A Summit Worth Watching

As the leaders of the Group of Twenty (G20) arrive in St. Petersburg, Russia, for the eighth G20 summit on September 5-6, 2013, complicating external factors are mounting. These factors may make achieving consensus on the summit’s broad agenda more difficult than earlier thought. Yet this year’s summit is already a significant event on several counts, and much may still be accomplished before the delegations depart and the final communiqué is released.

St. Petersburg will strengthen the G20 summit’s evolution from a crisis-response committee to a crisis-prevention and global steering committee, as outlined in John Kirton’s new book, G20 Governance for a Globalized World. It is the first G20 summit hosted by Russia, the only country to be a member of the other major global plurilateral summit institutions — the old Group of Eight and the newer BRICS of Brazil, Russia, India, China and South Africa. As the connector of all three summit institutions Russia has an opportunity to bring cohesion to and synergy among the three groups across the overlapping issues they address, which may help to reinforce the commitments that have already been made. Russia is also the first member of the BRICS to host the G20.

The St. Petersburg Summit will also bring together a number of new leaders, led by China’s Xi Jinping, Japan’s Shinzo Abe, Mexico’s Enrique Peña Nieto, Korea’s Park Geun-hye and Italy’s Enrico Letta, each of whom may bring different perspectives and goals from their predecessors. It is also an opportunity for newly re-elected Vladimir Putin to showcase Russia as a major global leader that can produce real results on economic issues, and overall, particularly after facing opposition and isolation over Syria at the G8 summit in Lough Erne this past June.

The three overall themes of the St. Petersburg Summit – strengthening growth through investment, trust and transparency, and effective regulation – will guide the eight core items on its built-in agenda: growth through the Framework for Strong, Sustainable and Balanced Growth; jobs and employment; international financial architectural reform; financial regulation; energy sustainability; development for all; multilateral trade liberalization; and the fight against corruption. Russia, in traditional host fashion, chose two priorities to add to the agenda: financing for investment, and government borrowing and public debt sustainability. Also rising rapidly on the agenda due to external events are the issues of tax fairness and counter-terrorism.

This summit takes place at a challenging time, with growth slowing in the global economy, monetary policy uncertainty in the United States, ever expanding debts and deficits in many G20 countries, and rising unemployment and social instability. Compounding these challenges are bilateral tensions between the host and the United States. Yet St. Petersburg still has the potential to be a substantial success in meeting its original objectives of promoting growth and jobs, while fulfilling its first core objective of ensuring global financial stability.

Where the St. Petersburg Summit may fall short is in meeting its second objective of making globalization work for all. To be sure, Russia has taken a step forward by including in its emphasis on job creation an acknowledgment of the contribution of start-ups and small businesses. It has been driven by the Russian presidency’s engagement with the Young Entrepreneurs Alliance (YEA), a civil society group created at the Toronto Summit in June 2010 to help young people create their own jobs when big government cannot and big business will not, and to enhance innovation and productivity in the economy as a whole. Engagement with such civil society groups is one of the ways in which Russia has strengthened the summit as an institution, along with joint preparatory meetings with labour and finance ministers and greater interaction with non-member countries and international organizations.

Yet much remains to be done on generating more inclusive, equal growth. Since the start of the global financial crisis in 2008, many G20 members have experienced increasing rates of inequality, which have been intensified by decreases in social spending and labour market reforms. The G20 summits, in their deliberative statements and commitments, have dealt increasingly with key components of social policy, such as employment, but they have yet to provide the kind of leadership in these areas as they have on macroeconomic policy coordination.

Greater attention to education, health, gender and social protection is needed for the G20 to be truly successful in making globalization work for all, including the middle class and those in lower income brackets. Russia considered adding a fourth pillar of “inclusiveness” to the Framework for Strong, Sustainable and Balanced Growth, to encourage public policies that recognize that more equitable growth is a cause of and not a cost of sustainable growth, as confirmed by recent research by the International Monetary Fund. Establishing the links among financial inclusion, financial stability and social stability would show that the G20 is an institution capable of leading on global issues in a more sophisticated and comprehensive way.

Although the leaders will meet at an economically challenging time, and their discussions could still be sideswiped by disagreement among key members over Syria, as an institution the G20 has been able to produce clear and concise decisions on a vast array of issues, particularly during a crisis. At St. Petersburg the G20 will continue to control the euro crisis, advance tax fairness and transparency by reinforcing the automatic exchange of tax information as the new multilateral standard, and make progress on previous G20 commitments on financial regulation in the banking sector. But it could still do more to make G20 governance work for the benefit of all, if only by laying a firm foundation on which Australia can build as the G20 host in 2014.