Sunday, November 16, 2008

G-20 marks time as it waits for Obama

Business Times - 17 Nov 2008


Summit drags its feet on major issues as it waits for Bush to leave the stage


THE meeting of leaders representing the world's 20 largest economies that took place in Washington over the weekend should be described as an 'historic' event for two main reasons: First, it was a dramatic response to one of the most devastating global economic crisis since the Great Depression of the 1930.

And it marked the shift of economic power from the 'old' club of the seven industrialised nations of North America, Western Europe and Japan to the 'new' emerging economies in Asia, Latin America and Africa.

But in practical terms, the presidents and prime ministers who attended the two-day summit of the Group of 20 have refrained from launching a major collaborative effort to deal with the continuing instability in the financial markets.

Instead, they reiterated calls for greater oversight of the financial markets and more action to stimulate struggling economies worldwide.

That the host of the summit, US President George W Bush, the leader of the world's largest economy, is in the process of leaving office to be replaced early next year by a younger and more visionary figure explains in part why the leaders gathered in Washington decided only on calling for more action in the global economic front instead of taking immediate and concrete actions.

Ironically, President Bush, who has tried during his two terms in office to establish the foundations for a American global hegemony and to spread the principles of the American free- market system, is retiring just at a time when both American capitalism and US global leadership position are being challenged by both Old Europe, led by France and Germany, as well as the rising economies of China, India and Brazil.

The hope among the attendees is that President-elect Barack Obama who will represent the US in the follow-up meeting next year will be more responsive to the idea pressed by the Europeans of coordinated moves by members of the G-20 to increase public spending and cut tax cuts as part of an effort to stimulate the global economy.

The new US president and his top economic aides are also expected to come-up with creative ideas on how to reform the World Bank and the International Monetary Fund (IMF), and in particular to bring China and other emerging economies into the leadership of these and other multilateral organisations.

In a radio address, president-elect Obama expressed support for the summit 'because our global economic crisis requires a coordinated global response.' Mr Obama asked two of his advisers, former US secretary of state Madeleine Albright and former Republican Congressman Jim Leach to attend the summit as his unofficial representatives.

One of the main concerns among the G-20 about the newly-elected US president is the growing calls for protectionism among leading Democrats that could affect the policies of the new administration. Hence Britain and other economies would like to highlight the importance of reviving the Doha Round on liberalising global trade on the G-20 agenda.

Pointedly, while the G-20 leaders expressed support for reforming the multilateral economic system established in the aftermath of World War II also known as Bretton Woods, there were no signs that they were closer to an agreement on how the new system would actually look like.

'Over the past months our countries have taken urgent and exceptional measures to support the global economy and stabilise financial markets,' said the statement issued by the G-20 on Saturday. 'These efforts must continue. At the same time, we must lay the foundation for reform to help to ensure that a global crisis, such as this one, does not happen again.'

The finance ministers have been instructed to prepare drafts on agreements on 50 economic issue-areas by March 31. The G-20 leaders would meet again by April 30, 2009, to discuss the progress in these discussions.

And while US global economic influence may have diminished, it is expected to play a leading role in a new 'directorate' that would emerge in the new Bretton Woods System, perhaps as a triumvirate that will also include China and the European Union.

Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.

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