Eleven years after its creation, the Group of 20 (G-20) has emerged as an important forum of most of the world’s systemically important economies. Iran is among the very few important countries left out. India made its mark within the G-20 from its very inception with Prime Minister Manmohan Singh being one of the important voices at the first three summit meetings in 2008-09. As the host of the 2022 summit, India has a stake in ensuring the continued relevance of G-20 for global policy.
The G-20 came into being in the midst of a financial crisis. It meets over the next two days in Osaka, Japan, in the midst of a crisis in world trade. In its early years, the G-20 shied away from talking trade. While it has focused on trade policy issues since 2013, the G-20 has not been able to revive the Doha Development Round of multilateral trade negotiations at the World Trade Organisation. Nor has it succeeded in arresting the drift towards mercantilism on the part of both the US and China — the world’s biggest trading nations. Host Prime Minister Shinzo Abe has done well to focus on trade policy as one of the three key issues to be discussed at the Osaka Summit, along with environment and the digital economy.
As of today, the G-20 owes its reputation mainly to its ability to restore stability to the global financial system following the trans-Atlantic financial crisis in 2008-09. As stock market indices from New York through London to Tokyo began to fall to new lows, the price of gold and oil declined sharply and the euro slumped against the dollar, then President of France, Nicolas Sarkozy, flew into Camp David for a hurriedly set up meeting with US President George W Bush and suggested that heads of government of major economies should get together to manage the enveloping crisis. That was October 2008, a month after the collapse of Lehmann Brothers, one of America’s biggest financial corporations. The two leaders came out of their huddle and announced the convening of the first summit level meeting of a group of finance ministers called the G-20.
A decade before that, in 1999, the G-8, a club of developed economies, created a group of finance ministers of 19 major economies and the EU to form the G-20 finance ministers’ forum. Bush and Sarkozy elevated this finance ministers’ group into a leaders’ summit. The US and the European Union (EU) knew that the one country they wanted across the table, in October 2008, to help deal with the fallout of the financial crisis was China. Should G-8 be expanded into G-9? Japan was certainly not comfortable with the idea. The US and the EU too were not ready yet to invite China to the high table of a rich man’s club. Two years after inviting Russia into G-7, some of the original G-7 members were already a bit uncomfortable with Russia’s elevation into a rich economies club when it was nowhere as prosperous an economy as the G-7.
But China had to be brought to the discussion table because China had the dollars and the means to save the Euro and stabilise Wall Street. That’s the dilemma Sarkozy solved for the West by converting an existing G-20 finance minister’s forum that included developing countries like Brazil and India into a leaders’ summit. It may be easier getting China to help the West in a group that would include other developing countries. Voila! The G-20 was born.
Since the immediate challenge was a financial crisis, the group focused on global financial issues. Once the global financial system stabilised, the G-20 summits lost steam and focus. Everything from climate change to women’s empowerment is now discussed at G-20 summits while the really important business gets done in bilaterals on the sidelines. This year, President Trump and China’s President Xi Jinping are expected to discuss bilateral trade issues on the sidelines of the G-20 summit. Their meeting threatens to overshadow the summit.
The summits have invited this fate with their diffused focus. In the run-up to the Osaka summit, there have been several ministerial meetings covering subjects ranging from environment and agriculture to women’s empowerment and the digital economy. Along with the summit, an entire circus comes to town. There is a B-20 for business leaders, Y-20 for youth, an L-20 for labour, S-20 for science and so on. Even a T-20 for think-tanks!
Since G-20 summits are annual gatherings of the world’s most important leaders, they should have an agenda that focuses on the here and now and a means of monitoring progress. At the end of each year, the host country should present a report to the next summit on progress made on agenda points. There are many other plurilateral and multilateral forums to discuss the myriad other challenges facing humanity. The B-20, Y-20, T-20 and other such parallel gatherings have become either farcical talk-shops of pretentious busybodies or networking opportunities for business leaders. Just as the World Bank, International Monetary Fund and WTO ministerial meetings have been trivialised and turned populist by parallel gatherings of non-governmental organisations (NGOs), the G-20 too runs the risk of becoming a ritual event with no concrete outcomes.
Osaka should bring sharper focus to G-20 proceedings by concentrating minds on today’s threats rather than tomorrow’s challenges. The US-China trade war, American unilateralism in trade policy and China’s opaque trade and other economic policies have emerged as major threats to global economic growth and stability. The G-20 must discuss these issues because all G-20 economies have a stake in the outcome of the US-China bilateral talks. The G-20 cannot be reduced to a G-2.
The writer is Distinguished Fellow, Institute for Defence Studies & Analysis, New Delhi