The G-20 Summit Was a Rerun
Can we actually expect international cooperation this time?
Now that the G-20 economic summit is over, inquiring minds have a few questions on their minds:
1. Will the Group of 20 be more effective because it includes important new players such as India and Brazil, or will it simply be more unwieldy?
2. Will we wait and see what cooperation there really is before praising global cooperation?
3. Is there a credibility gap?
4. Haven't we seen this movie before?
To answers these questions, let's look at a series of articles about the summit. Please consider the New York Times' Leaders of G-20 Vow to Reshape Global Economy, which stated:
"We have achieved a level of tangible, global economic cooperation that we've never seen before," President Barack Obama said shortly after the summit meeting. "Our financial system will be far different and more secure than the one that failed so dramatically last year."
The United States will be expected to increase its savings rate, reduce its trade deficit, and address its huge budget deficit. Countries such as China, Japan, and Germany will be expected to reduce their dependence on exports by promoting more consumer spending and investment at home.
The ideas are not new, and there's no enforcement mechanism to penalize countries if they stick to their old habits. But for the first time ever, each country agreed to submit its policies to a "peer review" from the other governments as well as to monitoring by the International Monetary Fund.
For all the unanswered questions, the final communiqué covered an extraordinary number of complex financial issues. The leaders agreed, for example, to devise policies by the end of 2010 for closing troubled financial institutions that were considered "too big to fail." They also agreed on the need to regulate financial derivatives, endorsing the approach proposed by the Obama administration in its bill to overhaul the regulatory system.
They also renewed their vow to give China and other Asian nations a bigger share of the vote at the International Monetary Fund and the World Bank. Asian countries have long complained that their stakes no longer reflect their financial contributions.
In another nod to developing countries, the leaders agreed to revive talks to reach a new global trade agreement by the end of 2010 that would, among other things, reduce barriers to agricultural exports. The goal may be optimistic: The Obama administration has shown no enthusiasm for new trade deals, and many Democrats want to see more protections rather than fewer.
The big question is whether the Group of 20 will be more effective because it includes important new players like India and Brazil, or whether it will simply be more unwieldy.
Obama's Premature Praise
President Obama is not waiting to see cooperation before praising it. Moreover, there's no enforcement mechanism, just numerous agreements to cooperate. Furthermore, history of round after round of trade summits have shown that agreements to cooperate and actual cooperation are two different things.
Indeed, actions are already speaking louder than words as Obama Risks Global Trade War With Misguided Tariffs.
That quickly addresses question number two while leaving questions one, three, and four intact. So let's continue our quest for answers.
Consensus Building Lesson
Please consider G-20 Plans to End "Financial Balance of Terror" After Summit.
President Obama and fellow Group of 20 leaders are trying to end what Obama adviser Lawrence Summers has called the "financial balance of terror."
G-20 leaders pledged to correct the lopsided flows of trade and investment blamed for contributing to the crisis: US consumers borrowed money to finance purchases of Asian-made cars and flat-screen TVs. Asian exporters, meanwhile, invested their surplus cash in US Treasury notes, pushing down borrowing costs and further fueling the credit binge.
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