[Viewpoint] A bigger global voice after the G-20The gathering of world leaders from the 20 leading and emerging economies in Seoul validated the G-20 platform as an executive steering board committed to guide and coordinate cooperation to set the global economy on the right course.
The four prior G-20 meetings had been primarily focused on mustering international coordination to pull the global economy out of the 2008 financial crisis. Until last week’s meeting, leaders failed to get around to the post-crisis damage and imperatives for the global economy.
The last conference in Toronto in June ended while leaving key issues like the adjustment in the International Monetary Fund quota hanging until the Seoul forum. Critics questioned the functional role of the G-20 structure and ridiculed it as a social gathering among men in gray suits.
The Seoul meeting suppressed much of the doubts about the G-20 framework. The forum was credited for patching up conflicts over global imbalances among major economic players. G-20 leaders helped to veer away from a catastrophic breakdown over the currency dispute and agreed to set guidelines to specifically fix the yawning imbalances in global trade while allowing flexibility for individual countries to commit themselves to the new rules based on their economic circumstances.
Finance ministers will by the end of June next year come up with a set of risk indicators to identify exact numbers and problems underlying the imbalances in world trade. It is the first time that ground rules have been agreed upon by advanced and emerging economies on exchange rates and current-account balances.
Knowing the existence of a warning system, members as well as countries outside the G-20 would now have to think twice before resorting to currency manipulation and other efforts to prop up current account surpluses. The mutual regulatory system will create peer pressure among members to maintain trade equilibrium. Many breathed a sigh of relief at the breakthrough at the Seoul summit, considering the smoke and fury ahead of the meeting in the wake of quantitative monetary easing in the U.S.
Progress was substantial in other areas. The G-20 leaders agreed on a new set of financial regulatory rules strengthening oversight and supervision of “too-big-to-fail” financial institutions as well as completing reforms at the IMF.
Despite concerns about protests, leaders of wealthy countries agreed to transfer more than 6 percent of the IMF quota - membership subscriptions help determine voting power - to emerging countries thanks to host country Korea’s active initiative. President Lee Myung-bak is said to have campaigned for the IMF realignment through private tete-a-tetes with individual leaders.
Korea also achieved progress on establishing a global safety network to protect economies against financial crises, and also set up effective aid programs for underdeveloped countries. By raising the two issues of great interest among non-member countries, the G-20 stretched its vision to broader global issues beyond the wealthy group of economies.
Assistance to underdeveloped economies has made little progress despite immense capital input, therefore it was expected to garner little enthusiastic support on the G-20 agenda. But Korea offered a fresh approach for helping underdeveloped countries in mentoring and creating new paradigms to build capability and resilience to propel growth on their own. The G-20 is required to commit to multi-year action plans that were laid out in the Seoul consensus to narrow the development gap among global members.
Korea proved its potential in serving as a bridge not only among advanced and emerging countries, but also among the G-20 and outside members. Its capability came not just from its status and authority as the host country. Korea has established a unique reputation and credibility among advanced, emerging and underdeveloped countries alike for its stunning track record in transforming its economy into an admired and high-technology society from the rubble of war.
We must continue to build our reputation and credibility so that our new status will serve as a valuable and powerful asset in gaining a more influential voice in the international community.
*The writer is a professor at the Graduate School of International Studies at Seoul National University.
By Park Tae-ho