G20 is getting more targeted in 2014

Different from its precedents, Australia G20’s logo is in the shape of an animal, which, according to the official notes, is designed to mean “the fish and the serpent-smart, innovative and fresh”. By coincidence or not, this image perfectly matches Australia presidency’s description about its expectation for this year’s G20. When the new Prime Minister Tony Abbott publicly elaborated on his plan for the G20 2014 at the World Economic Forum on 23 January, he started by declaring this year’s theme was about “getting the fundamentals right”. He introduced that his government had established a once-in-a-generation Commission of Audit to reconsider the size, scope and efficiency of government. Not surprisingly, he stated this year’s Brisbane Summit would focus on a few key subjects and aim to produce “a communiqué just three pages long”.[1] This was a very refreshing statement since last year the G20 summit at Saint Petersburg produced a leaders’ declaration that was 27 pages long consisting of 114 paragraphs, and the total number of documents issued by the Presidency, the five working groups, international organisations and other outreach groups reached 88.[2]

On the surface, we have not seen much difference in terms of the length of agenda. The G20’s website listed ten items for this year’s agenda: anti-corruption, development, employment, energy, financial regulation, fiscal and monetary policy, investment and infrastructure, reforming global institutions, tax, and trade. A new Investment and Infrastructure Working Group was established. Ten documents have been published in the first quarter. However, we have seen the top level of the G20 getting more determined and smarter. This year’s first G20 Meeting of Finance Ministers and Central Bank Governors in Sydney issued a communiqué of only 11 paragraphs, but unprecedentedly put forward a target of lifting the collective GDP growth by 2 per cent above the currently projected trajectory in the future five years, i.e., “around 0.5 per cent higher on average per annum than it would otherwise be”.[3] This was quoted by Chinese Prime Minister Li Keqiang as a legitimate base for his emphasis on securing a minimum growth rate for jobs in the press conference on 13 March 2014.[4]

The G20 is trying to strengthen the hierarchy for its agenda so as to reduce the increasing burdens for leaders and ministers. This move very much resembles the development of the G7 Summit in Tokyo in 1993. That year’s G7 Summit Economic Declaration stated at the end:

“We have reflected on how Summits could best focus our attention on the most significant issues of the time. We value Summits for the opportunity they provide to exchange views, build consensus and deepen understanding among us. But we believe Summits should be less ceremonial, with fewer people, documents and declarations, and with more time devoted to informal discussion among us, so that together we may better respond to major issues of common concern. We intend to conduct future Summits in this spirit.”[5]

The length of the Tokyo Declaration was more than halved and the number of documents was sharply reduced. This reflected a call for revival of the ‘Spirit of Rambouillet’ that characterised the G7’s birth in early 1970s, i.e., leaders should be left to have informal and candid dialogues on those most urgent issues. The difference is that the shift occurred when the G7 was nearly 20 years old while the G20 has just had its five-year anniversary. Reasons for this delay include not only the number of G20 members and international organisations, but also rising global challenges as well as the rising consciousness of the public for participating in global governance. The structure of the world has changed and the knowledge of people cannot be reversed. So we must be aware that the G20’s agenda cannot be as concise as 40 years ago. Observation and research on the G20 require more and more professional skills. For political and technical reasons, the proliferation of the G20 agenda is almost inevitable. The most we can do is to isolate those expanding agenda items into lower bureaucratic levels and keep a balance between efficiency and representation. Australia might lead us in this direction to a G20 documentation characterised by a shorter main document with heavy annexes. Like the G7 summit in 1993, this year’s G20 final document should call on the future G20 summits to be focused and streamlined.

To be innovative is more challenging

When Australia’s Treasurer Joe Hockey spoke at the Lowy Institute on 6 February 2014, he emphasised how his country could act as “an honest broker” in “building good bridges with countries of varied backgrounds”. Indeed, the G20 is a perfect platform for Australia to come to the centre and play a role of a middle power. South Korea was the first to declare its middle-power diplomacy in the G20 when it held the chair in 2010.[6] Korea invested enormous resources in the G20 activities and allegedly initiated a new alliance named ‘Pivotal Middle Power Group’. However, with a conservative government that stresses public expenditure reduction, Australia needs more innovation, both intellectual and entrepreneurial, to live up to its ambition.

This is not an easy job. How can the 2 per cent lift of growth be realised? The Mutual Assessment Process could not and should not be an enforcement mechanism at all. The collective target will depend on decentralised actions. Answers seem to lie in the following: prevention and preparation for new risks; investment, especially in infrastructure; freer trade; better and growth-friendly financial regulation; and effective tax cooperation. These are in the right direction, but none of them can be taken for granted. For example, first, for the potential ‘third wave’ crisis that might originate from some emerging economies,[7]the G20’s finance ministers are still emphasising their “domestic macroeconomic, structural and financial policy frameworks” are to blame for any harm by external volatility.[8] Emerging economies seem to be calmer than before at the G20 about the tampering effect of US monetary policy,[9] probably because of awareness of the uselessness of any complaint. There are many discussions but no serious action about ex-ante coordination of different layers of global financial safety nets, i.e., IMF, regional financing arrangements, bilateral swaps and national reserves. Ironically, we expect the Ukraine crisis could urge the US Congress to approve the 2010 IMF reform package.[10]

Second, the infrastructure financing agenda item is still more a vision than reality. Much attention is directed to private sector investment. Mr Hockey said “the age of entitlement is over….The age of personal and corporate responsibility has begun”.[11] There might be some misrepresentation. There is no shortage of supply of private capital – the key issue is how to better use public funds to leverage private sources. If Chinese experience with infrastructure domestically and abroad can be seen as a success, the role of public funding and aid for trade cannot be ignored. More broadly, when the Chinese Government firmly pursues economic reforms, it seeks to enable the market to play “the decisive role” while at the same time let the government “play its functions”.[12] Both invisible and visible hands are indispensable. This might also hold true for the G20’s infrastructure agenda which should take a more balanced position on the complementary roles of public and private investment. It will be useful for mobilising more funding from emerging countries. This year’s G20 could also promote better integration of its infrastructure agenda with regional initiatives, such as APEC’s move for increasing regional connectivity.

Third, the trade agenda is another chronic issue that needs both political and intellectual innovation. The concept of global value chains is such a fancy, which, however, has not been bought in by major powers in their trade policies. As seen previously, strategic considerations are again becoming the major driver of the trade agenda. G20 members’ trade ministers will meet in July this year. In addition to promoting transparency, what the G20 can do now is not much more than keeping patient. We need time to wait for the big emerging economies to get more confident in opening their markets and for established economies to be more accustomed to the rise of the rest world.

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