Rhetoric threatens to outweigh reality at G20 events
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What was decided in Toronto on the "cut or spend" debate? Needless to say, it's a great challenge to get 20 countries to agree on anything. The skillfully drafted official G20 statement enabled all participants to claim that their deficit reduction strategy had won though.
There was a recognition of the wide variations within different countries and that a "one-size-fits-all" policy is unworkable. Most of the countries support immediate deficit-cutting rather than Obama's stimulus policy as the way back to growth. But Brazil warned that steep budget cuts could harm emerging economies. The compromise suggests unity, but it's hard to see what difference it will make.
The meeting urged countries carrying weighty deficits to boost national savings while maintaining open markets and enhancing export competitiveness. Surplus economies, such as China and Germany, are expected to reduce their reliance on external demand and focus more on domestic sources of growth.
There was consensus on the need to reform global financial governance but not on how. The reform agenda rests on four pillars: a strong regulatory framework, effective supervision, resolution and addressing systemic institutions, and transparent international assessment and peer review.
Despite the setting up of anti-corruption frameworks, the G20 powers couldn't agree on the best methods to implement all four of these steps.
China, however, came out of the summit well. Its surprise announcement on June 19, ending the two-year pegging of the yuan to the dollar, took the subject off the table at the summit. Although the obligation was limited, it was generally well received.
The next summit will be held in Seoul in November. It is important to recognize that summits are relatively short, and are public events from which too much should not be expected, as they are part of a much longer process.
However, the structure of the G20, a key global institution, could be improved.
Close global cooperation in economic and financial policies and to prevent protectionism is vital. After all, we are all seeking common solutions to common problems.
The author is a senior fellow of the Brussels Institute of Contemporary China Studies. forum@globaltimes.com.cn
