Wednesday, April 1, 2009

G20 Summit in England

The G20 started in 1999 as a response to the financial crisis of the 1990s. It is an extension of the G8, which started in 1973 after the oil crisis. Many hail the G20 because it is a better representation of the world economy post globalization. With the additions, particularly India, China, and Brazil - "the G20 economies account for more than 80 percent of the global gross national product, about 80 percent of world trade and some two-thirds of the world population.” (Newark Star Ledger) What this summit represents is an opportunity for world leaders to shape the present and the future.

Here is a short list of questions that will flow through the G20:

1. What is the future of globalization? One finance commentator on CNN put it bluntly, “Western Capitalism is on its knees”. The free market is in free fall as countries are throwing stimulus packages and propping up teetering banks and multinational corporations.

2. “Cold feet” and protectionist policies can bring the global economy to even lower levels. Countries have already started the process of banning certain imports (China in particular) or creating tariffs. If markets start closing businesses will suffer greater losses.

3. Will the off shore banks that act as accounts to evade taxes and hide corruption be forced to open their books? This has been a hot topic issue, one that G8 members point to countries like Switzerland and Luxemburg – often throwing bricks before examining in-house. It is well documented that states, such as Delaware and Nevada, have reduced regulations and heavy incentives to attract corporate accounts.

4. What will come of the bilateral and scheduled side meetings? Not often are 20 heads of state together at a summit. Side meetings set the ground work for policy and the road ahead.

a. USA and Russia
i. Agreed today to reduce number of nuclear arms
ii. Can they find common ground with engaging Iran and what about Afghanistan?
iii. Russia is attempting to establish a “sphere of influence” over many of its former soviet satellite countries (US base closings in Kyrgyzstan and Uzbekistan). What is the diplomatic response?

b. USA and China
i. China has been financing much of how the US does business over the past decade. The stimulus package and bail outs have generated such vast amount of new money that inflation is surely to hit at some point. China has remarked that the US dollar should not be the world’s standard reserve.
ii. Trade policy, regulation, and human rights are all major issues that will be on the table when President Obama meets with Chinese President Hu Jintao

c. USA and the EU
i. Angela Merkel (Chancellor of Germany) and Nicolas Sarkozy (President of France) have both been publicly critical of the US stimulus package citing the high cost of spending. What measures come out of the summit will be interesting as all have suggested that collaborating and working together will greatly expedite the recession

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