By Mitch Yoshida, Mayme and Herb Frank Research Fellow
The G-20’s recent meeting in Seoul, which is widely regarded as a failure, has confirmed that the forum lacks the ability to address some of the most critical global challenges. Although it has strengthened global governance by giving rising powers a seat at the table and coordinating financial regulatory reform, its large size and heterogeneous interests have undermined its ability to tackle global imbalances, international trade, and climate change. In other words, despite its contributions and status as the “premier forum for international economic cooperation,” we now know that the G-20 can’t do it all.
Policy makers, particularly those in advanced economies, should now consider utilizing other multilateral fora and institutions to tackle challenges that the G-20 cannot. While it is true that global imbalances, including exchange rates, can only be addressed by the broader membership that the G-20 provides, other frameworks with more cohesive memberships such as the G-8 and the OECD have a better chance of facilitating progress on international trade, climate change, and other issues. US-European differences that surfaced during the summit and featured prominently in the headlines are exaggerated and would not derail such an approach. Despite the rift over quantitative easing, which not only emerged between the US and Germany but also between the US and non-European G-20 members, US-European positions on China’s undervalued currency, international trade, and climate change are still closer to each other than to others in the forum.
For advanced economies in the transatlantic area and beyond, the challenge will be to address these issues without compromising the legitimacy of the G-20 and the broader international order. History has shown us why it is important to build legitimate institutions that can accommodate rising powers, but doing so takes time and the consequences of delayed action – especially when it comes to climate change – could be very damaging for the world as a whole.