Thursday 11 Aug 2022 | 05:46 | SYDNEY
Thursday 11 Aug 2022 | 05:46 | SYDNEY

G20: How many around the table?


Stephen Grenville

11 September 2012 10:14

The G20, the pre-eminent forum for global economic cooperation, has its share of detractors. Australia, as the 2014 host, will be in the thick of this criticism and needs to work out how to respond.

Facing the urgency of the 2008 financial crisis, the G20 scored a couple of early successes, helping to avoid beggar-thy-neighbour trade protectionism and bringing some coordination into counter-cyclical fiscal policies. But these efforts at international policy coordination have run out of steam and many of the issues require domestic political solutions rather than international discussion.

The internal dynamic of the G20 process is partly to blame. The first problem is mission creep.

Every G20 host country wants its meeting to succeed. Each new host has an incentive to propose a fresh topic where progress ('initiatives' or even 'deliverable') can be reported. This widening of the agenda is encouraged by a wide range of outside players: NGOs, lobby groups and other international agencies who hope that high-level discussion and endorsement by leaders will advance their various causes.

The second problem is the G20's own structure and governance. G20 countries account for 85% of world GDP and two-thirds of world population, but only 10% of countries. It is argued that the G20 will have no legitimacy unless it has near-universal membership, like the UN and its economic agencies such as the International Monetary Fund and the World Bank.

Anyone observing the convoluted decision-making in this universal-membership model (not just within the UN, but in the IMF's IMFC) would agree that, whatever the virtues of the universal model, one of the great advantages of the G20 is its limited membership. Twenty is about the maximum that can sit around a table and have a useful dialogue.

The current G20 membership reflects its origins in the group of finance ministers and central bank governors who formed the initial 1999 G20 group in the aftermath of the emerging-country crises during the 1990s. At the time, there were heated debates about modifying this membership. Some wanted to add more participants (principally those Europeans who had been in the old G10 arrangements and who now found themselves excluded). Others wanted to make the pre-eminent forum a more exclusive club, building on the old G7 grouping, genuflecting to the changing world power by adding Russia, China, Brazil, India and perhaps South Africa. Others thought the future lay with an even-more-exclusive group: a G3 or even G2 (US and China).

When the 2008 financial crisis hit, the G20 finance group was elevated to leaders level. As the urgency of the crisis receded, membership gripes re-emerged. It was left to the successive rotating G20 hosts to respond. The result was rampant ad-hocery as each host country endeavoured to placate the diverse complainants.

Canada (host in 2009 and an important activist within the G20 throughout) invited a couple of Europeans who had missed the cut in 1999 and four other countries, on the grounds of geographical balance. Singapore participated, representing a disparate group of countries whose only commonality was that they were excluded. To broaden involvement and reflect geography, regional bodies such as ASEAN, the African Union, MERCOSUR, the Gulf Cooperation Council and the Economic Cooperation Organisation were invited. The UN also found a place, with the Secretary-General and the heads of various specialised agencies also invited.

As a result, sensible discussion around a single table becomes difficult. The real action spins off into bilateral meetings and specialised sub-groups.

This is not the only thing that has gone wrong at the G20. We'll leave the problems of agenda-creep to another day. But participation and governance needs fixing. Australia can't do it alone, but it might be able to improve on the limp attempts made so far. Rather than leave participation issue to the vagaries of rotating hosts (whose main interest is to get through the current meeting with everyone smiling, whatever the longer-term impairment done through participation-bloat), a more permanent and impersonal decision process is needed, perhaps from a standing governance committee.

The starting point might be to cease inviting individual countries as guests. Spain and Holland will be upset, but Europe has been over-represented in international economic governance since World War II (and remains so in the IMF). Europe is already double-counted by having the EU participate, as well as individual European countries.

With the decks cleared, the next task would be to enhance regional representation. Over time, the link between the regional groupings and the G20 might become important enough so that the regional bodies will devote significant time and resources to developing effective regional lobby and consensus positions (as Europe has traditionally done in promoting its interests at international institutions such as the IMF and World Bank). Australia could make it a priority of its 2014 hosting to encourage Asian countries to take a more active role in this sort of international diplomacy, not just through ASEAN, but through the East Asia Summit (whose initial core membership includes six G20 countries, nearly one-third of G20's country membership).

As the G20 meeting is at head-of-state level, these regional organisations inevitably play a different role from country representative, but they can be given an important place without over-crowding the discussion. The UN and its various economic institutions also need to be found a place in the room, although not at the top table; they have other opportunities to have their voices heard.

These are vexed issues. The nub is that there is an intrinsic conflict between effectiveness and inclusiveness. The more successful G20 is, the louder the clamour to join.

Australia has a choice. Do we want to make G20 a more focused institution at the risk of offending a few countries in the process? Or will the Brisbane meeting be like a children's birthday party, where the main objective is to make sure that no one feels excluded, every participant wins a prize, and everyone goes home happy?

Photo by Flickr user David Maddison.