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Analysis

Prospects for the Brisbane Summit:
Prescriptions for a Strong, Full-Strength Success

John Kirton, Co-director, G20 Research Group
November 13, 2014

Remarks prepared for "Strengthening Global Growth: The G20 Brisbane Summit's Challenges and Contributions," co-hosted by Griffith University and the G20 Research Group, Brisbane City Hall, November 13-14, 2014.

In my remarks I will address three questions.

First, how successful will the Brisbane Summit be? Second, why will it perform this way? And, third, what can the leaders still do to produce a stronger success?

My answers are as follows.

First, Brisbane will be a summit of significant but selective success.

Second, it will be shaped by severe global shocks in security and health, the failure of the United Nations in response, and the unique combination of a newly powerful United States and an irresponsible Russia within the G20 club.

Third, G20 leaders can still do better, by showing bolder, broader leadership on economic growth, on Ukraine and on climate change.

Prospects

First, at present, Brisbane promises to be a summit of significant but selective success. It will be a worthy successor to the eight summits that have gone before. But it will not meet the high standards set by the first four summits and that of the full-strength success at St. Petersburg last year. Brisbane will do well on the ongoing economic agenda that ministers and officials have carefully prepared during the past year. But it will struggle to meet the severe security, health and development challenges that leaders alone can solve.

On the core economic agenda, several important advances have already arrived.

Last week the G20 met, at least on paper, its old target of adding an extra 2% growth by 2018. This goal had been set by the finance ministers back in February, based on the baseline economic forecasts then prevailing. But the G20 and its affiliated international organizations had failed to predict or prevent the substantial slowdown that has since occurred. Australian prime minister Tony Abbott, as summit host, recently said that the G20 now needs "more than" just 2%. But there are still few signs that the leaders themselves will do much more than their ministers have already done.

On financial regulation and supervision, leaders will approve the new agreements produced by the Financial Stability Board (FSB) on resolution regimes for globally significant banks, on insurers and on financial derivatives. They will thus build on the strong success of past summits, to help prevent a new global financial crisis from breaking out to take all economies down.

On taxation, G20 leaders will endorse the work done the Organisation for Economic Co-operation and Development (OECD), since it was launched by leaders at the British-hosted G8 summit in Lough Erne in 2013. G20 leaders will also set a work program and schedule for the difficult tasks that lie ahead, ideally including detailed, public reporting on firms' business activities, and who really owns and controls those firms.

On infrastructure they will build on the work of the St. Petersburg Summit and the BRICS New Development Bank to create a plan and a new bureaucracy in Sydney to serve as the Global Infrastructure Hub. What it actually does to generate private sector–led growth — the overall theme of the Brisbane Summit — will only become clear in the coming years.

On trade they will agree, as they had at St. Petersburg, on an important trade facilitation deal. But this time they will abandon the failed World Trade Organization (WTO) and just do it on a voluntary basis on their own.

More innovation will come on employment, especially if they agree to reduce the gap between men and women in the workforce by 25% by 2025. And on corruption they could well start the process of creating a badly needed international organization to control this important economic and political harm.

Beyond these economic basics, the leaders will struggle or not even try to advance the broader issues where G20 summits have succeeded in the past. They will find it difficult to reach a serious consensus on Russia's increasing invasion of Ukraine, on the Islamic State's genocidal conquests in the Middle East or on the deadly Ebola virus devastating now West Africa. And they will do little to save next year's UN summits on development and climate change from failing yet again.

Propellers of Performance

So why is Brisbane destined to be a summit of such selective success?

This is the first G20 summit hosted by a leader with no previous experience in such global summitry and one who strongly believes that there are limits to the good that governments can do, by acting alone at home alone or together in the world. He also has great faith that the private sector can do the job. He thus started with, and has rigidly stuck to, a central plan that limited the summit agenda to a few economic fundamentals, and shrunk or eliminated several others where the private sector was not able or willing to lead.

But the big shocks on the road to Brisbane have erupted on these other issues — Ukraine, Islamic State and Ebola above all — and the summit plan is poorly designed to deal with them. Moreover, it is here where the UN most needs the G20's help, whereas in the field of economics, the International Monetary Fund, OECD, and the G20's own FSB, if not the WTO, have been performing well. Within the G20, the country most able to lead is a United States with its surging currency and growth. But it is now led by an unpopular, lame-duck president, who has just lost control of both houses of Congress. And the most domestically popular leader at Brisbane, Russia's Vladimir Putin, comes from a country whose economic capability, international connectivity and political openness are shrinking fast. The many inexperienced leaders who will be at Brisbane — from Australia, India, Indonesia and Turkey — will make it more difficult to forge a unifying personal bond.

Prescriptions for Strong Success

Still, when leaders finally are alone together they can do bigger, bolder, broader things than their subordinates have cautiously prepared. So it is still possible that the leaders can make Brisbane Summit a stronger, full-strength success. Here, in the spirit of our conference, are three ways in which they can make that move.

First, set a new goal of raising global growth by 3% above trend over the next five years, with a big down payment during the first year and global growth brought back to the overall 4% annual level that prevailed before the global financial crisis hit. It is time to recognize that 2% plus is no longer enough.

Second, agree that Russia's increasing invasion of Ukraine is not a just a future geopolitical risk but a current reality that is harming global growth, especially in Europe and above all in Russia itself. G20 leaders should have a full, frank discussion with President Putin to help him realize that Russia must reverse course, before Russia shrinks so much that it is no longer a systemically significant state.
 
Third, acknowledge that climate change harms economic growth, that bold action to control climate pollution is needed now, that the UN has failed to do, but that the G20 has helped, above all with its historic 2009 commitment to phase out fossil fuel subsidies in the medium term. Now is the time to implement that promise, and do more before those G20 members with all their major cities on the coast are attacked by oceanic extreme weather events and slowly sink beneath the rising seas.

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