Mind the Gap: the G20's Constant Quest for Success

Mind The Gap written on floor with red tram doorIt’s that time of year again. Fall foliage, Halloween trick-or-treating, and the next G20 Summit. As the chair and host, Australia, like others before it, want their Summit to be relevant and meaningful. According to the G20 Studies Director for Australia’s Lowy Institute Mike Callaghan what’s needed is “…a headline outcome, engaged leaders, a minimum of rhetoric, a focus on implementation, and clear evidence of cooperation between members.” He is right. However, his further emphasis on the need for increased involvement of G20 leaders in order to have meaningful outcomes is part of the problem, not the cure.

The problem can perhaps be summed up in the London subway’s recorded admonition to “mind the gap” – referring to the slightly too large space between the platform and the subway door. In the case of the G20, the gap lies between the lofty joint statements issued by G20 leaders and the reality of multiple global crises and domestic political priorities.

This year, the lofty goals include a recommitment to lift global growth by an additional 2 percent over five years; increased infrastructure investment; support for trade liberalization; combating tax evasion and avoidance through a new international tax code; and delivering further financial regulatory reforms. All are worthy issues that deserve the attention and support of G20 leaders.

But let’s face it, Mr. Obama is not likely to spend his last years as president of the United States trying to implement OECD recommendations on international tax principles, all of which would require changes to domestic laws. Likewise, Mr. Cameron is not likely to push for new financial industry regulations nor China’s premier for increased trade liberalization when they return to their own countries. Even if they wanted to expend the political capital to champion these causes back home, they would not be successful.

The top-down approach of relying on the cooperation and full engagement of G20 leaders to achieve tangible results is further hampered by the fact that some G20 members (the U.S., EU, Japan, Australia and Canada) have imposed economic sanctions against another G20 member (Russia). Yet another G20 member, Argentina, is in default; India vetoed the Bali agreement on trade facilitation; and the U.S. Congress continues to block an earlier G20 commitment to reform the IMF governance structure. Add to this the fact that many G20 leaders simply don’t like each other does not bode well for the Brisbane Summit.

What needs to change? Perhaps the model for the G20 should be turned on its head. Currently, the G20 has several side shows: Business 20, Civil Society 20, Labor 20, Think 20, and Youth 20. Officially, these groups serve to “inform” the G20 leaders. Some, such as the B20 hold their own summits and issue their own set of priorities and communiques. For example, the B20 infrastructure and investment task force notes that “by 2030, it is estimated that  ̴̴$60-70 trillion additional infrastructure capacity will be needed globally.” They highlight that “the greatest barrier to more private involvement in public infrastructure is the absence of a credible pipeline of productive, bankable, investment-ready infrastructure projects….” They go on to offer 6 steps that G20 governments should take in order to better engage business resources. However, while they note that “the business community is ready, willing and able to ‘step up’ and play its part,” it may be time for the private sector to take the reins and move ahead in areas it can tackle itself without the need for new national legislation or global treaties. If B20 members wait for new, healthy government budgets and the cooperation and full engagement of G20 leaders to bring about infrastructure initiatives, it will be a very long wait indeed.

In addition, many of the B-C-L-T and Y-20 groups either represent, or have the ability to reach out to, powerful domestic constituencies in the G20 countries. Business, labor or youth 20s can do more to develop grass-roots support for G20 economic priorities. As Callaghan points out, G20 leaders have failed “…to convince their own citizens of the forum’s relevance to their personal economic well-being.” A greater bottom-up role for the other “20s” could help when making the case that “transforming international taxation while driving financial innovation” is important to them and for their future. Perhaps then, when G20 leaders return home, they would have the political support and personal desire to make G20 goals a reality.

A common understanding and roadmap of the priorities of and challenges facing the 21st century global economy is important both at the top and from the bottom. Without change, the gap between top-down political statements and on-the-ground implementation will remain.