Presentation on theme: "For G-20, Lofty Goals Have Fallen to Earth By CARRICK MOLLENKAMP, STEPHEN FIDLER and ALISTAIR MACDONALDCARRICK MOLLENKAMP STEPHEN FIDLERALISTAIR MACDONALD."— Presentation transcript:
For G-20, Lofty Goals Have Fallen to Earth By CARRICK MOLLENKAMP, STEPHEN FIDLER and ALISTAIR MACDONALDCARRICK MOLLENKAMP STEPHEN FIDLERALISTAIR MACDONALD Wall Street Journal March 30, 2009
Six months ago, Mr. Brown, who will host the summit here, called for "a new Bretton Woods - - a new financial architecture for the years ahead," evoking the New Hampshire site where, in 1944, American and British officials mapped out the post-World War II economic order.
LONDON -- It was supposed to be the inauguration of a Global New Deal, in the hopes of British Prime Minister Gordon Brown, a comprehensive policy response to the world economic crisis, a root-and- branch effort to reorder the way capitalism itself works.
The push started with a hastily organized meeting of the G-20 in November. "What was preoccupying the leaders and their representatives for the most part was taking steps to address the financial crisis," says Daniel Price, a trade and investment expert who organized the meeting as a sherpa to then-President George W. Bush.
One reason why it has been so hectic for envoys such as Mr. Malloch-Brown and Mr. Timms is the sheer size of the G-20, –a loose organization that emerged from small, intimate gatherings of senior finance officials from the U.S., France, Britain, Japan and Germany – the Group of Five -- in the White House Library in the early 1970s. Since then, the group has grown, culminating with the G- 20's creation in the late 1990s amid the Asian financial crisis. "It's of course more comfortable to reach decisions with five or seven people," says Gordon Smith, a Canadian sherpa in the 1990s. "But then you don't have the right people around the table."
Multiple issues will face President Barack Obama on his first trip away from North America: seeking more civil support from European nations for his "surge" in Afghanistan and Pakistan; confronting Iranian nuclear ambitions; maintaining Chinese support for buying U.S. government debt; and easing tensions with Russia over energy and missile defense. –This slide doesn’t belong here, it just shows the President is a busy person
Officials insist the summit of the G- 20, which groups major developed and developing economies, will chalk up impressive achievements. "The things which people believed would never ever be changed, have changed. Quite historic changes," said Stephen Timms, financial secretary to the British Treasury.
This week, for example, Saudi Arabia, which has been lobbied by the U.K., is expected to contribute to the International Monetary Fund's finances. The oil-rich kingdom, along with new powers such as China, stands to get a bigger say in the IMF and in the regulation of global finance.
Governments and the IMF have agreed to provide hundreds of billions of dollars for hard-pressed emerging economies that have lost access to funding. Changes have been broadly agreed to improving the international supervision of cross-border banks, whose recklessness helped to create the crisis.
Mr. Brown has managed to win new consensus lately on one issue: the need to rein in tax havens. In recent weeks, countries including Switzerland and Liechtenstein have announced they would cooperate more with international tax probes, and this week's meeting is expected to produce new rules for oversight, transparency and conduct of offshore tax havens The U.K.'s Mr. Timms cites the tax haven issue as evidence that the G-20's achievements will be significant, but some question the role of tax havens in the financial crisis.
A call to reject protectionism was such a foregone conclusion that it was buried deep in the declaration issued at the meeting's end. The group stopped short of installing a surveillance system to monitor protectionist acts.
But by the time the much-heralded Group of 20 meeting of heads of government ends Thursday, it may be difficult to spot a new world order.
It is already clear that the summit will mostly fall short of Mr. Brown's original lofty goals. Over the past few days, European leaders continued to insist they wouldn't agree to U.S. and British calls for further fiscal stimulus for their ailing economies.
In the final weeks before this week's meetings, Mr. Brown found himself fighting a multi-front war to build consensus. He battled a growing chorus of critics, such as German Chancellor Angela Merkel, who warned against the push by Mr. Brown and U.S. leaders to further stimulate the economy. Problems flared at home, when Bank of England Gov. Mervyn King told Parliament the U.K. itself couldn't afford further stimulus efforts.
Saudi Backing another kind of provincialism Saudi Finance Minister Ibrahim al Assaf reminded him Western governments had yet to acknowledge his country's efforts to stabilize oil prices, and pushed back at the notion of providing more assistance at a time when the price of oil was about a third of its peak. Saudi officials told Lord Malloch-Brown, "we will do our proportionate share but don't treat us as someone who should make exceptional efforts."
On Feb. 20, Lord Malloch-Brown landed in Beijing on the heels of news reports that 20 million migrant Chinese workers had lost jobs in Beijing or the Pearl River Delta and were returning home. When Lord Malloch-Brown read the number in a briefing prepared by the U.K. Foreign & Commonwealth Office, he says, he thought it was a typo. "20 million people unemployed is bigger than the entire working population of even large European countries."
Arriving in Bangkok a short time later for a meeting of the Association of Southeast Asian Nations, Lord Malloch-Brown was confronted with data showing that some of its members saw their exports in January fall by as much as 30% from the year earlier.
Protectionist Measures Within weeks of the declaration, 17 of the 20 countries represented at the summit put in place protectionist measures, according to the World Bank. India placed a ban on Chinese toys while China nixed imports of Irish pork. The practice worsened as nations began matching each other's financial bailouts of domestic industries, with the –U.S., France, China, Argentina and Italy –installing direct or indirect subsidies for their auto companies.