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From 2012 to 2016, the G20 Studies Centre at the Lowy Institute for International Policy produced independent research on global economic governance and the role of the G20, and supported research networks in Australia and overseas. The Australian Government provided funding to establish the Centre.

The archives of the Centre’s quarterly G20 Monitors (as well as other publications from the G20 Studies Centre) are available below. The Monitor brought together opinions from Australia and around the world to discuss developments in the G20 and suggest policy ideas.

The Lowy Institute will continue to comment and publish on economic governance issues.

Latest publications

Thoughts from the 'father of the G20'

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre.

Former Canadian Prime Minister Paul Martin is often referred to as 'the father of the G20’. While Canada’s finance minister, he was the driving force behind the establishment of the G20 and was selected by the G7 in 1999 to be the first G20 chairman.

Paul Martin took part in a series of events organised by the Lowy Institute in Sydney, Canberra and Brisbane last week as part of the preparations for Australia chairing the G20 in 2014. He had many insights on the establishment of the G20 along with guidance as to how Australia should approach its term as chair.

On membership, Martin said there was never any question Australia would not be a part of the forum when it was established in 1999.

The G20 has only 19 countries as members. This led to jokes that finance ministers could either not add up or that they treated one country as a rounding error. However Martin said Nigeria was the twentieth country when the group was first conceived, but given political difficulties at the time, it was deleted from the list. As a result, Martin believes the main membership issue facing the G20 is the under-representation of Africa.

There has been some debate in Australia over who was responsible for the establishment of a leader-level summit in 2008, including Kevin Rudd’s claims that he was instrumental in its formation.

During his term as Canada’s Prime Minister, Martin campaigned for the G20 to meet at leaders’ level. He said that before 2006 every G20 leader agreed to a Leaders’ Summit except for President George W Bush, who said neither yes or no. Martin gave President Bush credit for finally calling the G20 leaders together in November 2008, although Martin emphasised the extensive preparatory work around the idea in the preceding years.

Looking ahead, Martin thought Australia had a critical role to play as G20 chair in 2014.

His overriding message was that the G20 was adrift because Western leadership is deficient. If the G20 is going to be the premier international economic forum for the future, Asia has to play a much bigger role. Martin believes Australia, with its Western traditions combined with its geographic position and economic integration in Asia, is in a unique position to be a bridge and enhance Asia’s role in global economic governance.

Martin observed that Korea successfully promoted the fact that it was the first emerging market to chair the G20 with the Seoul Summit in 2010. In a similar way, Australia needs to establish its credentials as a G20 chair by shifting the focus of the forum away from its European and North American bias and to help lift the voice of Asia.

As an example, Martin emphasised the need to extend the role of the Financial Stability Board (FSB), which is responsible for oversight of international financial regulation. It is still dominated by European and American financial issues. However, Asian financial institutions are likely to become increasingly significant global financial players in the future and it is important that the FSB be seen as being relevant to Asia. Martin believes the FSB will eventually need to become a full treaty organisation with its membership augmented, facilitated by reducing European representation.

In addition to the FSB, Martin said the G20 should focus on strengthening the other multilateral institutions. He is particularly concerned that the WTO is at risk of being marginalised by the emergence of a series of regional trade agreements. The dispute settlement process of the WTO is a critical global resource that needs to be preserved. Martin suggested that strengthening the WTO be a major G20 priority.

Martin is also concerned that the IMF has severely damaged its reputation with its involvement in the European crisis and is in need of reform that goes beyond improving the distribution of its quotas.

Leader summits bring protesters and, drawing from the experience of the violent protests during the Toronto Summit in June 2009, Martin observed that much of the good work in the lead-up to a summit can be lost in the eyes of the public with lasting images of violence. Martin recommended intensive training and preparation to deal with protesters and prevent unpleasant images and headlines.

While he had much valuable advice for Australia, Martin was also impressed by the extent of the preparations Australia has underway for its role as G20 chair.

Abbott's chance to seize the G20 lead

In this op-ed for the Business Spectator, Mike Callaghan, Director of the G20 Studies Centre, maps out the priorities for the Australian Prime Minister at the G20 Brisbane Leaders' Summit.

The clock is ticking on G20 preparations

In this op-ed for the Australian Financial Review, Director of the G20 Studies Centre, Mike Callaghan, discusses the essential steps the government should take in chairing the G20, including authoring a concept paper and encouraging leader engagement.

Playbook for the Brisbane G20 summit

Australia will chair the G20 for 12 months from 1 December 2013. It will be the largest international economic meeting ever held in Australia. This paper outlines the strategy, priorities and steps required for the Brisbane G20 summit to be a success – it is a ‘playbook’ for Australia’s G20 presidency.

Tax, Infrastructure, Anti-Corruption, Energy and the G20

This issue of the Monitor deals with infrastructure financing, combatting tax evasion and avoidance, fighting corruption and global energy governance. The question being explored in each area is ‘where can the G20 add value?'

Bilateral, regional, multilateral: Trade negotiations are warming up

APEC Bali 2013

Australian trade officials are having a busy time at the moment.

Firstly, the Trans-Pacific Partnership (TPP) is being discussed in Bali, alongside the APEC Economic Leaders' Meeting.

Secondly, the Regional Comprehensive Economic Partnership (RCEP) has just concluded another negotiating session in Brisbane. 

Thirdly, the new Australian government has specified a high priority for three unresolved bilateral free-trade agreements (China, South Korea and Japan), with the objective of concluding an agreement with China within a year.

Finally, WTO Ministers will meet in Bali in December to discuss the Doha Round

Each of these negotiating streams has its strengths and weaknesses.

The so-called free-trade agreements (FTAs) are actually preferential trade agreements (PTAs), where a country gives up the right to deal with the cheapest foreign supplier in order to get favoured access for its own exporters. The main reason for joining in these distortionary arrangements is a simple one: if everyone else is doing it, you have to join in. They result, however, in a 'noodle bowl' of complex overlapping and conflicting agreements.

Both the TPP and the RCEP are also PTAs, but of a less distorting kind. The more members there are in a PTA, the less the distortion, as there is more opportunity to trade with a low-cost efficient supplier. They represent an opportunity to mitigate the damage of bilateral PTAs, over-laying these diverse agreements with a uniform framework common to all members.

They also offer more opportunities to lower behind-the-border barriers. The TPP, for example, will cover labour regulations, investment procedures, environmental issues, competition policy and intellectual property rights. With this range of 'behind-the-border' issues, the TPP might more accurately be seen as part of an effort to establish Thomas Friedman's Golden Straitjacket — the set of universal rules which will govern international relationships.

The RCEP also looks 'behind the borders', but it focuses on the operational hindrances which slow trade and inhibit multi-country supply chains. It looks at how customs, quarantine and administrative procedures can be made simpler and more uniform. And of course its geographical coverage is quite different: its ASEAN focus makes it much more Asia-oriented than the TPP and progress there would link Australia into the wider regional activities

RCEP also restores a notable omission from the TPP negotiations: China. Is China's omission from the TPP negotiations a conscious element of US containment or is it an effort to establish a set of rules which China will later have to accept if it wants the benefits of participation? Perhaps the second is the stronger motivation, although there may be elements of both.

The theoretical first-best would be a comprehensive WTO multilateral agreement. WTO discussions, however, have lost the central dynamic which would motivate negotiators to reach agreement — the overarching understanding that reduced trade barriers benefit all countries. Tit-for-tat bargaining, an unwieldy unanimity formula for the 157 members, and long-held grievances and intransigencies have brought the Doha Round to a dead halt. Perhaps the G20 will be able to breathe life into the multilateral format. At the least, the past gains (including the valuable dispute-settlement procedures) need to be maintained.

The bilateral PTAs can best be seen as a stop-gap response to other countries' PTAs. If these will eventually be subsumed into wider agreements such as the TPP and RCEP (or a multilateral agreement), then no great harm will be done provided we don't lose sight of the long-term objective: a world in which everyone is treated the same. Thus playing special favourites now might just cause problems later.

It may be unhelpful for the negotiators to be given rigid instructions to conclude a deal within a specified timetable, as this can weaken bargaining positions. When the Australia-US Free Trade Agreement was negotiated, those on the other side of the bargaining table knew that Australia had to reach agreement, or admit that our Prime Minister was not as close to the US President as he wanted us to believe

The TPP presents some of the same problems. Paul Krugman has identified the key flaw in the Golden Straitjacket: written from an American perspective, these rules might be unhelpful for much of the rest of the world.

How are the Golden Straitjacket rules being written? The likelihood is that the first draft of any behind-the-border rules will be mainly written by the largest participant in the negotiations, and will understandably be tilted towards their own circumstances. The smaller negotiating countries are faced with all the political pressures to be a 'team player' and not to stand in the way of a platinum-standard agreement.

The potential for an unfavourable outcome is greater for behind-the-border issues than it is for agreements to reduce trade barriers. Trade theory says that a negotiating country will benefit from lowering its tariffs even if other countries don't follow suit by lowering their tariffs. Negotiators can be confident they can't make their country worse off. Behind-the-border issues such as intellectual property rights, on the other hand, are generally a trade-off: what one country gains, the other loses. While tariff negotiations are an unambiguous win-win opportunity, other rule-writing is closer to a zero-sum game. 

Image courtesy of the APEC CEO Summit 2013.

US shutdown just the latest G20 headache

Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre.

When G20 finance ministers meet in Washington, DC at the IMF Annual Meetings on 10-11 October, there will much  to discuss and worry about. A glance at the headlines identifies many of the issues that should be on their minds.

The financial press is currently focused on the shutdown in the US government. Hopefully, by the time ministers meet, common sense will have prevailed in the US Congress. But as global financial markets retreat due to concerns about the US government shutdown and the looming battle over  the US debt ceiling, it is a reminder of the inter-connected world in which we live.

As the Washington Post reported, ‘A prolonged government shutdown – followed by a potential default on the federal debt – would have economic ripple effects far beyond Washington, upending financial markets, sending the unemployment rate higher and slowing already tepid growth.’

A chapter in the IMF’s forthcoming World Economic Outlook report, called Dancing Together? Spillovers, Common Shocks, and the Role of Financial and Trade Linkages, provides a timely backdrop for ministers when they contemplate the implications of recent developments, particularly in the US. For example, the IMF points out that the global financial crisis triggered lock-step movements from the world's economies, with growth rates at their most synchronised since the end of World War II. And as the Fund goes on to note, when a crisis occurs in a global financial hub like the US, the effects on global output are disproportionately large.

Hence all G20 ministers should worry about the brinkmanship being played out between US politicians, the fourth such ‘crisis' in the past two years. Hopefully, those involved will recognise the implications of not getting an agreement on the budget and debt ceiling and sanity will win the day, although the most likely result will be a short-term fix.

Brinkmanship over US fiscal policy will probably continue until the end of President Obama’s term in January 2017. Not only is this bad for confidence and a reason for business to delay long-term commitments, there remains the threat of ‘political miscalculation’, which would result in investors acting on concern that the US will default on its debt.

The other concern is the US Federal Reserve’s handling of its tapering from ‘quantitative easing’ (QE), part of the global macro experiment the world is experiencing. Global financial markets were rocked when the US Fed Chairman Ben Bernanke failed to announce a widely anticipated reduction in the pace of monthly purchase of US securities. In May 2013, Bernanke had appeared to be conditioning markets into accepting that the Fed was about to taper.

Among the reasons cited for an apparent shift in the US Fed’s actions was a concern over how rapidly long-term rates had risen in response to Bernanke's comments in May, and concern that the US economy was slowing and would be further handicapped by the debate over the debt ceiling.

Pierre Siklos concludes that fiscal dominance is back, in that the boundary between monetary policy and government debt management has become blurred and central banks now have to reluctantly follow the demands of fiscal policy. G20 central banks should have this squarely on their minds, for as Siklos says: ‘Low interest rates and quantitative easing may well have helped to soften the blow of the last financial crisis but policies to deal with excessive sovereign debts and the cumulative distortionary effects of ultra-low interest rates may well require more unpleasant policies in the future.’

Maintaining ultra-low interest rates for an extended period is a concern but, as the IMF warns, so is a normalisation of US interest rates at a pace that is faster than warranted by economic conditions. As the Fund notes, a rise in US interest rates will have its biggest effect in Latin America, but will also have significant effects on Asia and Europe. The world should worry about the tightrope the Fed is walking in its handling of  QE tapering.

Emerging markets have been vocal regarding the impact of the ‘Fed taper’ on their economies. The Singaporean Finance Minister (and IMFC chair) Tharman Shanmugaratnam, claims that the emerging world is doomed to capital-flow instability unless the Fed takes into account financial volatility in high growth regions. He says that on the basis of self-interest, the Fed should factor in the negative feedback loop from its policies, because ‘the world is becoming more interconnected and aggregate demand from emerging markets increasingly matters for the US.’ However, Bernanke has made it clear that the Fed will be focusing on US employment and inflation.

Finally, G20 finance ministers should still worry about developments in Europe, particularly the political crisis in Italy, which has the potential to reverberate throughout the eurozone.

Bottom line: it remains a worrying time to be a finance minister (treasurer, in Australia’s case) or a central bank governor.

Judicious ambition: international policy priorities for the new Australian Government

In this new Lowy Institute Analysis, a number of Lowy Institute experts outline what they believe should be some key international priorities for the new Australian Government. 

The election's G20 factor

One of the more unanticipated explanations for the Rudd government’s delay in announcing the date of election 2013 is the need to factor in the G20 leaders’ summit on September 5-6 in St Petersburg. 

If the G20 is so great, why isn't Rudd going?

Hugh Jorgensen is a Research Associate in the Lowy Institute's G20 Studies Centre.

It took me three years of work to get us into the G20. We are hosting it next year. To have this jammed up against a federal election date is a problem and if I can overcome that problem I will.

— Kevin Rudd 

Given the 7 September election date, we now know the (political) problem of the G20 summit could not be overcome.

For mine, this is surprising. Only last week, French President Francois Hollande issued a press release stating he would be meeting with Kevin Rudd in Russia. Moreover, given the number of phone calls Prime Minister Rudd was making to his G20 colleagues, I had become so convinced that the Prime Minister would be mingling with twenty of the world's most powerful leaders at the 5-6 September G20 leaders' summit in St Petersburg that I actually tried to place a bet on a 21 September election.

Luckily for me, the risk of insider information corrupting such markets led to them being shut down back in January, and so while I may have saved $6 (I'm a high-roller), the bigger question for Australia is: what will we lose by not having our leader at this year's G20 summit?

There are at least a couple of reasons to believe that, as far as the G20 is concerned, the timing of the election is a less than preferable outcome for Australia's foreign policy aspirations.

The first reason, previously outlined by Mike Callaghan, is that the roll-call of leaders at the Brisbane summit may be more spoilt by 'the tyranny of distance' than any previous summit. Brisbane is a long way from the other centres of G20 power, even if only psychologically rather than physically. Yet if one or two major leaders decide they are unable to attend next year's summit due to domestic political concerns, it may become a dead rubber event. This could be bad-to-fatal for the future of the G20, and hence Australia's place at 'the top table'.

Greg Sheridan wrote on Monday that non-attendance at events like the G20 due to domestic elections or national disasters was par for the course. But the G8 only lost its perfect attendance record at its 38th meeting (Putin did not make it last year) and the newer BRICS summits still have a 100% success rate.

To date, only two leaders have failed to show at a G20 summit: at the Toronto 2010 meeting, Lula da Silva excused himself due to the death toll from the horrendous Brazilian floods, while Wayne Swan represented Australia, as Julia Gillard had only disposed Kevin Rudd days earlier. So it does not help that our second avoidable non-attendance will provide a ready-made excuse for reluctant participants in 2014. It will also bolster critics of the G20 who already dismiss its status as a 'premier forum for international economic cooperation.'

This is doubly so if Australia wants to aim for some 'visionary' outcomes in 2014.

If Australia's G20 presidency opts to take on a big global policy deadlock that is crucial to the future of our own country and region, such as the future of the multilateral trading system, resolving the morass of climate financing, or contributing to the post-2015 development agenda, then we need to convince all the key players to be in the room. And even if Australia targets something meaningful in 2014, given the precariousness of the election outcome, Foreign Minister Bob Carr, Rudd's likely substitute, will not be able to confidently advertise to other G20 leaders precisely what that target would be, as this is something to be determined by the election winner.

The second reason is that Australia will assume the G20 presidency on 1 December, after which time the prime minister will be responsible for corralling and establishing working relationships with fellow G20 leaders so as to produce a meaningful outcome at the Brisbane summit in November 2014. If the election had been held prior to 7 September, the new prime minister could have attended St Petersburg and begun building (or rebuilding, in Rudd's case) rapport with G20 colleagues.

This is a shame. The G20's great advantage over other multilateral bodies is that it brings together the key political figures from its member countries. Together, they can do significant things that ministers and officials cannot. At the 2009 London summit, leaders notoriously 'tore up the script' that had been prepared by their officials and collectively came up with the now famous 'trillion dollar' stimulus 'fight-back' that helped avert a global depression. But such action requires the G20 chair to have established a professional camaraderie with a core group of leaders before the summit.

In addition, if any bold action does emerge in St Petersburg, Senator Carr will simply not be able to contribute with the kind of clout that is the unique remit of a leader (and not least because his own political shelf life may be mere hours from expiry, although, admittedly the same could be said of Rudd).

Of course, realistically and unfortunately, the above considerations are likely all but immaterial for the Government. The decision to call an election that coincided with the timing of the G20 is clearly one short on foreign policy, and long on domestic. The evidence is abundant: recent private polling in the very marginal seat of Boothby (currently held by the Coalition by a margin of 0.6%) found that attending the G20 would have made voters feel less favourable to Rudd, and could forgoe any chance of the ALP winning the seat. And if the ALP were able to build up enough momentum in the next four weeks, then having the Prime Minister abscond overseas mere hours before the ballot would clearly be a political insanity.

While the prospect of the Prime Minister and the Leader of the Opposition attending St Petersburg in a bipartisan show of Australia's support for the G20 has been entertained in these pages and would probably be warmly welcomed by a campaign-weary public, Tony Abbott's recent stated aversion to the idea now all but precludes this from happening. Specifically, Abbott's belief is that 'Australian elections are not about someone being prime minister of the world, they're about someone being prime minister of Australia'.

Maybe, but one would have thought that elections are also about choosing which prime minister we want to send out into the world on our behalf, a world that needs all the help it can get in global economic governance.

Yet by not attending the St Petersburg summit, Rudd has also made it more difficult to claim Australia's participation in the G20 as a feather in his cap, or as a crucial part of his government's response to the global financial crisis, as was implied by the opening quote of this piece. Put bluntly, if it's so great, then why isn't he going?

On the night of Rudd's return to the leadership, Bob Carr indicated on Lateline that the G20 was going to feature heavily in the ALP's re-election campaign: 'The choice of whether you want Tony Abbott, or Kevin Rudd, representing this country at the G20 in September in St Petersburg becomes very clear'. Yet the timing of the election means we have only been presented with one choice: none of the above.

Photo by flickr user London Summit.