It’s time to make the G20 work for the Rest

It’s time to make the G20 work for the Rest

The G20 Summit started in Buenos Aires, Argentina this week. The G7 represents the West (plus Japan), while the G20 could be thought of as G7 + 13, with the 13 being the representatives of “the Rest.” I remember the Turkish and Chinese Presidencies of the G20 in 2015 and 2016 very vividly. How hopeful we all were to make the G20 more inclusive! To turn it into a mechanism that would bring “the Rest” into the fold! Yet the only news item coming out of the G20 this year appears to be bilaterals, or the occasional drama, like who dares to have their picture taken with the radioactive Saudi crown prince. It is a pity, if you ask me.

Now the world has moved from multilateralism to bilateralism and the G20 has become less significant. This is exactly the opposite of what we need. The G20 is not an institution; it is a meeting of leaders once a year with a carefully refined agenda. This refinement is the product of more than a hundred contacts at different levels among the G20 countries and multilateral institutions, such as the World Bank, the International Labor Organization (ILO) or the International Energy Agency (IEA). In a turbulent era of transformation, the more we cooperate and sharpen our common goals, the better. It is also good for the leaders of major economies shake hands at least once a year, and maybe overcome some of their deeper differences.

Let me tell you why I think that the G20 is still important. First, the G20 is the only global forum to focus on the question of how to operationalize the now defunct international organizations of the mid-20th century. It is obvious that they no longer reflect the reality on the ground. That is what President Erdoğan wisely summed up as “the world is bigger than 5,” referring to the Security Council of the United Nations (UN). The UN and its sisters need to be more inclusive and vocal.

Second, the G20 also appears to be the only venue to discuss how new technologies are allowed to diffuse among countries and the accumulated knowledge of humankind is to be shared equitably. This requires an extensive discussion of intellectual property rights (IPR) and forced localization strategies. The new industrial revolution (NIR) is important for the Rest in terms of catching up, yet IPR protection is also an issue. It is all about how foreign direct investments are to be treated globally.

Third, the G20 has to work for the Rest this time. In 2008, the G20 saved the world by keeping markets open and reigning in protectionist rhetoric. The Rest helped the West, if you ask me. Bankers in New York and London had been too greedy for everyone’s good, and leaders in Beijing and New Delhi and Moscow were willing to help clean up the mess. Now that western countries are coming out of the crisis, the taper tantrum is affecting the Rest, from Argentina to Turkey. Now it is the turn of the West to help the Rest.

The G20 had its first meeting in 1999, right after the 1997 South East Asian financial crisis. Its inception was actually at the G7 Cologne Summit. The G7 decided to bring together “systemically important” economies to help steer the new world order where global value chains (GVCs) established by large western corporations spanned countries like Brazil, China, South Africa, Argentina and Turkey. With the global financial crisis of 2008, the G20 turned into a summit of the G7 format, where leaders gathered to discuss the world’s big problems.

Note that the key even here is the change in the global manufacturing scene through GVCs. Take the long-term perspective. Have a look how global manufacturing shares evolved between 1970 to 2016. The G7’s share spread out to the G20. The West has lost, while the Rest has gained, thanks to western companies and the GVCs they built.

In this new world, the Rest still needs a functioning G20. Sadly we have lost the allure of the Turkish and Chinese G20 presidencies, with things turning sour in the German presidency, and now worse still in Argentina. Why? According to Steve Bannon, Trump’s former chief strategist, the problem with the old system was that American elites – the people who built the GVCs – were “comfortable with decline.” They were invested in China and the Rest, and as their bottom lines improved, they began to accept the idea that their country would in future no longer be “number one.” His president, and all those who think of the world in these terms, will no longer tolerate poor countries catching up. Hence, structures like the G20 must never again be made useful.

What’s our silver lining? With American unilateralism on the rise, the rest of the West has also become part of the Rest. It must be lonelier than ever to be at the top.

G-20 summit, Economy,