At G-20 in Pittsburgh, expect large agenda, small results

20090923 Trade G20

WASHINGTON -- As the leaders of the Group of 20 nations gather Thursday and Friday for an economic summit in Pittsburgh, they'll be testing two themes:

How much appetite remains for coordinated economic decision-making among the world's leading and developing nations as the global crisis shifts into recovery mode?

Can President Barack Obama, the host of this third meeting of G-20 government heads in a year, persuade his country to help him deliver the financial revisions and climate change initiatives that he's told other nations he wants?

Organizers don't expect to announce major new spending at this G-20; nothing like the summit last April in London, where leaders committed more than $1 trillion to manage the economic crisis and help poor nations. On the contrary, they'll talk about how to dial back spending as they cautiously congratulate one another on using central bank coordination to avert a global depression.

"Pittsburgh is not intended to be a victory lap," said Mike Froman, Obama's deputy national security adviser for international economic affairs. "I think for the average American, the most important thing about this summit is the way it underscores how our economy here at home is integrally linked with the global economy."

To that end, the nations will seek agreements on many fronts, including:

_ Limiting compensation for financial executives. Experts consider this the most likely topic for action, even if it doesn't go as far as Europeans would like, because it's a populist issue. France's President Nicolas Sarkozy is threatening to walk out if nothing concrete happens to contain banker bonuses.

_ Tightening fiscal controls on banks, in order to force higher cash reserves to buffer downturns.

_ Easing out of governments' stimulus spending.

_ Shaping policies to make growth balanced and sustainable globally. This could require China and other large developing nations to boost their domestic markets and depend less on U.S. consumers to fuel global trade.

_ Liberalizing trade and curbing protectionism. This could be inflamed by Obama's recent decision to raise tariffs on Chinese tires.

_ Revamping the International Monetary Fund to give nations with smaller economies a greater say in policy and perhaps leadership positions, to better reflect emerging markets.

_ Moving toward more commitments on clean-energy and climate change policies.

Expectations are limited. Nations have different circumstances and priorities and are likely to grant one another much leeway on how they implement any agreed-on principles.

While Europe wants caps on financial-executive bonuses, Obama doesn't support government setting individual compensation levels.

China, India and the United States aren't prepared to go as far as Europe is on restricting carbon emissions.

Europe wants the United States to spell out more clearly how and when it will end government economic-stimulus policies, concerned that they skew currency values and could trigger global inflation. China sees value in continuing stimulus policies. China and Russia have expressed interest in creating a global reserve currency other than gold or the U.S. dollar, but no credible alternative has been proposed.

Heather Conley, a senior fellow and the director of the Europe Program at the Washington-based Center for Strategic and International Studies, described "a growing disquiet" on the part of Europeans "that the Obama administration is unable to take action on many of these fronts," including climate change, "and really seriously restructuring the global financial regulatory system."

German Chancellor Angela Merkel, who's facing a re-election vote days after the G-20 summit, has been campaigning partly on the notion that Germans should be proud of their economic and social welfare systems compared with U.S. versions. To that end, she's noted the millions of Americans without health insurance, another priority that Obama has pledged to change but hasn't yet been able to deliver.

The G-20 accounts for about 85 percent of the world's economy and two-thirds of the world's population. Members are Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States.

An open question is whether the developed nations will agree this time or soon that the G-20 ultimately should replace the smaller G-8 format, which has been the premier global policy-coordinating group for the past 30 years.

The broader membership beyond the G-8 — the U.S., Russia, Japan, the United Kingdom, France, Germany, Italy and Canada — is becoming increasingly important on trade, labor and environmental progress.

"There is widespread consensus emerging," said Fred Bergsten, the director of the Washington-based Peterson Institute for International Economics, a policy research organization. "I suspect Pittsburgh will begin to move in that direction."

Bringing together the world's largest emitters of pollution and carbon dioxide could help nudge efforts along to fight global warming, experts say. Also, the representation in the G-20 provides a broader format to address issues such as allegations that China manipulates its currency to gain trade advantages.

However, Morris Goldstein, a former IMF official who's affiliated with the Peterson Institute, suggested that a bulked-up G-20 organization could make it even more difficult to impose mandatory requirements that all member nations must follow.

For example, the G-20 members could agree that banks should sock away more reserves in good times to buttress their balance sheets against downturns. Nations vary greatly in terms of the size and wealth of their banking systems, however, and a one-size-fits-all approach would be unpopular.

"I think the big question is on capital requirements and the numbers," Goldstein said. "Are we going to get a small increase (in reserves) or a big increase?"


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