Introduction to the G20
by Nancy AlexanderThis article is a brief introduction to the G20 – its origin and power dynamic, membership, structure, mandate, and governance mechanisms for accountability (updated June 2011).
Click here for the Spanish version of the Introduction to the G20
I. Origin and Background of the Group G20
In 1999, in the wake of the Asian Financial Crisis, the Canadian Finance Minister Paul Martin and German Finance Minister Hans Eichel hosted the first meeting of G20 Finance Ministers and Central Bank Governors in Berlin. US President Clinton’s Treasury Secretary Larry Summers – working with Martin and Eichel – chose the G20: 19 countries, plus the European Union. At the Berlin meeting, Asians – still emerging from their 1997-98 financial crisis – sought help from the West. Click here for the 1999 G20 communique.
In 2008, after the US-triggered global financial crisis, the G20 met for the first time at the “heads of state” level in Washington, D.C. At this G20 Leaders Summit, Western countries sought help from emerging market economies, such as China, with its large budget and trade surpluses in order to avert a global depression. This event decisively shifted the balance of power from West to East.
After the G20 Summit in Washington, D.C., Leaders Summits were held in London and Pittsburgh in 2009, Toronto and Seoul in 2010, and Cannes in 2011. Click here for the communiqués of these Summits and of the meetings of Finance Ministers and Central Bankers.
Now, the G20 meets once a year. G20 Summits will be held in Mexico on June 18-19, 2012. Subsequently, they will be hosted by Russia (2013), Australia (2014), and Turkey (2015).
II. Structure and Dynamic
A. Who is in and who is not
Members of the G8 include Canada, France, Germany, Italy, Japan, Russia, United Kingdom, and the United States. In addition, the G20 includes:
- Australia and Saudi Arabia
- 9 emerging market countries: Argentina, Brazil, China, India, Indonesia, Mexico, South Africa, South Korea, and Turkey
- the European Union
Among these countries, power continues to shift to “surplus” countries, such as China and Germany, and away from “deficit” countries, such as the U.S.
The G-20, itself, categorizes its member countries as follows:
- advanced surplus countries: Canada, France, Germany, Japan, and South Korea;
- advanced deficit countries: Australia, United Kingdom, and United States, and the euro area minus France, Germany, and the Netherlands;
- emerging surplus countries: Argentina, China, and Indonesia;
- emerging deficit countries: Brazil, India, Mexico, South Africa, Turkey, and other European Union countries; and
- major oil exporters: Russia and Saudi Arabia.
B. “Informal” participants
Countries. At the 2012 Mexican Summit, the five “informal” participants will be: Spain, Benin (for the African Union); Cambodia (for the Association of Southeast Asian Nations (ASEAN); Colombia and Chile. This means that there will be only one “informal” participant from Africa instead of the two places that the G20 agreed to reserve (see para 74). In 2010 and 2011, Ethiopia represented the New Partnership for Africa’s Development (NEPAD) and Singapore represented the Global Governance Group (3G).
International organizations. Representatives of the International Monetary Fund and World Bank have “permanent” seats. In 2012, other participating organizations are: the United Nations, the World Trade Organization, the Financial Stability Board, the Organization for Economic Cooperation and Development (OECD) and the International Labor Organizations.
C. Business and Civil Society
It is customary for G20 Leaders to participate in a Business Summit (B20) during the two days prior to each Summit. In advance of the Summits, the G20 Advisory Group of the International Chamber of Commerce consults with companies around the world in order to consolidate business positions in advance of Summit meetings.
At the Cannes Summit, business leaders issued a call for G20 countries to take actions to support free trade, bolster foreign investment, facilitate green growth, nurture small- and medium-sized enterprises (SMEs), improve energy efficiencies, and increase youth employment. Trade unions hope that the Labor-20 (L20) will increasingly act as a counter-weight to the B20.
Other groups that seek to influence Summit outcomes include:
- The G-20Y of young business leaders
- the Think Tank-20 (TT20)
- Civil Society Organizations
Whereas the G20 has formal relations with businesses, its relations with civil society are informal due to the fact that some autocratic G20 governments do not believe that civil society groups are legitimate participants in their deliberations.
D. Levels of Summitry
The G20 calls itself the “premier forum for international economic cooperation” and works at several levels. The highest level is that of G20 Leaders, who meet for an annual Summit. In addition, throughout each year, there are regular meetings of:
- G20 Finance Ministers and Central Bankers.
- Sherpas. Each Head of State has a representative called a “sherpa” and, for each Summit, these individuals meet regularly do the heavy work of negotiating the agenda, the analyses of issues and the outcome documents.
Ministerial Meetings. In addition to Finance Ministers, the G20 may convene meetings of other Ministers. In 2011, French President Sarkozy convened meetings of G20 Agriculture Ministers in June and G20 Labor/Employment Ministers in September.
Working Group Meetings. Some of the G20 Working Groups include:
- “The Development Working Group” chaired by South Africa, South Korea, and France has three foci in 2012: the Development Action Plan, Infrastructure, and Green Growth. There is a “Green Growth” sub-group that is chaired by Australia.
- “The Working Group on the Growth Framework (“The Framework on Strong, Sustainable and Balanced Growth”) chaired by Canada and India
- “The International Financial Architecture Working Group” chaired by Australia and Turkey
- “The Energy and Commodities Markets Group” chaired by the UK and Indonesia. The two sub-groups are: a) Commodity Markets Subgroup chaired by the UK and Brazil and b) the Energy and Growth Subgroup chaired by the U.S. and South Korea.
Co-chairs have invited experts from relevant international financial institutions, standard setting bodies, non-G20 countries, business, and academia to advise the working groups. Members of parliaments and civil society have largely been excluded from working group processes.
Seminars and Workshops. The G20 holds seminars and workshops on a variety of topics.
Special Assignment on Sources of Innovative Finance. President Sarkozy asked Bill Gates (as an individual, not as co-chair of the Bill and Melinda Gates Foundation) to prepare a report for the Summit on sources of innovative finance, including finance for climate change.
III. Priorities for the Mexican Presidency of the G20
Mexico has established five priorities:
i) Economic stabilization and structural reforms as foundations for growth and employment;
ii) Strengthening the financial system and fostering financial inclusion to promote economic growth;
iii) Improving the international financial architecture in an interconnected world;
iv) Enhancing food security and addressing commodity price volatility, and
v) Promoting sustainable development, green growth and the fight against climate change.
These priorities reflect both the continuation of work streams of previous presidencies of the G-20 and the challenges for policy coordination derived from the economic outlook for 2012.
A. G20 Accountability
The G20 prepares “Progress Grids” that show its progress toward each objective to which it has made a commitment. The G20 has also commissioned the preparation of regular reports on their progress from:
The International Monetary Fund. The IMF’s regular report -- the “Mutual Assessment Process” (MAP) reports on the performance of each G20 member countries in carrying out designated actions for promoting growth and rebalancing the global economy. This involves tracking whether “advanced deficit” countries are cutting their fiscal deficits; “advanced surplus” countries are expanding their domestic demand; and countries are cutting minimum wages and dismantling collective bargaining mechanisms, among other things. Click here for the IMF MAP prepared for the November 2011 French G20 Summit.
Trade bodies. The UN Conference on Trade and Development (UNCTAD) and Organization for Economic Cooperation and Development (OECD) prepare a regular “Report on G20 Trade and Investment Measures” (See October 2011 Report: http://www.unctad.org/templates/Page.asp?intItemID=5518&lang=1). This report notes protectionist actions on the part of G20 countries and identifies new Bilateral Investment Treaties and International Investment Agreements. Protectionist measures have included actions, such as Brazil’s restrictions on rural land-ownership for foreigners; China’s increased threshold for approval of foreign-invested projects; and actions by Brazil, Indonesia and Korea to reduce the volatility of short term capital flows.
B. Controversy over G20 legitimacy.
There are 173 UN member countries which are excluded from the G20, but many people believe that the creation of the G20 improved global economic governance by expanding the G8. In addition, they claim that the G20 has legitimacy because its member countries account for 85% of global output and two-thirds of the global population.
While a G20 may be preferable to a G8, the G20 lacks balanced regional representation. For instance, the continent of Africa is represented only by South Africa. And, for the most part, each G20 country represents its own interests, not those of its neighbors.
The G20 has established itself at the pinnacle of global governance structures and given mandates to dozens of other global institutions which, in turn, become accountable to the G20. For instance, the G20 governments control about 65% of the votes on the Executive Boards of the IMF and World Bank. Therefore, the G20 can effective give a mandate to these organizations, but this practice further marginalizes those countries which hold the other 35% of votes.
The United Nations is designed to make decisions in a democratic way, with each nation holding one vote. Therefore, when the G20 countries assign mandates to UN agencies, it can undermine their democratic nature.
Nancy Alexander is Director of the Economic Governance Program at the Heinrich Boell Foundation
The Global Governance Group (3G): A Call for “Strengthening the Framework for G20 Engagement of Non-Members” (13 pages, pdf, 93KB) - This paper makes the case for greater inclusiveness of the G20 through the 3G proposal initiated by the government of Singapore.
The Progress Grid (57 pages, pdf, 355KB) - This 57-page grid reports on the status of every initiative under the auspices of the G20.