Emerging Countries Set Summit Strategy
November 13, 2008
The Washington Times
By: David R. Sands
The world’s up-and-coming economic powers will have a seat at this weekend’s emergency global financial summit hosted by President Bush. Whether they will have a voice is another question.
By word and by deed, developing economic global powers such as China, Brazil, Russia and India in recent days have served notice they will not be passive bystanders at Saturday’s gathering of leaders of the Group of 20 powers at the National Building Museum in Washington.
Much of the pre-summit hype has focused on tensions between the Bush administration and European countries. But the presence of such leaders as Chinese President Hu Jintao, Russian President Dmitry Medvedev and Brazilian President Luiz Inacio Lula da Silva will almost certainly alter the dynamic of the conversation and influence the game plan for redesigning the troubled global financial architecture.
"We are still directed and controlled by institutions that reflect the economic situation of the 1940s and 1950s," Brazilian Finance Minister Guido Mantegna told reporters in Sao Paulo last week after a meeting with his counterparts from Russia, India, China, Mexico and South Africa.
Countries such as Brazil will no longer accept being "mere coffee drinkers" at summits where the rich industrial countries dictate the agenda, Mr. Mantegna said.
"It’s increasingly clear that it’s just wrong to let the rich nations make all the decisions and ask the poorer countries to just shut up and follow," said Jo Marie Griesgraber, chairwoman of the New Rules for Global Finance Coalition, a collection of labor and social groups demanding reforms of the world’s financial system.
Mr. Bush’s decision to expand the guest list to the G-20 was widely seen as an acknowledgment that more restrictive clubs like the Group of Eight industrial nations could not tackle a credit crunch and financial free fall that has staggered economies and stock markets around the globe.
The G-20 includes the seven traditional industrialized powers — the United States, Canada, Britain, France, Germany, Italy and Japan — along with Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey. The European Union as a bloc also is considered a member.
China’s announcement of a massive $586 billion domestic stimulus package earlier this week was widely seen as in part a pre-emptive strike just days before the summit, advertising both its huge foreign exchange reserves and its importance to the global economy.
Finance ministers from the so-called BRIC nations — Brazil, Russia, India and China — held their first formal summit on the sidelines of last week’s Sao Paolo gathering. Brazil’s Mr. Mantegna has led the push to include the stalled Doha global trade talks on Saturday’s agenda.
U.S. and European dominance of the main global economic institutions is a constant source of irritation. By tradition, for example, the presidency of the World Bank goes to an American while the Europeans select the head of the IMF from their ranks.
Russia has backed a drive to revamp or replace the current system of international financial watchdogs, a system dating to the 1944 Bretton Woods conference.
"We are absolutely sure that today the current system of institutions used for crisis settlement, including the IMF, are inadequate," Russian Finance Minister Alexei Kudrin said in comments broadcast Monday on the state-funded network Russia Today.
In addition to their deep natural resources and population base, the BRIC countries are growing markedly faster than the United States and other developed powers. The IMF and World Bank project that 80 percent of the world’s growth in 2009 will come from the developing world.
The BRIC countries also boast some of the world’s deepest pockets as the industrial nations seek to ease a severe credit crunch. The four all rank in the top seven globally in foreign exchange reserves, with China topping the list with nearly $2 trillion in its treasury.
Brad Setser, a fellow in geoeconomics at the Council on Foreign Relations, said emerging markets have another reason to be annoyed as they prepare for the summit: This time the global crisis can’t be blamed on them.
Unlike the Latin American debt crisis of the 1980s or the Asian and Russian currency meltdowns of the 1990s, the world’s current economic mess had its roots in the U.S. mortgage market and in the risky lending and investment practices of major U.S. and European banks.
"Given the way the U.S. and Europe regulated their financial institutions," Mr. Setser said, "the emerging economies have every right to say they should have a voice and some ability to press the United States and Europeans to do their jobs."