Firstly, there is Syria. Russia and the US are at loggerheads in the UN Security Council, which, in turn means that US military action against the Assad regime, when it comes, risks being of questionable legality. The US cancelled the planned bilateral summit that was to take place following the G20 summit between Obama and Putin due to the row over US intelligence leaker Edward Snowden. The Kremlin has apparently responded by indicating there was no time to pencil in a bilateral meeting with the US during the summit itself.
The Syria crisis is not on the formal agenda for the meeting, and the Russians are stressing the G20’s traditional mandate of coordinating action to solve global financial and economic problems. But, in reality, we can expect that progress on Syria will be at the very top of the agenda of a number of heads of state at the Summit (particularly Obama, Cameron and Hollande). Russian Foreign Minister Sergei Lavrov has indicated that the topic will be accommodated if requested. Whether or not Syria makes it into the formal discussions there will be a frenzy of behind-the-scenes bilateral and small-group meetings seeking to make progress towards a common approach. This may involve efforts to persuade Russia to signal a softening of support for the Assad Regime, or a more radical solution, which could draw support from countries with different stances (such as moving to a UN-supervised process to remove chemical weapons). But going into the summit opposing positions appear to be hardening.The UK, following on from the embarrassment of the government’s defeat in Parliament on joining the US in military action, is keen to be seen to be leading the effort to strengthen delivery of humanitarian assistance both within Syria and in the surrounding countries being flooded with refugees. Either way, it will be tempting to conclude that, if the final leaders’ communique includes wording on Syria, it will be a sign that some progress has been made – and if it does not, that the diplomatic activity at the summit has not yet borne fruit.
Another group of G20 leaders will be turning up with something quite different at the top of their agendas. The signals from the US of an intention to bring to an end (albeit gradually) the era of large-scale monetary stimulus through so-called ‘quantitative easing’ measures has caused a major bout of instability in emerging markets. Declines in exchange rates and stock markets have been sharp – with countries affected including some very significant G20 members such as India, Indonesia, South Africa and Brazil.
The transmission mechanism is as follows. When OECD countries seeking to restart growth after the global economic crisis of 2009 opted over a sustained period to increase the total supply of money in circulation, much of this (bearing in mind the low rates of return on offer in those same economies) headed for emerging markets. This bolstered investment flows, currencies, and, in some cases, asset prices (particularly real estate). US signals of a desire to ‘taper’ this supply has produced the reverse effect – capital exiting some emerging market economies rapidly. As Jayati Gosh has argued, the bursting of an unsustainable debt bubble in India has many policy drivers that are entirely Indian in origin. But the perception endures that the trigger is the cause. In short, a group of significant G20 middle-income countries are seeing monetary policy in OECD countries as causing them serious problems – so this is bound to be a focus of debate. In the run-up to the G20 summit, South Africa has called for stronger global collective action in relation to monetary policy.
A broader problem is that, globally, most major economies are currently over-reliant on expansionist monetary policy to maintain growth. As Ha Joon Chang has pointed out it is an instrument which can exacerbate inequality and does little to promote jobs and inclusion. In contrast recovery driven by fiscal policy would have involved an increase in the shares of public investment and social welfare spending in national income, reducing the share going to the rich.The debate on monetary policy will take place against a backdrop of improved economic performance in developed countries and growing problems in large middle-income countries (including China, where growth has slowed markedly). This is an altogether new situation for the G20. If the G20 could facilitate collective action on monetary policy, this would make a big contribution to global economic governance. Dirk Willem te Velde argues that the G20’s development agenda could play a big part in this if there was a new partnership between the G20 and developing countries, focused on coordinating core G20 issues, but also able to deal with spillover issues, such as monetary policy, tax, base erosion and profit shifting.
The G20’s Development Working Group continues to make good progress, with a strong Accountability Report (reviewed by Dirk Willem), which will be used to develop the next action plan (the ‘Development Outlook’ to be published during the Summit, replacing the Seoul Multi-Year Action Plan). The Accountability Report signals a shift from a narrow growth focus to a broader developmental agenda than we have seen up to now from the G20 – indicating a forward direction of strengthening the relationship between economic growth, social inclusion and environmental protection. We anticipate that this broader approach to development will be matched by strong support in the final G20 communique for the UN process to develop a new framework of post-2015 development goals. At the Summit, due credit will likely be given to both the High-Level Panel Report on Post-2015 (bearing in mind that two of the three co-chairs – Cameron and Yudhoyono – will be present) and the current UN process through the Open Working Group on Sustainable Development Goals.
An important issue for low-income developing countries who are not members of the G20 will be the tax agenda. There are hopeful signs the G20 ‘Development Outlook’ will take up a key issue which emerged during the G8 in Lough Erne on tax and development action - namely, the need to build low-income-country capacity to engage in global debates, to use new information to enhance revenues, and to challenge multi-national companies engaged in trade mispricing practices. However, the kind of broad-based progress in reforming global tax rules so that developing countries can derive a fair share of revenues from corporate activities, which we would hope to see in the long run (reflected in the civil society commentary and the OECD Action Plan on Base Erosion and Profit Shifting), may be more than one summit can achieve.
Ever since the global economic crisis broke in 2009, the G20 has been carrying a heavy load of expectation in terms of addressing the big challenges in global governance. We need to emerge at the end of this summit with some kind of progress on the three compelling issues discussed here (the Syria crisis, coordinating monetary policy to reduce volatility in emerging markets, and global tax reform) to build continuing confidence that those hopes are not misplaced.