What is the G20 and how did this international forum begin?
The G20 is an informal forum for discussion between advanced and emerging countries that seeks to strengthen international cooperation and ensure global economic stability. The G20 has its origin in the 1998 Asian economic crisis. One year later, the finance ministers and central bankers of the most important global economies convened in Berlin, Germany, at a meeting co-sponsored by the finance minister of Canada and the finance minister of Germany.
In the wake of the international financial crisis that erupted in 2008, the most serious since the Great Depression (1929), the G20 began to meet at a Leaders’ level and has since become the most important forum for global economic and financial cooperation and discussion. The economies that make up the G20 represent almost 90% of global GDP and two thirds of the world’s population. Its main goals are to coordinate macroeconomic policies to strengthen the global economic recovery; to reshape the international financial architecture; and to promote financial regulations to help prevent another crisis, such as the one in 2008, from occurring again.
Which countries and international institutions participate in the G20 and what types of issues does it address?
G20 Members: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Republic of Korea, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.
Invitees: Spain (permanent guest), Benin, Cambodia, Chile, Colombia.
The World Bank and International Monetary Fund also participate on a permanent basis.
International Organizations: The Financial Stability Board, the United Nations, the International Labor Organization, the Organization for Economic Cooperation and Development, the World Trade Organization, amongst others.
Agenda: Economic and financial issues such as the reform of:
1. International financial institutions;
2. Financial supervision and regulation; and
3. The international monetary system; as well as macroeconomic policy cooperation via the Framework for Strong, Sustainable and Balanced Growth and its Mutual Assessment Process; financial inclusion; and commodity price volatility.
The G20 agenda now includes issues that are not financial in nature, but have an impact on or are affected by international financial instability, such as development, energy, trade, food security, jobs and the fight against corruption.
How many Leaders’ Summits have been held?
To date, there have been six Leaders’ Summits (Washington, London, Pittsburgh, Toronto, Seoul and Cannes). This will be the second occasion that an emerging economy chairs the Group (the first one was Korea) at Leaders’ level. In addition, Mexico will be the first Latin-American country to hold the annual group Presidency.
Why is it important for both emerging and advanced countries to participate in the G20?
The institutionalization of the G20 at the Leaders’ level reflects the fact that the distribution of international economic influence is increasingly multipolar. The G8 countries are being joined by emerging countries of increasing economic weight and political influence. At the same time, as an informal forum for cooperation that seeks solutions to global issues, the G20 reflects the need for innovative means of cooperation in a world where our problems now transcend national borders, especially in the areas of economics and finance, which are increasingly complex, and now require the coordinated action of developed and emerging countries.
What does Mexico propose to do during its presidency of the G20 in 2012?
What was the cause of the 2008 economic and financial crisis?
The financial crisis had several causes, including inadequate implementation of economic and financial policies at the national level, whose effect were exacerbated by the fragility of the international monetary system, deficits in current accounts (a country’s net trade balance and capital flow with the rest of the world), and imprudent management by the banking sector that caused excessive financial speculation and the creation of bubbles in the housing-market.
What has the G20 done to deal with the economic and financial crisis?
The economic stimulus plan that was implemented helped to restore confidence and liquidity to the markets; avoided the collapse of global demand; saved millions of jobs and laid the foundations for recovery. The G20 created a Framework for Strong, Sustainable and Balanced Growth and a Mutual Assessment Process to monitor and coordinate the domestic economic policies of its members. This was done in an attempt to avoid and gradually correct global imbalances, consolidate sustainable and balanced growth; accelerate job creation; promote structural reforms and, in general, reduce macroeconomic risks that could threaten global recovery.
One of the G20’s key successes is that it has enabled the discussion of issues that were seldom addressed between advanced and emerging economies, such as the exchange rate flexibility or the trade deficits of various countries and regions. The G20 Finance Ministers now address these issues openly and directly. Through the Financial Stability Board (FSB), the G20 has also agreed on the principles of financial regulation and supervision. This represents a very important step in reducing the risks that led to the 2008 crisis. The banking sector will now be more transparent and responsible.
The G20 has also played a key role in reforming the World Bank and the International Monetary Fund so that their internal structures better reflect the transformation of the global economy; they have sufficient resources to help countries that are experiencing economic difficulties; and better administrative structures. These reforms have been of utmost importance for the emerging countries, as it strengthens their representation in these institutions.
In addition, the G20 has helped strengthen the financial safety nets that protect emerging countries from sudden capital flows. This was one of the most important achievements of the G20 Summit in Seoul.
Lastly, the G20 Leaders have focused on job recovery and creation. According to statistics from the International Labor Organization, by the end of 2009, the steps taken by the G20 had preserved or created between seven and 11 million jobs. At the same time, the G20’s stand against protectionism has helped to prevent the creation of new barriers to investment and to trade in goods and services.
How is the preparatory process for a G20 Summit conducted?
The preparatory process for the G20 Summit is conducted through the established Sherpa and Finance tracks that prepare and follow up on the issues and commitments adopted in the Leaders’ Summits. The Sherpas’ track focuses on non-economic and financial issues, such as development, anti-corruption and food security, while addressing internal aspects such as procedural rules to the G20 process. The Finance Track focuses on economic and financial issues. The Sherpa and Finance tracks both rely on the technical and substantive work of a series of expert working groups. Additionally, the thematic agenda is developed through the organization of several Ministerial Meetings, such as the Joint Meeting of Finance and Development Ministers, and the Labor, Agriculture and Tourism Ministerial meetings, respectively.
What are the G20 working groups?
Sherpas' Track
Employment and Social Dimension of Globalization
The G20 leaders have repeatedly expressed that job creation must be at the core of global economic recovery. To that effect, the ministers of Labor of the G20 countries meet periodically to define strategies and exchange best practices in order to respond to the social consequences of economic and financial instability.
Food Security
The priority of improving food security and increasing agricultural productivity is discussed within the Sherpas’ Track with the participation of the ministers of Agriculture. The ministers of Agriculture of the G20 countries meet as part of the preparatory process for the summits in order to share their views and seek solutions to problems affecting the stability of global economy, such as food security and agricultural price volatility.
Development
Building on the advances made during the past year, the Mexican chairmanship of the G-20 is working on actions geared towards sustainable economic growth in the least developed countries. The Seoul Multi-Year Action Plan on Development foresees the implementation of actions during 2012 and beyond in several areas, including food security, the development of human resources, social protection, and private investment and job creation. Likewise, the Mexican chairmanship has included the sustainability approach in this working group as a means to foster green growth and reduce poverty.
Anti-Corruption
The Anti-Corruption Working Group was set up following the acknowledgement of the strong impact of corruption on economic growth, during the G20 Summit held in Toronto in June 2010. This group seeks to foster the main United Nations and OECD tools to combat international corruption, prevent the access of corrupt officials to the financial system, fight money laundering and tax havens, strengthen agreements on mutual aid, extradition and confiscation of assets, improve the protection of denouncers, and exchange best practices.
Multilateral Trade
G20 leaders have underscored the merits of the multilateral trading system as a way to avoid protectionism and strengthen the international economy. They have also recognized the difficulties to conclude the Development Agenda of the Doha Round and the need to pursue fresh, credible approaches to furthering negotiations in 2012. Accordingly, they have instructed ministers to work on such and to report back by the Los Cabos Summit.
Finance Track
Working Group on Framework for Growth
The discussions, preparation of documents and events related to economic stabilization, restoration of market confidence and structural reforms sustainably leading to greater growth and employment take place within this working group. In this group the Los Cabos Action Plan will be developed, it will include policy actions directed to comply with countries’ commitments to reach strong, sustainable and balanced growth.
Strengthening of the International Financial System
This strand of work deals with issues related to the goals of strengthening the financial regulation in order to prevent the problems seen in the last few years, as a consequence of the crisis, and to stimulate economic growth. The Financial Stability Board and the Alliance for Financial Inclusion, established at the Cannes Summit, participate directly in this group. This year, promoting financial inclusion, increasing financial education and strengthening consumer protection have been included in the agenda with the objective of improving the financial system.
Working Group on International Financial Architecture
The discussions of this group tackle the adequacy of global resources for crises prevention and resolution, including different alternatives and mechanisms to increase these resources if necessary; they also consider the IMF’s framework of supervision and surveillance and the necessary actions to reinforce it, as well as the reform of its decision-making process so that the members’ quotas reflect appropriately the weight of emerging economies.
Working Group on Energy and Commodity Markets
The Working Group on Energy and Commodity Markets carries out efforts aimed at facing volatility in international commodity markets within the Finance Track. This group is in charge of developing an analysis on the relationship between commodity price volatility and growth, and presenting recommendations on how to mitigate the adverse effects resulting from this volatility. The group is responsible of delivering a report on how to insert green growth policies in the countries’ structural reform agendas. The group will also continue working on improving the functioning and transparency of energy markets and the G-20 countries’ commitment to rationalize and phase out fossil fuel subsidies.
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