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New G20 Forum: Backgrounder

Estimated date of publication: March 2000
See also What Is the G20?

Introduction

On September 25, 1999, in Washington, D.C., the finance ministers of the Group of Seven (G7) leading industrialized nations announced the creation of the Group of Twenty (G20). This new international forum of finance ministers and central bank governors represents 19 countries, the European Union and the Bretton Woods Institutions (the International Monetary Fund (IMF) and the World Bank).

The creation of the G20 fulfills the commitment by G7 leaders at the June 1999 Summit at Köln "…to establish an informal mechanism for dialogue among systemically important countries within the framework of the Bretton Woods institutional system."

Mandate of the G20

The G20 will promote discussion, and will study and review policy issues among industrialized countries and emerging markets with a view to promoting international financial stability.

G20 Participants

Member countries include: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States and the European Union.

The Managing Director of the IMF and the President of the World Bank, as well as the Chairpersons of the International Monetary and Financial Committee and Development Committee of the IMF and World Bank, will participate fully in the discussions.

G20 Chairmanship

Finance Minister Paul Martin of Canada has been selected as chairperson of the G20 for its first two years. The first meeting will be chaired by Minister Martin in Berlin in December 1999. Canada will host the second meeting in 2000.

Characteristics of the G20

Through broad participation by industrialized countries and key emerging markets, the G20 will represent a range of viewpoints.

Like the G7, but unlike larger international organizations such as the United Nations, the World Bank and the IMF, the G20 will have no permanent secretariat. The size and structure of the G20 will encourage the informal exchange of views and the formation of consensus on international issues.

How the G20 Fits In With Other International Organizations

The G20 will complement the activities of other international organizations:

• The inclusion of the President of the World Bank, the Managing Director of the IMF and the Chairpersons of the International Monetary and Financial Committee and the Development Committee will ensure that the G20 process is well integrated with the activities of these institutions.
• The G20 will help co-ordinate the activities of other international groups and organizations, such as the Financial Stability Forum.
• It will also facilitate the deliberations of more formal bodies such as the International Monetary and Financial Committee.
• The potential for the development of common positions on complex issues among G20 members will expedite decision making in other fora.

Why a G20?

Since 1986, the G7 finance ministers’ grouping has proven to be an effective forum for informal and substantive discussion of important international economic issues, leading to greater understanding and co-ordination among policy makers in the G7 countries.

The lack of emerging market representation in the G7 limits its ability to deal with some issues related to developments in the international economy and financial system. In today’s economy, broader representation in policy discussions is crucial. As the Asian financial crisis has demonstrated, financial markets in developed countries can be seriously affected by financial instability in emerging markets. The G20 will fulfill the need for representation from emerging markets.

In his April 27, 1999 remarks to the Interim Committee of the IMF, Minister Martin highlighted the need for more representative institutional arrangements. This need was further reflected in the June 1999 Report of G7 Finance Ministers to the K&Mac246;ln Summit on Strengthening the International Financial Architecture.

During the last two years, ad hoc groupings known as the G22 and G33 were convened to help address specific issues related to the Asian financial crisis but were not integrated with the governance structures of the IMF or World Bank.

• The G22 met in Washington in April and October 1998. The purpose of the G22 was to involve non-G7 countries in the resolution of the global aspects of the Asian financial crisis.
• At two subsequent "outreach" meetings in March and April 1999, the G33 discussed issues related to reform of the global economy and international financial system.

The useful suggestions for enhancing global economic security that emanated from the G22 and G33 processes demonstrated the need for a regular international consultative forum with a broader membership than the G7.

The creation of the G20 represents the next stage in the evolution of informal consultation among industrialized countries and emerging markets.

Administrative Functions of the G20

Like the G7, the G20 will not have a permanent secretariat. Instead, the chair country will provide support. In addition, the G20 will be able to call on the resources of the IMF and World Bank, as well as officials of member countries and outside experts.

Meetings of the G20

Meetings of finance ministers and central bank governors will be held every year. Ministers’ and governors’ deputies will meet from time to time to prepare for the ministerial meetings.

• Ministerial meetings of the G20 will include the finance ministers, deputy finance ministers and central bank governors of the member countries.
• As well, the finance minister of the country holding the Presidency of the European Union and the President of the European Central Bank will participate.

The Managing Director of the IMF, the President of the World Bank, and the finance ministers of the countries chairing the International Monetary and Financial Committee and the Development Committee of the IMF and World Bank are also included as full members of the group.

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Source: Department of Finance, Canada