On April 2, 2009, international leaders, including representatives of regional organizations, will meet in London for the second G-20 Summit. The Summit takes place at a time when the global economy is on a knife edge and disagreement between Europe and the United States on a path forward appears in greater focus than before.

The summit is burdened by a shadow from history. Seventy-six years ago, and in the absence of Franklin Roosevelt—the newly elected U.S. president—the London summit to revive international trade collapsed and set in train the next phase of the Great Depression. Can another newly elected American president, in his first debut on the world stage, help steer this London Summit in a different direction?

The Chicago Council on Global Affairs and the Managing Global Insecurity (MGI) project at Brookings have launched a special online forum, a follow-on to a similar exercise around the G-20 Summit in November, asking experts and policy-makers from the G-20 nations to submit commentary on what their country hopes to see accomplished at the meeting. With over half of the G-20 member states represented, the outcome is an interesting glimpse into the diverse set of responses to the crisis currently being considered by some of the world’s preeminent thought leaders on global politics and financial policy.

ARGENTINA

Silvina Vatnick
President , Center for Financial Stability, Buenos Aires

The upcoming meeting of the Group of 20 (G20) in London is a defining moment. However, it should be interpreted as a significant initial step of a prolonged process towards attaining policy coordination and economic recovery, which includes financial stabilization. The already-accepted notion that there will be a larger number of countries addressing the pressing issues stemming from the global economic crisis is a significant and promising change from the past.

In Argentina, the concept that “global crises need global solutions and coordinated actions” has not yet been widely discussed. As has been indicated, the Summit’s first priority is to commit to a stimulus package large enough to eliminate the risk of a downward spiral in world demand and output. Those commitments should be explicit, transparent, and open to monitoring. The risks of crowding out the private sector are quite high and efforts should be made to minimize this. Emerging markets, with the exception of China, will play a secondary role in contributing to this fiscal stimulus.

The second priority is an increase in resources available to the IMF to respond to the difficulties of developing countries. This is a concept that needs to be defined more precisely and not be overlooked. In some emerging and other developing economies, there has been a perception that a softer IMF lending conditionality could lead to an almost “no questions asked” policy. The need for transparency and consistent policy measures should be clearly spelled out in the new lending schemes.

The third priority for the Summit is agreement on a revised regulatory and supervisory framework, including a strategy to cleanse the balance sheets of financial institutions in a credible and effective way without accelerating the disintegration of formal intermediary channels, which could result in the majority of the productive assets ending up in the hands of the Government. The risk in countries like Argentina is that this might occur. Fiscal stimulus combined with the restructuring of financial institutions should always contain exit clauses for the public sector to remain a shareholder of those entities on a temporary basis. On the trade front, a “standstill” on protectionism, monitored by the World Trade Organization (WTO) would be necessary.

In each of the priority areas, there will be a number of issues that will require both technical and policy-related follow up. It is important that not only the executive branches of the G20 countries, but also the legislative bodies and the private sector, broadly defined, be included in such tasks to ensure transparency, and establish best practices and ownership of the processes.

AUSTRALIA

Andrew Shearer
Director of Studies and Senior Research Fellow, Lowy Institute for International Policy
Mark Thirlwell
Program Director, International Economy, Lowy Institute for International Policy

Australia has significant short and long-term interests bound up in the G-20, reflected in successive Australian governments’ strong commitment to establishing the G-20 as a new peak global forum.

In the short term, Prime Minister Rudd is looking to the G-20 to mount a robust coordinated response to the global economic crisis, in order to minimise the length and severity of the global economic downturn and its impact on Australia’s highly globalised economy.

Top of Rudd’s agenda will be to broaden international support for coordinated fiscal expansion to help cushion the downturn. Australia has expressed concern that some governments are not prepared to do their bit. But this reflects at least in part their weaker fiscal and public debt position, and Australia acknowledges that individual circumstances will need to be taken into account.

Rudd is also emphasising the need to repair national financial systems by dealing with toxic or legacy assets as a priority for G-20 leaders. He urges international coordination and cooperation in order to share technical expertise and avoid a destructive ‘race for capital’, although the reality is that national preferences and circumstances will be the overwhelming drivers of this process.

Other Australian aims for the London meeting include:

• A renewed G-20 commitment to open markets. As a major trading economy Australia worries not only about a resurgence in trade protectionism but also so-called financial protectionism – an important issue for Australia given the significant role of foreign banks in the local economy
• International support for a strengthened global regulatory system along the lines of the Washington Action Plan. Although his purpose may have been more political than economic, Rudd recently wrote a prominent essay proclaiming the end of ‘neo-liberalism’ and calling for a greater government role to rein in ‘out of control’ capitalism
• Buttressing domestic political support for the government’s economic management. Rudd has been reluctant to acknowledge that one of the reasons Australia is in a relatively strong position to weather the global economic crisis is the strong fiscal position and regulatory framework he inherited, but in London he will emphasise that Australia is one of best-performing OECD economies in terms of growth, unemployment, fiscal position, public debt and financial sector health (all of which also bolsters Australia’s claim to a seat at the table).

Over the longer term, Rudd will seek to use the London meeting to advance Australia’s longstanding argument that the G7/8 no longer reflects global power realities and needs to be replaced by a body that reflects the rise of China and India in particular and the shift of global economic power towards Asia in general. As well as promoting the primacy of the G-20 he will want to lock in the G-20’s existing membership – both on grounds of national interest (the G-20 gives Australia a seat at the top table; no government will want to surrender that) but also on substantive grounds: opening up membership discussions would serve only to distract attention from the urgent business at hand.

Like the Howard government, the Rudd government is a strong advocate of IMF and World Bank reform. Australia is co-chair with South Africa of the G-20 working group on Reform of the IMF and would like to see a range of measures, including increased resources, changes to lending processes and instruments, and improved governance (reform of the Executive Board and increased representation of emerging markets/developing countries).

Australia will look to work closely with the other Asia-Pacific members of the G-20, which are its major economic, and in most cases strategic, partners. It will be interesting to observe whether we start to see the emergence of G-20 regional caucuses based on shared regional interests and perspectives.

CANADA

Alan S. Alexandroff
Research Director, Munk Centre for International Studies, University of Toronto;
Senior Fellow, Centre for International Governance Innovation (CIGI)
With assistance from CIGI Distinguished Fellows John M. Curtis and Andrew F. Cooper

Canada remains an active participant of current leader summit activity – whether G20 or G8 – what has come be called the Gx process. An early advocate for the G20 finance ministers, a previous Canadian prime minister even advocated a number of years ago for an L20, which would appear to look a great deal like the current G20 leaders meeting.

Like most leaders, a principal interest for the Canadian PM Stephen Harper at the London Summit is the presence and anticipated performance of President Barack Obama.

The Canadian government will be as supportive as it can be to U.S. administration initiatives. It will support coordinated, stimulative efforts, but Canada will also support stronger bank regulatory efforts, as well as other regulatory efforts to avoid future financial crises.

While Canada will support strengthening global institutions – such as the International Monetary Fund and the Financial Stability Forum – and bringing large emerging governments, e.g. China, more fully into these organizations, it would be unlikely to support Russian and Chinese efforts to promote a new global reserve currency that would displace the U.S. dollar’s global reserve currency role. It will likely support efforts to boost the emergency capacity of the IMF and assist regional development banks in increasing their lending to emerging markets.

Canada will remain a strong advocate for the ‘standstill’ – avoiding the addition of trade barriers to investment or trade measures by countries.

On the question of G20 governance, the ‘jury’ remains out. G20 finance is a well-established organization. It remains too early to tell whether the G20 leadership summit will supplant the G8 or even an expanded G8 plus. One thing is evident: it will be difficult to maintain these numerous leaders meetings beyond this evident crisis period.

CHINA

Wu Jianmin
President, China Foreign Affairs University;
Former Ambassador of China to the United Nations

The London financial summit is a test to the wisdom and courage of G20 leaders. The financial crisis is still unfolding. All countries are suffering from it. They are confronted with mounting difficulties. Naturally, every leader has to defend the national interest of their own country. However, in the globalized world, we are highly interdependent. National interest can be effectively protected only if the global situation improves. The whole world has to join hands to restore confidence, to mitigate the impact of the crisis and to resist any protectionist attempt. An old Chinese saying goes: “History not forgotten is a guide for the future.” During the Great Depression, protectionism led the world to disastrous consequences. We should never forget it.

The crisis facing us is systemic. We should try to find not only short-term but also long-term solutions. The current world financial system needs to be reformed, because it does not reflect the reality today. The reform has to be carried out through consultation and in a gradual and balanced way. Developing countries should have a greater say in the decision-making process.

I hope that G20 will address the concerns of developing countries. They are much more vulnerable in the current crisis. The international community should not let them down.

FRANCE

Justin Vaisse

Senior Fellow, The Brookings Institution;
Former Advisor, Policy Planning Staff, Ministry of Foreign Affairs, France

On the American side of the Atlantic, the most frequently used metaphor for the coming G20 is that of a burning house, to the effect that you need to put off the fire before thinking of redesigning its architecture. On the European side, especially in France and Germany, there is no denying that the house is on fire, but there is greater awareness of two dangers. First, that panicking could result in flooding the house and compromising its long-term viability. And second, that pretending we can’t do reforms at the same time we stimulate the economy would result in a self-fulfilling prophecy. On the contrary, now is the critical time to put the house on a firmer ground and reform the financial system, as there will be much greater reluctance to do so when the economy is recovering. This explains why Europeans have been heartened by the announcement of a new regulatory framework for the U.S. financial system by Secretary Timothy Geithner a week before the summit.

But the appropriate level is the international one, and France supports the agenda for the G20 meeting agreed upon at the European Council of March 19-20. It is in line with Nicolas Sarkozy’s original idea of reforming the financial system when he suggested a meeting of the G8 + 6 countries to tackle the challenge in early Fall 2008 – a proposal George W. Bush took up by convening the G20. More specifically, Paris has indicated that it would see the April 2 summit as a success if decisions were made on the regulation of hedge funds and rating agencies, and if meaningful agreement was reached on accounting norms and non-cooperative offshore centers. Other French objectives, shared with Europeans, include the coordination of stimulus packages and bank rescue, the recapitalization of the IMF, and support for developing economies.

ITALY

Federiga Bindi

Visiting Fellow, The Brookings Institution;
Director, European Office and Jean Monnet Chair, University of Rome Tor Vergata

Italy is an EU member and currently holds the G8 Presidency. Its positions in the forthcoming G20 summit therefore have to be seen in light of these two facts.

On February 22nd, 2009, the leaders of Italy, France, Germany, the United Kingdom, Spain, and the Netherlands met in Berlin with the President of the European Commission, the Governor of European Central Bank, and the President of the Euro Group to define a common position in view of the G20 meeting in London. Agreement was reached on the need to introduce compulsory registration and control for hedge funds; the need for registering and supervising rating agencies; and the need to increase International Monetary Fund resources. Italy will thus support all these issues in London.

Minister Giulio Tremonti, the Italian Minister of Finance, has been a precursor for today’s debate on the need for regulating international economic and financial entities. Therefore, other Italian priorities for the G20 summit include: a redefinition of what is intended by “State aid”; the introduction of new rules in the international financial market, starting with the need for new ethical rules; the need to fight poverty; and the need for full transparency of toxic assets that are owned by banks.

With regards to the relations between G8 and G20, Italy – which has coordinated with the UK in order to ensure that contradictions and redundancies are avoided – generally feels that the G20 should focus on the financial aspects of the crises, while the G8 should deliver of the aspects of “real” economy: macroeconomic policies, energy, climate, trade and investment. This shall be done by involving emerging economies in a more inclusive way than so far done – yet without enlarging the G8 as such, which remains an important forum for coordination.

In Italy’s view, in fact, larger forums, such as the G20, are already showing difficulties in terms of governance. Only four months after the November 15^th G20 meeting – where commitment was reached on the need to not introduce new protectionist measures – some countries are already having difficulties in complying with this commitment.

JAPAN

Shijuro Ogata
Deputy Pacific Asia Chairman, The Trilateral Commission;
Former Deputy Governor for International Relations, Bank of Japan

Despite the apparent divergence in policy priorities among major participants in the forthcoming Summit, it is extremely important for the assembled leaders to re-affirm their common targets and the directions of their policy coordination, in order to strengthen the confidence in the future of the world economy of not only financial market participants but also the general public in the following manner:

1. Leaders should declare their joint determination to:

• take every possible macro economic policy action “within their means” to reverse the continued downturn of the world economy;
• avoid any further protectionist action against international trade and investment, and to strengthen their efforts to conclude successfully the Doha Round as soon as possible; and
• reinforce development assistance to the poorest countries which suffer most severely from the negative impact of the current crisis.

Leaders should pledge to give further support to the on-going discussion of regulatory reform through the Basel Committee and the Financial Stability Forum, taking into account the recommendations from the group of 30, the de Larosiere Committee and the Turner Review, among others.

A special committee of experts and government representatives should be created to produce a comprehensive plan by a certain specific date on the replenishment of financial resources of the IMF, the World Bank, and regional development banks, and on the improvement of their governance, including the revision of their members’ quotas and voting rights, taking into account the recommendations from the Bretton Woods Committee and some others.

Leaders should agree to assemble again on some date in the near future to review the implementation of their above agreements and to indicate the directions of their further cooperation.

TURKEY

Hakan Altinay
Executive Director, Open Society Institute Assistance Foundation-Turkey

In the weeks leading up to the London Summit, Turkey was immersed in a highly competitive general election which was held on March 29. The election consumed all, and the public attention and debate about the London Summit were scant.

Having suffered from speculative attacks on its currency in the past, Turkey is likely to support enhanced international regulation against highly leveraged financial transactions. Having benefitted enormously from a tightly regulated banking system, Turks will be in favor of increased and coordinated oversight of the international financial sector. Turkey is unlikely to be able to commit to an overly generous fiscal stimulus of its own, as this is likely to erode hard-fought fiscal stability of the recent years, and might trigger the reversal of recent de-dollarization of the Turkish economy. On these two issues, Turkey is likely to be closer to the European position than that of the U.S.

President Gul has expressed support for the reform of voting rights at the International Monetary Fund (IMF) and the World Bank. Turkey expects long-term sustained growth, and hopes to gain from dynamic formulas of weighted voting at international finance institutions. As a possible recourse for its own external financing challenges in 2009, Turkey is likely to benefit for the expansion of IMF’s new low-conditionality lending facility.

Being iself a member and anticipating a more leveled global playing field in the medium-term, Turkey favors G20 over G8 as the main forum to coordinate responses to future global challenges. Turks would welcome incremental expansion of G20’s mandate to include other issues of global cooperation besides the global economic crisis.

UNITED KINGDOM

Will Straw
Associate Director for Economic Growth, Center for American Progress

The focus of this week’s G20 London Summit will be on measures to address the stasis in financial markets, the causes of the current crisis, and avoid a slide into protectionism. But the second gathering of G20 leaders needs a bigger outcome if it is to be worthy of its billing. Measures to tackle climate change and prevent a global poverty crisis must be on the table.

The size of economic stimulus plans has been a hot talking point, but these discussions miss the more important question about a package’s composition. In short, a green recovery is the only real kind of recovery. Ensuring that stimulus funds invest in a clean-energy future will offer opportunities for innovation, economic growth, and job creation. The G20 is also the right place to design and resource a global fund for the transfer of technology related to combating global warming, which has become a huge hurdle to a post-Kyoto agreement.

Additionally, up to 200 million people may be pushed into poverty by the downturn, and this should be a major concern at the summit. The World Bank has issued a call for developed countries to pledge 0.7 percent of their stimulus packages to a fund to help the most vulnerable countries. The IMF also needs its reserves bolstered so that it can assist countries that default on their external debt. Rich world countries with fiscal room for maneuver must meet these important goals.

Finally, to ensure that promises are kept, the G20 leaders meetings should be properly constituted with a formal mission and a clear membership. This body has much greater legitimacy than the G8 and can become the principal body for global economic governance if leaders are willing to entrench its current status.

UNITED STATES

Harold James
Professor, History and International Affairs, Princeton University;
Director, Program in Contemporary European Politics and Society, Princeton University

There are a great many tasks that look important in responding to the financial crisis and in preventing further damage to the world economy. Because disagreements about a range of different issues can create stalemate, it is important to have a sense of the priorities that should be set.

1. It is most urgent to have a mechanism to respond to emerging market crises adequately. Many vulnerable emerging markets are in politically sensitive areas and economic collapse risks creating major geo-political upheavals. The most obvious solution is to expand the resources of the IMF so that it is capable of implementing stabilization and reform packages. Since this is a measure that is needed quickly, it would be too complex and cumbersome to embark on a quota increase. Instead, the resources should be obtained by borrowing from major economies, including some of the emerging market economies. In the end, those countries that contribute large-scale resources will need to be compensated through increased influence, in the form of larger voting shares.

2. Those economies that are in a position to engage in fiscal stimulus measures should be encouraged to implement spending proposals, and also to embark on tax reductions. It should be recognized that some countries with very high debt and deficit levels may not be in a position to increase their spending; if possible, in these cases, alternative stimulus measures should be sought from regional institutions (notably from the European Union).

3. In the longer run, enhanced and internationally-coordinated banking supervision and regulation will be needed. But this may be harder to negotiate, and is less urgent as a counter-cyclical crisis measure, but is more needed as a way of preventing future crises. It is important to postpone desirable longer term measures (such as increases in bank capital ratios) if they are achieved at the cost of immediate cuts in bank lending.