The G20 is at a crossroads and the world is watching. A lack of continuity, legitimacy and credibility are shadowing the G20 in 2012.
This year’s Los Cabos Summit takes place only seven months after the Cannes Summit, yet it has a very ambitious agenda: green growth. Last year’s agenda was hijacked by European crisis management. This time, green growth has been criticized as having a lack of clarity in terms of where it is leading to.
On the topic of economics and finance, a financial inclusion, financial literacy and consumer protection agenda will give an inclusiveness that is important to Mexico as the first developing country to hold the G20 Summit.
But there are other agenda items, such as disaster-risk management, which is also a top concern for APEC and ASEAN. Mexico will also push for governance and voting reforms for international financial institutions, especially the IMF, to give emerging, developing countries and under-represented members a more balanced voice.
Mexico will also push for an increase in IMF funding and a war chest to create a firewall to contain the European crisis. The Financial Stability Board is also expected to deliver concrete progress in financial regulatory reforms.
Although it has not been much discussed, trade financing in non-G20 countries that has been evaporating slowly as a result of the European bank credit crunch will be a crucial agenda item to sustain global trade and growth. After all, the G20’s economic and financial agendas must balance the long and short term as well as contingent issues, such as a hike in oil prices.
As G20 president, Mexico’s footprint is likely to be green growth. It is an ambitious move to link green growth to strong, sustainable and balanced growth. The issue of green growth itself cuts across many concerns: the environment, climate change, the financialisation (or internalisation) of nature, phasing out fossil-fuel subsidies, energy savings, green jobs, people-oriented development, decentralisation and gender.
The policy implications of the G20’s agenda have to be clear. Moreover, green growth is being discussed at other international forums, including the UNFCCC and the Rio+20 meeting that will be held right after the Los Cabos Summit.
The G20 must avoid discussing a topic that can be more effectively discussed at other existing forums. Drawing a clear line between what is in the G20 and non-G20 domains will be very difficult.
The issues of food security and food price volatility will be high on the agenda. Although these issues have been on the G20’s and many other forums’ agenda, the progress has been slow. On food security, agricultural productivity will be prioritised.
However, it needs to be balanced by shorter-term issues, such as the financialization of commodities and food price volatility. Indonesia, which has shown some concerns on the financialization of commodities, and the U.K. are co-chairing the energy and commodity working group.
The key here is to avoid topics being sidelined because of national interests, which is not surprising since some countries or regions are benefiting from the financialization of commodities and biofuel production, while others have been hurt.
Literature on the effect of trading on commodity price volatility and the effect of biofuel on the increase of nominal food prices are inconclusive. Because of a lack of agreement, these issues are fading away. Hence, the G20 must be able to present objective and comprehensive studies agreed upon by all its members on these issues.
Other urgent issues are policy coherence, transparency, phasing out agricultural subsidies, and empowering women farmers with insecure land tenure. As food security is a regional issue, it is also important to recognize the existence of regional initiatives, including the ASEAN food security initiatives. Africa is seen as the key to the food security issue, but is often left out or underrepresented at the G20.
With the expected recession this year, the G20 must not leave out social issues that are inseparable from the economic and environmental issues discussed above. Structural reforms and adjustments in the medium and long term are the keys to welfare improvement.
There has been a proliferation of forums within the G20: B-20 (for business), Think-20 (for think tanks), L-20 (for labour unions), a Youth Forum, and soon a C-20 (for civil organizations).
This year, the G20’s foreign ministers met informally for the first time since the London Summit in April 2009. These forums are important in their own ways. Think tanks, for example, are “idea banks,” a source of accountability and a network of continuity. They are able to deliver “buy-ins” when leaders are not implementing the right policies despite their awareness of what the right policies are.
The deep involvement of think tanks in the G20 process also helps distinguish it from the G8.
The success of the G20 should not be judged by how well it handles the European crisis since it is not under the control of many G20 countries. By introducing its green growth agenda, Mexico will leave a legacy of having the G20 be the premier international economic forum recognising growth from a different perspective.
But, the process toward green growth -- how it is becoming integrated into national strategies and policies -- is as important as the desired result itself. This will be a challenge to the G20, which has an extremely diverse membership of nations at different stages of development.
By Maria Monica Wihardja The Jakarta Post
The writer is a researcher at the Centre for Strategic and International Studies in Jakarta and a lecturer at the University of Indonesia’s economics school.
