Trends In Multilateral Cooperation - Part I Posted by David Shorr

I have a small backlog of posts starting to accumulate, all having to do with the shape of future multilateral cooperation. I'll start with David Bosco, "The Multilateralist,"and his analysis of the Sarkozy visit in light of the French president's ambitions as host of G-8 and G-20 summits later this year. David raises some great questions about whether Sarkozy's eyes are too big for his stomach. As he faces an impending re-election campaign, President Sarkozy's will no doubt face a temptation to prize flash over substance. With so many ideas for the summit agenda swirling, it's not clear that the French hosts have figured out what they really want and whether they have a realistic plan.

 

Where Bosco loses me, though, is his assessment that the G-20 is on a steep slide to irrelevance. We probably agree about the proper yardstick to measure the value and success of these summit meetings: are they focused on worthy agenda items and making headway on those problems? In this vein, David scores the last round of G-20 consultations as a failure because of the stalemate over the valuation of the RMB and the dim prospects for a near-term shift away from the dollar as a global reserve currency (in the event Sarkozy goes down that road).

But this analysis mistakes the political buzz surrounding the G-20 for the group's actual agenda: macroeconomic rebalancing and stabilizing the global financial system. The G-20 summits have launched or sponsored initiatives in other areas, but they have really put their stamp on financial stability and reaching better balance between export- and consumption-oriented economies. If one accepts that these are worthwhile subjects for high-level international cooperation, then they constitute the fairest tests of G-20 effectiveness. Fair and, at this point, far from conclusive.

On financial stability, the G-20 mandated the tightened Basel III standards for banks' capital requirements, drove IMF governance reform across the finish line, and set up a new Financial Stability Board (which is still finding its legs). Hardly a disastrous record. Clearly the G-20 has been wrestling with how to spur export-led economies to boost domestic consumption. The first hurdle was to gain China's acknowledgment that rebalancing was even a fit topic for multilateral discussion (they relented in September 2009 in Pittsburgh). Now G-20 governments are trying to decide what metrics should be used to measure -- and thereby spur -- rebalancing. That's what the Seoul summit mandate for finance ministers to draw up "indicative guidelinds" was about. If the question of how to quantify imbalances becomes another of those round-and-around debates, that would be a strike against the G-20, but as I say, it's far too early to reach a verdict.

Suspicions are mounting that lowballing expectations for the G-20 is simply a dodge. That's the implication in this passage of David Bosco's post:

Even some French officials have been seeking to temper expectations. "We have to adapt the G-20 to a new environment, from high frequency management of the world economy to low frequency management. The pace is likely to be slower because we are tackling deeper and more difficult issues," a senior official told the Wall Street Journal.

The problem for the French -- and for the world -- is that a creation like the G20 may not be able to operate for long at a low frequency.

But I think there's a substantive argument for cutting some slack. First, the G-20 was bound to suffer from being compared to its dramatic early successes in mounting a coordinated response to the worst of the financial crisis. This is the exact same issue that arises for the political response to any tough issue: how do you take difficult steps without a sense of urgent crisis to spur you on? Second, the G-20 has shifted focus from putting out the fire to some more structural issues, which also argues for a longer-term view and greater patience.

In future posts, I will talk about UN Security Council reform (in light of an excellent recent report from the Council on Foreign Relations) and the consensus rule at the UN.



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