Plans for France’s G20 Summit in 2011
By Nicolas Sarkozy, president, France
International monetary reform, agriculture and governance are just some of the issues on France’s 2011 agenda
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There are moments in history when fate wavers between the best and the worst possible outcome. Moments when all that has been achieved could be lost or, conversely, lead to lasting progress. We are at one of these moments now.
The global economy has not yet resumed the path of solid and sustainable growth, yet the G20 must prove that it has the determination to pursue the necessary reforms.
At the big table where the decisions are made, new actors have joined the recognised powers. With good reason, they are calling for their rights to be recognised. But they must also accept that with these rights come duties and responsibilities. They must recognise that their amazing success means that they must go beyond the defence of their national interests and must make their contribution to solving the world’s problems. This momentum has begun.
In 2011 France will assume the G20 presidency for one year and, on 1 January 2011, that of the G8.
Created at France’s behest, the G20 represents 80 per cent of the planet’s wealth. It enabled the main economic powers to successfully weather the most severe crisis since the 1930s.
It did so first by supporting world growth in a coordinated manner. Thanks to the G20’s efforts, the world experienced renewed growth earlier than expected.
But to save the global economy in the long term, there must also be new rules for the financial system. Reforms that not long ago would have been unthinkable have been decided and implemented: the activities of speculative funds are now regulated; ratings agencies must be registered, the payment of bonuses by banks is defined by strict rules, and penalties are in place in the event of losses or poor performance. Tax havens are disappearing. Five hundred agreements to exchange tax information have been signed since the G20 in London in 2009. Bank secrecy is on the wane, and sanctions have been implemented against tax havens that do not adopt the new international rules.
It was necessary, in fact, to engage in a dialogue to resolve, in the long term, the dangerous imbalances in the global economy. That dialogue was launched with the establishment of the Framework for Strong, Sustainable and Balanced Growth at the Pittsburgh Summit in November 2009. In 2011, it must be deepened and enriched: coordination mechanisms must be consolidated, multilateral oversight must be strengthened and expectations must be raised with respect to the commitments that were taken, including concrete economic policy measures and a timetable.
All in all, the ‘crisis version’ of the G20 has done a fantastic, even unprecedented, job. Today, now that relative calm has returned, there is a temptation to limit the G20’s ambitions to implementing its decisions, supplementing them in 2011 by expanding regulation where it remains insufficient, verifying the implementation of tax exchange information agreements, adopting strong measures to fight corruption, strengthening the mandate of the Financial Stability Board and, more broadly, re-examining the prudential framework of banking institutions to avoid a repetition of the recent crisis.
Completing the work that is under way is important — the G20’s credibility depends on it. But is it enough?
Sticking with this agenda would condemn the G20 to failure and the world to new crises.
Paradoxically, it was easier to be bold when the world was on the brink of a precipice and there was no choice. Today, there is the choice either to complete the projects under way and deal with unforeseen developments as they arise or to add those projects that have remained at a standstill for far too long, and on which global prosperity and stability depend. France offers its partners the choice of ambition with a single conviction: that only the G20 has the weight, legitimacy and decision-making power to give these projects of the future the impetus they need.
What are they? France will consult its partners on this subject. For its part, it identifies three: the first is the reform of the international monetary system.
No one can deny that the instability in currency exchange rates is a substantial threat to world growth. Businesses cannot plan for production and exports when the euro suddenly shoots from, say, parity with the dollar to $1.60, before tumbling back down a few weeks later to $1.27.
Post-war prosperity owed a lot to the rules and institutions of Bretton Woods. What are necessary today are the instruments to prevent excessive currency volatility, the accumulation of imbalances, and the search for an ever higher level of foreign exchange reserves for emerging countries facing the sudden, massive withdrawal of international capital.
France plans to suggest that this delicate issue be broached with its partners, without taboos but with the necessary caution. Basically, three tracks could be studied.
First, crisis management mechanisms must be strengthened. Since 1990, emerging countries have experienced 42 episodes of sudden international capital withdrawals, jeopardising their stability and growth. These international guarantee mechanisms and institute must become more effective, faster multilateral instruments to prevent and handle these crises.
The tools offered by the International Monetary Fund (IMF) are currently under study. The financial crisis, as well as the crisis of the euro, showed that to guarantee stability, the world must be capable of swiftly mobilising very large sums to deal with irrational market speculation.
Reality has revealed the illusion that opening capital markets is always progress. It is legitimate for countries that depend heavily on foreign capital to take steps to regulate it at times of crisis. The best guarantee against a rise in protectionist risks, in this area as in others, is the development of multilateral rules.
The suitability of an international monetary system dominated by a single currency in a now-multipolar world must be re-examined. The accumulation of foreign exchange reserves in certain countries corresponds to the deepening current account deficit in the United States.
In London, the G20 countries decided on an allocation of 250 billion in special drawing rights. The availability of an international reserve asset that is not issued by an individual country would help strengthen the stability of the system as a whole.
Finally, there must be a better way to coordinate the economic and monetary policies of the major economic zones. The G20 in Pittsburgh established the framework that must allow each member to implement the appropriate economic policies to achieve high, stable growth while reducing international imbalances.
But the G20 must go further, and define a new framework for consulting on foreign exchange developments beyond the G7 finance ministers and central bank governors.
Discussing these issues calmly, within the most legitimate, most effective forum — the G20 — is necessary.
The second project to undertake is controlling volatility in the prices of raw materials, which is happening with the sudden rise of wheat prices.
Who does not remember the hunger riots in Haiti or Africa when the prices of certain foodstuffs suddenly skyrocketed in 2008? Who has forgotten the tragic consequences of sudden rises in the price of oil and gas, followed by equally sudden drops, for the global economy?
First, the G20 should consider the actual functioning of derivative markets in raw materials. Extending regulation to raw materials is possible and desirable. Speculation should also be limited.
Next, with regard to agricultural raw materials, several directions could be explored without preconditions, such as market transparency and storage policies, and also the creation, by international financial institutions, of tools enabling importing countries to protect themselves against exchange rate volatility.
Finally, with regard to the cost of energy, on the G20’s agenda since the Pittsburgh Summit, France was given the mandate to propose measures for Seoul and for the 2011 summit to curb price volatility. France recommends transparency measures and a substantial dialogue between producers and consumers to limit exchange rate fluctuations.
The third project proposed for the French G20 presidency is global governance reform.
The G20 has declared itself ‘the premier forum’ for global economic and financial issues. But it must still give itself the means to work more effectively. Shouldn’t we create a G20 secretariat to continuously monitor the implementation of decisions and deal with issues in conjunction with all pertinent international organisations?
Shouldn’t the G20 also include new subjects, such as development, on its agenda? Should it not adopt rules of good conduct and best practices for public aid? Should it not debate innovative financing, notably a possible tax on financial transactions? This financing is essential if the Millennium Development Goals and the financing objectives of the Copenhagen climate change agreement are to be met.
And should the G20 not discuss financing a climate agreement? Cancun will be important, but the November 2011 meeting in South Africa will probably be the decisive time to seal an agreement. The G20 summit in France will be held just before that.
France will also suggest a broader debate on world governance. The G20 gave a decisive impetus to World Bank reform; it should do the same, in the coming months, for the IMF. How can it ignore the specialised UN bodies dealing with the economy, jobs, trade…? They all need reform. They all must learn to work together better.
How, in this context, can we not send a strong signal to the UN General Assembly on an interim reform of the Security Council? Without this decisive effort, that reform — debated at the UN for 20 years now — will remain deadlocked for a long time to come.
All nations must answer a simple, decisive question: together, can we build a more secure, more prosperous, more just world for all?
Adapted from an address to the 18th Ambassador’s Conference, 25 August 2010, Elysée Palace, Paris.
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