G20 London 2009


G20 Video Wrap-up
April 6, 2009, 11:14 am
Filed under: Admin | Tags: , , , , , ,

In collaboration with CBC’s The National, contributors of this blog prepared a set of short video commentaries from behind the scenes of the G20 London Summit. Below are the two final commentaries by CIGI experts, following the conclusion of the summit.

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Dr. Andrew F. Cooper  CIGI Associate Director and Distinguished Fellow
PLAY VIDEO (Runs 3:05)

In this video blog, Dr. Cooper summarizes the final outcome of the G20 London Summit following US President Barack Obama’s press briefing. He notes that the core challenge the president faced at his first international summit was to bring home the importance of these brokered decisions to an American audience. Furthermore, Dr. Cooper submits that the world was waiting in anticipation of Obama’s view on how the United States could act as a legitimate force in first resolving the immediate economic crisis and second in developing an effective global architecture for preventing /resolving future crises. While London was a first step in bolstering confidence back in the US and the world economy, great challenges of delivering on new promises and meeting expectations remain in the months ahead.

 chin-vblog

Dr. Gregory Chin  CIGI Senior Fellow
PLAY VIDEO (Runs: 1:26)

In this video blog, Dr. Chin comments on the growing public confidence of the Chinese government within global governance. He suggests that the G20 London Summit may well be remembered as the moment with China upgraded its status to an active global diplomatic power, and the time when a consolidated and informal “G2″ between the United States and China launced a strategic decision-making bloc. Moving beyond the London Summit, Dr. Chin raises the issue of implementation after consensus, and that a renewal of confidence in the global economy will rely on the G20’s ability to mobilize action and resources.

Post your feedback on these videos and the conclusion of the G20 London Summit on CBC’s The National’s blog, by video or text.

Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.



G20 Gets a Big Obama Bounce

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Andrew F. Cooper
  CIGI Associate Director and Distinguished Fellow

On the eve of the G20 it looked as though the summit would be a marked failure. As with the first meeting in Washington DC meeting back in November the public optics were all about the clash of civilizations between the market oriented countries led by the US and the UK and the regulatory oriented countries led by France and Germany. The former pushed for a collective stimulus or ‘rescue’ package. The latter wanted to focus on putting into place constraints on the excesses of the so-called ‘Anglo-Saxon’ business model. In an unconventional move the German chancellor and the French president upped the ante via a joint appearance amidst speculation of red lines and even a De Gaulle-like empty chair.

A big crisis however did concentrate the mind of the leaders about the implications of a non result from the major economies. Cutting through the temptations to simply reinforce what President Obama called at his press conference national ‘quirks’ compromises were made to give the G20 the big result it needed to be a confidence booster.

Obama did not get national set of stimulus packages he originally wanted. But this omission was overshadowed by the announcement of the one trillion dollar initiative for the International Monetary Fund. Angela Merkel and Nicolas Sarkozy did not get a grand new architecture of regulation but they got important bits and pieces of regulation directed at hedge funds and bankers’ pay, a revamped Financial Stability Board, and an upgraded drive against tax havens.

In cliched terms this was a win-win situation as leaders on both sides of the Atlantic could claim victory. Yet it must be allowed that the scope of these wins was highly differentiated. Although Gordon Brown did a first class job as host his government is fading into certain defeat at the next election with the idea of him extracting some further personal bounce through the G20 highly unlikely. Angela Merkel acted as a solid national leader but without any image of an international statesperson. Nicolas Sarkosy blends energy and shallowness as his stylistically impressive calls for action lack substantive follow up.

President Barack Obama enhanced his reputation in an unanticipated manner. Fighting a cold at his press conference his pronouncements of the G20 achievements were fairly perfunctory. And although he flashed some of his vast store of charm he also bobbed and weaved around some tough questioning. From the US press corps the focus was exclusively instrumentally. What did the G20 result mean for main-street USA? From the international journalists in attendance the focus was on the sense of American decline.

Although deft in these handlings of these questions (see my video blog for CBC as a G20 ‘insider’), it was his operative diplomacy not just his communication skills that deserves kudos. Behind the scenes he crafted a compromise between France and China on tax havens. He gave ground on issues without doing anything that was offside with his domestic initiatives. He gave the impression that a new type of assertive US leadership was on tap without being ‘soft’ in acknowledging that the US was the exclusively to blame for the crisis. While speaking about the flaws of Wall Street he also pointed to mistakes in the European and Asian banking sectors.

If Obama was the big winner he was not the only one. As other blogs have commented China made a mark to the extent where observers are talking about an informal G2 inside the G20. Institutionalism is back in whether in the case of the formerly obscure (the Financial Stability Forum, now Board) or the controversial (the IMF). The biggest winner of all – along with Obama – though may well be the G20. Here the parallelism about the positional ascendancy of the new US president and the new forum is striking. For if reports are right about the third G20 being in New York in September, it will be Obama who chairs the next stage of this dynamic process.

Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.



China Upgraded to Global Power

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Paola Subacchi  Research Director, International Economics, Chatham House
From the London Summit Media Centre

It is the end of the big day and I am travelling from the Excel Centre to a Brazilian café in Acton. The BBC wants to record an interview for Newsnight there, so to add some colour – a long way to go for a couple of soundbites! Does the London Summit make any difference for countries like Brazil? What do the BRICs get out of it?

Perhaps the voice of the developing countries was a bit muted, but surely being around the table is already a big achievement. By delivering a sensible, albeit not exciting, plan of action and showing unity and cooperation, the G20 has qualified to be the key multilateral forum for some years to come. It has de facto replaced the G7 in terms of depth and scope of its agenda – the G7 will continue to be the forum for developed economies. And the developing countries are part of it. However, they will have to move from the background to the limelight and ensure that they are not ‘junior partners’ forever. How can this happen?

Assertiveness is not only a function of geopolitics, but, and foremost, of the ability and willingness to commit resources. This is the big lesson of the London Summit, and the dividing line between ‘senior’ and ‘junior’ partners, or ‘global powers’ and ‘regional powers’. Putting aside some initial reluctance – as in the G20 summit in November 2008 – in London China graduated from regional to global power. It showed political and financial muscles and the appetite to be involved in the global dialogue – with also an interest in developing a closer relationship with Washington.

China is no longer a BRIC, and should no longer put together with countries, like Brazil, that have the potential of becoming large economies and global powers, but they are not quite there. Economic figures clearly show this divide. China’s economy is about US$30,000 bn in volume, has about 10% of GDP current account surplus and approximately US$2,000 bn in FX reserves (estimates for 2008). Brazil’s economy is much smaller (slightly below US$3,000 bn), has about 2% current account deficit and just below US$200 bn FX reserves. This puts China along with the other large economies – US, EU and Japan – and, also, in a special relationship with the US – it is worth noting that President Obama and President Hu Jintao have already agreed to meet twice later this year under the framework of the China-US strategic and economic dialogue.

Political influence and economic power go together, and China seems determined to use both to shape a more global role for itself.

Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.



G20 London Summit Declaration
April 2, 2009, 1:25 pm
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declaration

By late-afternoon today, as the formal meetings were wrapping up, the G20 Leaders’ Statement was circulated to the media and online. There were reports that leaders were agreeing to the final language up until the final minutes. Largely, there are not many surprises in the substance of the declaration, while much is left to interpretation on who will deliver and enforce the key points of agreement.

These documents make clear the need to empower or reform the international financial institutions, particularly the International Monetary Fund and the World Bank, to allow for continued monitoring of G20 progress on reversing the world economic crisis. There is also mention of another G20 summit (host country TBA) by the end of 2009 to track national and international action on the statement’s main points.

The declaration came in three parts, the statement and two annexs:

Leaders’ Statement (2 April 2009)
Annex: Declaration on Strengthening the Finanical System (2 April 2009)
Annex: Declaration on Delivering Resources through the International Financial Institutions (2 April 2009)

Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.



G20 and Tax Havens: Efficiency, Yes; Legitimacy, Maybe…

Andrew F. Cooper  CIGI Associate Director and Distinguished Fellow
From the London Summit Media Centre

Offshore financial centres (or tax havens) did not cause the financial crisis. But tax havens have become one of the prime targets of the G20 in its efforts to deal with the global economic meltdown. Although there are some differences in the means to do so, the accelerating offensive against tax havens has bridged the trans-Atlantic divide that has defined the London Summit on so many other issues.

The US has become far less tolerant of tax havens in the wake of the UBS scandal, in which Swiss banking officials stand accused of facilitating tax evasion by US citizens. During the presidential campaign, Mr. Obama often cited frustration on tax havens, often referring to a single office building in the Cayman Islands that houses 12,000 US-based corporations. The UK – facing a marked decline in the role of London as a financial hub – is trying to repatriate some of the big pools of money not only from tax evaders but tax avoiders (with Labour Prime Minister Gordon Brown pledging to have Briton’s pay the ‘right amount of tax’). Germany has mounted a concerted drive against the culture of secrecy found in Liechtenstein, especially when so many rich Germans have taken advantage of that secrecy. And French President Nicolas Sarkozy has stated a successful outcome relating to the regulation of tax havens one of his ‘red line’ in which the G20 summit must deliver results.

The issue of tax havens as viewed through the lens of efficiency has become one of the unanticipated markers of the success of the G20. At the first Washington DC summit in November 2008, Sarkozy lamented the lack of success in this agenda area. Yet, as pushed by the Paris-based OECD, the G20 has moved to send a strong signal to those tax havens which have refused to sign tax information exchange deals. It appears as though a ‘naming and shaming’ approach will lead to eventual sanctions on states that don’t enter into tax sharing agreements.

If a sign of efficient action, however, the issue of tax havens raises the question of legitimacy. Can the G20 not only speak for the rest of the world but impose its will on countries that do not belong to the group. The G20 is arguably over-represented by European countries – to the point where the Czech Republic and Spain have hung on their spots from the Washington DC meeting. But it is quite striking that the countries targeted as tax havens in Europe (not just the small principalities such as Liechtenstein, Luxembourg) and Monaco but middle sized countries including Austria, Belgium and Switzerland are not included.

The question of legitimacy is even more pronounced in the case of the Caribbean, where many of the best known tax havens are located. As noted this type of niche highlights some of the defects associated of the shadow economy. The Cayman Island’s for example have more registered businesses than citizens. Yet, targeting developing countries contributes to other anomalies. While the offshore has been targeted their onshore competitors (most notably, the US state of Delaware) has been left alone. Nor has there been any move to have Caribbean regional representation akin to ASEAN or the African Union.

The site for individual or collective voice on this issue, therefore, turns away from the G20 to another forum – the Summit of the Americas, to be held in Trinidad and Tobago in two weeks time.

Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.



Global Imbalances have Consequences
April 2, 2009, 9:33 am
Filed under: Analysis | Tags: , , , , , ,

Ruth Davis  Junior Research Fellow, International Economics, Chatham House

boutros-ghaliThe Chatham House panel discussion held on the eve of the London Summit promised “Multiple Perspectives on the G20” and it delivered just that. This event marked the launch of the Chatham House-Atlantic Council report “New Ideas for the London Summit”; there is broad support for this summit and a will for the G20 to succeed in delivering the “ambitious, but manageable and focused agenda” which the report deems necessary.

However, there are dissenting voices or at least notes of caution too – quite apart from the much publicised intransigence shown by certain EU leaders. Dr Boutros-Ghali, the Egyptian finance minister and Chair of the IMFC, will be attending the summit although Egypt is not in the G20. He reminded the audience that these “twenty countries represent themselves. They don’t represent the rest of the world even if they work for it.” Though he acknowledged it was a strong word, he noted that the G20 is technically “illegitimate” as it is not part of an international treaty backed system. Acting as a conduit for the voices of the 172 countries not in the G20, he spoke of the crowding out taking place in the world debt market, which means that US and EU borrowing requirements are pushing out countries like Indonesia and Mexico where the human consequences of financing shortfalls will inevitably be more grave than in developed countries with established welfare systems.

Dr Boutros-Ghali also talked about the IMF: the adult meant to be supervising the global economy but who was “out of the room” when the crisis happened. He noted the problems surrounding the provision of extra funds for the IMF; although this new money is necessary to prevent the collapse of vulnerable emerging economies, refinancing by means of bilateral borrowing rather than by expanding IMF aggregate quotas negates the need for immediate governance reform and a rebalancing of country representation within the organisation.

Stephen Roach, Chairman of Morgan Stanley Asia, also drew out what he saw as contradictions in the G20’s approach to crisis resolution and sequencing of policy actions. While Lord Malloch-Brown and others feel that the global fiscal stimulus measures are a necessary and imperative short term response to substitute for the collapse in global demand, Roach challenged this view and asserted that policymakers are misreading Keynes. For Roach, “this is our time to deal with the heavy lifting” and “shame on us if we fail to do it at this summit.” This means tackling the global imbalances head on (essentially, raising consumption in the Chinese domestic economy and encouraging saving in the US) and addressing the interplay between asset bubbles and global imbalances – a complicated task that he is not convinced politicians are up to. For the sake of countries both inside and out of the G20, let’s hope he is wrong.

Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.



Star Power and the G20
April 2, 2009, 8:13 am
Filed under: Analysis | Tags: , , , , ,

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Andrew Schrumm  CIGI Research Officer
From the London Summit Media Centre

The massive media stage that the G8/G20 has become is a magnet for big personalities and star power. Without a doubt, the biggest star of today’s G20 meeting has been US President Barack Obama. The London Summit marks his first major international meeting, which has drawn huge attention from both journalists and state officials.

Major UK news outlets have been overcome by an Obama phenomenon, covering his every move (alongside wife Michelle’s fashion choices). Everyone has been trying to capitalize on his time in London. For instance, discount airline RyanAir even put Mr. Obama’s face on a full-page ad in Tuesday’s Daily Mail, playing off his arrival at their main depot at Stansted Airport.

World leaders too have been anxious to score time with the new president, hoping to build new relations with the Obama administration as it scales back many of the Bush-era foreign policy decisions. There is a sense the established diplomatic stiffness is lessening as Mr. Obama’s relaxed but confident style of diplomacy allows for fair and frank negotiations.

Here at the media centre, a different type of star power is taking hold. The ever-present and bombastic Sir Bob Geldof has created a stir that most leaders are unable to achieve. The most recognizable face among a crowd of journalists, he has begun to shift the ‘buzz’ back on African issues, amid heavy economic discussions. With the lead editorial in yesterday’s Financial Times, he provocatively posed the need for a global fiscal stimulus for Africa to cancel toxic debt and promote economic development. Today, he brought this message to the media centre, forming a large scrum in the middle of the room.

The magnetism of celebrities and star power has allowed some to reach a level of prominence within international affairs few occupy. And yet, such activity is easily dismissed by critics. Not without its flaws, celebrity-driven diplomacy is an emergent, albeit contested, pathway to bolster the legitimacy of international public policy.
Star power – whether employed by a president or a provocateur – is practiced in a fine balance of buzz (firm language) and bite (technical, professional support). In a sense, the power of celebrity provides an accessible a conduit between citizens, advocates and sites of power, in a fashion that no one would have imagined a decade ago.

Serious activists like Geldof – and his regular compatriot U2 frontman Bono – are changing the diplomatic discourse. Their ability to gain extended face-time with prominent national leaders, while their message is heard at both the mass and elite level means that they are engaging in the kind of widespread communication that underpins successful diplomacy. At the other end, the presence of Mr. Obama and his fresh diplomatic approach appears to draw huge attention to otherwise dry and technical international issues.

Disclaimer: This blog is solely intended to spur discussion, while the opinions expressed are those of the author(s) and do not necessarily reflect the views of CIGI, Chatham House or their respective Boards of Directors.




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