The Hangzhu Summit: Why G20 Needs a Complete Reset

G20 nations represent about 85% of the global GDP and two thirds of the world's population. G20 summits would be more meaningful if the leaders focus on a few issues and make a concerted attempt to solve them. Instead, as it happened this time in Hangzhou also, a large number of issues are discussed and then remain as mere platitudes. Rajat Nag suggests that given the people and the portion of the global GDP they represent, G20 summits are important, But they need an institutional structure of some kind to give the summits continuity and a narrower focus. They should try and focus on what they can effectively achieve: specifically issues of the global economy, growing inequality, etc. 

Rough Transcript:

Prabir Purkayastha (Prabir): Hello and welcome to Newsclick, this program with The Real News. Today we have with us Rajat Nag, former MDG of Asian Development Bank and will discuss the G-20 Summit. Rajat, we have discussed the G-20 Summit earlier. But today, we would really like to focus on what do you think came out of it?

Rajat Nag (Rajat): The communique with Hangzhou was about 7000 words long. Right at the end, there is something very interesting and very honest which says once we agree, we will deliver. Now that I think is the fundamental problem, not once we agree because they agreed on everything which was in the 7000 words communique, but once we agree on the priorities. So exactly the point that you are making Prabir, they did talk about all of these things but it's sort of all over the place.They talked about international financial architecture, they talked about microbial challenges, health issue, food security, climate change. But at the end of it as you said, what will come out it. That is where I have the biggest problem as I was mentioning the other day about the G-20. In one sense, I think it is a very useful forum. 85% of the global GDP, two third of the world population are around that table. So it is a great opportunity and we saw it working very well in the aftermath of the Global Financial Crisis. The London summit of 2009 I think stands out as a very concerted effort by the leadership on an issue which was critical. Now, it has become sort of a bit of everything and therefore, I think the institution really needs to prioritize otherwise, it will become probably has become a bit of a talk shop.

Prabir: Coming to three issues, we have discussed this three issues in the earlier discussions. One is, what are called the tax savings. They have bounced the ball again into the OECD court. Now, the OECD major countries are the ones involved with the tax savings. Now, what is the point of bringing it back to the OECD table who have had the vested interests not solving the problem?.

Rajat: That's exactly is the challenge. I might disagree with some of the characterization that you made. But, that's not the point. The point is the G20 as a group have now set up what they are calling a task force on BESP basic erosion and profit shifting and they all came out when they realized Google was not paying any taxes and as a matter of fact, Star Bucks was not paying etc. So what they are doing really is just shifting the buck, passing the buck. Therefore, in this communique as you would have seen, the G20 leaders note BESP and compliment the first meeting that happened in Kyoto and look forward to the G20/OECD group to think more about it. Nothing is going to happen, all the reasons that you have mentioned. So let's take tax savings for example if the G-20 feels that this is critical for the transparency in the financial architecture and they do agree that then they have to say okay, this is something they will take on for the next three years and will have something happen. Otherwise, it's just sort of repeating. Let me give you another example. Not on the tax saving but one I think which really typifies the problem. In Brisbane in 2014, when the world growth was fragile, it is still is but it was more fragile then. The G-20 leaders said we will grow an additional two percent by 2018. Great! Everybody applauded. 2015 in Turkey, they reiterated that. In 2016, there is no mention of this two percent. There is mention of Brisbane but no mention of 2016 and the reason is they didn't define what was the base. Additional two percent over what? It would have grown at a certain level anyways. So these are the sort of things that I think G-20 is getting itself really caught in the mire, tax saving is one; they talk about coordination of growth.

Prabir: You know Rajat when you talk about the steel I am thinking if it is China then whole bunch of people do say that they are affected. But the whole bunch of other things for instance people are affected which again is to do with global trade, for example the fact that intellectual property is a huge issue. Now obviously, the US will never will let it come either. So the question is you can not bring one issue to the G-20 which affects others and not put it on any other table in which case again, the issue would be then global trade something has to be done, the architecture of WTO has to be examined, then G-20 can take an initiative but it has to be a holistic one. It can not be steel alone.

Rajat: Exactly, but even more importantly was why talk about that global trade issue when you have got an issue called WTO. But what G-20 could do and this is where one has to think of some solutions. Let's take migration which is I think a very major issue, the displacement of people that is happening because of various crises around the world. G-20, what does it do? It recognizes global migration issues particularly from the middle east into Europe as an issue and then says we will look into this we have asked task force again to look into this and tell us the global leaders what to do and will talk about it in 2017. Now that I think is total abdication of responsibility. Either you say migration is a major issue and there is no other institution which looks at it or don't waste time. Just as you were saying for trade. I agree with you. Steel is a major issue over supply in China but so are the others. But why spend time inthe summit in solving it?

Prabir: Now, let's get back to the issue for instance of what you raised earlier in the earlier discussion that we had inequality doesn't figure in anywhere and the global inequality is a consequence of global trade is not mentioned. We have also discussed that while global trade increased benefited a certain section. It also disadvantaged seriously other sections and the growth has not been 'equitable'. Now, this doesn't figure in what says will promote trade, will fight populism, which means BREXIT kind of backlash we are seeing in the different parts of the world. But really again, no attempt to address inequality as a consequence of global trade either.

Rajat: What I think forum like G-20 can do where I think the general consensus of certain basic principles. Global trade is good, you should remove barriers, you should have more sort of economic activities which are cross bordered. Those are sort of motherhood statements. What I think needs to be recognized is that globalization , particularly global trade the benefits are diffused the causes are local. Steel manufacturer or the factory worker who loses his job because of globalization is a loser. The benefits of cheaper steel, cheaper goods, cheaper trade is diffused over a larger period. G-20 should then say now what can we do for those who are affected negatively. Otherwise, the global benefits will always out weigh the costs and we are back to square one. Now, my feeling is that G-20 needs to recognize that BREXIT or the appeal of Mr. Trump strange as it might be but there is a certain appeal of Mr. Trump as the polls continue to show. How is the global community going to counter this feeling either of resentment or disappointment or disillusionment whatever about globalization?

Prabir: A very interesting point that you raised that a lot of the things which seem to be 'more important' are really the Geo-strategic balances that get exhibited in terms of who stares at whom who smiles at whom in fact both these have made headlines recently. Putin and Obama staring at each other it's called the 'death stare' apparently and the fact that Erdogan was talking very nicely with Putin again see there is a Geo-strategic shift. But leaving that out, do you think there is a need for a G-20 secretariat to do this preparation a, and do you think the leadership in that sense of the country each time shifting itself is a problem as there is no permanent leader of G-20?

Rajat: That's a very good point that you have raised Prabir and it's a dilemma. One the one hand, you don't want to create one more international institution and this is why when the G-20 was formed in 2008, it was recognizing on the one hand that G-7, G-8 was totally irrelevant, an anachronism and you needed to expand. But also that group of 77 or the UN was too big. So G-20 seemed to be a reasonable forum 85% as I said of the global GDP, two thirds of the world population. But the downside is, because there is a shifting chair and every chair wants to leave its mark and it is very interesting that you raised that because as I was going through some of the communiques of the past few years nobody talks about saying, okay, look no more new plan of action. Let us review what we said and have we done. So no sort of report card of the past because there is not much glory in that and therefore, Hangzhou consensus, Brisbane summit declaration of this 2 percent additional left etc. My feeling is that time has come for the G-20 leaders to think of it, may be a small secretariat but the trouble with secretariats is that they never remain small but at the moment the chair may rotate because in a global setting but probably a more permanent secretariat would be desirable.

Prabir: Thank you very much Rajat for coming and talking to us on these issues. This is all the time we have.Keep watching Newsclick for further episodes.

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