G20: Next Time, Perhaps…
by Sanjay Suri
31 Mar 09 | IPS
If the draft declaration of the G20 meeting in London is anything to go by, the most specific outcome of this summit is that there will be another one later in the year.
Several governments have begun to lobby already to host the next G20, in apparent confidence that this one is not going to take care of the problems that the leaders are gathering to address, if not resolve.
As governments take their time, real dangers look so large that the problem may rapidly outpace any solution.
A 24-point draft declaration published by the Financial Times reveals little sign of any agreement with teeth. The Consensus declared by G20 leaders in Washington last November became notable for a breach of what was agreed – the G20 declared itself against protectionism, only for the World Bank to count 73 instances of protectionism by G20 members since then. And that is not the final tally.
This time the G20 is seeking to bring institutional surveillance to that resolve. The draft declaration notes that world trade is falling for the first time in 25 years. And in order to sustain the benefits of globalisation and open markets, “we reaffirm the commitment made in Washington not to raise new barriers to investment or to trade in goods and services, including within existing WTO limits, not to impose new trade restrictions, and not to create new subsidies to exports.”
The draft declaration says governments will “notify promptly governments and other relevant institutions of any measures which have the potential to cause direct or indirect trade distortions,” and that governments “will not retreat into financial protectionism.”
The leaders “call on the WTO, together with the IMF and other international bodies as appropriate, to report on our adherence to these undertakings on a quarterly basis.” In effect the WTO and the IMF are appointed policemen on duty to report aberrations from these ideas, if not to act against them.
Certainly, the draft declaration is subject to change; a tougher agreement may well emerge when heads of government meet. But the indications are, through weeks of high-level official meetings capped by a G20 finance ministers’ meeting in London last month, that the leaders will not agree very much that is more binding than this.
There is nothing here to say what the IMF might actually do once it identifies instances of protectionism. The World Bank’s 73 have made little difference to the countries that produced them. For just about every country, the choice is clear between conference room embarrassment over protectionist measures and an answerability to people and enterprises in severe need of some form of protection.
The language again is sufficiently vague on the matter of regulation to mean almost nothing at all. The draft speaks of “effective regulation” and “a stronger supervisory and regulatory framework for the future”, but what that really means is open to intense negotiations when the leaders meet Thursday. French President Nicholas Sarkozy has called for a global regulatory system, a proposal rejected outright by the U.S. and by Britain. And these two countries have not quite worked out just who will regulate banks and financial houses like the hedge funds, and with what powers of intervention.
Here again, as with protection, the draft speaks of “regulation or oversight”. Critical to such a body will be at least powers of access; and there is no agreement in sight of any decision by banks to open their books to such inspection. And the record so far is not promising; in the face of the biggest banking crisis ever, and with trillions of dollars of taxpayer money paid into keeping banks going, there is no public disclosure just how bankrupt the banks may be, of how deep the pit is.
One provision in the draft agreement provides that “each of us commits to candid, even-handed and independent IMF surveillance of our economies and financial sectors, of the impact of our policies on others, and of risks facing the global economy.” This provision seems certainly up for debate; for a start it will have to be a new look International Monetary Fund, with greater clout for developing countries, and perhaps more money from them as well.
The arrangement by which the IMF is run by a European and the World Bank by a U.S. citizen is certain to be dropped. But then too, there is little promise in sight that any IMF observations – and they could be little more than that as provisions now stand – could do anything to change policies that leaders may determine to be in national interest.
Heads of government can of course initiate and agree changes to the draft that may give it more punch. But the draft as it stands leaves leaders plenty of room for taking national decisions independent of international commitments. And few seem in a hurry to abandon that kind of right to choose. So, to the next G20, then.