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G20 Analysis

Cannes 2011:
A Summit of Substantial Success

John Kirton, Co-director, G20 Research Group
Cannes, November 4, 2011

The G20 leaders’ gathering at Cannes, France, on November 3-4, 2011, has proven to be a summit of substantial success. It contained a financial crisis reaching critical levels in Greece and Italy, riding to the rescue of a European Union that had tried but failed repeatedly to cope on its own. G20 leaders endorsed a recipe for stronger, more sustained and balanced growth by recommitting to medium-term fiscal consolidation first, short-term stimulus where possible, and substantially more exchange-rate flexibility, respecting market fundamentals than ever before. The summit moved to augment the resources of the International Monetary Fund (IMF), so it could credibly assist large countries in Europe or elsewhere that were afflicted by short-term market panic but were seriously committed to painfully needed reforms at home. It similarly strengthened the resources, role and status of the Financial Stability Board (FSB), while appointing an impressive new chair in Mark Carney who could get the core job of smarter, fairer, more inclusive financial regulation and supervision done.

Less prominently but still importantly, the G20 finally effectively declared the decade-long Doha Development Agenda negotiations of the World Trade Organization to be dead, choosing instead to focus on smaller measures that would provide some relief in 2012 to the poorest countries in the world. The G20 also wisely rejected two bad ideas: a global financial transaction tax at a time when more inexpensive money was needed to flow in from abroad to Europe and a G20 secretariat that would transfer ownership of the club from the most powerful leaders in the world to international bureaucrats claiming to act in their name.

Along with this substantial list of successes were several opportunities missed. In identifying who would chair the G20 summit in future years, the Cannes Summit failed fully to affirm its professed equality between advanced and emerging economies and gambled that it could govern an ever more connected, complex and crisis-prone global economy but meeting only once a year, rather than twice a year as it had in the past. It did nothing in the final communiqué to intensify the implementation of its commitment at the 2009 Pittsburgh Summit to phase out fossil fuel subsidies in the medium term, a move that would bring major gains in fiscal consolidation, in climate change control and in enhancing human health. Nor did it repeat the concern of the 2011 Seoul Summit with non-communicable diseases, whose prevention and control could contain soaring healthcare costs and save many lives around the world. The G20 also failed in its communiqué to note the need to move quickly to a single global set of accounting standards, so investors and employees anywhere can compare and understand the actual performance of firms anywhere, an catch problems before they become big enough to drive such firms an their partners into bankruptcy.

There is thus is still a large demand for more G20 governance in the months ahead, until the leaders will gather together again in Los Cabos, Mexico, on June 17-18, 2012.