If there were ever a time for the average American to pay close attention to a president’s trip to an international summit, this would be it. Hopefully, this week’s G-20 summit in London will help to turn around the ailing global economy, but also, it may remind the American people—understandably preoccupied with domestic economic woes—that we’re all in this economic mess together.
The goal of the summit is to develop a more internationally coordinated action plan to tackle the world’s worst financial crisis since the 1930s. Specifically, G-20 members will work to restore global economic growth through boosting demand, assisting emerging economies and cutting interest rates in a manner consistent with price stability.
The current G-20 membership—made up of 20 countries that account for approximately 85 percent of the world’s economic production—includes established economic powers such as the United States, France, Germany and the United Kingdom. But it also includes emerging powers such as China, India, Brazil and South Africa.
Representatives of economic aid organizations such as the International Monetary Fund (IMF) and the World Trade Organization (WTO) will also attend the meeting. Until recently, there was no forum where leaders of emerging powers had a significant voice in matters of global governance. The G-8 and similar groupings were poor substitutes because of limited representation.
G-20 members are also working hard to reform the regulation and oversight of various global financial institutions, to create low-carbon paths to economic recovery and to enhance the effectiveness of the IMF and the World Bank.
Why do these summit goals matter for the United States? Quite simply, our economy is inextricably linked to those of other nations. If Canadians, Germans or Mexicans are doing poorly and are unable to purchase American goods and services at current rates, U.S. manufacturers, firms, small businesses—and those they hire—feel the pinch almost instantly. Also, many of the financial regulations scheduled to be debated at the summit require cross-border compliance to be effective, and that will have a direct impact on domestic fiscal policies.
Unfortunately, there are reasons to fear that the summit won’t produce the necessary results. These forums have a history of being “talk shops” that produce little in the way of concrete achievements. Also, there are philosophical differences in approaches among keys participants on how to tackle the crisis. The United States and Japan, for example, have put a major emphasis on fiscal stimulus packages, while many of our European counterparts have focused on tighter regulations for financial institutions. And then there are the protectionist trade policies currently in place, which negatively affect global commerce.
It’s hard enough to come to an agreement at a G-7 or G-8 forum. But imagine the exponential level of difficulty when a group of 20 countries with varying interests and values have only one day to develop effective solutions.
Despite the obstacles, President Obama has an opportunity to demonstrate a new brand of U.S. leadership in which we are engaging the world community and seeking its input on resolving international challenges that affect us all. While we should actively listen to our partners, we must be prepared to put forth our own ideas. In particular, Obama should call for the institutionalizing of the G-20 to ensure the effectiveness of the summit’s resolutions over the coming years and encourage rotating membership based on clear economic criteria. This will help maintain the legitimacy of the grouping as well as its effectiveness.
Most likely, however, this forum will just be a start, not an end, to addressing the global economic trauma. Luckily, we have U.S. leadership that recognizes that going at it alone, or with the aid of small groups of like-minded countries, won’t be sufficient. We don’t really have a choice. Unless there’s a global solution, there won’t be a solution.
Spencer P. Boyer is the director of international law and diplomacy at the Center for American Progress, a Washington-based think tank.
Archana Menon is a researcher at the Center for American Progress.