No clear consensus at G20 summit, warns expert
The London G20 summit is unlikely to be a watershed in efforts to tackle the global financial crisis and economic governance, warns an international economics expert.
Cédric Dupont, professor of political science at Geneva's Graduate Institute, tells swissinfo that consensus is lacking on specific issues and warns a vague final declaration could seriously damage its credibility.
Leaders from the world's 20 biggest economies are due to meet in the British capital on Thursday to discuss how better regulation, help for international trade and extra spending could help end the worst recession since the 1930s.
But leaders got a stark reminder on Tuesday about the size of the economic storm they face. The Organisation for Economic Cooperation and Development (OECD) said the world economy would shrink at a far faster pace than originally expected this year, sending unemployment soaring and highlighting the need for extra steps to halt the crisis.
The stakes are high for world leaders, in particular for United States President Barack Obama, who is making his debut on the world stage this week with his first major foreign trip since taking office on January.
swissinfo: Will the London summit be able to fix the financial system and help foster sustainable economic growth and development?
Cédric Dupont: In the short term we shouldn't expect this summit to fix anything specific but to send signals where governments and international organisations like the International Monetary Fund and the World Trade Organization (WTO) should be going.
There is general consensus that the situation is serious and that unity and joint efforts should be tried, but there is little consensus on specific measures.
The stimulus plan will probably be one of the stumbling blocks. They are going to agree that they should coordinate stimulus packages, but due to different budgetary constraints, decision-making structures, and social and political demands they will not be able to agree on anything specific, either between the US and the EU or between the western world and emerging powers.
And when you go one step below the general statement on [international regulation of the banking sector] you get into very difficult territory: capital ratios, risk assessments, who should do the risk assessments, the credit rating agencies, the IMF and the Financial Stability Forum.
swissinfo: So what's your realistic prediction for the outcome of this summit?
C.D.: The situation is not very reassuring, as consensus is not there. So they may try to do something similar to what happens at G-7 or G-8 meetings, coming up with a declaration that is sufficiently broad so that it doesn't show that there is a lack of consensus.
I think they need to preserve what exists and not undermine it. If they come up with an iffy final statement it could hurt the G20 and the credibility of existing international economic institutions like the IMF, World Bank or WTO.
swissinfo: Protectionism is on the rise, yet the London summit looks like offering nothing but pieties. How worried should we be?
C.D.: It's a difficult question. If you look at previous economic crises, like in the 1970s and 1980s, it's unclear to what extent protectionist measures affected trade flows.
Decision makers have to try to help national industries and particularly to save jobs. They use veiled protectionist rhetoric, but what happens in practice is often very different.
Even though we have rising protectionism, it's not as ugly as it could be, but that doesn't mean that we should be complacent.
swissinfo: There has been a lot of pre-summit talk about tax havens. How much time will be devoted to this issue in London?
C.D.: My reading is that this is not going to be very high on the agenda, as they've already more or less solved it via the OECD. They are going to mention it and it could become part of the detailed regulation measures, but it's very specific.
If there is a serious discussion at the G20 to address the broader context, there will be little time to discuss tax havens.
On the other hand, if everything else goes badly, then it could be an easier topic on which they could reach agreement on the principles – an OECD model implemented fully by everyone, including the Swiss.
I think the British are starting to show signs that they want to address some of their offshore territories. US action has been less visible, as they have been more focused on other measures, particularly the stimulus plan.
swissinfo: Switzerland has been an outsider in the G20 process. How can it make its voice heard on questions of global economic governance?
C.D.: For a country the size of Switzerland the only way to be heard and be influential is to develop its capacity to come up with new ideas and technical expertise rather than have a seat of political influence.
It's normal that the Swiss government would like to sit in the G20, but they have to face the reality that this is very difficult and will become even harder in the future. So Switzerland has to build its reputation on the quality of its interventions and ideas, and offer advice and help to countries in need.
swissinfo-interview: Simon Bradley
The Group of 20 first met in Berlin in December 1999. It was created as a response to the Asian financial crisis of 1997-98, which exposed the need to bring emerging market nations into the core of global economic discussion and governance.
The G20 represents around 90 per cent of global gross national product, 80 per cent of world trade (including EU intra-trade) and two-thirds of the world's population.
The Group met in Washington on November 15 and agreed a plan to try to restore global growth and bring order to a financial system reeling from the worldwide credit crisis.
The leaders pledged to "work together to restore global growth" but stopped short of any coordinated new fiscal measures, saying spending policies should be used to stimulate domestic demand rapidly, as appropriate for each nation.
They backed: fiscal measures to boost demand; monetary policy steps changes; more funds for the IMF to support emerging economies; progress in the Doha round of trade talks; reforms to provide emerging economies with influence according to their economic weight; increased oversight of major global banks; review of accountancy standards, CEO pay, bankruptcy rules, credit rating agencies and moving credit default swaps to exchange trading.
G20 finance ministers were instructed to work on specifics by March 31, 2009, ahead of the next summit.
Professor Cédric Dupont, who has dual French-Swiss citizenship, has been a member of the Graduate Institute since 1995 and has also served as visiting assistant professor at the University of California at Berkeley (1996-1997).
He is the director of the Master's programme in International Affairs and of Executive Education at the Graduate Institute and Associate Editor of the journal Business and Politics. He received his Ph.D. from Geneva University.
He specialises in the politics of economic integration and international financial regulation.
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