Bridges Weekly Trade News Digest • Volume 13 • Number 10 • 18th March 2009
BRICs Show New Influence at G20 Finance Ministers Meeting
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Emerging economies displayed a new level clout at a gathering of finance ministers from the Group of 20 old and new economic powers over the weekend, winning pledges for increased funding from international financial institutions, as well as a greater say in how those institutions are run.
The G20 ministers, whose nations together represent roughly 85 percent of the world economy, pledged to stimulate bank lending, resist protectionism in domestic policies, and pour more money into developing countries. But they fell short of agreeing on an overall approach to mitigating the economic crisis, as the group remained divided among some, like the US and Japan, who stress the importance of more stimulus spending and others, namely European nations, who say the focus should be on strengthening regulatory oversight.
The declaration the ministers agreed at the one-day meeting in Southeast England is meant to lay the groundwork for a summit of their heads of state that is set for 2 April in London.
In a significant first for the G20, Brazil, Russia, India and China (the so-called BRIC countries) issued a joint declaration outlining their vision for how world leaders should respond to the crisis.
Their list of priorities included a boost in funding to the International Monetary Fund, calling current IMF resources “clearly inadequate.” The IMF offers technical and financial assistance to countries in need, but has recently suffered from a shortage of cash.
The BRICs also asserted themselves on the political front, stressing that the next leaders of the IMF and the World Bank should be chosen “through open merit-based processes, irrespective of nationality or regional considerations.” Traditionally, Europe has appointed the head of the IMF, while the US has selected the World Bank chief.
“The IMF should increase the share from emerging economies, and treat all members equally,” Wu Xiaoling, the former vice governor of the People’s Bank of China, said in Shanghai this week. “A new set of rules should be set up to regulate the world economy, with a focus on global superpowers.”
World Bank President Robert Zoellick agreed that a new approach was in order. “Looking ahead, one can’t just rely on the old models of economic recovery, US consumption alone will no longer rescue the world,” Zoellick said ahead of the finance ministers meeting. “One will have to have a new model that must be broader and include the developing world.”
Calls for a Focus on Doha
The statement on the global financial system that the ministers released at the end of the meeting made no reference to the Doha Round of trade talks at the WTO. But on the sidelines of the gathering, many observers continued the now-familiar calls for the world’s economic powers to resist protectionism and push for a swift conclusion of the seven-year-old Doha Round of trade talks at the WTO.
“The leadership of the G20 will be tested this time,” Valentine Rugwabiza, the WTO’s deputy director general, told Reuters in an interview after an IMF meeting Tanzania.”The poorest countries, which were not the source of the current crisis … can’t be asked to wait until the developed economies fix their crisis before reverting to the Doha Agenda,” she said.
The Global Services Coalition warned against countries’ raising new trade barriers. “These ill-advised inward- looking actions, which continue apace, are significantly compounding the uncertainty already plaguing the world economy,” the group warned in a letter to the leaders of the G20.
“Now is the time for a clear political decision to conclude the negotiations of the Doha Round by the end of this year,” the group said.
Although the G20 pledged in November to temporarily refrain from erecting new barriers to trade, the extent to which the countries are living up to such pledges is increasingly coming into question (see World Bank story, this issue).
African leaders: Economic crisis could trigger violent conflict
In another meeting looking ahead to the 2 April summit, a group of African leaders met with British Prime Minister Gordon Brown on Monday to argue for the need to provide greater support for the continent amid the global downturn. African countries are being hit hard by the economic crisis, thanks to a fall in tourism, price drops for key commodities, and a decrease in remittances sent home from workers that have moved abroad.
Such changes could undermine stability in many African countries, the leaders warned, and could ultimately drive post-conflict countries such as Ethiopia and Liberia back into violence.
“Some countries could go under and that would mean total chaos and violence,” Ethiopian Prime Minister Meles Zenawi said on Monday. “In the end the cost of violence is going to be much higher than the cost of supporting Africa. We are talking about the range of money that is being spent on the mid-sized banks. Consider Africa as one of those banks,” he said.
Liberian President Ellen Johnson-Sirleaf echoed Zenawi’s message, stressing that the cost of investing in reform and recovery in the near term would pale in comparison to the cost of future peacekeeping.
The African leaders pressed the G20 to make international financial institutions more flexible and to increase the availability of trade finance.
South Africa is the only African country that is a member of the G20. But Ethiopian president Meles, who is the chair of the New Partnership for Africa’s Development (NEPAD), will also attend the summit in London next month.
Tanzanian President Jakaya Kikwete also weighed in, calling on rich countries to meet their aid commitments.
“This is a very unprecedented problem. Africa is a victim. We are not responsible for its genesis but all of us are suffering,” he said.
ICTSD reporting; “G20 underscores emerging economies’ growing clout,” REUTERS, 15 March 2009; “WTO says G20 leaders must focus on Doha Round,” REUTERS, 12 March 2009; “African leaders tell G20 crisis threatens ‘chaos’,” AFP, 16 March 2009; “Downturn ‘risks Africa conflict’,” BBC NEWS, 16 March 2009; “World Bank head urges help for poorer countries,” AP, 13 March 2009.
2 responses to “BRICs Show New Influence at G20 Finance Ministers Meeting”
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The G-20 must seize this unique opportunity to push for bold reform of the international policy architecture in key economic sectors such as agriculture, energy and fisheries, which are essential for sustaining livelihoods at this time of crisis, and avoiding a major derailment from the objectives of the Millennium Development Goals in developing countries.
Investing one per cent of global GDP, or around $750 billion, into five key sectors such as sustainable energy and freshwater, could in conjunction with other policy measures, play an important role in reviving the global economy and boosting employment while accelerating the fight against climate change, environmental degradation and poverty, according to a recent press release by the UN Environment Programme.
As many African and developing country leaders are indicating, the cost of inaction or delaying action would be much greater than what is required to assist poor and vulnerable countries now.
There is high expecting for the G 20 to show bold leadership.
The fact that US and UE economies represent the equivalent of 84% of the world’s economy, that does not mean that representatives from African countries cannot participate in the so called G-20.
To the contrary and due to their hardship experiences, African countries, other than cash, can offer new intangible ideas to combat this current world financial and economic downturn that might work out to utilize in solving the world from violence or more chaos.
Although most world leaders are aware about Africa, it is honest to say that they get to know more about Africa through out text books, films, or TV news.
There are few public officials, especially from rich natios that have visited, lived or have some other type of physical contact with the large and rich continent of Africa, but again, it has never been felt the real life on africanes by wealthy public oficials.
So, Africa’s delegation should be seriously considered into the G-20 summit, especially in ways and terms of how to aliviate their economies due to the current crisis impact to the African continent’s country.
Because their adverse experiencies on poverty and inequality is constantly in continuty on fresh famine episodious, day by day on plants and animals health, and farmers and Banking system as well.
African’s help might provide an insight light to world leaders on their efforts to alivate this absurd and irresponsible crisis.
Kirk Nelson, Pres.
WeSolutions.org
New York, NY. USA