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Ahsan Habib
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Launch LEADERS of the world’s largest
Supplement « economies, the G-20, will meet for
Special the second time this year on
Supplements « September 24-25. At the Pittsburgh
summit, leaders will review the
progress made since the
Washington and London summits
and discuss further actions to
assure a sound and sustainable recovery from the global
financial and economic crisis. The members of the G-20 are
the finance ministers and central bank governors of 19
countries – Argentina, Australia, Brazil, Canada, China, France,
Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi
Arabia, South Africa, South Korea, Turkey, the United
Kingdom and the United States – as well as the European
Union, represented by the rotating council presidency and the
European Central Bank.
In the face of the global economic crisis, the first summit
was held in Washington on financial markets and the global
economy where the G-20 leaders committed to an action plan.
It was later renewed and reviewed at the London summit in
April 2009. The earlier summit at the London’s Excel Centre
made six pledges – to restore confidence, growth, and jobs; to
repair the financial system to restore lending; to strengthen
financial regulation to rebuild trust; to fund and reform
international financial institutions; to promote global trade and
investment and reject protectionism, to underpin prosperity;
and to build an inclusive, green, and sustainable recovery.
Taking into cognisance of the recovery of the world economy,
particularly of the developed countries, it seems that the
London summit was a success. This was largely due to cut in
interest rates, expansionary policy followed by most central
banks and concessional finance for the poorest countries by
the international financial institutions, particularly by the
International Monetary Fund, which was pledged in London an
additional resource of $750 billion.
Still, there are things that can make the developing
countries cynical about such a summit. One is the
establishment of the Financial Stability Board as a successor of
the Financial Stability Forum. The FSB is based in Basel,
Switzerland at headquarters’ of the Bank for International
Settlement which has a history of playing controversial and
dark roles. In addition, the FSB is chaired by Mario Draghi,
governor of the Bank of Italy and a former partner at Goldman
Sachs. These raise a logical question whether the FSB would
be able to serve its mandate to develop and implement strong
regulatory, supervisory and other policies in the interest of
financial stability.
The pre-summit London meeting held earlier this September
vowed to continue life support package until the world
economy regains its health. The London meeting also agreed
that emerging nations should have a greater say as regards
the International Monetary Fund and the World Bank. As
regards climate change, the meet vowed that they would work
towards a successful outcome at the Copenhagen summit in
coming December. This meeting did not discuss the issue of
resisting protectionism in broad detail which they pledged in
the April summit. The London summit was held at such a time
when world trade growth was falling for the first time in 25
years. Ever since the recession started rolling down, it has
been argued by experts and of course admitted by the
developed countries that protectionism has been a ‘historic
mistake’ of previous era. But till date the developing world is
yet to witness any such action.
The Doha Development Round vowed to ‘recognise that the
integration of the LDCs into the multilateral trading system
requires meaningful market access.’ Little has so far been
done towards the successful completion of the DDR. The G-20
leaders in London committed themselves to reach an
‘ambitious and balanced conclusion to the DDR’ that would
boost the world economy by not less than $ 150 billion every
year. Any such positive conclusion largely depends on duty-
and quota-free access by the LDCs which has been recognised
as the most powerful tool that can make the much debated
market access issue meaningful. The upcoming Pittsburgh
summit is an opportunity for world leaders to deliver what
they had promised in the bygone days. It is time that they
avoided diplomatic language and went for some real action.
The world leaders also reaffirmed their commitment to
Gleneagles Commitments and the Millennium Development
Goals and agreed on the issue of preferential treatment that it
was an effective tool for poverty reduction and economic
growth. It is worth mentioning that the United Nations through
the MDGs has urged all its members, developed countries in
particular to address special needs of LDCs by adopting DFQF
market access for LDCs for all exportable. The Gleneagles
Commitments emphasised the need for easing the Rules of
Origin so that they can be followed in a more flexible way. The
US has long been following an unbending policy to allow to 97
per cent of products from LDCs while the rest of the products
include clothing and agricultural products which LDCs can
produce competitively. Other G-20 countries namely Japan
and South Korea also have product exclusion. Although the
European Union offers 100 per cent duty- and quote-free
access under its Everything but Arms initiative, the Rules of
Origin provisions have hindered the LDCs from taking
advantage of such an opportunity. So the upcoming G-20
summit has opened up an opportunity for world leaders to
deliver on the promises they made.
Again, worries are there that world leaders are yet to
determine a definite figure to help developing countries
combat climate change. The early September meeting did not
give priority to this issue. World leaders must make progress
ahead of the Copenhagen summit with only 90 days in hand.
Any triviality will only result in creating mistrust within the
poor developing countries. Meanwhile, the European
Commission has put forwarded a proposal of $ 21.8 billion in
aid to poor developing countries so that they can be pursued
to sign a deal at the Copenhagen summit. But money is not
the only thing that will fight irreversible impact of climate
change, innovative risk management tools should be offered
as well.
The US president Barak Obama will chair meeting of the
world leaders that represent 85 per cent of the world
economy. In his first speech on the Pittsburgh G-20 summit,
Obama asserted that he has chosen Pittsburgh as it stands as
an example of ‘how to create new jobs and industries while
transitioning to a 21st century economy.’ It has created high
hopes both among the US citizens and among the people from
around the globe. The US being the driver of the G-20 faces
the challenge to re-energise its alliances. It has been
recognised by the Obama administration that this goal can be
attained by broadening engagement based on mutual interest
and mutual respect. It is time to watch whether the world
leaders have moved towards the right direction or have waved
another possible catastrophe.
Meer Ahsan Habib works for the Centre for Policy
Dialogue, a Dhaka-based research organisation.
ahsan@cpd.org.bd