14 June 2012
Mexico hosts the 2012 G20 Summit, beginning June 16th and 17th with the B20 (Business 20) Summit, then continuing into the leaders' summit on June 18th and 19th. This article is one of a series examining the issues on the G20's agenda.
It is the age of multipolarity. No longer is power, both political and economic, highly focused in one or two countries. As the rest of the world steps into roles of larger economic responsibility, it becomes more important than ever that countries cooperate, ensuring open and free markets to combat a global financial downturn and unemployment crisis. However, if G20 countries are to avoid a second global slump, several major issues must be finally addressed.
These issues were supposed to be hammered out, once and for all, at the 2011 G20 Summit in Cannes. Unfortunately, the deterioration of Greece's financial and political stability took center stage due to cascading destabilization of the European Union. Now, even as the global economic mood turns warily optimistic about the future, disjointed national policies focusing on internal growth and protecting nascent industries threatens to hinder – or even ruin – any recovery progress. It is imperative that the G20 makes concrete progress at this year’s meeting.
This is where the B20 plays a vital role. By organizing the business communities of the world’s largest economies, the meeting provides a venue for coordinated action and a strong voice advocating the political meeting of the G20 to implement business-friendly policies.
The first area in which the B20 must step in is the battle between the International Monetary Fund and the G20 economies over capital regulations. In 2010, an IMF study found that countries with regulations on speculation and the flow of capital were hit the least hard by the global recession in 2008; at the 2011 G20 Summit, French President Nicholas Sarkozy called for formation of a code of conduct for these regulations to prevent the piecemeal adoption of different standards across the globe, but nothing was accomplished. This left the issue open for interpretations by the both the IMF and the G20 economies separately that suited the need of each. The IMF, wary of the rise of protectionist policies since 2008, tried to push capital regulations into a status of “tactic of last resort.” Several of the G20 nations, especially the emerging markets that most of this capital flocked to, felt rather that such regulations should be an accepted tool in a nation’s arsenal in the quest to retain sovereign control over currency. Without the intercession of the B20 on this issue to negotiate a code of conduct, it is likely a piecemeal policy will continue to develop, further destabilizing the global economy.
Protectionism writ-large is another area the B20 must mediate, lest further recovery of job markets be hampered. According to the Peterson Institute for International Economics, every single G20 country has implemented protectionist trade measures since 2008, and in 2008 alone these measures accounted for a loss of US$1.6 trillion, or 10 percent of all global trade. In 2011, the B20 and L20 released a joint statement calling for the end of job-killing protectionist measures. While the sentiment was appreciated, the statement said, it was more important for nations to prioritize youth employment, entrepreneurial support, the greening of jobs, and the fight against the informal economy. As protectionist rhetoric grows ever more en vogue – from Occupy movements to U.S. Presidential candidate Ron Paul – the B20 must address this desperation by advocating policies to open trade and, above all, create jobs.
Finally, the B20 must do more to fight corruption. Austerity measures and economic desperation become breeding grounds for corruption, killing innovation and severely harming struggling SMEs. The World Economic Forum conservatively estimates the total dollar amount of bribes paid internationally to conduct business to reach US$1 trillion, and increases the cost of doing business globally by up to 10 percent. The recent B20 meeting in Mexico (the current G20 President) presented a series of recommendations to President Felipe Calderon on how to best implement the G-20 Anti-Corruption Action Plan that was launched in Seoul, South Korea in 2010. Six themes, as reported by the World Economic Forum, emerged from the meeting including:
- Making government procurement more transparent
- Promoting and extending sector-based anti-corruption initiatives
- Engaging the private sector in the UN Convention Against Corruption country peer-review process
- Designing and launching capacity-building opportunities in anti-corruption between the public and private sectors
- Incentivizing private and public sector organizations to adopt anti-corruption codes of conduct
- Strengthening the legal and regulatory framework on anti-corruption
There have been many great examples of progress made at national levels to strengthen anti-corruption efforts, but there is still much that needs to be done. Public-private partnerships, as well as a strong emphasis on the rule of law, will be the most effective means of battling back the stifling culture of corruption and creating a global business environment that allows SMEs to flourish.
The B20 is in a unique position. In an age of globalization, trade is the common thread tying the world together and bringing millions out of desperate poverty. It is not enough for the governments of the world to have diplomatic relations, but business entities must also form some sort of diplomatic corps. The B20 fulfills this on the highest levels of international relations, and therefore has the unique responsibility to mediate and mitigate the international challenges facing business relations today.
This article was originally published in the special annual G20-B20 Summit 2012 edition. Published with permission.