The new year is a time of hope. As 2013 dawns, optimists yearn for a period of sustained global economic growth after five years of recession, turbulence, and sluggish recovery. Achieving this scenario will require close policy coordination among governments of the world’s major economies. This places a heavy burden on the Russian Federation, which on December 1 assumed the rotating chairmanship of the Group of Twenty (G20).
It has become fashionable to dismiss the G20 as irrelevant at best or a failure at worst. Neither critique is fair. During the depths of the global financial crisis, the G20 proved its value by helping to set the global agenda, shape new international rules and norms, and address practical challenges of macroeconomic policy coordination. As an uneven recovery began to take hold and national interests came to the fore, however, the group’s momentum stalled. The question now is whether the G20 can serve not only as a short-term crisis manager but also as a longer-term steering group for the global economy—and other global challenges.
The Kremlin does not lack for outside advice about how to manage its tenure. At the invitation of Russian officials, the Council of Councils (CoC)—a global network of think tanks convened by the Council on Foreign Relations (CFR)—recently offered the Russian Government eleven separate memos suggesting priorities for its chairmanship, which will culminate in September at the G20 summit in St. Petersburg. My own contribution recommends several steps for success. Given space constraints, I’ll focus here on the three most important. Moscow should persuade its partners to:
– Embrace a G20 mandate encompassing both crisis management and long-term challenges. The G20 provided an indispensable forum to respond to the 2008 global financial crisis. The body must remain prepared to coordinate multilateral responses to future crises, including convening emergency meetings outside the regular summit schedule to grapple with extraordinary crises. At the same time, the Russian chair should encourage the G20 to confront and resolve longer-term structural issues.
Several long-term priorities come to mind. First, the G20 must continue to press surplus and deficit countries to rectify longstanding global imbalances. While China’s undervalued exchange rate has already appreciated gradually, easing some frictions, significant international imbalances persist, imperiling global recovery. Second, the G20 must press for the evolution of the new Financial Stability Board into a fully-fledged international organization, with adequate staff, resources and authority to monitor and enforce the new financial regulatory standards it is promulgating. Third, the G20 must engage the global trade agenda. In a shaky recovery, holding the line against protectionism is insufficient. With the death of Doha, the era of comprehensive trade deals may be over. But the G20 can spearhead negotiation of more limited sectoral and plurilateral agreements, to which interested parties can adhere.
– Strengthen the Mutual Assessment Process (MAP) to permit candid evaluation of G20 efforts. When it comes to summit meetings, nothing breeds cynicism like perceived failure of states to live up to their past pledges. Russia can help dispel such skepticism by pressing fellow G20 members to give real teeth to the MAP. Currently, each G20 member agrees, on a purely voluntary basis, to share economic information and policy targets with one another and the staff of the IMF, which then ascertains whether national policy choices are consistent with the Pittsburgh Framework for Strong, Sustainable and Balanced Growth. At Los Cabos, the G20 strengthened this peer review process by establishing a new Accountability Assessment Framework, accompanied by a public, annual report. While the MAP provides a useful global forum for the negotiation and sharing of national commitments, it remains a weak instrument for policy coordination.
To strengthen the MAP, Moscow should push its G20 partners to support reforms outlined in a recent report by the Canadian think tank CIGI: create a transparent, online database permitting analysts to review international commitments; adopt a more rigorous peer review process; create a more robust analytical capability (notionally within the IMF) to assess the global impact of national policies; and establish an enhanced negotiating forum where G20 members can engage in bargaining over respective national commitments.
– Craft a broader agenda and create a foreign ministers’ track. Among the biggest debates about the G20’s future is whether it should hew closely to its initial macroeconomic and financial focus, or expand its vision to address a wider array of global challenges. G20 finance ministries, which have dominated the summit process to date, are nearly unanimous in resisting any “mission creep”, fearing that a sprawling list of tasks would dilute its coherence and effectiveness. Over time, however, leaders themselves are likely to find the G20 an irresistible setting to tackle other pressing items on the global agenda. Already, successive hosts have broadened the G20’s substantive agenda, adding items like a new approach to development in Seoul and a commitment to “green growth” in Los Cabos. The quandary for Russia is to manage the G20’s expanding agenda so that it does not jeopardize the body’s crisis management capacity, overwhelm the annual summit process, or jeopardize the informality that makes such leaders-level gatherings attractive.
The G20 can reduce these risks by taking three related steps. First, it should create a permanent foreign ministers’ track to complement the finance ministers’ track. Here, Russia can build on the “informal” meeting of G20 foreign ministers hosted by Mexico in February 2012. Potential agenda items would include climate change, development cooperation, nuclear non-proliferation, counterterrorism, cybersecurity, and efforts to combat transnational crime. Second, it should sharpen the agenda of G20 finance ministers (and central bank governors), so that they can focus more narrowly on their core missions of promoting global growth, improving financial regulation, and advancing governance reforms within international financial institutions. Third, the G20 should raise the bar for including new items on the actual G20 summit agenda. An issues should be raised to the leaders’ level only rarely—notably when it requires a high-level decision and when no existing global institution has already been seized of the problem