing and sovereign debt management systems.

In a column from Sergey Strokan a Russian journalist posted by Russia’s RT titled, “Uphill battle: Russia at the helm of G20“,  Strokan reports:

The key issue Russia’s G20 presidency needs to address is the restoration of investor confidence, adds Russia’s Finance Minister Anton Siluanov. In a situation, when economic growth in the locomotives of the world economy, including China, is still slowing down and the southern countries of the EU are in recession, global investor confidence is crucial for meeting the main global challenge of jump-starting economic growth, says Mr. Siluanov.

It appears the Russian Presidency hopes to hold – beyond the usual Sherpa and Finance Ministers and Central Bankers gatherings, a meeting of Finance and Labor Ministers as well as a meeting of Energy Ministers.

What can we make then of all of this?  First, as usual there is far too much G20-speak; for the ordinary citizen from the G20 and beyond, this appears like a lot of ‘gobble y-guck’.  It is hardly transparent to them.  Even to the G20-types there is much vagueness and a lack of clarity over the specific policy objectives – probably to satisfy large and disparate interests in the G20.  Then there appears to remain a conundrum at the heart of G20 policy – a key clash by G20 countries that appeared at the Toronto Summit – and remains to this day.  That is which lever should G20 countries pull – the austerity and fiscal consolidation lever, or the stimulus lever.  Now it is likely that the answer lies in timing and reflected in the specific conditions of various country budgets, job creation, debt accumulation and most critically economic growth.  But the fiction remains of an overarching  G20 policy agenda.

It would also appear that Russia can’t help but poke at the traditional economies with calls for monetary reform.  What is urgently needed is a more serious discussion over currency manipulation whether China’s or the United States or now with a new Prime Minister in Japan.  This is a tough issue but currency reform starts here.

And then there is hollowness of the consultation process.  While it is valuable to encourage the various interests – business, think tanks, youth and labor – it lies rather uncomfortably with a government that still retains legislation that requires foreign-funded NGOs to declare themselves as “foreign agents”.  It is dispiriting to witness this Janus-like behavior and the willingness of NGOs largely to ignore, this oppressive domestic behavior in the face of what appears a seat at the table – if a small one and far from the core table.

So the picture remains clouded but let’s see if the Russian presidency takes it upon itself to order transparency and accountability in the G20 agenda and policy process.  There is time yet.

Image Credit: Official Russian Website of the G20.

“Creeping Urgency” Still

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The New York Times article today, “Leaders Say the They Expect Agreement on Aid for Spanish Banks This Year.” called leaders decision-making as “creeping urgency”.  So where are European Leaders?  Well kinda where they were months ago.   Leaders have agreed to set up a Eurozone bank supervisor, among other things, but the current agreement leaves unclear when the new bank supervisor will be fully in place.  That is critically important because without the bank supervisor in place, European Stability Mechanism (ESM) funds will not be available to struggling banks, especially in Spain.  So while the EU leaders will seek to “spin” the agreement as success, the lack of clarity around the regulatory startup is trouble.

And why is the date for the start of this new banking supervisor still so unclear?  Well, the problem is a German election in 2013 where German Chancellor Merkel doesn’t want to have to defend the use of ESM funds directly to the sagging banking sector in Spain.  So while the European Commission urged that the banking supervisor be up and operating by the start of the year – January 2013, it is pretty evident that European politics will not permit that.  So some of Europe’s most fragile banks are unlikely to be under this new European supervisor.  In fact Germany has insisted that the extension of regulation of Eurozone banks be done in stages.    That too appears to be a product of national politics.  The German local and state banks are not eager to be regulated by this new ECB bank supervisor.

And the determination to bring Greece into line in a austerity program that is well off track appears to have made no progress either.   And there other supervisory and budgetary issues that EU leaders have been unable to resolve.

Notwithstanding the “comforting” words of leaders in the Eurozone, the bank supervisory issue – that was generally perceived by officials and observers to be reasonably straightforward – is being delayed.   Leaders have to be assuming – at least hoping – that global markets will not render their own judgment on the failure of Eurozone leaders to resolve the continuing sovereign and banking debt issues.  That kind of gamble well may not pay off.

The only good thing that may arise from this lack of collective political will is that there is no immediate prospect of a G20 Leaders meeting.  Att least at the moment G20 leaders are not to gather until September 2013 though finance ministers and central bankers will gather well before this.  If such a summit were planned we could once again witness an agenda largely hijacked by Europe’s apparent determination not to take the necessary action to resolve the debt issues stalking at least Europe.

Meanwhile watch global markets!

Image Credit:  CNNMoney.com

 

So it is a Tentative “Thumbs Up”

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With our colleague Dan Drezner about to descend on the mighty University of Toronto, Dan was kind enough to alert me to a a recent Council on Foreign Relations Working Paper he’d just completed.  Entitled, “The Irony of Global Economic Governance: The System Worked” Dan, so he suggested to me, would be using this paper as the basis of his remarks here in Toronto.

On title alone I commented to him that he’d finally become an “advocate for global governance”. While Dan was unwilling to sign onto my admittedly rather exuberant characterization, he was willing to concede that he was more positive now than he’d been in the past.  Ah – at least some progress.

So let’s start with the conclusion.  Dan writes:

None of this is to deny that global economic governance was useful and stabilizing at various points after 1945.  Rather, it is to observe that even during the heyday of American hegemony, the ability of global economic governance to solve ongoing global economic problems was limited.  The original point of Kindleberger’s analysis of the Great Depression [The World in Depression] was to discuss what needed to be done during a global economic crisis.  By that standard, the post-2008 performance of vital institutions has been far better than extant commentary suggests.  Expecting more that an effective response might be unrealistic. …  The evidence suggests that global governance structures adapted and responded to the 2008 financial crisis in a robust fashion.  They passed the stress test.  The picture presented here is at odds with prevailing conventional wisdom on this subject.

Well amen to this last line of thought.  And although Dan reflects that effectiveness to date is no guarantee of the future, he suggests that it is at least as likely that a renewed crisis could foster a greater policy coordination effort, which seem to have waned in the immediate post crisis period.  As Dan concludes at the end of the Working Paper:

The post-2008 economic order has remained open, entrenching these interests even more across the globe.  Despite uncertain times, the open economic system that has been in operation since 1945 does not appear to be closing anytime soon.

Amen.

But it is hard slogging, as Dan freely admits.  Dan opens his analysis with the general critique that has accompanied the global governance efforts since 2008.  They generally recognize three items that reflect the failure global economic governance – though I would just refer to this as global governance period.  Critics, according to Dan,  have focused on the collapse of the Doha trade round, the breakdown of the macroeconomic policy consensus – this at the Toronto summit 2010 – and the escalation of the sovereign debt crisis as clear signs of the failure of global governance.  In examining each Dan identifies the rebound in fact of the global economy contrasting the Great Depression with the 2008 global financial crisis.  And in general Dan shows that the global economy has rebounded much better than was the case in the 1930s.

On trade – and as Dan belatedly suggests, the Doha Round was a spent deal well before the crisis; it had little to do with the global financial crisis.  But the trade institution world is probably not as healthy as Dan suggests.  That is because Dan kinda combines the growth of trade – the market, the trade regime and the trade institution, the WTO into one.   Trade flows have been growing and are robust.  The market remains largely vibrant.  The success can be laid at the doorstep of the global market and the trade regime – the GATT now the WTO and the explosion of the plurilateral regimes – yes the preferential trade agreements that have flourished since the Doha Round.  An open trading system, equal trade treatment and the willingness to accept trade liberalization remain the rockbed of the global trade regime.  This is the accepted set of norms.  While protectionism rose with the economic crisis – especially among the major developed states – it rose to a far less damaging levels that many feared. So whether a large emerging market economy or a traditional economy the open trading system remains a foundation for the the global economy.

But the institution of the WTO is not particularly healthy.  To the extent it is designed to promote trade negotiation – it abjectly is a failure.  It is evident that absence of a real operating institution is at the heart of the problem not just with respect to trade negotiations but with the operating of the market.  Now the judicial side is robust compared to any other international judicial institution, but the legislative and executive functions were inadequately addressed at the conclusion of the Uruguay Round – and it now costs this global governance institution mightily.  The universal decision rule structure is, as with most such universal representation structures – largely incapable of effective decision-making – ergo the Doha Round.

On the multilateral investment front, Dan correctly points out, there isn’t one.  Instead there is a myriad of bilateral and plurilateral investment protections regimes.  According to Dan the data shows that there is a marked slow down in the generation of these bilateral investment treaties.  That might be – though a number of interesting new agreements have been signed recently including a China-Japan-Korea agreement and a China-Canada one – but if you examine the number of ICSID or UNCITRAL investor-sate cases, – in the interests of transparency I should point out that have been involved in such cases for several decades – there has been an explosion of cases for the breach of investment protection.  The system is doing what was intended.  Also many free trade agreements incorporate investment protections into the comprehensive arrangements that are being concluded.

Where there is trouble is that a number of states – Venezuela in particular – have repudiated recent awards and the treaties of protection themselves.  Furthermore, states such as Australia have insisted that their courts are adequate to hear foreign investor cases and refused to sign new investor-state agreements.   Other states have created new model investment agreements that significantly narrow the scope of investor protection That does spell trouble.

On the macroeconomic and imbalances front, I do agree with his general conclusion that that the response was more robust than generally conceded by many journalists and experts.  But I am not sure this should be laid at the doorstep of the United States.  First many of the referenced statutes are purely national (that is not strange) but fail to really incorporate a wider collaborative standard.  Dodd -Frank which of course isn’t even fully implemented – and could largely be repealed if Romney replace Obama – hardly takes into account the concerns of other key financial centers.  As for Basel III there is was a much more collaborative effort of the G7 and G20 in its creation.

Some of Dan’s analysis suffers from a too narrow architectural framing as well.  Dan and I have drawn “swords” over the definition of global summitry and derivatively global governance because Dan sees summits as stand alone leadership settings – G20, etc.  Favoring an “iceberg theory” of global summitry, I see the structure of global summitry and governance as a galaxy or package of institutions – the leaders summit, ministerial meetings, transgovernmental regulatory networks of public and private institutions – all linked.  Many of the advances in such esoteric organizations such the FSB, the BCBS, IOSCO, etc., let alone the more formal Bretton Woods institutions such as the World Bank and the IMF are being tasked to produce surveillance and evaluative reports, and international standards at the direction of the G20 leaders/ministerial gatherings.  The architecture is a very decentralized structure but a linked one of  institutions and organizations.

Finally, and briefly the Eurozone crisis is not at its heart a global matter, though it has likely huge global consequences.  In fact in such a tightly wound interdependent world, it is hardly a surprise.  But the heart of the action has to be with the eurozone and the EU.  And it is the failure of will by key players, especially Germany and France, that have left the crisis on the front burner of global governance.

Now I think I will go off and hear Dan speak.

 

 

Still Looking for an Apt Description – G20 and Global Summitry

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As I was catching up on my global governance reading – yes, this is what I do at the beach – I came across a study by by two Brookings scholars – Homi Kharas and Domenico Lombardi on the G20 Leaders Summit.  Homi Kharas is a senior fellow and the deputy director for the Global Economy and Development Program at Brookings and Domenico Lombardi is a senior fellow and in the same Brookings program.  The piece “The Group of Twenty: Origins, Prospects Challenges for Global Governance” is worth reading and provides excellent detail on the work of previous G20 ministerials and the the more current G20 leader summits.   The study appears to have emerged in August though it also seems to have been written prior to the Los Cabos G20 Leaders Summit.  No matter.

What remains interesting are the conclusions the two authors draw on this relatively new “high table” of global governance   The fact is experts continue to struggle to comprehend fully the influence of this new global summitry institution and to determine moreover its effectiveness.  It would seem that the two authors see the G20 as more “effective” than the predecessor G8 but they continue to dwell on its shortcomings especially with respect to representation and legitimacy.   I would also suggest that the authors still struggle to understand where the G20 has most effectively moved the yardsticks of global governance.

So how do they see this new global summitry “beast”:

As we look back, however, there is a sense that, although the G-20 was quite effective as a crisis manager, its effectiveness as an enduring facilitating framework for international cooperation has proved mixed at best. … The G-20 does not operate on the basis of setting specific goals, financial commitments or timelines in the same fashion as the G-8. That is because it has organized itself as a process-oriented forum [emphasis added] for first helping to build a consensus and then providing the required political momentum to ensure implementation. … In fact, those decisions are being made through an engagement with other forums and treaty-based institutions where there are established governance procedures for representation and voice.  … For the time being, the G-20 appears to be the “best available option” for global economic governance. It is not designed to achieve institutional legitimacy per se, and thus it has chosen to work with other bodies that have a more inclusive and universal representation. It is not an implementing body, but it encourages others to rise to the challenge of addressing the issues that its agenda advances.  … Leaders who now participate in it are finding ways to demonstrate to their own electorates that they are making a difference in the conduct of global affairs through the stance they take at its summit meetings.  This link between global and domestic dialogues, and the building of popular support to address global challenges, may yet become the greatest value that the G-20 adds.

I see their first point as significant.  Most observers would argue that no matter what else one says about the G20, the early coordinated success of leaders’ efforts to avoid a complete global financial meltdown marks a highpoint in the effectiveness of the organization.

So the G20 is an effective crisis manager.  But it may not be true at all.  While the G20 effectively steered the global economy away from the abyss, thereafter it has proven itself to be a rather feeble crisis manager.  In fact the insistent intrusion of the eurozone crisis has significantly distracted and sapped the Leaders Summit.  Ambiguity surrounding its role in the crisis and the German determination to enforce austerity has motivated the eurozone and then the G20 to “kick the can down the road” as many experts have commented on.  G20 Leaders have found themselves unable to “move the yardsticks”  on this crisis but  – and more importantly – the Leaders have found themselves unable to redirect the agenda firmly toward to big item crisis prevention matters.  Both the French and Mexican agendas have largely been jettisoned.  So the G20 is has foundered between the Scylla of crisis management and the Charybdis of crisis prevention.  And it appears that is where we sit today.

As for the debate over institutionalization.  Well as I have pointed out in the past – I am not attracted to to the formal treaty-based structural forms of global governance. And even if I was – it ain’t going to happen.  But for experts and officials closer in to the reality of the Bretton Woods and UN system of institutions, the allure is just too great.  And that is certainly where the authors are, looking for integration with a reformed IMF, etc., etc.  But even though irresistibly drawn to formal institutions they go part way by pointing to the engagement with these formal treaty bound institutions.  But in fact the tasking by the G20 with the Bretton Woods institutions such as the IMF and the transgovernmental regulatory networks – FSB, IOSCO, BCBS, etc., is not only engagement but creation of a new structural architecture of formal and informal institutions.  It is all of one piece gents as I’ve argued in the “Iceberg Theory” of global governance.

Messy but effective possibly – as long as the G20 shifts from crisis to prevention.  And on that score we are not there yet.  So put your measuring instruments aside.

Image Credit:  TrendingAddict.com – Washington G20 Leaders Summit 2008

 

 

Measuring Success – The G20 and Food Security

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There continues to be a raging debate – all right so in global governance and global summitry there is hardly likely to be a raging anything – but there continues to be a serious difference of opinion among officials and experts over the success of the G20 Leaders Summit.  Some have argued that the G20 proved effective, at least in the immediate context of the financial crisis in 2008 – especially after the turbulence from the Lehman Brothers’s bankruptcy.  Others, while admitting the immediate success have suggested that as this critical crisis receded, so did the effectiveness of the G20.  Thus, the G20 Leaders has become unwilling to accept the economic and financial coordination identified by various international organizations and regulatory bodies.

Well I suspect there is no immediate way to resolve the debate – to determine definitively – the overarching success or failure – the final measure of effectiveness for global governance –   of the G20 Leaders Summit.

But I think there is a possibility of some assessment in the near future.  The possible metric that we may use to gauge the G20 Leaders capability to coordinate action and to avoid, or at least ameliorate a possible crisis comes in the area of food prices.   The assessment available is, or will be, the G20 action(s)/or not, to avoid a recurrence of food price spikes that led in 2008 to riots in a number of developing countries.

Since that time global summitry has been busy addressing – at least rhetorically – the question of food price volatility.  Former President Sarkozy was particularly engaged in food security though he leaned toward the influence of derivatives on commodity prices as much or more of a direct factor on food supply and demand.

First at the Seoul Summit the G20 Leaders identified a food security pillar in the Seoul Consensus.  Then the ministers of Agriculture gathered in June 2011 in Paris and produced an “Action Plan on Food Price Volatility and Agriculture”.  And even more recently at the Los Cabos Summit the agriculture vice-ministers annexed a Report (Report May 18, 2012) to the Los Cabos Declaration (see paragraphs 55 through 62) describing the progress made on previous food security commitments.

Now comes the drought in North America that poses an immediate threat to the supply of commodities and the real prospect of significant prices increases. Apparently it would seem that Mexican, French and US officials are urging their colleagues to hold a conference call in the week of August 27th to discuss the possibility of calling a meeting of the Rapid Response Forum (RRF).  The RRF is a creature of AMIS or the Agricultural Market Information System  (AMIS) that was launched in September 2011.  The main objective of AMIS is to encourage major players on agri-food markets to share data and enhance information systems.  That would seem more than reasonable but a number of nations particularly China have been unwilling to do so and private agri-business – major players in the food distribution chain – are reluctant to play as well.

Now the RRF is a body designed to “promote early discussion among decision-level officials about abnormal international market conditions.”  What could this body discuss?  Well it might well encourage producing states to avoid placing food export bans on key commodities.  It was the Russian embargo that exacerbated prices in the already volatile commodity markets in 2008.  And major producers – the US for instance that uses approximately 40 percent of the corn crop to make biofuels – could consider lifting the mandates on bio-fuel production.

Well you’ll not be surprised that a number of experts have already “pooh poohed” the likelihood of action by G20 countries.  As trade expert Simon Evenett was quoted as saying:

Beyond words, expect little from the G20 on rising food prices. … With a string of broken promises on protectionism, no serious enforcement, monitoring well after the horse has bolted, and a tendency to pull their punches, any G20 promises on food trade won’t be taken seriously – by the G20 themselves or by anyone else.

Well here is a useful test of the G20s capacity to coordinate action in the face of what appears to be a real prospect of price increase in such critical commodities as corn, wheat and soybeans.

 

Image Credit: OMAFRA report authored by John Chippa July 13, 2012

“So Easy” – Trashing Today’s Multilateralism

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After a hurried return flight to Toronto, via San Francisco, I was trying to gather my thoughts and reflections on this last G20 Summit  in Los Cabos.  But before I could get there before I was “assaulted” by a piece from David Rothkopf currently the CEO and editor at large of Foreign Policy – “For Multilateralism, Is This the Dark Moment Before the Dawn?”  This piece is the latest and clearest instance of what I call “opinionation” – or in other words  – opinion without much knowledge or data.  Not that I am  suggesting that David does not know about multilateralism.  Far from it (I guess I am saying he should know better).

Indeed David was a major official in the Clinton Administration in Deputy Under Secretary of Commerce for International Trade Policy and Development.  And he has been significantly involved in the beltway foreign policy crowd.  Furthermore David wrote his weekly column from Rio de Janeiro as he awaits  the Rio+20.

So what is the analysis about?  David is not just examining the success/effectiveness of the “high table” of global summitry – the G20 Leaders Summit; he is  reflecting on a wider swath of global summitry architecture though he employs the older term “multilateralism”.  He starts out commenting on the Rio+20, which Rothkopf is attending.  He says: “I am now attending, an event that is likely to be both one of the largest and least consequential in the history of the United Nations.”

But he then takes aim on global summitry more generally:

Our problem is not that the biggest powers are incapable of action to address current problems.  It’s that just when the promise of a new post – Cold War, post single power era of collaboration among nations seemed to be greatest, many of the big powers have revealed themselves to be unwilling to assume the responsibilities of true global leadership – of motivating, cajoling, inspiring, intimidating, confronting or blocking actions by other powers.  It’s not so much that we are in a G-Zero world [a term adopted and adapted from Ian Bremmer of the Eurasia Group] as it is the most of our leaders are zeroes.

And having identified “leaders” as the operative agent of failure he then frames the G20 Summit’s outcome this way:

One sign of this [this is the failure of President Obama] is the G-20 meeting in Los Cabos this week, which has an official agenda that is almost laughably remote from the big issue sof the day.  In the past year, the group has played a much smaller role than was envisioned at the height of the financial crisis – a reality that will be underscored as the reactive, last-minute agenda to address Europe’s continuing crisis dominates the meeting, mostly through a flurry of bilateral leader conversations on the perimeter of the official event.There will be strong language, lectures to Europeans and pushback from them, signs of the deepening tensions between the United States and Russia,  … and then will shift the main venue for  addressing the global economic crisis back to the G-7, the European Union itself, and the other fora that have supplanted the unwieldy G-20 over the past three years.

While David attacks all current multilateral settings he concludes with the position that things will get so bad that ultimately “Multilateralism will ultimately flourish not because it is more equitable but because we cannot solve global problems without it.”

Well I certainly agree with the final conclusion, I am not sure when that dire turning point will come.  Furthermore I think the evidence he draws on fails to see adequately the current multilateral efforts in tackling the challenges. Multilateralism is hard, messy and often achingly incremental.  But let me suggest that the evidence leads to a different evaluation than that proffered by David.

First on Rio+20. We have known for a long time that the universal model presented by the UN is an unworkable ineffective structural approach.  The legitimacy advocates claim that the universal model is the only mechanism – indeed I heard French President Hollande at his final press conference at Los Cabos advocating for the UN – I guess it is part of French Socialist equity.  And of course he was at a G20 Leaders Summit.  But there is no surprise with Rio+20 other than possibly there is likely to be an agreement at all.  Given that President Obama and his people were well aware of the results, it is no surprise that Obama and other leaders are taking a pass on this gathering.

But the existence of the G20 – the G7 before it – is no accident.  These informal multilateral institutions appeared exactly because of the failure of the universal treaty- defined institutions.  The legitimists will never go away – nor will their call for universal representation – but for effective multilateralism you will have to look elsewhere.

Now for the G20.  The critique by David of the Los Cabos meeting probably requires a longer answer than I’ll give here but let me suggest that a reading of the Los Cabos Declaration and the Action Plan suggest more forward work than David Rothkopf acknowledges.  The structure of global summitry is well beyond the Leaders getting together for less than 48 hours.  There is forward movement – assessments, plans, targets – by the G20 countries.  But it is not just the announcements by Leaders.  It is in the meetings, reports, and draft standards of the many tasked organizations.

But speaking of announcements – the statements by Leaders – especially China’s President Hu Jintao (see the written interview with Reforma) – his urging on the G20 to act collectively –  from a Chinese leader – suggests that the leadership takes the collective behavior seriously.  Are these perfect leaders. Nope.  Do they bend to domestic pressures more than they should – probably – whether it’s Merkel or Obama or whomever.  But they are definitely not zeroes.  Way too easy and rather flippant, David Rothkopf.

I buy the Leaders commitment from the Los Cabos Declaration:

Despite the challenges we all face domestically, we have agreed that multilateralism is of even greater importance in the current climate, and remains our best asset to resolve the global economy’s difficulties.

A huge success – no – but multilateralism – or global summitry – in action and the best means for overcoming the challenges – and it is happening now.

Image Credit: Seacoast Properties

In the Game but Wounded – The G20 at Los Cabos

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A slightly bitter gathering of G20 Leaders.  The tone was set yesterday when the Commission President Jose Manuel Barroso, took a question from Toronto Sun Media reporter David Akin to push back against North American criticism of the eurozone’s inability to solve the economic crisis in Europe or to have North American funds to buttress the IMF intervention fund.

As we roll up to the release of the final communique this afternoon in Los Cabos several major news outlets have been quoting from the “leaked” draft communique.  In fact in a Chris Giles piece from the FT Giles suggested that the communique was finalized before the Leaders gathering.  Now we are aware of course that officials prepare the draft communique well in advance – often with bracketed phrases – but a finaled communique without last minute emendations as a result of leaders discussions – and indeed agreements/not agreements – would not be useful.  I am not assuming that it is any different at this leaders gathering.  Indeed other sources have suggested that the communique is being hammered out as I write this post.

The basic outline – which I doubt will change suggests that though leaders pledge support for European efforts  – “take all necessary policy measures to safeguard the single currency” – and to further express the need for growth agenda policies, subject to individual country circumstances – the communique may well lack specifics.  That would be an unfortunate turn.

These comuniques can be “freighted” with rhetorical phrases urging collective action of one sort or another, but success at the summit is determined by specific targets or policies that G20 countries commit to and are published.

On the positive side BRICS leaders at the margin of the G20 summit have agreed to add financial pledges to the IMF intervention fund.  The pledges could include $10 billion from India, Brazil and Russia and then $43 billion from China – a large amount though Japan is committing $60 billion to the fund.

Less positively is the description and details of the action plan for growth promised since Cannes Summit.  Though there is mention, at the moment, the details remain unclear.  Chris Giles has this to say:

G20 statements have pledged to take actions on growth and jobs based on individual countries following their own preferred paths for nearly two years, so the main interest will be in the precise commitments made by the large eurozone economies to restore the sovereign debt crisis.

So we wait now to see the final communique.

 

Lightening Mood at G20 Leaders Summit Los Cabos

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The gloom so reminiscent of the collective mood of  officials and Leaders at Cannes seemed to lift this morning following the Greek election results.  Even the press conference from EU officials Herman Van Rompuy, President of the European Council and Jose Manuel Barroso, President of the European Commission seemed energetic and forward leaning.  The Greeks were urged  to move quickly to form a government and proceed forward on implementing what had previously been agreed to by earlier Greek authorities. Reference was made to the upcoming European Summit at the end of the month with the officials speaking of the plan to raise the levels of banking and institutional integration – as well as fiscal integration, in the Eurozone.

So the warmth of averting disaster filled the room and extended to the audience of journalists and other media types.  Only the Canadian Sun media reporter caused disquiet raising the ire of President Barroso with a critique of European actions by the Canadian Prime Minister Stephen Harper. This animated the generally downbeat European official, Barroso who responded angrily to the reporter’s question insisting that Europe did not need lessons from anyone and declaring that reform by democratic countries – all 27 of the EU – takes time.  And, while Europe had to take care of its internal imbalances others – read that as China and the US – had to take care of their external imbalances.

And that, it seems to me, was the unspoken problem left on the table by the European officials.  The G20 Leaders Summit has suffered from a breach in the timeline of results between the Leaders plans and goals and the incremental results from the tasking on medium-term reforms from the many international and transgovernmental regulatory networks and organizations – the ministers, working groups, IMF, FSB, IOSCO, etc.

But added to this timeline rupture there is now a second.  It is apparent that the EU officials are describing a timeline for reform that stretches out for months if not years.  I expect that global markets and non-European officials andLeaders  will not accept such a timeline – even in the name of democracy and democratic accountabilty.  It could get very fractious and turbulent.

Timeline ruptures are politically serious to the legitimacy and success of the G20 Leaders Summit.

All

Approaching Los Cabos – Waiting for Godot

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[Editor: Apologies to all for the lengthy silence. But graduation of my older daughter took precedence.  And let me just say that Princeton University knows how to conduct a graduation. Believe me!]

Every rescue effort brings momentary relief to world markets.  Within days, however, the  good feeling drains away. Worry returns and leaders then describe and urge the next step to solve the crisis.  We move from Greece, to Spain and now to Italy and then back.  The Eurozone crisis continues – at a low boil – but a boil nonetheless.

As significant time has passed on the Eurozone crisis, we are now faced with yet another G20 Leaders Summit in the midst of a Euro crisis.  In fact the Greece national elections will occur just before the convening of the Leaders Summit – shades of Cannes all over again.  And so the Los Cobos G20 Leaders Summit faces the fate that we experienced with the G20 in Cannes and the G8 in Camp David – a crisis in Europe that is likely to occupy and distract officials and G20 Leaders occupying, we presume, much of Leaders face time notwithstanding the agenda prescribed by the host country.

We are even more likely at the conclusion of this Summit – as opposed to earlier ones –  to receive a round of media condemnation for the distraction from the agenda, the lack of outcomes for the Summit and no doubt a round scolding for the Leaders’ inability to solve the crisis.

And at one level who can blame the media.  This slow motion Euro crisis results in each global summitry meeting “kicking the can down the road” on whatever agenda the host has prepared for the summit.  The problem is that the excuse wears thin after several Summits and it is unlikely that the media will be placated that the next G20 Summit is likely to be more productive – after so much delay – not to mention that the next Summit could be well be over a year away somewhere – and hosted in Russia.

To parry such “negativism” leaders and officials have begun to urge the G20 to not let the agenda to be set aside by the “hurly burly” of the European crisis.  Thus, for example, German officials have been urging a focus beyond Europe – now that of course is hardly a surprise since a crisis focus can only lead to greater pressure on Germany to take bolder action to end this seemingly “never-ending story”.  Thus Reuters reported that senior German officials urged that:

The euro zone will surely be a topic, but as Europeans we also want to talk about other themes related to the global economy that go beyond the euro zone, for example budget consolidation in the United States, currency flexibility in China and structural reforms in emerging markets. … We think when talking about global growth it is important to look beyond the euro zone, not to the discussion to Europe.

German officials also expect to see action – long promised – to provide for the strengthening of the global economy over the medium-to-longer term, but still not likely to provide concrete stimulus plans by the G20 Leaders.

Mexican President Calderon too has spoken out expressing his hope that this action plan will form an important deliverable for this Summit:

(The action plan) will not only include measures to confront and resolve the European crisis, which is ultimately an economic crisis, but will also put forward concrete measures on public policy in key areas in the realms of tax, finance and monetary policy, which will help to boost global growth in the long term.

Chinese officials have also spoken out for the need to tackle not just the European crisis but make progress on on financial reform and push forward on international financial governance reform.  Brazil has raised the spectre of even more conflict suggesting that it may cap its overall assistance to the IMF fund if there are not firmer efforts to address the quota and share issues – though Brazil is aware, as are the others, that the US Administration is not prepared to amend the IMF formula by way of legislative changes till after the November US election.

Forecasts are thus not bright for the Los Cabos gathering.  The transition of the G20 Summit to a permanent meeting targeted on more medium-term issues – whether financial regulatory reform or on macroeconomic issues – seems to have faltered.  It may be inevitable that leaders will be drawn to, or pushed, to deal with the issue of the moment.  But the inability to get out from under the European crisis over an extended period of time has eroded, or is eroding, a sense of  effectiveness of this Summit.  This is not good for global governance overall.

As my colleague Dan Drezner says –  “Am I missing something”.

Image Credit:  Government of Mexico