Seoul Summit to determine future of G20

By Chot Jin-seo

It's finally here, the G20 summit. Two days from now, many of the world's most powerful people will arrive in Seoul to sit at a roundtable around Korean President Lee Myung-bak.

This may surely be an emotional moment for Koreans. But some see economic benefits, too. As a national PR event, some optimists estimate the event will bring direct and indirect profits of more than 20 trillion won ($20 billion) over the long term. That's even better than hosting the World Cup finals or the Olympic Games, they say, though previous experiences in other host nations do not support this argument very well.

For the rest of the world, the G20 is nothing like a sporting event but serious business where national interests collide and hundreds of thousands of jobs are at stake. The G20 summit was initiated as an emergency response to the 2008 financial crisis, and still remains so in a sense.

History and legitimacy

Before the financial crisis, the G20 was a meeting of finance ministers. It had been thought of as an expansion of the G8, the group of rich nations in Europe and North America plus Japan and Russia.

The financial crisis that broke out in 2008 upgraded the G20 into a leaders' meeting.

The first summit was held in Washington, in November 2008. It was only three months after Lehman Brothers filed for bankruptcy, so the summit's primary goal was to save global financial markets from collapsing.

The next summit was held in London, a place where the damage of the crisis was at its largest, in April 2009. At the time, global stock markets were racing downward. So the main issue on the agenda was how to avert the threat of a global depression via international coordination in monetary and fiscal policies.

The London Summit commissioned the Financial Stability Board to make new rules for financial markets. It was also in London that a citizen died of a heart attack during a clash between police and anti-Wall Street demonstrators, which has been the only death so far related to the G20.

The Pittsburgh Summit was held in September 2009. Its communique articulated that the G20 was the premier forum for international economic coordination, meaning it should be treated as a more permanent fixture rather than a temporary meeting. There was also an agreement that nations needed to work together for a strong global recovery, and there should be at least a 5-percent shift of IMF voting shares from advanced to emerging economies.

The next meeting was held in Toronto in June 2010. The theme this time was the European debt crisis in the so-called PIGS (Portugal, Italy, Greece and Spain) countries, so national debt and current account balances became a major issue. The meeting also had a setback in international coordination toward a universal bank levy, as host Canada raised strong objections to it.

South Korea won the bid to host the fifth summit in Seoul at the Pittsburgh Summit. Sakong Il, former finance minister, played a critical role in the process by using his international network of politicians and researchers. He then took the chairmanship of the G20 Preparation Committee in Seoul.

The Seoul summit is by itself important in that it is the first to be held by an emerging (and non-Anglo Saxon in that sense) country. So the Korean government hopes that it can play the role of a bridge between developed and developing nations and between the West and the East.

With all its reputation, the G20 still has a legitimacy problem. While it is often referred to as a group of 19 largest economies plus the European Union, the selection of the G20 was not actually in the order of economic size.

For example, Iran, Venezuela and Taiwan are non-G20 members but they have larger economy than South Africa, the representative of Africa at G20.

Other participants include representatives of intergovernmental organizations such as the United Nations, the International Monetary Fund, the Financial Stability Board, the World Trade Organization, the Organization for Economic Cooperation and Development and the International Labor Organization.

The summit's achievements will be kept by more than 4,000 registered journalists. Most nations will have press conferences when the meeting is over on the eve of Nov. 12.

Agenda

The Seoul summit is not a one-shot event. The countries have been working on the agenda for over a year via numerous meetings of financial ministers, central bank governors, financial regulators and their representatives.

The draft of the Seoul Summit communique is still being drawn up at the office of the G20 Seoul Preparation Committee, located among the fancy cafes and pricy restaurants of Samcheong-dong.

The general guideline is already set at the Gyeongju finance ministers' meeting last month. But the communique still needs presidents' resolutions on many items.

The global imbalance of trade surpluses and deficits has been a key agenda issue for the G20 this year, since it is a sensitive issue in domestic politics in many nations such as the United States.

At Gyeongju, the G20 nations agreed not to talk too loud about foreign exchange rates of other nations, in order to avoid a "currency war." Rather, they decided to make more general guidelines on the current account balance.

As a host and a mediator, the Korean government wants to have a numerical target on the current account surpluses and deficits. The number will be different for five sub-groups of the G20 member nations. The groups are oil exporters; advanced nations with a surplus; advanced nations with a deficit; developing nations with a surplus; and developing nations with a deficit.

This will be part of a policy guideline called the "Framework for strong, sustainable, balanced growth" or for short the "Framework." The G20 is using an intensive multilateral peer-review system for this process, which they believe to be more effective in enforcing nations to follow the agreement than any legal covenants or bilateral agreements.

The G20 and the FSB have almost finalized a code of new banking regulations called Basel III. Though it is not well publicized outside the finance industry, it is nevertheless "a big step forward toward a financially safer world," said Kim Chong-soo, the governor of Bank of Korea, in a recent interview with the Korea Times.

In other areas of discussion, the G20 has made agreements on "surprisingly important and meaningful projects" on the issue of economic development of poor nations, a high-ranking Seoul official said in a recent meeting with The Korea Times.

Korean President Lee Myung-bak has claimed that the development issue would be the Korea Initiative, since it is where the country can teach others very well out of its own experience. A success in the development agenda will help raise the G20's legitimacy among non-G20 nations.

After the Seoul summit, France will officially take over the role of host for the next summit, which will be held in Paris next year. The country has vowed to tackle the problems of international monetary system, but has not articulated anything on the details of the plan, yet. So the communique of the Seoul summit is likely to mention this issue as well.

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