From Seoul to Cannes: What Has the G20 Delivered So Far?
Rhee, Changyong, Harvard International Review
The views expressed are those of the author and do not reflect the views and politics of the Bank.
As the Sherpa of the Republic of Korea, I found one of the most rewarding outcomes of the Seoul Summit was that it delivered on all of the commitments made at previous Summits. For instance, member nations reached an agreement on quota reform of the International Monetary Fund (FVIF); it was a difficult endeavor because reform was long viewed as a "zero sum game." The G20 nations also adopted new international standards for bank capital adequacy, leverage ratios, and liquidity standards. They agreed up(m general principles for regulation of systemicaily important financial institutions (SIFIs). These IMF quota and core financial regulatory reforms were originally scheduled for early 2011, but the Seoul Summit facilitated a November 2010 agreement on these issues. In short, the Seoul Summit adhered to the fine tradition established at the Washington Summit in 2008--the principle that subsequent G20 Summits should deliver on the commitments made at the previous Summits in a timely fashion.
The Seoul Summit also strengthened our ability to ensure macroeconomic policy coordination, thus alleviating the concern and uncertainty related to the implementation of the Framework for Strong, Sustainable, and Balanced Growth and our Mutual Assessment Process (MAP). "Currency wars" became a "hot button" headline issue in October 2010, and many predicted that the success of the Seoul Summit would depend on its ability to achieve policy coordination to address global imbalances. Pessimists said that while it was possible for the G20 to muster policy coordination in the immediate aftermath of the subprime crisis due to looming fears of a global crisis, effective and amicable resolution of the "currency wars" and global imbalance issues would be far more difficult since members' positions and interests were much more divergent with respect to these matters.
However, at the Seoul Summit, the G20 nations agreed to maintain current account imbalances at sustainable levels and to establish indicative guidelines under the French Presidency. To be sure, the media has delivered different assessments of this achievement. However, as someone who was intimately involved with negotiations, I am certain that it would have been impossible to reach this agreement without the strong belief among the leaders that concerted policy action is essential to solving the problems of the world economy.
The Seoul Summit's third main achievement was that it demonstrated the G20 is not just about crisis management, but also about global economic management beyond crisis. For example, for the first time ever, the Republic of Korea placed development at the center of the G20 agenda. Doing so helped to demonstrate that the G20's leadership actively engages with all the stakeholders in the global economy, not just its members. The Republic of Korea took seriously its historic responsibility to demonstrate that emerging economies can successfully lead global discussions.
Global Imbalances and Indicative Guidelines
The sudden media focus on exchange rates and the "currency wars" caused serious concern in the lead-up to the Seoul Summit. Just as the financial crisis in southern Europe loomed large at the Toronto Summit, the centrality of the currency tensions immediately prior to the Seoul Summit demanded the G20 reach a political consensus on how to address such tensions. That is why the Republic of Korea proposed current account targeting at four percent of GDP as a fundamental alternative solution. I have been asked numerous times how we came up with the number four. This figure was based on economic forecasts that member nations themselves submitted as part of the MAP exercise. Most of the non-oil-producing nations estimated that their current account balance for the next several years would be in the range of four percent. …