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Monday, April 11, 2011

The G-20 and International Economic Cooperation: Background and Implications for Congress

Rebecca M. Nelson
Analyst in International Trade and Finance

The G-20 is an international forum for discussing and coordinating economic policies. The members of the G-20 include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union. 

In the wake of the Asian financial crisis, the G-20 was created to facilitate coordination among major advanced and emerging-market countries. Until 2008, G-20 meetings were held at the finance minister level, and remained a less prominent forum than the G-7, which held meetings at the leader level (summits). With the onset of the global financial crisis, the G-7 leaders decided to convene the G-20 leaders to discuss and coordinate policy responses to the crisis. The G-20 leaders have held five summits to date. At the third G-20 summit, held in Pittsburgh in September 2009, they agreed that, henceforth, the G-20 would be the premier forum for international economic coordination. Previously, this role had implicitly been held by the G-7. The most recent G-20 summit was held in Seoul, South Korea in November 2010, and the next G-20 summit is to be held in Cannes, France in November 2011. 

Leaders have made commitments on a variety of issues at the G-20 summits. In the United States, implementing some of these commitments would require legislation. Issues that are likely to influence future policy debates and/or the legislative agenda include: a new international framework to monitor and coordinate economic policies, aimed at correcting global imbalances and promoting economic growth; financial regulatory reform and harmonization; commitments for fiscal consolidation; governance reforms at the IMF; increasing funding for the multilateral development banks (MDBs); conclusion of the WTO Doha multilateral trade negotiations; and elimination of fossil fuel subsidies. 

Effectiveness of the G-20:
As the G-20 adapts to its new role as the premier forum for international cooperation, the effectiveness of the G-20 moving forward is being debated. Some anticipate that the G-20 will be an effective steering body in the global economy, pointing to its success in coordinating countries and international organizations at the height of the financial crisis. Others are more pessimistic about the G-20’s effectiveness in future summits, arguing that the G-20 as a group is too heterogeneous to achieve real coordination and its agenda too ambitious. Still others suggest a middle ground, that the G-20 will be effective in some instances but not others. For example, they argue the G-20 could be an effective body in times of economic duress, when countries view cooperation as critical, but less effective when the economic growth is strong and the need for cooperation feels less pressing. Likewise, it has been suggested that the G-20 will be effective at facilitating economic coordination over some issues, such as monetary policy where finance ministers largely exercise autonomous control, and not others, such as fiscal policies, where implementation of commitments depends on a number of actors, including national legislatures in many countries.

Date of Report: March 31, 2011
Number of Pages: 25
Order Number: R40977
Price: $29.95

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