G20 aims to meet expectations as global finance savior

Heads of state attending the first G20 summit on financial markets and the world economy pose for a group photo at the National Building Museum in Washington on Nov. 15, 2008.

By Kim Tong-hyung
Staff reporter

South Korean President Lee Myung-bak will undoubtedly be a happy host when he welcomes world leaders to Seoul for the G20 Summit in November, which is clearly the most important business event the country has ever hosted.

Whether the G20 arrangement ever lives up to its massive early expectations as the rebuilder of global finance, as well as continuing to maintain its relevance as the main vehicle for designing and implementing international economic policies, however, remains to be seen.

Since its first meeting in Washington in 2008, the G20 has moved to replace the narrower, Western-dominated G8 as the primary global forum for economic policy. And the meeting in Seoul between the G20 leaders slated for Nov. 11 and 12 doubles as a deadline to produce an outcome that goes beyond diplomatic blather and provides a detailed set of measures to inject new life into the world economy, and fix global financing.

The Seoul meeting represents the fifth G20 summit, following the fourth held in Toronto in June, and is hoped to provide an important platform for fast-developing nations such as China, Brazil, India, and of course South Korea, to wield larger influence on key issues related to global economic stability.

The Korean organizers for the Seoul summit are finding their roles as hosts becoming increasingly tricky. With economic recovery taking hold around the globe, it has become that much harder to keep countries on the same page in discussions for reregulating global finance, especially since different nations are at different stages of recovery.

Many countries, regardless of agreements reached in G20 events, have already designed and implemented their own measures for controlling government debt and achieving banking sector reform.

Although the earlier G20 meetings were centered on pledging fiscal stimulus, the focus of the talks appeared to have shifted toward reducing government deficits since the Toronto meeting.

And there seems to be a widening gap between the Americans, who want to see other parts of the world offering more economic stimulus, and Europeans, who are focused on restoring austerity.

``Korea’s role as the host of the G20 summit will be critical in advancing the discussions and influencing direction. There is pressure to take the achievements from the summits from Washington to Toronto and assure that something meaningful is produced out of them,’’ an official from Korea’s Ministry of Strategy and Finance said.

G20 members, comprised of the 19 countries with the world's largest industrial and emerging economies, plus the European Union (EU), collectively represent about 90 percent of the world's gross domestic product (GDP), 80 percent of world trade and two-thirds of the global population, according to the body’s website.

World leaders gathered at the third G20 summit in Pittsburg, the United States, in September last year declared that the G20 will replace the G8 as the permanent council for international economic cooperation.

The decision reflected the increasing importance of rapidly-growing Asian and Latin American economies, a point that garnered particular relevance after the U.S. subprime mortgage crisis tested the mettle of the American and European banking systems.

The G20 was established in 1999 as a response to both the Asian financial crisis of the late 1990s and the growing recognition that key emerging-market countries were not adequately represented in the core of global economic discussions and governance. The first G20 meeting was held in Berlin, on Dec. 15 and 16, 1999, hosted by the German and Canadian finance ministers.

Before the G20 was established as a more permanent economic body, a group of 22 countries (G22) and then 33 (G33) gathered on an ad hoc basis under the goals of involving a broader range of countries in global economic discussions.

The current G20 members are South Korea, the U.S., China, Japan, India, the U.K., Germany, France, Italy, Russia, Canada, Argentina, Australia, Brazil, Indonesia, Mexico, Saudi Arabia, South Africa and Turkey. The EU is also a member, represented by the rotating council presidency and the European Central Bank.

With the exceptions of Argentina, Saudi Arabia and South Africa, all of the member countries fall within the world's top-20 list in GDP. The financial and economic crisis that crippled the world in 2008 enabled the G20 to solidify its status as the main platform for international cooperation.

The G20 held its first leaders' summit in Washington in November, 2008, as a response to the economic crisis. The world leaders that gathered in the U.S. capital produced a five-page communiqué that vowed for a ``broader policy response'' to the crisis, collectively pledging not to raise any trade and investment barriers over the coming year.

The leaders continued their discussions to jolt the world economy and re-regulate global finance in their second summit in London on April, 2009. The core of the talks was aimed at providing the International Monetary Fund (IMF) with extra resources to help the organization pump more money into struggling developing economies, such as Eastern European countries.

With stability beginning to return to the global economy, the G20 leaders in Pittsburg shifted their discussions toward finding effective measures to put economies and their banking sectors on a sounder footing.

There was also a wealth of discussions to harmonize macroeconomic policies to avoid large global economic and financial imbalances. The leaders also vowed not to withdraw stimulus measures until a durable recovery takes hold and agree to coordinate their exit strategies, although acknowledging that the timing of those could vary from country to country.

G20 leaders in Toronto shifted the focus back to austerity, while the summit in Seoul is aimed at adding detail to the complex picture of achieving durable economic growth and reducing the risks of financial instability.