The G-20 and International Economic
Cooperation: Background and Implications
for Congress
Rebecca M. Nelson
Analyst in International Trade and Finance
August 10, 2010
Congressional Research Service
7-5700
www.crs.gov
R40977
CRS Report for Congress
P
repared for Members and Committees of Congress
The G-20 and International Economic Cooperation
Summary
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.
Background: The G-20 was established in the wake of the Asian financial crisis in the late 1990s
to allow major advanced and emerging-market countries to coordinate economic policies. 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.
To date, the G-20 leaders have held four summits: November 2008 in Washington, DC; April
2009 in London; September 2009 in Pittsburgh; and June 2010 in Toronto. The G-20 leaders have
agreed that the G-20 is now the premier forum for international economic coordination,
effectively supplanting the G-7’s role as such.
Commitments: Over the course of the four G-20 summits held to date, the G-20 leaders have
made commitments on a variety of issue areas. 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; voting reform at the IMF; increased funding of
multilateral development banks (MDBs); concluding the WTO Doha multilateral trade
negotiations; and elimination of fossil fuel subsidies.
Discussions at the Toronto summit in June 2010 were largely a continuation of previous summits,
There is some anticipation for more ambitious discussions at the next G-20 summit, scheduled for
Seoul, South Korea in November 2010.
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, suggesting
that the G-20 as a group is too heterogeneous to achieve real coordination. 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 economy is strong and the need for cooperation
feels less pressing. Likewise, it is 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. At the same time, the G-20 could find it more difficult to coordinate
in other areas, such as fiscal policies, where implementation of commitments depends on a
number of actors, including national legislatures in many countries.
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Contents
Introduction ................................................................................................................................ 1
The Rise of the G-20 as the Premier Forum for International Economic Cooperation................... 2
Economic Coordination in Formal Institutions and Informal Forums ..................................... 2
1970s – 1990s: Developed Countries Dominate Financial Discussions .................................. 2
1990s – 2008: Emerging Markets Gain Greater Influence...................................................... 3
2008 – Present: Emerging Markets Get a Seat at the Table..................................................... 4
How the G-20 Operates............................................................................................................... 6
Frequency of Meetings.......................................................................................................... 6
U.S. Representation .............................................................................................................. 7
Location of Meetings and Attendees...................................................................................... 7
Agreements........................................................................................................................... 8
Overview of the G-20 Summits ................................................................................................... 9
Washington, DC, November 2008 ......................................................................................... 9
London, April 2009............................................................................................................... 9
Pittsburgh, September 2009................................................................................................. 10
Toronto, June 2010.............................................................................................................. 10
Seoul, November 2010........................................................................................................ 10
Protests at G-20 Summits .................................................................................................... 11
Major Issues on the Horizon...................................................................................................... 11
A New Framework to Coordinate and Monitor Economic Policies....................................... 11
Fiscal Austerity vs. Fiscal Stimulus ..................................................................................... 12
Regulatory Reform.............................................................................................................. 13
Increasing the Representation of Emerging Markets in International Financial
Institutions (IFIs) ............................................................................................................. 14
Increasing Funding of the Multilateral Development Banks (MDBs) ................................... 16
Concluding the WTO Doha Round of Multilateral Trade Negotiations................................. 17
Eliminating Fossil Fuel Subsidies........................................................................................ 18
Looking Ahead: Effectiveness of the G-20 Moving Forward ..................................................... 19
Scenario 1: Effective ........................................................................................................... 19
Scenario 2: Ineffective ........................................................................................................ 19
Scenario 3: Effective in Some Instances, but Not Others...................................................... 20
Figures
Figure 1. Expansion of the G-7 to the G-20 ................................................................................. 5
Figure 2. Comparison of Relative Size in the World Economy with IMF Quota Share................ 15
Figure 3. Net Private Capital Inflows to Emerging Market Economies, by Region ..................... 17
Tables
Table 1. Chairs of the G-20, 1999-2012....................................................................................... 7
Table A-1. World’s Largest Countries and Entities ..................................................................... 21
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Appendixes
Appendix A. World’s Largest Countries and Entities ................................................................. 21
Appendix B. CRS Reports on Related Issues ............................................................................. 23
Contacts
Author Contact Information ...................................................................................................... 24
Acknowledgments .................................................................................................................... 24
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The G-20 and International Economic Cooperation
Introduction
The Group of Twenty, or G-20 is a forum for advancing international economic cooperation
among 20 major advanced and emerging-market countries.1 The G-20 was originally established
in 1999 to facilitate discussions among the G-20 finance ministers. The prominence of the G-20
has increased since the global financial crisis hit in the fall of 2008,2 and the G-20 started meeting
at the leader level. In September 2009, the G-20 leaders announced that, henceforth, the G-20
would be the “premier” forum for international economic cooperation. Before this announcement,
it was widely accepted that the G-7, a small group of advanced countries, held this position.3
Congressional interest in the G-20 is, at the least, two-fold. First, implementing many of the
commitments made by the Administration at the G-20 summits to date would require reform of
U.S. laws and regulations. As a consequence, the agreements reached by the G-20 leaders may
influence policy debates and the legislative agenda. Second, the transition from the G-7 to the
G-20 represents a major shift in international economic coordination, and understanding the
implications of this shift may prove fruitful as Congress provides oversight of U.S. participation
in the G-20.
This report addresses the following key issues:
• Context on the emergence of the G-20 as the premier forum for international
economic coordination;
• Background on how the G-20 operates, including where and when the G-20
meets and how the G-20 reaches decisions;
• Analysis of previous G-20 summits held to date, plus an overview of the agenda
for the Seoul Summit to be held in November 2010;
• Analysis of major G-20 commitments that are likely to shape the policy agenda
moving forward; and
• Broader debates about the effectiveness of the G-20 moving forward.
1 The G-20 includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan,
Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, and the United States, as well as
the European Union (EU). Spain and the Netherlands have also been invited to participate as observers. The G-20’s
website is http://www.g20.org. The University of Toronto G-20 Research Group is also a good source of information;
their website is http://www.g20.utoronto.ca/. The G-20 discussed in this report should not be confused with the
coalition of developing countries in the World Trade Organization (WTO) formed in 2003, also referred to as the G-20.
2 For more on the global financial crisis, see CRS Report RL34742, The Global Financial Crisis: Analysis and Policy
Implications, coordinated by Dick K. Nanto.
3 The G-7 includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. Russia has
joined the G-7 meetings at the leader level (summits) as a full participant since 1998, forming the Group of Eight (G-8).
With a smaller economy than the G-7 members, Russia does not usually participate in international economic
discussions, however, which continued primarily at the G-7 level. For example, Russia is not included in the G-7
meetings at the finance minister level.
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The Rise of the G-20 as the Premier Forum for
International Economic Cooperation
Economic Coordination in Formal Institutions and Informal
Forums
Since World War II, governments have created and used formal international institutions and
more informal forums to discuss and coordinate economic policies. As economic integration has
increased over the past 30 years, however, international economic policy coordination has
become even more active and significant. Globalization may bring economic benefits, but it also
means that a country’s economy is increasingly affected by the economic policy decisions of
other governments. These effects are not always positive. For example, a country’s exports may
decline should another country devalue its currency or restrict imports to attempt to reverse a
trade deficit or protect domestic industries. Instead of countries unilaterally implementing these
“beggar-thy-neighbor” policies, some say they may be better off coordinating to refrain from such
negative outcomes. Another reason countries may want to coordinate policies is that some
economic policies, like fiscal stimulus, are more effective in open economies when countries
implement them together.
Governments use a mix of formal international institutions and international economic forums to
coordinate economic policies. Formal institutions, such as the International Monetary Fund
(IMF), the Organization for Economic Co-operation and Development (OECD), the World Bank,
and the World Trade Organization (WTO), are typically formed by an official international
agreement and have a permanent office with staff performing ongoing tasks.4 Governments have
also relied on more informal forums for economic discussions, such as the G-7, the G-20, and the
Paris Club.5 These economic forums do not have formal rules or a permanent staff.
1970s – 1990s: Developed Countries Dominate Financial
Discussions
Prior to the current global financial crisis, international economic discussions at the top leadership
level primarily took place among a small group of developed industrialized countries. Beginning
in the mid-1970s, leaders from a group of five developed countries—France, Germany, Japan, the
United Kingdom, and the United States—began to meet annually to discuss international
economic challenges, including the oil shocks and the collapse of the Bretton Woods system of
fixed exchange rates. This group, called the Group of Five, or G-5, was broadened to include
Canada and Italy, and the Group of Seven, or G-7, formally superseded the G-5 in the mid-1980s.
In 1998, Russia also joined, creating the G-8.6 Russia does not usually participate in discussions
4 For more information about formal international institutions, see, for example: CRS Report R40578, The Global
Financial Crisis: Increasing IMF Resources and the Role of Congress, by Jonathan E. Sanford and Martin A. Weiss
and CRS Report RL32060, World Trade Organization Negotiations: The Doha Development Agenda, by Ian F.
Fergusson.
5 The Paris Club is an informal group of developed countries. It negotiates financial services such as debt restructuring
and debt relief to indebted developing countries.
6 While the EU is not an official member of the G-7 or G-8, the EU has participated in meetings since 1977. The EU is
(continued...)
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on international economic policy, which continued to occur mainly at the G-7 level. Meetings
among finance ministers and central bank governors typically precede the summit meetings.
Macroeconomic policies discussed in the G-7 context include exchange rates, balance of
payments, globalization, trade, and economic relations with developing countries. One of the
most significant agreements reached by the G-7 was at the first summit in Rambouillet, France, in
1975. The G-7 leaders agreed to a new monetary system to replace the system of fixed exchange
rates that unraveled in the early 1970s and set the stage for amending the IMF Articles of
Agreement to allow floating exchange rates.7 Examples of other significant agreements reached
by the G-7 are the Plaza Agreement in 1985 and the Louvre Accord in 1987. The Plaza
Agreement aimed to depreciate the U.S. dollar in relation to German Deutsche mark and the
Japanese yen, and the Louvre Accord aimed to halt the continued decline of the U.S. dollar. Over
time, the G-7’s and, subsequently the G-8’s, focus on macroeconomic policy coordination
expanded to include a variety of other global and transnational issues, such as the environment,
crime, drugs, AIDS, and terrorism.
1990s – 2008: Emerging Markets Gain Greater Influence
Although middle-income countries, or emerging-market countries, became more active in the
international economy, particularly in financial markets starting in the early 1990s, this was not
reflected in the international financial architecture until the Asian financial crisis in 1997-1998.
The Asian financial crisis demonstrated that problems in the financial markets of emerging-
market countries can have serious spillover effects on financial markets in developed countries,
making emerging markets too important to exclude from discussions on economic and financial
issues. The Group of 22, or G-22, was established as a temporary forum for finance ministers and
central bank governors from both advanced industrialized and emerging-market countries to
discuss the Asian Financial Crisis.8 The G-22 met twice in 1998, and was superseded by the
Group of 33, or G-33, to discuss international financial stability and the international financial
stability forum.9 The G-33 was also a temporary forum that met twice in 1999.
Including emerging-market countries in economic discussions proved to be fruitful, and the G-20
was established in late 1999 as a permanent international economic forum for developed and
emerging-market countries. However, the G-20 was a secondary forum to the G-7 and G-8; the
G-20 convened finance ministers and central bank governors, while the G-8 also convened
leaders in addition to finance ministers.
(...continued)
represented by the president of the European Commission and the president of the European Council. The EU does not
hold leadership positions within the G-8 or host summits.
7 Nicholas Bayne, “Reforming the International Financial Architecture: The G7 Summit’s Successes and
Shortcomings,” July 2001, http://www.g8.utoronto.ca/conferences/2001/rome/bayneRev.pdf.
8 The members of the G-22 are the G-8 members plus Argentina, Australia, Brazil, China, Hong Kong, India,
Indonesia, Malaysia, Mexico, Poland, Singapore, South Africa, South Korea, and Thailand.
9 The members of the G-33 are the G-8 members plus Argentina, Australia, Belgium, Brazil, Chile, China, Côte
d'Ivoire, Egypt, Hong Kong, India, Indonesia, South Korea, Malaysia, Mexico, Morocco, the Netherlands, Poland,
Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Thailand, and Turkey.
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Emerging markets were also granted more sway in international economic discussions when the
G-8 partly opened its door to them in 2005.10 The United Kingdom’s Prime Minister Tony Blair
invited five emerging economies–China, Brazil, India, Mexico, and South Africa–to participate in
its discussions but not as full participants (the “G-8 +5”). The presence of emerging-market
countries gave them some input in the meetings but they were clearly not treated as full G-8
members. Brazil’s finance minister is reported to have complained that developing nations were
invited to G-8 meetings “only to take part in the coffee breaks.”11
2008 – Present: Emerging Markets Get a Seat at the Table
It is only with the outbreak of the current financial crisis in fall 2008 that emerging markets have
been invited as full participants to international economic discussions at the highest (leader) level.
There are different explanations for why the shift from the G-7 to the G-20 occurred. Some
emphasize a recognition by the leaders of developed countries that emerging markets have
become sizable players in the international economy and are simply “too important to bar from
the room.”12
Others suggest that the transition from the G-7 to the G-20 was driven by the negotiating
strategies of European and U.S. leaders. It is reported that that France’s president, Nicolas
Sarkozy, and Britain’s prime minister, Gordon Brown, pushed for a G-20 summit, rather than a G-
8 summit, to discuss the economic crisis in order to dilute perceived U.S. dominance over the
forum, as well as to “show up America and strut their stuff on the international stage.” 13
Likewise, it is reported that President George W. Bush also preferred a G-20 summit in order to
balance the strong European presence in the G-8 meetings.14 Some attribute the G-20’s staying
power to the political difficulties of reverting back to the G-7 after having convened the G-20
leaders.
10 Emerging markets had been sporadically invited to a few G-8 summit dinners and events as early as 1989, but their
participation was very minor compared to 2005 onwards. See Peter I. Hajnal, The G8 System and the G20 (Ashgate,
2007), pp. 47-49.
11 Jonathan Wheatley, “G20 Calls for Expanded Role to Combat Economic Turmoil,” Financial Times, November 10,
2009.
12 “After the Fall,” The Economist, November 15, 2009.
13 “Not a Bad Weekend’s Work,” The Economist, November 16, 2008.
14 Ibid.
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Figure 1. Expansion of the G-7 to the G-20
Source: G-20 website, http://www.g20.org
Notes: The European Union (EU) is a member of the G-20. Pink (for color copies) or medium gray (for black-
and-white copies) indicate members of the European Union (EU) that are not individually represented in the G-
20.
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How the G-20 Operates
Frequency of Meetings
The G-8 and G-20 heads-of-state meetings, or summits, are the focal points of the G-8 and G-20
discussions and where the forums’ key decisions are announced. However, various lower-level
officials meet frequently before the summits to begin negotiations and after the summits to
discuss the logistical and technical details of implementing the agreements announced at the
summits.
Prior to the current global financial crisis, the G-20 finance ministers and central bank governors
have met once a year since the G-20 was established in 1999. The annual meeting of G-20
finance ministers and central bank governors has been preceded by extensive preparation to
provide them with up-to-date analysis and insights and to better inform their consideration of
policy challenges and options. This includes two deputies meetings each year as well as extensive
technical work, including an array of workshops, reports, and case studies on specific subjects.
It is expected that the G-20 schedule will mimic the G-7’s schedule in the past. The G-7 leaders,
plus Russia (the G-8), have met annually, and the G-7 finance ministers and central bank
governors have met at least semi-annually, and as frequently as four times a year, to monitor
developments in the world economy and assess economic policies. The G-20 leaders are
scheduled to meet twice in 2010, June 2010 in Canada and November 2010 in South Korea.
Starting in 2011, the G-20 is expected to hold summits on an annual basis.
At various points in time, usually at the request of the G-8 leaders, the G-7 or G-8 ministers of
development, education, employment and labor, energy, ministers, global information and society,
health, justice, science, and trade have also occasionally convened to discuss pertinent issues. The
G-20 has already, for example, called on the G-20 employment and labor ministers to meet in
2010 to discuss the problem of unemployment.
In addition to the summits and various ministerial meetings, there are also meetings among the
leaders’ personal representatives, known as “sherpas.”15 Sherpas meet several times a year to
prepare for the forthcoming summit, attend the formal summit meetings with the leaders, and
hold several follow-up meetings. The sherpa team for each country typically includes a lead
sherpa and two “sous-sherpas”: a finance sous-sherpa and a foreign affairs sous-sherpa.16 The
foreign affairs sous-sherpa covers issues outside the purview of finance, such as trade and the
environment.
Finally, a variety of task forces, working groups, and expert groups have been established by the
G-8 leaders or G-7 finance ministers over the years as well to support the work of the G-8 and the
G-7. Examples include the Financial Action Task Force (FATF), the Financial Stability Forum
15 The term “sherpa” is a play on words. Typically, sherpas refer to local people, typically men, in Nepal who are
employed as guides for mountaineering expeditions in the Himalayas. Recall that meetings held among leaders are
called “summits,” which also refers to the highest point of a mountain.
16 The term “sous-sherpa” is also a play on words, referencing the French term “sous-chef” for under-chef or an
assistant to a master chef.
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(FSF), the Counter-Terrorism Action Group, and the Global Fund to Fight AIDS, Tuberculosis,
and Malaria, and the G-8 Renewable Energy Task Force.
U.S. Representation
Because the G-20 began as a forum for finance ministers and central bank governors, the
Treasury Department and the Federal Reserve have traditionally been the primary U.S. agencies
involved in the G-20 meetings. As the G-20 has replaced the G-7 on finance issues, the Treasury
Department has taken the lead on the G-20 meetings. However, the Treasury Department works
closely with other agencies throughout the G-20 process. In addition to the Federal Reserve, the
Treasury Department also coordinates with the State Department, the U.S. Agency for
International Development, and, increasingly, the Department of Energy to coordinate G-20
issues. The White House, particularly through the National Security Council and the U.S. Trade
Representative, is also heavily involved in the G-20 planning process.
The U.S. sherpa for the G-20 is the Deputy National Security Advisor for International Economic
Affairs, a position currently held by Mike Froman. The U.S. sous-sherpa for finance issues is the
Under Secretary of International Affairs at the Treasury Department, who also represents the U.S.
at G-20 meetings at the level of deputy finance minister. The Under Secretary of International
Affairs at the Treasury Department is currently Lael Brainard. Finally, the U.S. sous-sherpa for
foreign affairs issues is the Under Secretary for Economic, Energy, and Agricultural Affairs at the
State Department, a position currently held by Robert D. Hormats.
Location of Meetings and Attendees
Unlike formal international institutions, such as the United Nations and the World Bank, the G-20
does not have a permanent headquarters or staff. Instead, each year, a G-20 member country
serves as the chair of the G-20. The chair hosts the highest level meetings, which before the crisis
was among finance ministers but moving forward will be the leaders’ summit meetings. The chair
also establishes a temporary office that is responsible for the group’s secretarial, clerical, and
administrative affairs, known as the temporary “secretariat.” The secretariat also coordinates the
G-20’s various meetings for the duration of its term as chair and typically posts details of the G-
20's meetings and work program on the G-20’s website.17
The chair rotates among members and is selected from a different region each year. Table 1 lists
the previous and current chairs of the G-20, as well as the member country slotted to chair in
2010 (South Korea) and 2011 (France). The United States has never officially chaired the G-20,
although the United States has hosted two of the three G-20 summits held to date.
Table 1. Chairs of the G-20, 1999-2012
Year
Country
1999-2001 Canada
2002 India
17 http://www.g20.org
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Year
Country
2003 Mexico
2004 Germany
2005 China
2006 Australia
2007 South
Africa
2008 Brazil
2009 United
Kingdom
2010 South
Korea
2011 France
2012 Mexico
Source: G-20 website (http://www.g20.org); G-20, The G-20 Toronto Summit Declaration, June 26-27, 2010,
http://www.g20.org/Documents/g20_declaration_en.pdf.
In addition to the G-20 members, Spain and the Netherlands have also attended, as observers, the
G-20 summits. In the Toronto summit in June 2010, Ethiopia, Malawi, and Vietnam also
participated as “outreach participants.”18 Several regional organizations and international
organizations also attend G-20 summits. For example, official participants at the Toronto summit
included representatives from the following organizations:
• the European Commission
• the European Council
• the International Labour Organization (ILO)
• the International Monetary Fund (IMF)
• the Organization for Economic Co-operation and Development (OECD)
• the United Nations (UN)
• the World Bank
• the World Trade Organization (WTO)19
Agreements
All agreements, comments, recommendations, and policy reforms reached by the G-20 finance
ministers and central bankers, as well as by G-20 leaders, are done so by consensus. There is no
formal voting system as in some formal international economic institutions, like the IMF.
Participation in the G-20 meetings is restricted to members and invited participants and is not
open to the public. After each meeting, however, the G-20 publishes online the agreements
reached among members, typically as communiqués or declarations. 20 The G-20 does not have a
18 University of Toronto, G20 Research Group, G20 Toronto Summit Participants, June 24, 2010,
http://www.g20.utoronto.ca/2010/to-participants.html.
19 Ibid.
20 The G-20 communiqués are posted online at http://www.g20.org/pub_communiques.aspx.
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way to enforce implementation of the agreements reached by the G-20 at the national level; the
G-20 has no formal enforcement mechanism and the commitments are non-binding. This
contrasts with, for example, the World Trade Organization (WTO), which does have formal
enforcement mechanisms in place.21
Overview of the G-20 Summits
The G-20 has held four summits to date: Washington, DC, in November 2008; London in April
2009; Pittsburgh in September 2009; and Toronto in June 2010. The types of agreements reached
at the G-20 summits have evolved as global economic conditions have changed from fear of
economic free-fall to signs of economic recovery (with high levels of unemployment in some
advanced economies). The next G-20 summit is scheduled for November 2010 and is to be hosted
by South Korea.
Washington, DC, November 200822
The Washington, DC, summit focused on immediate crisis management. The G-20 pledged to
pursue extensive regulatory reforms, including the creation of new international regulatory
standards and national level reforms. The G-20 also pledged to use expansionary macroeconomic
policies, both fiscal and monetary, to stimulate aggregate demand and encourage economic
growth, or at least keep things from getting worse. Finally, the G-20 committed to refrain from
protectionist trade policies.
London, April 200923
The London summit occurred several months after the Washington, DC, summit, but the G-20
leaders were still in crisis management mode. The G-20 leaders reiterated many of the
commitments from the Washington, DC, summit and also reached agreement on more specific
and far-reaching policy responses to the crisis. One of the biggest commitments from the London
summit was the pledge to increase funding for the IMF and the MDBs by $1.1 trillion, including
a tripling of the IMF’s lending capacity.24 The G-20 leaders also pledged $5 trillion in fiscal
stimulus spending over the next two years and to create the Financial Stability Board (FSB) as the
successor to the Financial Stability Forum (FSF) to coordinate and monitor progress on
regulatory reforms. The G-20 emphasized their commitment to concluding the World Trade
Organization (WTO) Doha Round of multilateral trade negotiations, which have stalled since
2001, and honoring their foreign aid commitments. Reforming the international financial
21 E.g., see: CRS Report RS20088, Dispute Settlement in the World Trade Organization (WTO): An Overview, by
Jeanne J. Grimmett.
22 The G-20 Washington, DC, declaration is available at http://www.g20.org/Documents/g20_summit_declaration.pdf.
23 The G-20 London communiqué is available at http://www.g20.org/Documents/final-communique.pdf. Supplemental
documents are available at http://www.g20.org/Documents/Fin_Deps_Fin_Reg_Annex_020409_-_1615_final.pdf and
http://www.g20.org/Documents/Fin_Deps_IFI_Annex_Draft_02_04_09_-__1615_Clean.pdf.
24 For more on the $1.1 trillion package to increase IFI and MDB resources, and the requisite congressional
authorizations, see: CRS Report R40578, The Global Financial Crisis: Increasing IMF Resources and the Role of
Congress, by Jonathan E. Sanford and Martin A. Weiss.
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institutions (IFIs) to increase the representation of emerging-market countries was discussed, but
no specific commitments were announced.
Pittsburgh, September 200925
The Pittsburgh summit occurred as the global recession was bottoming out, although
unemployment was generally still rising in developed countries. The tone of the Pittsburgh
communiqué reflects a sense of accomplishment with the G-20’s response to address the crisis,
while recognizing more work was needed. The G-20 leaders announced the creation of a new
framework to coordinate and monitor national economic policies in order to correct the current
global imbalances and prevent such imbalances from occurring in the future. The G-20 also
announced more specific plans to increase the representation of emerging-market countries at the
IMF and World Bank, as well as specific commitments on a host of new policy areas, including
economic development and the environment. Finally, the G-20 leaders announced that henceforth,
the G-20 would be the premier forum of international economic cooperation.
Toronto, June 201026
The Toronto summit was the first G-20 summit under the new format of the premier forum for
international economic cooperation. The summit was held against a backdrop of growing
economic uncertainty as looming sovereign debt crises and growing political instability in a
number of European countries unnerved international credit markets. The summit broadly
addressed five major areas: (1) growth; (2) the mutual assessment process (aimed largely at
correcting global imbalances); (3) financial sector reform; (4) international financial institutions
and development; and (5) fighting protectionism while promoting trade and investment. In the
lead up to the summit, there was discussion about a G-20 commitment on introducing a bank tax,
or levy, but in the end no agreement was reached.
With few exceptions, the discussions in Toronto were a continuation of issues that were discussed
in previous G-20 summits in Washington, London, and Pittsburgh. The Toronto summit was
viewed by many as a foundational summit that laid the path for more ambitious announcements at
the South Korea summit in November 2010.
Seoul, November 2010
South Korean officials have stated that their top priority for the Seoul summit is delivering on
previous G-20 commitments.27 That said, Korea is the first non-G-7/G-8 country to chair a G-20
summit, and Korean officials are also proposing an ambitious set of new initiatives for the Seoul
summit that focus on the needs of the emerging and developing world. First, to help countries
handle volatile capital flows, Korea is advocating strengthening global safety nets. These safety
nets, it is argued, would reduce the need for countries to build up substantial foreign exchange
reserves, which many believe created imbalances that, in turn, led to the global financial crisis.
25 The G-20 Pittsburgh leader’s statement is available at
http://www.g20.org/Documents/pittsburgh_summit_leaders_statement_250909.pdf.
26 The G-20 Toronto declaration is available at http://www.g20.org/Documents/g20_declaration_en.pdf.
27 See http://www.seoulsummit.kr/eng/goPage.g20?return_url=TOP01_SUB03_02.
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Safety nets would include replenishing the IMF’s resources and adjusting its lending facilities, as
well as supporting regional arrangements (like currency swaps). Second, Korea hopes to refocus
the G-20’s discussions on development issues, in particular narrowing the development gap and
reducing poverty. Third, Korea feels that the private sector plays a vital role in promoting future
economic growth, and will hold a Business Summit in the days leading up to the G-20 summit.
The Business Summit is to focus on trade and investment, finance, green growth, and corporate
responsibility.
Protests at G-20 Summits
Each of the G-20 summits have attracted protesters. The protesters tend to come from a mix of
broad movements, including environmentalists, trade unions, socialist organizations, faith-based
groups, anti-war camps, and anarchists.28 At the Pittsburgh summit, for example, thousands of
protestors gathered in the streets, holding signs with slogans such as “We Say No To Corporate
Greed” and “G20=Death By Capitalism.”29 The protests have primarily been peaceful, although
at times tensions between the police and protesters have escalated. In Pittsburgh, protestors began
throwing rocks,30 police used pepper gas against a group of students,31 and several protestors were
arrested.32
Major Issues on the Horizon
The major G-20 commitments that are likely to influence the policy agenda in the near future are
described and analyzed in greater detail below.
A New Framework to Coordinate and Monitor Economic Policies
Some believe that the United States’ external deficit and China’s external surplus contributed to
an unstable imbalance in the world economy. In order to correct this imbalance, and promote
compatible national economic policies in the future, the G-20 announced a new “Framework for
Strong, Sustainable and Balanced Growth” at the Pittsburgh summit.33 Through this framework,
the G-20 members agree on shared policy objectives, assess (with the IMF’s assistance) the
collective implications of national policy frameworks for the global economy, and consider and
agree to actions that are necessary to meet common objectives.
The peer-review process of economic policies, or the “mutual assessment process,” is being
completed in two phases. The first stage was completed prior to the Toronto summit. For this
assessment, the IMF collected data from the G-20 countries on their national policy frameworks
28 Carl Prine, “An Overview of Protests Expected in Pittsburgh for G-20,” Pittsburgh Tribune-Review, September 20,
2009.
29 Michelle Nichols, “Protesters, Police Clash After G20 in Pittsburgh,” Reuters, September 25, 2009.
30 Daniel Lovering and Michael Rubinkam, “G-20 March Turns Chaotic as Police, Protesters Clash on Streets of
Pittsburgh,” AP Newswire (Government Feed), September 24, 2009.
31 Michelle Nichols, “Protesters, Police Clash After G20 in Pittsburgh,” Reuters, September 25, 2009.
32 Dennis B. Roddy and Michael A. Fuoco, “Protests Lead to 19 Arrests Across City,” Pittsburgh Post-Gazette,
September 25, 2009.
33 http://www.g20.org/Documents/pittsburgh_summit_leaders_statement_250909.pdf.
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and assessed the collective consistency of these national policies. The IMF concluded that better
policy coordination could increase global output by almost $4 trillion, create tens of millions of
more jobs, lift more people out of poverty, and reduce global imbalances. The IMF recommended
the following key policy actions:34
• Advanced deficit economies: credible fiscal consolidation over the medium
term;
• Advanced economies: accelerate financial repair and reform to reduce
regulatory uncertainty;
• Advanced surplus countries: reform product and labor markets to repair
possibly lower supply potential and reduce persistently high unemployment;
• Emerging surplus economies: enhance social safety nets, reform corporate
governance, develop financial markets, and pursue greater exchange rate
flexibility to increase domestic demand; and
• Emerging deficit economies: simplify product market regulation, improve
infrastructure, and increase efficiency of the formal sector to strengthen growth
and employment.
The second phase of the mutual assessment process is to be completed at the country and
European level. This assessment will further refine policy recommendations that are tailored to
individual country circumstances to help fulfill the framework’s goals of strong, sustainable, and
balanced growth.
The G-20 does not have a formal enforcement mechanism for inducing countries to adopt the
recommending policy changes. The only tool at the G-20’s disposal is the threat of “naming and
shaming.” This has worked to some extent for the G-7 economic process, but it has worked less
well in international organizations. Some question, then, whether the new G-20 Framework will
be different than IMF surveillance.35 The IMF has the responsibility of monitoring the
international monetary system and the economic and financial policies of individual IMF member
countries. In recent years, it has also monitored broader global and regional trends. Under its
surveillance programs, the IMF can point to weaknesses in an economy but does not have
authority to enforce policy changes to address those weaknesses. Countries that do not need to
borrow from the IMF have often shrugged off its advice. It is not clear under the current
framework for the G-20 how the mutual assessments will translate into policy actions by
participating countries on particular key issues such as correcting global imbalances that may
require, for example, increasing savings in the United States or increasing spending in China.
Fiscal Austerity vs. Fiscal Stimulus
In the three G-20 summits prior to the Toronto summit, the G-20 leaders made commitments to
adopt economic stimulus measures to blunt the economic recession associated with the recent
financial crisis. Over the past year, however, various G-20 leaders have expressed concerns about
34 See Staff of the International Monetary Fund (IMF), G-20 Mutual Assessment Process—Alternative Policy
Scenarios, June 26-27, 2010, http://www.imf.org/external/np/g20/pdf/062710a.pdf.
35 E.g., see Chris Giles, “Three-Stage Plan for Growth,” Financial Times, September 26, 2009, and Chris Giles, “Spot
the Difference,” Financial Times, September 23, 2009.
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rising debt levels. The Toronto summit exposed rifts among the developed G-20 countries over,
on the one hand, fiscal austerity and deficit reduction, and, on the other hand, the need to provide
fiscal stimulus to boost employment and prevent a slide back into recession by the advanced
economies. The Obama Administration was one of the proponents in the G-20 for sustained fiscal
stimulus until economic recovery and job creation were better secured.
In the end, the Toronto summit reflected a compromise between the two sides of the debate. The
summit declaration stated that, “while growth is returning, the recovery is uneven and fragile,
unemployment in many countries remains at unacceptable levels, and the social impact of the
crisis is still widely felt… recent events highlight the importance of sustainable public finances
and the need for our countries to put in place credible, properly phased and growth-friendly plans
to deliver fiscal sustainability, differentiated for and tailored to national circumstances.”36 At the
same time, concerns about debt levels in advanced economies was recognized by the G-20
leaders. The G-20 leaders announced at the Toronto summit that advanced countries would
commit to halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016.
Regulatory Reform
Some argue that a major cause of the current global financial crisis was the failure of
policymakers to adequately regulate financial markets both domestically and globally.
Consequently, proposals for regulatory reform have been central components of each of the G-20
summits held to date. The proposals have generally emphasized the need for new international
regulatory standards and the implementation of regulatory reforms at the national level. Examples
of the reforms proposed include:
• Creating new global accounting standards;
• Expanding the transparency of complex financial instruments;
• Strengthening and harmonizing capital standards;
• Reassessing banker compensation;
• Regulating all systemically important financial institutions;
• Regulating credit rating agencies; and
• Fighting illicit financial activity.
At the G-20 summit held in Pittsburgh, the G-20 leaders announced several deadlines for some
key regulatory reforms. Examples include:
• Developing new standards for bank capital by end-2010;
• Implementing new capital standards by end-2012;
• Strengthened regulation of over-the-counter derivatives markets by end-2012;
• Addressing cross-border resolutions and systemically important financial
institutions by end-2010;
36 G-20, The G-20 Toronto Summit Declaration, June 26-27 2010,
http://www.g20.org/Documents/g20_declaration_en.pdf.
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• Converging on new global accounting standards by June 2011;
• Implementing countermeasures against tax havens from March 2010; and
• Initiating a peer review process of non-cooperative jurisdictions (NCJs) by
February 2010.
At the Toronto summit, the G-20 reiterated many of these commitments, but in a slightly different
format. They announced four “pillars” of reform, which include: (1) a strong regulatory
framework; (2) effective supervision; (3) resolution and addressing systemic institutions; and (4)
transparent international assessment and peer review.
Within the G-20, the United States is generally viewed as a leader in regulatory reform, having
passed a major regulatory reform act in July 2010 (P.L. 111-203).37 The Administration is now
expected to focus on making sure that other countries adopt consistent and harmonized regulatory
reforms to ensure a “level playing field,” or that capital does not flow out of the United States to
countries with looser banking standards. As other G-20 countries move towards regulatory reform
and the FSB assesses the implementation and consistency of national level regulations, regulatory
reform is expected to continue to be a major G-20 priority.
Increasing the Representation of Emerging Markets in
International Financial Institutions (IFIs)
There has been frustration among emerging-market countries that the World Bank and the IMF
have not been reformed to reflect their increased weight in the world economy. At the Pittsburgh
summit, the G-20 leaders committed to increase the voting power for developing and transition
countries at the World Bank by at least 3%. In April 2010, the shareholders at the World Bank
having agreed to reforms that will increase the voting power of developing and transition
countries by more than 3%.38 U.S. voting power is not expected to be affected by the 2010
reforms and the United States will retain veto power over major decisions at the Bank.
The G-20 also pledged a shift of at least 5% of the IMF quota share, which impacts voting power,
from over-represented countries to under-represented countries by January 2011.39 The IMF
reforms are proving more controversial than the World Bank voting reforms. It is generally
agreed that IMF quotas should broadly reflect a country’s relative size in the world economy.40 It
is also broadly acknowledged that some European countries are over-represented at the IMF,
because their relative weight in the world economy is smaller than their IMF quota. Likewise,
some emerging-market countries, like China, are under-represented at the IMF, because their IMF
37 For more information, see CRS Report R40975, Financial Regulatory Reform and the 111th Congress, coordinated
by Baird Webel.
38 Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund, Development Committee
Communique, April 25, 2010,
http://siteresources.worldbank.org/DEVCOMMINT/NewsAndEvents/22556084/FinalCommunique(E)042510.pdf.
39 IMF quotas determine a country’s maximum financial commitment to the IMF and its voting power, and has bearing
on its access to IMF financing.
40 E.g., see “IMF Quotas,” International Monetary Fund, October 31, 2009. Available at
http://www.imf.org/external/np/exr/facts/quotas.htm. Also see “Quota Reform at the G-20,” Reserve Bank of Australia,
February 2006. Available at
http://www.treasury.gov.au/documents/1102/HTML/docshell.asp?URL=G20_Quota_Reform.htm.
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quota is smaller than their relative weight in the world economy. This is illustrated in Figure 2,
which compares a country’s relative size (GDP, adjusted for purchasing power parity) in the
world economy to its IMF quota.
To date, no agreement has been reached on which countries will see their quota share, and thus
voting power, change, and if so, by how much.41 The G-20 leaders did, however, announce in
Toronto that they expect to reach an agreement by the G-20 Seoul summit in November 2011.
Figure 2. Comparison of Relative Size in the World Economy with IMF Quota Share
Source: Data used in calculations from “Updated IMF Quota Day – September 2009,” International Monetary
Fund, September 23, 2009, http://www.imf.org/external/np/fin/quotas/2009/091509.htm.
Notes: 25 IMF members with the smallest and largest differences between IMF quota share and share of world
GDP. GDP is adjusted for purchasing power parity (PPP).
The G-20 leaders have also pledged that the heads and senior leadership of the international
financial institutions should be appointed through an “open, transparent, and merit-based
selection process.” This may affect the 60-year-old unwritten convention that the Managing
Director of the IMF is selected by Western European countries and the President of the World
Bank is selected by the United States. However, the wording in the G-20 declarations on this
point are vague and to date there is no consensus on how this would be implemented in practice.
41 “Money, Votes and Politics,” The Economist, October 7, 2009.
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Increasing Funding of the Multilateral Development Banks
(MDBs)
As the financial crisis spread internationally during 2008 and 2009, more and more emerging-
market and developing countries turned to the IMF and the World Bank for financial assistance.
In response to greater demand for IMF loans, the G-20 leaders agreed at the London summit to
triple the Fund's lending capacity to $750 billion as part of a larger $1.1 trillion package to
increase funding.42 Specifically, the leaders agreed to increase the resources of the New
Arrangements to Borrow (NAB), a supplemental fund that bolsters IMF resources, by up to $500
billion. To fulfill this commitment, Congress approved the extension of a $100 billion loan to the
NAB in May 2009, included in the FY2009 Spring Supplemental Appropriations for Overseas
Contingency Operations (P.L. 111-32).43 In the end, total new commitments to the NAB are
greater than $500 billion, more than originally expected.44
At the G-20 summit in Pittsburgh, the G-20 turned their attention to the lending capacity of the
multilateral development banks (MDBs). Proposals have been made in all the MDBs in the past
year suggesting that substantial increases in their capital stock are needed.45 There are two general
reasons why the MDBs are requesting general capital increases. First, demand for loans is high.
The current crisis and the resulting shrinkage in private capital flows is creating a large gap in the
external financing needs for developing countries. The World Bank estimates this gap is between
$350 billion and $635 billion for 2009 alone, and is expected to continue in 2010 and beyond.46
Second, it has been noted that the Inter-American Development Bank (IDB)’s request for a
general capital increase comes on the heels of a loss of nearly $1.9 billion in 2008.47
A general capital increase for any one of the banks is an infrequent occurrence; simultaneous
capital increases for all the MDBs is quite unusual and has not happened since the 1970s. The
Administration has requested that U.S. contributions to the Asian Development Bank (AsDB)
capital increase be included in the FY2011 budget. Capital increases for the other MDBs, if
agreed to, would likely be included in the FY2012 budget.
In the view of many, the need and size of any MDB capital increases would depend on the
availability of private capital. Prior to the current global financial crisis, in 2007, net capital
inflows to emerging markets were at a historic peak of $1,252 billion in 2007.48 Capital flows
began slowing in 2008 and fell to $531 billion in 2009. Capital flows to emerging markets are
forecasted to rebound to $746 billion in 2011. There are some important differences among
42 For more information, see: CRS Report R40578, The Global Financial Crisis: Increasing IMF Resources and the
Role of Congress, by Jonathan E. Sanford and Martin A. Weiss.
43 CRS Report R40578, The Global Financial Crisis: Increasing IMF Resources and the Role of Congress, by Jonathan
E. Sanford and Martin A. Weiss.
44 International Monetary Fund, Bolstering the IMF's Lending Capacity, November 5, 2009,
http://www.imf.org/external/np/exr/faq/contribution.htm.
45 For more on the MDBs and the general capital increases, see CRS Report R41170, Multilateral Development Banks:
Overview and Issues for Congress, by Rebecca M. Nelson.
46 World Bank, Review of IBRD and IFC Financial Capacities: Working with Partners to Support Global
Development, October 5, 2009.
47 Daniel Bases and Javier Mozzo, "IADB Should Increase Capital by $150-$180 Billion," Reuters, March 29, 2009.
48 Data for this section is from “Capital Flows To Emerging Market Economies,” Institute for International Finance,
October 3, 2009.
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regions, as shown in Figure 3. By 2011, net private capital flows are forecasted to have returned
to 80% of their pre-crisis (2007) levels in Latin America, 48% of their pre-crisis levels in
emerging Europe, 52% of their pre-crisis levels in Africa and the Middle East, and 63% of their
pre-crisis levels in emerging Asia.49
Figure 3. Net Private Capital Inflows to Emerging Market Economies, by Region
Source: “Capital Flows to Emerging Market Economies,” Institute for International Finance, October 2009 and
June 2010.
Notes: Data for 2010 and 2011 are forecasts. Emerging Europe includes Bulgaria, Czech Republic, Hungary,
Poland, Romania, Russia, Turkey, and Ukraine. Latin America emerging markets include Argentina, Brazil, Chile,
Poland, Ecuador, Mexico, Peru, and Venezuela. Emerging Asia includes China, India, Indonesia, Malaysia,
Philippines, South Korea, and Thailand. Africa/Middle East emerging markets include Egypt, Lebanon, Morocco,
Nigeria, Saudi Arabia, South Africa, and UAE.
It is not clear whether the high level of inflows seen before the crisis were sustainable or whether
their size actually contributed to the severity of the crisis in some instances when the flow
precipitously declined. Overall, however, the resurgence of capital flows to emerging markets
raises questions about the need for permanent capital increases, and some have raised questions
about the commitment to increasing funding for the MDBs as governments have become more
concerned about budget deficits and rising debt levels.
Concluding the WTO Doha Round of Multilateral Trade
Negotiations
Doha negotiations have been stalled since 2001 due to differences among the United States, the
European Union, and developing countries on major issues including agriculture, industrial
tariffs, non-tariff barriers, and services.50 Before the Toronto summit, the G-20 leaders have also
pledged to conclude the WTO Doha Round of multilateral trade negotiations within specific
49 “Capital Flows to Emerging Market Economies,” Institute for International Finance, October 2009 and June 2010.
See notes on Fig. 3 for more information on the data.
50 For more on the Doha negotiations, see: CRS Report RL32060, World Trade Organization Negotiations: The Doha
Development Agenda, by Ian F. Fergusson.
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timeframes, for example, before the end of 2010. In the most recent G-20 summit in Toronto, this
commitment has been somewhat watered down to “reiterating our support for brining the WTO
Doha Development Round to a balanced and ambitious conclusion as soon as possible.”
To date, there appears to be a disconnect between the pledges of the G-20 leaders and the lack of
specific negotiations on the ground to meet this goal. It is not evident that WTO members have
made progress in resolving the stalemate over the Doha negotiations, and the G-20 pledge to get
the Doha Round back on track is viewed by many as unlikely to be met.51 Confidence might be
enhanced if the G-20 discussed the basic controversies deadlocking the Doha negotiations rather
than just announcing their intent to reach agreement.
Eliminating Fossil Fuel Subsidies
As the current financial crisis began to stabilize and growth started returning to the world
economy, the G-20 leaders turned to other issues, including the environment. At Pittsburgh, the
G-20 leaders committed to eliminating fossil fuel subsidies over the medium-term. At Toronto,
the G-20 leaders pledged to continue to review progress towards this commitment at future
summits.
Support for the ban on fossil fuel subsidies comes from the Obama Administration, who is
reported to have pushed for the G-20 commitment in Pittsburgh.52 It is estimated that the removal
of fossil fuel subsidies by 2020 would reduce greenhouse gas emissions by 10% in 2050, and it is
reported that the President views the elimination of fossil fuel subsidies as a “down payment” on
the international goal of reducing greenhouse gas emissions by 50% from 1990 levels by 2050.53
In addition to the environmental benefits, eliminating fossil fuel subsidies may also even out the
large price swings that have characterized the oil markets in recent years.54 With fossil fuel
subsidies, increases in the price of oil are not necessarily passed on to consumers. This means that
demand for oil can continue to rise even as oil prices increase and in fact further contribute to the
price increase, leading to large upswings in the price of oil. Stabilizing oil prices may prove
important as the current financial crisis has led to what some see as under-investment in the
energy sector, such as energy companies drilling fewer oil and gas wells. Under-investment in the
energy sector may lead to higher energy prices, particularly for oil and electricity, in a few
years.55 Additionally, elimination of fossil fuel subsidies may ease the budget deficit problems of
many countries.
Eliminating fossil fuel subsidies may prove difficult. Governments in low- and middle-income
countries, who spend $310 billion a year on fossil fuel subsidies compared to the $20-30 billion
spent annually by developed countries, may be reluctant for political reasons to eliminate these
subsidies.56 In 2008, cuts in subsidies in Egypt, India, and Indonesia resulted in street protests and
51 E.g., see “Regaining Their Balance,” The Economist, 26 September 2009.
52 Ben Geman, “White House Wants Fuel Subsidy Cuts on G-20 Agenda,” Washington Post, September 16, 2009.
53 “Fossilised Policy,” The Economist, October 1, 2009.
54 “No Free Lunch: The G-20’s Case Against Fossil-Fuel Subsidies,” Wall Street Journal, September 25, 2009.
55 International Energy Agency, World Energy Outlook 2009, November 10, 2009.
56 “Fossilised Policy,” The Economist, October 1, 2009.
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political upheaval.57 Eliminating fossil fuel subsidies in rich countries may also face obstacles.
The Environmental Law Institute, a think-tank, estimates that the United States spent $72 billion
on fossil-fuel subsidies between 2002 and 2008.58 Elimination of fossil fuel subsidies would
require Congressional approval, and it is expected that the oil industry would strongly oppose
such legislation.59
Looking Ahead: Effectiveness of the G-20 Moving
Forward
As the G-20 adapts to its new status as the premier forum for international economic cooperation,
there has been speculation about how effective the G-20 will be moving forward. Three scenarios
have been discussed. Specifically, the G-20 as a coordinating forum will be (1) effective; (2)
ineffective; or (3) effective in some instances but not others. These possible scenarios are
discussed in greater detail below.
Scenario 1: Effective
Some believe that the G-20 will be an effective forum for international economic cooperation
moving forward. The G-20 will be able to play this role, it is argued, for three reasons. First, the
G-20 includes all the major economic players at the table, representing two-thirds of the world’s
population, 90% of world GDP, and 80% of world trade,60 but at the same time is small enough to
facilitate concrete negotiations. Second, the involvement of national heads of state in the
negotiations could serve to facilitate commitments in major policy areas. Third, as the issues
discussed by the G-20 leaders expand, the G-20 may be able to facilitate cooperation by enabling
trade-offs among major concerns, such as climate change and trade, that are not possible in issue-
specific forums and institutions.
G-20 optimists typically point to the G-20’s successes at the height of the financial crisis, when
the G-20 played a unique, strong, and central role in steering the recovery efforts. The G-20 was
the source of major decisions regarding fiscal stimulus, regulatory reform, tripling the IMF’s
lending capacity, and other response efforts. The G-20 also tasked other international
organizations, such as the Bank for International Settlements (BIS), the IMF, the World Bank, and
the FSB (which the G-20 strengthened from the FSF), with facilitating, monitoring, or
implementing various aspects of the response to the crisis.
Scenario 2: Ineffective
Others are skeptical that the G-20 will be an effective forum for international cooperation moving
forward for at least three reasons. First, the G-20 includes a diverse set of countries with different
57 Ibid.
58 Environmental Law Institute, Estimating U.S. Government Subsidies to Energy Sources: 2002-2008, September
2009.
59 “Fossilised Policy,” The Economist, October 1, 2009.
60 Arvind Panagariya, The G-20 Summit and Global Trade: Restore Credit and Resist Protectionism, Brookings, March
14, 2009. Trade data includes intra-EU trade.
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political and economic philosophies. As economic recovery begins, it is argued that this
heterogeneous group with divergent interests will have trouble reaching agreements on global
economic issues. Second, some believe that G-20 does not include the right mix of countries. It is
argued that Europeans are over-represented at the G-20 (with Germany, France, Italy, the United
Kingdom, and the European Union taking up five of the 20 slots), while some important
emerging-market countries are excluded. Poland, Thailand, Egypt, and Pakistan are typically
cited as examples (see Appendix A).61 By concentrating European interests while excluding
important emerging-markets from the negotiating table, it will be difficult, it is argued, to achieve
cooperation on economic issues of global scope. Third, some experts believe that the G-20 will be
ineffective because it has no enforcement mechanism beyond “naming and shaming” and with
little follow-up will not be able to enforce its commitments. As evidence that the G-20 is an
ineffective steering body in the international economy, G-20 skeptics point to the portions of
recent G-20 declarations that merely reiterate commitments made by countries in other venues
and institutions or at previous G-20 summits.
Scenario 3: Effective in Some Instances, but Not Others
A third scenario represents a middle ground between the previous two, namely, that the G-20 will
be effective in some instances but not others. It is argued the G-20 could be an effective body in
times of economic duress, when countries view cooperation as critical, but less effective when the
economy is strong and the need for cooperation feels less pressing. Proponents of this view point
to the strong commitments achieved in the London G-20 summit at the height of the crisis
compared to what many view as the weaker outcomes of the Toronto summit, when economic
recovery was underway (although unemployment remains high in several advanced countries).
Another variant is that the G-20 will prove effective in facilitating cooperation over some issue
areas but not others. For example, the G-20 could be effective in coordinating monetary policy
across the G-20 countries, by providing a formal structure for finance ministers, central bankers,
and leaders to gather and discuss monetary policy issues. In most countries, central banks
exercise largely autonomous control over monetary policy issues and would have the authority to
implement decisions reached in G-20 discussions. By contrast, it is argued that the G-20 could
find coordination of other policies more difficult. One example may be fiscal policies, because
although finance ministers and national leaders undoubtedly can influence fiscal policies at the
national level, control over fiscal policies in many countries ultimately lies with national
legislatures. It is not clear to what extent national legislatures will feel bound in their policy-
making process by decisions reached at the G-20 and thus how effective G-20 coordination on
these issues will be.
61 “G20 Gains Stature But is Overambitious,” Oxford Analytica, September 28, 2009.
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Appendix A. World’s Largest Countries and Entities
Table A-1. World’s Largest Countries and Entities
2009 GDP in current prices, billions of U.S. dollars
Rank G-20
Member Non
G-20 GDP
Member
1. European
Union
16,447
2. United
States
14,256
3 Japan
5,068
4. China
4,909
5. Germany
3,353
6. France
2,676
7. United
Kingdom
2,184
8. Italy
2,118
9. Brazil
1,574
10.
Spain
1,464
11. Canada
1,336
12. India
1,236
13. Russia
1,229
14. Australia
997
15. Mexico
875
16. South
Korea
833
17.
Netherlands 795
18. Turkey
615
19. Indonesia
539
20.
Switzerland 495
21.
Belgium
470
22.
Poland
430
23.
Sweden
405
24.
Norway
383
25.
Austria
382
26.
Taiwan
379
27. Saudi
Arabia
370
28.
Venezuela 337
29.
Greece
331
30.
Iran
330
31. Argentina
310
32.
Denmark 309
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Rank G-20
Member Non
G-20 GDP
Member
33. South
Africa
287
Source: IMF World Economic Outlook.
Notes: The European Union (EU) includes 27 countries. Some 2009 data are IMF forecasts. Ranking is for
illustrative purposes only. Using a different measure of economic size, for example, GDP adjusted for purchasing
power parity (PPP), would yield different rank orders.
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Appendix B. CRS Reports on Related Issues
Looking for more information on a specific issue?
Global Financial Crisis
CRS Report RL34742, The Global Financial Crisis: Analysis and Policy Implications, coordinated by Dick K. Nanto
CRS Report R40496, The Global Financial Crisis: Foreign and Trade Policy Effects, coordinated by Dick K. Nanto
CRS Report R40173, Causes of the Financial Crisis, by Mark Jickling
CRS Report R40415, The Financial Crisis: Impact on and Response by The European Union, by James K. Jackson
CRS Report R41167, Greece’s Debt Crisis: Overview, Policy Responses, and Implications, coordinated by Rebecca M.
Nelson
CRS Report RS22988, Iceland’s Financial Crisis, by James K. Jackson
Regulatory Reform
CRS Report R40975, Financial Regulatory Reform and the 111th Congress, coordinated by Baird Webel
CRS Report R41176, Federal Financial Services Regulatory Consolidation: Structural Response to the 2007-2009 Financial
Crisis, by Walter W. Eubanks
CRS Report R40877, Financial Regulatory Reform: Systemic Risk and the Federal Reserve, by Marc Labonte
CRS Report R40696, Financial Regulatory Reform: Consumer Financial Protection Proposals, by David H. Carpenter and
Mark Jickling
CRS Report R40788, Financial Market Supervision: European Perspectives, by James K. Jackson
Global Imbalances
CRS Report RL31032, The U.S. Trade Deficit: Causes, Consequences, and Policy Options, by Craig K. Elwell
CRS Report RL33274, Financing the U.S. Trade Deficit, by James K. Jackson
International Monetary Fund (IMF)
CRS Report R40578, The Global Financial Crisis: Increasing IMF Resources and the Role of Congress, by Jonathan E. Sanford
and Martin A. Weiss
CRS Report R41239, Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis, coordinated by
Rebecca M. Nelson
Multilateral Development Banks (MDBs)
CRS Report R41170, Multilateral Development Banks: Overview and Issues for Congress, by Rebecca M. Nelson
CRS Report RS20792, Multilateral Development Banks: U.S. Contributions FY1998-FY2011, by Jonathan E. Sanford
CRS Report RL33969, The World Bank’s International Development Association (IDA), by Martin A. Weiss
CRS Report RS22690, The African Development Bank Group, by Martin A. Weiss
CRS Report RS21437, The Asian Development Bank, by Martin A. Weiss
World Trade Organization (WTO)
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The G-20 and International Economic Cooperation
CRS Report R41291, World Trade Organization (WTO): Issues in the Debate on Continued U.S. Participation, by Raymond J.
Ahearn and Ian F. Fergusson
CRS Report RL32060, World Trade Organization Negotiations: The Doha Development Agenda, by Ian F. Fergusson
Author Contact Information
Rebecca M. Nelson
Analyst in International Trade and Finance
rnelson@crs.loc.gov, 7-6819
Acknowledgments
Susan Chesser, Information Research Specialist, assisted with research on G-20 protests; Pat McClaughry,
Senior Graphics Specialist, helped create the maps; and Amber Wilhelm, Graphics Specialist, assisted with
preparation of the graphs.
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