Commentary | 13 November 2015

G20 needs to find new momentum to progress global issues

G20 needs to find new momentum to progress global issues

Tristram Sainsbury and Hannah Wurf

Australian Financial Review

13 November 2015

  • Hannah Wurf
  • Tristram Sainsbury

G20 needs to find new momentum to progress global issues

Tristram Sainsbury and Hannah Wurf

Australian Financial Review

13 November 2015

  • Hannah Wurf
  • Tristram Sainsbury

Executive Summary

On Sunday, leaders of the world's largest advanced and emerging economies will convene on the Mediterranean coast in Turkey to discuss the problems facing the global economy at the 10th G20 leaders summit.

Australia had an ambitious agenda when we hosted the summit in Brisbane last November. We attempted to revitalise the G20 and provide some momentum to the flagging forum. This included efforts to establish a growth target, a proposal for a Global Infrastructure Hub and progress on long-term G20 issues such as international tax, financial regulation, trade and energy governance.

However, the Australian legacy will depend on what Turkey and future hosts deliver. Has Turkey followed through? From our observations of Turkey's hosting throughout the year, there is likely to be only modest progress at this year's summit.

Turkey's G20 presidency has been a bumpy ride. On the first of this month, conservative president Recep Tayyip Erdoğan finally got the majority he needed to govern without a coalition. This follows turbulent elections in June, when the Justice and Development Party suffered losses after Erdoğan's attempts to consolidate his power and amend the constitution.

The fervour of Turkish politics has been heightened by regional chaos. Erdoğan has taken in nearly 2 million refugees from neighbouring Syria and instigated a bombing campaign against IS (which conveniently seems to have targeted the Kurdish PKK). Both Ankara and Istanbul have suffered suicide bombings, killing large numbers of civilians.

Given these pressing domestic concerns, it is not surprising that the 86 G20 meetings Turkey organised in 2015 have flown under the radar.

While the Australian presidency had a tight focus on jobs and growth, Turkey embraced a broader narrative of inclusiveness, investment and implementation - dubbed the "three i's". There will be progress on each of them. We can expect leaders to welcome an accountability framework for G20 efforts to boost growth and each G20 member will put forward a strategy for domestic investment. There will be support for youth employment, small and medium enterprises, and women's empowerment.

These outcomes are modest compared to the G20's past achievements.

Despite the somewhat unimpressive i's, there are a few success stories outside the Turkish priorities. The Global Infrastructure Hub, an Australian G20 initiative, was recently established in Sydney and offers some prospect of making a real contribution to plugging shortfalls in investment in the coming years.

Last month, the Organisation for Economic Co-operation and Development completed its two-year base erosion and profit-shifting project to cut down on tax avoidance. And ongoing efforts at financial regulation will result in globally systemic banks and insurers holding more capital, which will reduce the need for taxpayer bailouts in the future.

Rather than three i's, three other big questions are more likely to be top of mind for G20 leaders this week. Can the global economy transition into stronger recovery? Will the United Nations meeting on climate change succeed next month? What can be done about the refugee crisis in the Middle East and Europe?

For all the G20 talk of strong, sustainable and balanced growth, the global economy remains sluggish and macro-economic policy settings are overly reliant on monetary policy. We are two years into Australia's five-year target to increase G20 GDP by an additional 2 per cent, yet forecasts from the International Monetary Fund, World Bank and OECD have been continually downgraded and have not attributed any growth to G20 action.

The 2 per cent target is a distraction from the real issue - whether G20 countries have been implementing difficult structural reforms in areas of trade, investment, labour markets, and competition. Leaders cannot just "shift a dial" on growth and will instead need to focus on these reforms, and making them publicly accountable.

At the same time, leaders will be acutely aware of the UN climate meeting, where there will be expectations of a global agreement to significantly reduce greenhouse gas emissions. The G20 is not the place to negotiate climate change targets but leaders will need to add political momentum if the UN meeting is to have a chance of success.

Then there is the Syrian refugee crisis, another sticky issue for the G20. It is a global humanitarian crisis and the G20 needs to respond if it wants to be the premier forum for international economic co-operation. Turkey, the EU and civil society groups want the issue on the table.

Turkey's G20 year has been a troubled one and risks undermining the gains from Australia's hosting. It is necessary to separate the problems inherent in the G20 forum from a difficult host year. After the Antalya summit Turkey will hand over to China, which has a much bigger stake and interest in global economic governance. Will China be able to turn the forum around?

 

Tristram Sainsbury is a research fellow at the Lowy Institute for International Policy and an editor of a new book, The G20 and the Future of International Economic Governance. Hannah Wurf is a research associate at the Lowy Institute.