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The G20

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The G20

Should we really expect anything of importance to come out of the G20 meeting this weekend? Or is it really “much ado about nothing”?

The G20 initially started out as the G6 in 1975 following the first oil price shock in 1973 and the subsequent recession in 1974. Canada was invited to join in 1976, expanding the group of major industrialized democracies to the G7. For most of the next 10 to 15 years, the G7 focused on macroeconomic issues, and had some modest success in coordinating policies on a few occasions. As long as there were a small number of members and a narrow focus, the G7 made some sense.

In 1997, Russia joined to create the G8. The G20 began as a meeting only of finance ministers of 19 countries and the EU on December 1999. Since 2008 the G20 meetings have begun to include the leaders of these 19 countries. The membership has expanded well beyond the major industrialized democracies.

When a group expands to include many diverse members and voices, and the agenda expands accordingly to accommodate the interests of every member, the effectiveness of the group seems to diminish exponentially in inverse proportion to the number of members. For example, in the private sector, the most effective boards of directors (this might be an oxymoron) have five to seven members. There must always be an odd number so that there is likely to be a majority vote on every important issue. (The G20 fails this test.) Once the size of the board expands beyond this range, it becomes increasingly less effective.

In the early days of the GATT, when the only issues on the table were the magnitude and speed of reduction of tariffs on industrial products, and the US, Germany, France, the UK and Japan dominated the meetings, negotiations tended to take a short period of time. Of course, outstanding issues always remained, but it was understood that they were to be dealt with at a future round of negotiations.

As the membership of the GATT, now the WTO, increased and the issues became more complex, negotiations dragged on much longer, and the number of outstanding issues seemed to increase. The latest round of multilateral trade negotiations under the auspices of the WTO, the Doha Round, started in November 2001, and the end is nowhere in sight.

The negotiations have stalled over a divide on issues such as agriculture, non-tariff barriers, services, investment and trade remedies. The most significant differences exist between the “developed” nations led by the US, the EU and Japan, and the “developing” nations led by India, Brazil and China. (Canada does not really count in these negotiations.) There also is considerable contention between the EU and the US over agricultural subsidies.

If the WTO with a much narrower set of objectives cannot reach any agreement after nine years and counting, why should we expect the G20 to reach a consensus on any issue in a much shorter time frame? The same protagonists that we find in the WTO are there in the G20.

Furthermore, even if the G20 manages to issue a statement at the end of the meeting, expressing some consensus on an issue, there is little reason to expect any meaningful follow through. Each country faces its own set of problems, and even where there are some similarities in the problems, their approaches are markedly different.

So, does the G20 serve a useful purpose? I really do not know, but I suspect that it no longer does.

The opinions expressed in this blog are personal and do not reflect the views of either Global Brief or the Glendon School of Public and International Affairs.


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