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Analysis

Making History:
G20 Governance from Pittsburgh to Muskoka

John Kirton and Madeline Boyce, G20 Research Group
September 25, 2009, 16h30

The G20 gathering at Pittsburgh on September 24-25, 2009, has been a summit of historic success. It was the third such summit of the G20 within a single year. It was a summit to which all the leaders came, including China’s Hu Jintao, who had to leave Italy on the eve of the G8 summit at L’Aquila just a few months before in July. Pittsburgh saw the leaders take up a broad agenda, covering key economic and development issues, as well as adding environmental issues such as climate finance, energy efficiency and food security and the political security issue of nuclear proliferation in Iran.

Pittsburgh’s first policy accomplishment was to send a strong, unified message that all members of the G20 would stay the course on stimulus until a genuine, durable, private sector–driven economic recovery was fully assured. Second, it agreed that now was the time to start to design the smart, sophisticated, well-tailored, market-sensitive exit strategies that could be implemented over the next year, in ways that were appropriate to the economic conditions that would unfold. Third, and more ambitious, it put in place a framework for encouraging the newly growing global economy to be based on more balanced foundations, with consumers in key economic powers such as China, Germany and Japan generating domestic demand and imports, and finally allowing Americans to accumulate the savings they needed at home. Fourth, the summit moved forward on strengthening and internationally coordinating domestic financial regulations, starting with the core issue of improving banking capital and liquidity, and mobilizing the structure of bankers’ compensation to this end. Fifth, the summit took a major step forward on the reform of international financial institutions, specifying that by the previously agreed date of 2011, there would be a shift of at least 5% of the quota share and resulting votes in the International Monetary Fund (IMF) from the established powers of old to the rapidly emerging economies of today.

Sixth, the summit made substantial progress on the critical issue of climate finance, putting in place principles to guide where the required money would come from, how it would be governed and to whom it would go. This would to help developing countries mitigate their carbon pollution and cope with the destructive consequences of the climate change already underway. This framework could be an essential step in breaking the current stalemate in climate negotiations, which have focused primarily on funding, just in time for the UN climate change conference in Copenhagen in December, where environment ministers from 192 countries will meet to put in place an effective successor to the failed Kyoto protocol regime.

The seventh accomplishment was the historic decision to institutionalize the G20 as the new centre of global economic governance. Such G20 governance would finally give the central role to the emerging and established powers, reflecting a predominance of capability and a broad array of the world’s diversity. It would treat established and emerging powers as equals. It would add the new Financial Stability Board to the IMF, the World Bank and the World Trade Organization, as a fourth pillar of the global civil service to advise the G20 and implement what the leaders would collectively decide to do.

By deciding to hold the next G20 summit under the joint chair of Canadian prime minister Stephen Harper and Korean president Lee Myung-bak in Muskoka, Canada, in June 2010, where the G8 summit would be held, Pittsburgh affirmed the equality between established and emerging countries as hosts. Both the G8 and G20 finance ministers’ platforms now would serve the new G20 summit and both the G8 and G20 institutions would cooperate rather than compete. This cooperative spirit was evident in the Pittsburgh communiqué, which on several occasions noted, endorsed, built on or promised to implement previous decisions of the G8. Moreover, essentially the same group of leaders would gather to govern the globe twice a year rather than only once, even after the current financial and economic crisis had faded away. To strengthen its own capacity to do so, the leaders created new G20 ministerial gatherings on energy and labour, and perhaps development as well.

To be sure, there were some disappointments. The Pittsburgh Summit did little on international trade protectionist beyond repeating past pledges to renounce new protectionism, rectify past action, finally deliver the badly overdue Doha development agenda of international trade liberalization negotiations, to liberalize trade, to reduce tariffs on environmentally enhancing and climate friendly goods and services, or to otherwise reduce barriers to trade and investment. While it did directly address the critical issue of unemployment, it did little to ensure that the current economic recovery would soon create the good, clean, green jobs that are essential to reducing income and gender inequality in G20 countries and around the globe. Despite such welcome announcements as the Canadian contribution of an additional $2.5 billion to the African Development Bank, the summit as a whole did relatively little to mobilize new money to help the still struggling poor countries and peoples of the world. Nor did it deal with promoting health security even as swine flu and other pandemics, and volatile oil prices afflicted the world.

However, with the G20 summit now institutionally integrated with the G8 summit actively working on these G20-neglected tasks, there are good grounds to believe that the Pittsburgh Summit has helped create architecture for overall global governance that will benefit all. It is now up to Stephen Harper and Lee Myung-bak to follow in the footsteps of Barack Obama’s America to bring the promise of Pittsburgh fully to life.

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