Revitalizing the G20

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Revitalizing the G20

World leaders will gather in Saint Petersburg, Russia, Sept. 5-6 for the eighth annual G20 summit. The summit will proceed according to the agenda and themes coordinated during the so-called sherpas meetings and agreements made in the G20 finance ministers and central governors’ meeting. As in the past, leaders will discuss issues related to the global economy, finance, trade and development. It will be South Korean President Park Geun-hye’s debute on a global summit stage.

As the president of a country that hosted and chaired the 2010 G20 summit, Park can make a meaningful contribution to the event and to the global economy. She might even be able to help bolster the waning status of the group and restore its pivotal role in global economic cooperation.

The group of 20 economies replaced the G7 as a venue for effectively coping with the global financial crisis triggered by the Lehman Brothers meltdown in September 2008. It included key emerging economies in global economic discussions. Leaders from the United States, Britain and France arranged the first summit in Washington in November 2008.

Amid the need for concerted efforts to rein in the global financial meltdown, restore the global economy and restructure international financial governance mechanisms, leaders met again in London the following year. They reached a consensus on detailed action plans to improve regulatory problems and enhance financial safety nets to prevent and cope better with future dangers and risks.

Satisfied with the results, the G20 leaders met again in Pittsburgh in the same year and agreed to regularize the summit and make it a premier forum for international economic cooperation.

The world economy, which is even more interconnected and integrated, requires deeper and closer policy coordination and cooperation among major economies. And yet, international cooperation becomes harder under the multi-layered economic landscape and non-polar world order. That is why the G20 leaders agreed that a larger framework would be more effective than the exclusive G7 in staging negotiations and inducing cooperation. It has been a big development in the global economic governance framework.

The G20 framework has been losing global influence since the Seoul meeting in 2010. There have been several complicated factors. First of all, the collective leadership structure had innate weaknesses and limitations. The sense of urgency that brought together the world leaders into a common campaign to stabilize the global economy after the financial meltdown was watered down once the immediate dangers passed.

Also, there was no strong and central leader within the G20 group. Government leaders were replaced in elections. British Prime Minister Gordon Brown and French President Nicolas Sarkozy - who were very active voices within the G20 - were replaced by David Cameron and Francois Hollande, who are less eager and relatively passive on global cooperation. In fact, the G8, which includes Russia, held a summit in London in June that primarily focused on pending global economic issues, which goes against the Pittsburgh agreement that the G20 summit should replace the smaller G8 as the new permanent council for international economic cooperation. But none of the G20 members thought of questioning the threat to the G20’s status.

The challenging issues of a global economy, financial markets and turbulent foreign exchange markets depend on decisions from the wealthiest G7 economies. But their policies have direct and indirect repercussions to the rest of the world. That is why major decisions should be discussed within the framework of the G20 as agreed in Pittsburgh.

In our very globalized world, the G7 alone cannot solve global problems. It needs close and coordinated cooperation from all of the G20 countries. The G20 has the mechanisms and the systems to play that role. Its framework and mutual assessment process has been established and developed in Pittsburgh and Seoul. Washington’s plan to taper off quantitative easing should also be discussed in the G20 meeting in view of the ramifications on global financial markets.

Concrete steps should be taken to restore and revitalize the role of the G20 as the premier forum on international economic cooperation. The Korean president could take the lead in raising the issue during the upcoming summit to redefine the roles and partnership between the G20 and G7 and draw an agreement among world leaders on the need to reinforce the G20 framework.

Fortunately, Korea is in a position as a middle-scale country to coordinate all the differences among advanced and emerging economies. But such an initiative wouldn’t have been fruitful if Seoul had not made prior efforts to persuade world leaders and coordinate opinions. Yet I believe President Park, as a new leader to the G20 summit, can contribute greatly in drawing attention to the issue and pave the way for the stronger role of the G20. I wish good luck to President Park in her debut on the G20 stage.

Translation by the Korea JoongAng Daily staff.

*The author, former deputy prime minister and finance minister, is an adviser to the JoongAng Ilbo.

by Sakong Il
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