Divided over war in Ukraine, G-20 summit struggles over economic agenda
To say expectations are low for the annual meeting – which will draw President Biden and Chinese President Xi Jinping, as well as European leaders and emerging powers such as India and Brazil – would be an understatement.
A gathering that began at the invitation of President George W. Bush in 2008 and helped coordinate the global response to the worst financial crisis since the 1930s has turned into a rudderless talk shop that may even have some difficult to produce an official press release.
“The main attraction of the G-20 is its ability to force the leaders of countries in one place and at the same time to interact. The actual outcome of the G-20 will likely be very unsatisfactory, if there is a consensus outcome,” said Douglas Rediker, founder of International Capital Strategies, an investment advisory firm in Washington, DC. trajectory for a long time.
The current situation of the G-20 contrasts with its initial strength.
At the second meeting of leaders, in London in April 2009, they agreed to collectively spend $5 trillion to stimulate global demand, provide an additional $1.1 trillion to the International Monetary Fund, and tighten financial regulation.
Five months later, when the leaders met for the third time in less than a year, President Barack Obama and his counterparts declared the G-20 “the premier forum for international economic cooperation.”
Since then, the group has been looking for a second act.
“The G-20 is not what it was in 2008, 2009. We miss that sense of common purpose,” said Matthew Goodman, senior vice president for economics at the Center for Strategic and International Studies at Washington.
In 2009, the United States, China and Russia worked together to prevent the financial crisis from plunging the world into a depression. In his memoir, Obama wrote that “probably the best news” he received at the London summit was China’s commitment to a major economic stimulus package.
This year, any notion of joint effort has become a victim of the growing rift between the United States, on the one hand, and Russia and China, the other. Russian President Vladimir Putin stays at home; his Minister of Foreign Affairs, Sergei Lavrov, will be present in his place.
But there will be a meeting between the US president and Xi, who are due to meet in person on Monday for the first time since Biden’s inauguration. They are expected to tackle disputes over Taiwan and american efforts to prevent China from acquiring advanced semiconductors.
For their part, European Union officials have sought to lower expectations, hinting ahead of the summit that leaders may be unable to muster the bare diplomatic minimum: a joint statement.
That’s what happened last month when G-20 finance ministers and central bank governors met in Washington. Discord over Russia’s invasion of Ukraine has thwarted efforts to produce an official communiqué, the standard diplomatic product that closes such talks. Instead, the Indonesian president released her own “summary,” which noted multiple divisions among members.
Institutions such as the G-20 are in trouble today because the ills of the global economy stem from the war in Ukraine, rather than the kind of financial problems that tipped the world into recession in 2009, according to Kristalina Georgievamanaging director of the International Monetary Fund.
“You cannot solve a geopolitical problem with economic policy measures,” she said. “It will be very difficult to bring the level of economic cooperation to the level it should be. … Ending the war in Ukraine is the single most powerful factor in restoring the global economy.
Yet the White House insisted this week that the G-20, whose members account for more than 80% of global economic output, remains effective.
“The president believes very centrally in the continued importance of the G-20,” said a senior administration official who briefed reporters on the meeting, speaking on condition of anonymity.
The summit is where “the world can come together to discuss the significant challenges we face”, he added.
Even if the whole group fails to agree on bold moves, the president expects productive one-on-one talks with other leaders. In addition to Xi, he is due to meet privately in Bali with the leaders of Indonesia, Italy and the UK. Main topics include plans for a previously announced global infrastructure initiative, soaring food and energy prices and the need to strengthen the IMF and World Bank.
The G-20 should also address its slow progress in tackling growing debt in the developing world.
In November 2020, the group agreed on a “common framework” designed to provide debt relief for some of the world’s poorest countries, which have borrowed heavily to fight the pandemic.
Two years later, only three countries participated. Officials have struggled to win support from China, the world’s largest public lender, and private sector financial institutions.
“The debt crisis is intensifying,” warned the United Nations Development Program last month, identifying 54 countries with serious debt problems, including Somalia, Argentina and Laos.
The main focus of the summit, however, is likely to be the fallout from Russia’s invasion of Ukraine, particularly the commodity price shock it triggered – issues on which agreement between the Russian government and the rest of the group is unlikely.
A key question is whether China will support Russia in the negotiations or seek to rally others to the Kremlin’s cause. Although Xi has yet to condemn Russia’s war in Ukraine, the Chinese leader came out against nuclear war – a remark that some diplomats took as an indirect warning to Putin – during a recent meeting with German Chancellor Olaf Scholz.
European officials say they have seen no evidence that Beijing will drop its support for Moscow. A senior EU official, speaking on condition of anonymity to discuss private conversations, said the Russian and Chinese sides appeared to be aligned at the G-20 preparatory meetings. This coordination brings “additional challenges in finding the capacity to have a joint statement,” the official said.
In turn, the Ukrainian standoff makes joint action on global economic diseases more difficult, even as they grow in number. Growth is slowing or expected to slow in the United States, Europe, the United Kingdom and China, while high food and energy bills resulting from the conflict in Ukraine push poor countries in Africa, the Middle East and Asia to take on more debt.
Inflation nears four-decade highs in most advanced economies, and markets struggle to adjust a new financial climateas the Federal Reserve and other major central banks raise interest rates.
“These challenges make global cooperation on financial stability issues as important today as it was after the global financial crisis,” Dutch central banker Klaas Knot wrote in a letter to leaders this week. Knot chairs the Financial Stability Board, created by the G-20 in 2009 to provide early warning of systemic risks.
The creation of the leaders’ summit was a response to an economic emergency. But he also recognized the economic reality of the 21st century. Where once the United States and a handful of its allies accounted for the bulk of world trade, emerging economies, particularly Brazil, Russia, India, China and South Africa, have become increasingly important in the early 2000s.
These nations – which represent about 40% of the world’s population – had been promised for years a greater voice in the management of international institutions. Amid a global crisis that many attributed to financial excesses on Wall Street, the time seemed right for the global torch to pass to a larger group.
“When the G-20 was elevated to leadership, it was an acknowledgment that you can’t run the economy from a comfortable Western boardroom,” said Stewart Patrick, senior fellow at the Carnegie Endowment. for International Peace.
The irony is that the smaller, wealthier G-7 club was reinvigorated by Russia’s war in Ukraine after foundering during the Trump years. The United States and its European allies led the response to Russia’s invasion, rallying others to isolate Moscow and back Ukraine.
“The Biden administration has done a good job of rallying advanced market democracies,” Patrick said. “The difficulty has been trying to bring together a broader coalition.”
Lynch reported from Bali; Rauhala reported from Brussels. Beatriz Rios in Brussels contributed to this report.