Tag Archives: G20

Five Stories You Might Have Missed

The G20 meeting in Pittsburg this week resulted in agreement on several important principles, with the group agreeing in principle to establish guidelines for bankers’ pay, developing a timetable for reforming financial regulations, and establishing a new framework for economic growth. The G20 also agreed to transfer five percent of the shares in the International Monetary Fund and three percent of the shares in the World Bank to emerging countries. The organizations have long been criticized for voting structures which over-represent the developed world at the expense of the developing world.

In other news from the previous week:

1. There were several important developments in Iran this week. On Sunday, Iran test fired a short-range missile as part of ongoing war games in the country. The missile, a Shahab-3, has range sufficient to reach Israel and U.S. bases in the Persian Gulf. The launch comes just days after the United States announced it had discovered Iran possessed a second, secret uranium enrichment facility. France and the United Kingdom joined the United States in condemning Iran for misleading the international community. The discovery and announcement put pressure on Tehran, which maintains that the facility is used for peaceful purposes. The most recent announcement produced new signals from Russia, which had historically opposed sanctions against Iran. But after being briefed on the new facilities by the Obama administration, Russian President Dmitry Medvedev indicated that the Russian government may be willing to consider sanctions as a way of addressing the Iranian nuclear situation.

2. Germany is headed to the polls today, with most analysts calling the election too close to call and many speculating about what kind of coalition will take control of the world’s fourth largest economy. Although Angela Merkel’s ruling Christian Democrats have been leading throughout the campaign, her support has been slipping over the past week. With low turnout forecast, observers believe that the election could still be close. Further, a quirk in the German voting system could result in Merkel’s CDU winning a plurality of seats in the Bundestag despite winning a smaller percentage of the popular vote than her rivals. Her rival, the Social Democrats, have lagged in the polls throughout the campaign but managed a late-campaign surge. No matter what the margins, negotiations around a forming a new coalition in Germany will likely be the central focus of German politics in coming days.

3. Two car bombings believed to the work of the Taliban in Pakistan killed 27 people on Saturday. The attacks targeted Pakistan’s military and police forces, coming just days after the country’s President, Asif Ali Zardari, appealed to the G20 for assistance in fighting terrorism in Pakistan. The attacks demonstrate the resilience of the Taliban in Pakistan, which has been engaged in a protracted war with the national military. Last month, the Pakistani military killed Baitullah Mehsud, the Taliban’s main leader in Pakistan, and earlier this year, the military killed more than 3,000 Taliban militants in operations in the Swat valley region. Despite these losses, however, the Taliban remains a central threat to the stability of the Pakistani regime. 

4. The government of Guinea is moving forward with its efforts to overturn some of the contracts signed with foreign companies under the military dictatorship of Lansana Conté, whose 24 year-rule ended with his death in December. The new government has already forced Rio Tinto to return a portion of its iron ore concessions and convinced the South African gold company, AngloGold Ashanti, to establish a $10 million fund to pay for environmental damages caused by their operations in the country. On Tuesday, the government ordered the Russian aluminum company Rusal to quit the country, claiming that it owed more than$750 million in taxes, royalties, and other duties owed since 2002. With a GDP per capita of $442, Guinea remains one of the poorest and least developed countries in the world.

5. Deposed President Manuel Zelaya returned to Honduras last week, sneaking into the country and hiding in the Brazilian embassy in Tegucigalpa. Honduran security forces used water cannons and tear gas to dispurse crowds which had gathered outside the embassy in support of Zelaya. The Brazilian government has called on the international community to do more to support Zelaya’s return. Most of the international community has refused to recognize the new government and international assistance from the World Bank and the International Monetary Fund has been suspended. Speaking before the United Nations General Assembly on Wednesday, Brazlian President Luiz Inácio Lula da Silva said, “The international community demands that Mr Zelaya return immediately to the presidency of his country and must be alert to ensure the inviolability of Brazil’s diplomatic mission in the capital of Honduras.”

Five Stories You Might Have Missed

It’s been a weekend of high-profile political resignations in the United States and China. On Sunday Morning, President Barack Obama’s top environmental policy adviser, Van Jones, reigned after it became public he had signed a petition alleging U.S. government involvement in the September 11th attacks. Jones had also been a key player in the Color of Change group, which has spent considerable money trying to influence the tenor of the health care debate in the United States. His resignation comes at a poor time for the administration, which is simultaneously trying to salvage passage of health insurance reform legislation in the U.S. Congress, address the ongoing economic downturn, and beginning to consider efforts to address climate change and green jobs, Jones’ area of expertise.

On Saturday, the Chinese government fired the top party official in Urumqi, where ethnic unrest has been raging between ethnic Uighurs and the majority Han. Li Zhi, the Chinese Community Party Secretary for the city of Urumqi, was replaced by Zhu Jailun, who had previously served as the head of the regional law-and-order committee. Li’s firing has also raised speculation that regional party boss, Wang Lequan, may also be forced from office. In firing Li, the Chinese government is hoping to quell unrest and prevent another outbreak of violence like that of July, when almost 200 people were killed in ethnic violence.

And on Friday, the head of Google’s China operations, Lee Kai-Fu, resigned. Lee was responsible for the launch of Google.cn, Google’s Chinese-language search engine. But Google’s operations in China have been marred by tensions with the Chinese government and debates over the degree to which the company should allow the Chinese government to censor search results. Lee’s resignation came amid a new round of tensions, with some inside Google arguing that the company should reconsider its efforts to break into the Chinese market.

In other news from the last week:

1. The G20 concluded two days of meetings in London on Saturday with a preliminary outline for tougher regulations on financial institutions. While the final statement stopped short of imposing limits on financial bonuses, it would increase the size of capital reserves and require the development of “living wills” for banks, and require that banks retain a portion of loans they sell as asset-backed securities. But the G20 avoided dealing with some of the most controversial elements of banking reform, choosing instead to forward those issues to the Financial Stability Board, an institution comprised of central bank governors and treasury secretaries from around the world. 

2. The situation in Afghanistan continues to be marred by uncertainty. On Friday, a NATO airstrike against two fuel tankers hijacked by the Taliban killed an estimated 90 people, nearly all of whom were civilians, according to local village elders. The airstrike provoked an angry response among Afghans, and represented yet another setback for the U.S. mission in Afghanistan. On Sunday it became apparent that the NATO airstrike was ordered by German commanders on the ground, a fact which will likely play an important role in upcoming German elections. The European Union issued a statement criticizing the airstrike on Saturday, one day before EU foreign ministers were scheduled to meet to consider efforts to improve stabilization efforts in Afghanistan.

Meanwhile, results from the Afghan election continue to trickle in. By Sunday, the Independent Electoral Commission had tabulated returns from just almost ¾ of country’s polling stations. So far, incumbent President Hamid Karzai leads his closest challenger, Abdullah Abdullah 48.6% to 31.7%. Under Afghan law, the winner must receive an absolute majority of votes cast, so if Karzai is unable to secure at least 50% of the vote, a runoff election would be held in October. But accusations of voting rigging continue to be raised, particularly by Abdullah, who contends that the vote was characterized by widespread fraud. The IEC announced that it had excluded an unknown number of votes from 447 polling stations in which suspicious returns had been found. But the scope of electoral fraud remains unknown.

3. The World Trade Organization issued its preliminary ruling in the U.S. dispute against EU assistance to aircraft manufacturer Airbus. Although the report is still confidential and the final report will not be issued for several months, the WTO panel found that some of the estimated €3 billion offered by the EU to Airbus was an unfair subsidy. Nevertheless, both sides are claiming victory. The WTO panel dismissed 70% of the U.S. claims against the EU and several of its member states, including France, Germany, Spain, and the United Kingdom, which the U.S. had claimed offered as much as $15 billion in illegal loans since the 1970s. Although the United States is celebrating the decision, the European Union is withholding its formal reaction until its case against U.S. subsidies to Boeing is resolved. In a case filed at the WTO several years ago, the European Union accused the United States of offering more than $27 billion in illegal assistance in the form of tax breaks, research contracts, and defense spending. A ruling on that case is expected within the next few months. 

4. Israeli Prime Minister Benjamin Netanyahu is moving forward with a plan to expand settlement activity in the West Bank, offering approval for the construction of hundreds of new homes. The United States government was quick to condemn the move, asserting, according to White House spokesperson Robert Gibbs, “The U.S. does not accept the legitimacy of continued settlement expansion and we urge that it stop.” Netanyahu is under pressure from rightwing member of his coalition to remove restrictions on new settlements in the West Bank. But the status of settlements in the West Bank remains a key stumbling block in negotiations between Israel and Palestine, and Israel’s decision to increase settlement activity will likely undermine hopes for progress in rekindling stalled peace talks when President Obama’s Middle East Envoy, George Mitchell, visits Israel next week.

5. Last week’s presidential elections in the West African state of Gabon sparked violence after the ruling party candidate, Ali Ben Bongo, claimed victory. Bongo’s father, Omar Bongo, had been Africa’s longest serving ruler, presiding over Gabon since 1967. Under his rule, Gabon’s oil and wood resources were used to expand his personal wealth.  At the time of his death, he was under investigation by the French government, which had identified 39 properties, 9 cars, and more than 70 bank accounts owned by the dictator in France alone. Sunday’s announcement that Ali Ben Bongo had won a plurality of the vote to win the presidency sparked unrest by the supporters of his two rivals, former interior minister Andre Mba Obame and opposition figure Pierre Mamboundou, each of whom received approximately 25 percent of the vote. Supporters of Obame and Mamboundou targeted the French embassy and facilities owned by foreign oil companies. But according to the French government, the election “took place in acceptable conditions.”

Assessing the G20

The G20 summit has now concluded with a final communiqué outlining the common points of agreement between participants. The blogosphere has already parsed the outcomes, and the reviews are decidedly mixed. The meeting failed to create of a stricter system of global financial regulation; nor did it establish global stimulus package, two of the most important (and admittedly the most controversial) items on the agenda.

According to the Baseline Scenario emerging markets (like China, India, and Brazil) were the big winners, as the Europeans lost control of the International Monetary Fund’s managing director position. Most observers, however, were much more sanguine. Blogging for Foreign Policy, David Rothkopf described the meeting as important for its symbolism but falling short in substance.  Paul Krugman generously described the outcome as “better than I expected,” pointing to the increase in funding for the IMF.  And Dani Rodrock called the outcome “a glass half full.”

But in the Financial Times, Chris Giles notes that the G20’s communiqué likely overstates the actual increases in funding for the IMF. While Barack Obama and Gordon Brown were touting the $1.1 trillion in new funding for the IMF, the actual figure was probably far less than that…probably closer to $100 billion, according to Giles.

In reality, the final outcome of the G20 summit probably will do little to address the global economic crisis. As Clive Crook concludes,

In the longer term, it matters even more that the governments of some huge and (until recently) fast-growing economies, such as Brazil, China, and India, are being given a bigger voice…Valuable as entrenching the G-20 and reviving the IMF may be, though, the most urgent need at this summit was to deal with the immediate danger of a worsening global slump. Designing a coordinated fiscal stimulus to expand global demand, keep people at work, and relieve the pressure for competitive devaluation and new trade restrictions — the means by which governments traditionally try to export their unemployment — was the prize that mattered most.

While Brazil, China, and India will almost certainly garner greater influence in the international financial institutions as a result of the shift, such a shift was likely to occur with or without the summit. China’s $2 trillion is U.S. dollar-denominated assets makes it a critically important player in international economic discussions.  And its suggestion of moving away from the U.S. dollar as the global reserve currency demonstrates its willingness to use its position to influence international talks.

Will the G20 Bust?

The G20 is meeting in London tomorrow. It is supposed to address the ongoing global economic crisis. But there appears to be some widespread disagreement between its members over how precisely to do that. Germany and France are pushing for stricter financial regulation. The United States wants Europe to commit more money to their economic stimulus efforts. Argentina, Brazil, South Korea, and China want a greater say in the international financial institutions.

Not surprisingly, the blogosphere is alive with discussion of the G20 spectacle. France’s threat to walk out of the G20 meeting unless agreement is reached on “key issue” of offshore tax havens was greeted with ridicule by Dani Rodrik. Gideon Rachman argues that the G20 is focusing on the wrong issues; that unless the problem of toxic assets in the banking sector is addressed, no financial stimulus or regulatory changes can be successful. Alex Evans and Rob Elliott both argue that the G20 should not forget the environment in their discussions.

And Daniel Drezner, who always seems to be at the forefront, has already leaked the G20’s final communiqué, the Miracle of London, in which all the G20 parties get everything they want, thereby resolving the world’s economic crisis and achieving the goals of Security Council reform and concluding the Doha Round in one fell swoop—okay, this was an April Fool’s gag, but a good one!

But back in the real world, I’m suspicious that the G20 will not be able to produce any real agreement. The problem is that, despite his popularity, Obama faces an uphill battle in convincing the other G20 countries that they should sacrifice for his program. As Clive Crook surmised, Obama’s nice guy image buys only so much goodwill. This is a classic example of the free rider problem. The G20 members are each hoping that the other members will bear the cost of stimulating the economy, saving them from having to do it themselves. At the same time, no single country has the hegemonic position necessary to advance real, fundamental reform of the global financial system. As a result, I believe we are more likely to see piecemeal changes to the international financial institutions. Perhaps the International Monetary Fund will move to an open selection process for its Managing Director. But any real restructuring of financial regulations would depend on closer cooperation between the United States, Europe, China, and other leading financial players. And I don’t see that in the cards. Hegemonic stability theory tells us that the construction of any effective and powerful international regime (such as a global system of financial regulation) requires the existence of a hegemon willing and able to create and enforce norms, and having the economic, technical, and military capacity to do so. The United States was clearly this country after World War II, as was the United Kingdom during the period of Pax Britanica. The overriding question, then, is whether or not the United States (or some other country) plays that role today. Of that, I’m not sure.

Five Stories You Might Have Missed

The world is preparing for the upcoming G20 summit, scheduled to meet in London later this week. While each country is arriving at the meeting with their own objectives, it is clear that the global financial crisis will dominate discussions. In this context, the main issues on the table appear to resolve around three key policy debates: developing a globally coordinated stimulus package, strengthening global financial regulation, and reforming the international financial architecture, particularly the International Monetary Fund. Police are preparing for widespread tens of thousands of protestors accompanying the meeting.

In other news from the previous week:

1. President Barack Obama on Friday announced that the U.S. would expand its commitment in Afghanistan, sending an additional 4,000 troops to train Afghan security forces. The Obama administration is also hoping to refocus the U.S. mission in Afghanistan, moving away from the nebulous mission of national building and democratization and instead focusing on defeating al-Qaeda and Taliban militants operating along the Afghan-Pakistan border. FT blogger Gideon Rachman raises some important questions about the new strategy, pointing out that bringing the fight to al-Qaeda militants in Pakistan may well undermine the stability of Pakistan—an ultimately self-defeating strategy, he argues.

2. After struggling for weeks to secure a coalition government, incoming Israeli Prime Minister Benjamin Netanyahu was able to convince their center-left rival, the Labour party, to join a new coalition government on Tuesday. Netanyahu hoped to bring the center-left Labour party into the coalition in order to avoid allying with a number of far right parties and running the risk of souring relations with the U.S.  Nevertheless, the new government raises concerns among many Palestinian leaders about the future prospects of the peace process.

3. The medical journal the Lancet offered a powerful criticism of Pope Benedict’s recent speech during a trip to Cameroon and Angola. During the visit earlier this month, the Pope claimed that condom use increased the prevalence of AIDS on the continent. After the World Health Organization and other AIDS experts attacked the claim, the Vatican last week issued a statement that reasserted the Pope’s claim that condom use was both ethically wrong and actually exacerbated the AIDS crisis. The condom/AIDS debacle is just the recent in a series of missteps and controversies that have plagued the current Pope. In February, he lifted the excommunication of four ultra-conservative clerics who denied the holocaust. And in 2006, he quoted a fourteenth century emperor who characterized Islam as “evil and inhumane.”

4. On a Thursday press conference with British Prime Minister Gordon Brown, Brazil’s President Luiz Inácio Lula da Silva told reporters, “This [current global economic] crisis was caused by the irrational behaviour of white people with blue eyes, who before the crisis appeared to know everything and now demonstrate that they know nothing…I do not know any black or indigenous bankers so I can only say [it is wrong] that this part of mankind which is victimised more than any other should pay for the crisis.” Brown immediately sought to distance himself from the comments. But the comments underline the potential difficulty of securing agreement at the upcoming G20 meeting, in which Argentina and Brazil will be pushing for reform of the international financial institutions and campaigning against protectionist policies in the developed world.

5. German Chancellor Angela Merkel cautioned against excessive stimulus spending in Europe while at the same time calling on China to expand its stimulus package in an effort to address the global financial crisis. In an interview given in anticipating of the upcoming G20 summit, Merkel argued that the current crisis was caused, in part, by policies which facilitated unsustainable growth with too much money. She argued it was necessary to avoid repeating those mistakes in the recovery. Spain’s finance minister, Pedro Solbes, on Friday said that Spain would not be able to expand its own stimulus spending, fearing that excessive national debt would undermine future economic prospects.

Five Stories You Might Have Missed

It was a busy week for the U.S. Federal Reserve. Addressing a meeting of bankers on Friday, the Chair of the U.S. Federal Reserve, Ben Bernanke, called on legislators to address the need for regulatory reform of global financial markets. On Wednesday, the Federal Reserve undertook announced new plans intended to improve the position of the U.S. credit markets. With the federal funds rate remaining near zero percent, the Federal Reserve has been forced to turn to a program of qualitative easing, under which it purchases mortgage-related securities, removing them from the market and expanding the amount of cash in circulation. It is coordinating policy with the central banks of England, Japan, and Switzerland. But the dramatic move carries a number of risks, including the introduction of high rates of inflation and a decline in the value of the dollar

In news from outside the United States last week:

1.  A two-day meeting of the European Union last week produced a number of important outcomes, including a commitment to increase the E.U.’s contribution to the International Monetary Fund by €75bn. The European Union also staked out its position on reforming global financial market regulation, the focus of an upcoming G20 meeting in April. Current speculation is that the meeting of the G20 will likely pit Germany and France, which favor stricter regulation, against the United States and China, with the United Kingdom falling somewhere in the middle. However, all sides are currently playing up the likelihood of compromise.

2. On Saturday, the Abhisit Vejjajiva’s government in Thailand survived a no confidence motion in the national legislature. Vejjajiva has been in office for only three months, but has been under fire nearly the entire time, as Thailand has been plagued by political and economic instability compounded by declining exports, part of the impact of the global economic crisis. 

3. On Thursday, the government of China announced it would step up naval operations in the South China Sea, specifically targeting the disputed Spratly Islands. The Spratly Islands are claimed (in whole or in part) by at least six countries, including Brunei, China, Malaysia, the Philippines, Taiwan, and Vietnam. The announcement comes after a standoff between U.S. and Chinese naval vessels earlier this month, when the U.S. accused China of harassing a U.S. naval vessel operating in the South China Sea. China maintains the vessel was operating illegally in Chinese waters.

4. Israeli President Shimon Peres last week granted Likud party leader Benjamin Netanyahu two more weeks to form a coalition government. Netanyahu’s right-wing Likud party was named by Peres as formateur party after extremely close restuls in national elections earlier this month.  Netanyahu has the option of forming a coalition with a group of far-right and religious parties, but has been seeking to form a more centrist coalition with either Ehud Barak’s Labour party or Tzipi Livni’s Kadima party. A more centrist coalition, Netanyahu believes, would be better positioned to avoid potential clashes with the United States. But both Labour and Kadima remain hesitant to join a coalition government with Likud.

5. Andry Rajoelina was sworn in as the new president of Madagascar on Saturday. Brought to power under the auspices of a military rebellion, Rajoelina committed the new government to routing out the corruption of the previous regime and to re-establishing democracy within two years. But may observers remain skeptical. On Friday, the African Union suspended Madagascar from the organization, many donors have announced they will freeze aid, and the United States

And a bonus story this week:

6. A standoff between farmers and the government in Argentina last week threatens global food markets. Farmers are angry about the imposition of a 35 percent duty on soya exports and bans on export of some other food commodities. A similar standoff last year resulted in nationwide strikes and export bans. The standoff in Argentina has the potential to influence global food prices, as Argentina is one of the word’s largest food exporters—second only to the United States. China is the largest consumer of Argentinean soya exports.

Five Stories You Might Have Missed

The G20 (which actually has 22 states attending this year) met this weekend in London. The ongoing economic crisis, of course, dominated discussions. The meeting produced a communiqué in which the states commit themselves to restoring financial growth and strengthening the global financial system. Discussions were dominated by several important divisions between the member states, particularly between the developed and developing countries (largely over reform of the International Monetary Fund) and between the United States and Europe (over the urgency and scope of economic stimulus efforts). In the end, the only real, concrete policy initiative was the agreement to enlarge the membership of the Financial Stability Forum to include all G20 members. Created in the aftermath of the 1997 Asian Financial Crisis, the FSF monitors the global financial system and coordinates policies between the international financial institutions.

In news from outside the G20 meeting:

1. On Friday, Chinese Premier Wen Jiabao expressed concern over the mounting U.S. deficit and the future stability of the U.S. economy. The Chinese government currently holds an estimated 70 percent of its $2 trillion foreign exchange reserve in dollar-denominated assets and is the single-largest buyer of U.S. Treasury Bills. A decline in the value of the U.S. dollar therefore threatens China’s massive reserves. But while the Premier is pressuring the U.S. to ensure the stability of its currency, Luo Ping, the director general of the Chinese Banking Regulatory Commission, reassured the U.S. government (and dollar markets more generally), that the investment in the dollar remains the “only option” for Chinese foreign reserve holdings.

2. Secretary of State Hillary Clinton, fresh off her trip to the Middle East and Europe, will be visiting Mexico later this month to discuss the crisis resulting from the growth of drug cartels in the country. The U.S. and Mexico already have an ongoing anti-drug effort (currently valued at approximately $750 million). However, the effort has not been successful in curbing the growing influence of the cartels, and many observers fear that Mexico may fall to the cartels. The situation in Mexico has become so stark in recent weeks that the U.S. State Department has issued a travel advisory, and the U.S. Joint Forces Command has begun gaming exercises based on the assumption that Mexico could undergo a “rapid and sudden collapse.”

3. The deepening political crisis in Pakistan continues. Over the last week, the government has increased its crackdown on opposition party members, which they accuse of attempting to undermine Pakistan’s fragile parliamentary democracy. A series of nationwide protests led by many of the country’s lawyers has been demanding the “restoration of democracy and the rule of law.” On Sunday, the government placed Nawaz Sharif, leader of the Pakistan Muslim League-Nawaz, under house arrest and attempted to block protests in Islamabad, the country’s capital.

4. On Tuesday, Madagascar’s the army gave the country’s president, Marc Ravalomanana, a 72-hour ultimatum to resolve the ongoing crisis or resign from office. Madagascar has been suffering from an economic malaise due the collapse of the vanilla market, Madagascar’s main export. While the country has begun to attract foreign investment, Madagascar remains incredibly poor, with a GDP per capita of just $330, and inequality between rich and poor remains very high. Ravalomanana remains defiant. On Saturday, he addressed his supporters to say he would not be resigning.

5. In a new statement released on Saturday, Al Qaeda leader Osama bin Laden warned Arab leaders against cooperating with the West and renewed calls for his followers to prepare for jihad. Bin Laden singled out Egypt, Jordan, and Saudi Arabia, as countries headed by leaders that “have plotted with the Zionist-crusader coalition against our (Muslim) people.” Bin Laden also made reference to the recent conflict between Hamas and Israel in Gaza, describing it as a “holocaust.”