“So under my presidency, I intend our country to promote the imperative of better global governance. The financial and economic crisis has shown the current institutions’ limitations. The G20, which had allowed us to respond urgently to the banking crisis, must again reflect on its role, because we’re a long way from the essential financial regulation.”
François Hollande, President of the Republic - Paris, 27 August 2012
A. Why the G20?
The G20 was established in 1999 in response to the financial crises in the emerging countries at the end of the 1990s. It was originally conceived to bring together, once a year, the finance ministers and the central bank governors of the industrialized countries and the emerging countries in order to facilitate international cooperation in the economic field.
Faced with the most serious economic and financial crisis since the Second World War, the G20 was transformed at the end of 2008, at the instigation of France, which held the presidency at the time, into an economic steering authority, bringing together the major public decision-makers at the highest level. During the founding summit in Washington in November 2008, the heads of State and government reached an agreement on an exceptional action plan to prevent the collapse of the financial system and the global economy.
Since then, the G20 has met on a regular basis: London in April 2009, Pittsburgh in September 2009, Toronto in June 2010, Seoul in November 2010, Cannes, under French presidency from 3-4 November 2011, and Los Cabos, Mexico, from 18-19 June 2012. The next G20 summit will be held on 5 and 6 September 2013 in St. Petersburg, under Russian presidency.
Although it is an informal organization (the G20 is not an international organization, but a forum for meetings and collective decisions), it has become the primary forum for economic and financial cooperation aimed at ensuring world growth based on sound, solid foundations.
B. Who are the members of the G20?
G20 countries account for 85% of global output and two thirds of the global population. It is made up of South Africa, Germany, Saudi Arabia, Argentina, Australia, Brazil, Canada, China, South Korea, the United States, France, India, Indonesia, Italy, Japan, Mexico, the United Kingdom, Russia, Turkey and the European Union.
Each year, the members of the G20 have the option of inviting a limited number of other countries (5 in principle, including Spain which is a permanent guest) and regional organizations to their summits.
In order to successfully complete its work, the G20 relies on the technical expertise of the international organizations, notably the International Monetary Fund (IMF), the World Bank, the Organization for Economic Cooperation and Development (OECD), the International Labor Organization (ILO), the World Trade Organization (WTO), the United Nations (UN) and the Financial Stability Board (FSB).
C. How does the G20 function?
The G20 is based on an annual rotating presidency system that is not very formalized. Each year, a G20 member country is responsible for organizing and furthering preliminary negotiations for the summits of the heads of State and government throughout the year. France had the honor of assuming this responsibility for 2011, Mexico for 2012. Russia assumes the rotating presidency from 1 December 2012 and during the first 11 months of 2013, before Australia takes over in 2014, and then Turkey in 2015.
Under the “Troika” system, which was introduced following the Cannes summit, the incumbent presidencies work with the immediate past and future presidencies to develop the agenda of the preparatory meetings and the summit.
The decisions of the heads of State and government are prepared by their personal representatives (“Sherpas”) and also by the finance ministers and the central bank governors (“financial” sector). The Sherpas and the finance ministers meet on a regular basis.
The Sherpas and the ministers also coordinate the work of several thematic groups (development, the fight against corruption, food security, etc.). These working groups are not permanent: each presidency can choose to continue them or not. Each group is co-chaired by two member countries of the G20. France has notably co-chaired the Working Group on “Development” since its creation.
The presidency of the G20 can also organize specialized thematic meetings. Accordingly, in 2011, France organized a G20 of labor and employment ministers and a G20 of agriculture ministers. The Mexican presidency also brought the employment ministers together and for the first time organized a meeting of the G20 foreign ministers from 19 to 20 June 2012.
D. Opening up of the G20 to civil society
During the course of successive presidencies, several initiatives have been introduced in order to complement the actions of the leaders and to give the G20 increased visibility and raise its profile among civil society. These initiatives are usually referred to as outreach initiatives. They are directed toward different categories of the population: the Youth G20 (Y20), bringing together students from the 20 countries and the invited countries, the Business G20 (B20), bringing entrepreneurs together, Labour 20 bringing trade unions together, Civil 20 (G20 of the NGOs), the T20 (G20 of the think tanks).
The results of these parallel meetings are generally taken up to the level of the leaders’ summit, whether through meetings, reports or recommendations.
In addition, the presidency has considerable freedom to organize high-level conferences, seminars and meetings on the G20 priorities during the year.
A. The results of the G20
The concerted action of the G20 has allowed us to mitigate the effect of the growth and employment crisis and restore confidence sooner than forecast by analysts.
Indeed, the G20 countries have found new ways to support the global economy: massive and coordinated fiscal stimulus plans, injections of liquidity by the central banks, measures to support banks’ credit activities, considerable strengthening of the capacity of international organizations to provide assistance to emerging or developing countries.
However, the G20 has also tackled the root causes of the crisis: the accumulation of global macroeconomic imbalances and financial regulation failures. To reduce global imbalances, the G20 created a “framework for strong, sustainable and balanced growth,” to refocus national macroeconomic strategies in a direction that is more favorable for the world economy. This framework is reviewed and updated every year at the summit.
The G20 reached an agreement on an unprecedented financial regulation plan, commensurate with the scale of the financial crisis. The scope of monitoring and financial surveillance was expanded to include high-risk players, products, activities and behaviors that until now were subject to little or no supervision within the sector.
Finally, the G20 has brought about in-depth change in terms of economic decision-making methods at the global level, in particular by reforming the governance of the IMF and the World Bank.
Beyond the coordinated response to the crisis, which inspired its creation, the G20 is a unique consultation forum, bringing together developed countries and emerging countries, and allowing a dialogue that goes beyond “bloc-wide” positions.
B. The Mexican presidency of the G20
Mexico assumed the presidency of the G20 from 1 December 2011 to 1 December 2012, following on from the French presidency.
The G20 Summit took place in Los Cabos (Baja California, Mexico) from 18 to 19 June 2012. In addition to the G20 members, Mexico invited to the summit Spain (a permanent guest of the G20), Chile, Colombia, Benin, as president of the African Union in 2012, and Cambodia, as president of ASEAN.
In the context of the economic crisis and the debt crisis, the G20 heads of State and government sent out in Los Cabos a message of unity in support of growth and employment, while reaffirming their budget consolidation commitments. This collective responsibility is reflected in the adoption of the Los Cabos Growth and Jobs Action Plan. This plan contains a package of economic policy measures which update the G20 Cannes Summit Action Plan.
In line with the work begun under French presidency of the G20, the response to the economic crisis addresses issues relating to employment and social protection, notably youth employment. The leaders also reaffirm the priority given to implementing social protection floors in developing countries.
From a financial perspective, international firewalls have been strengthened in order to avoid any risk that the financial crisis may spread. IMF resources have been increased by $456 billion. The IMF’s lending capacity has thus been doubled thanks to new contributions from 37 countries.
Efforts to implement the G20 financial regulation commitments are continuing, notably with respect to the regulation of traders’ salaries and the prudential regulations of banks. The Financial Stability Board, created at the instigation of the G20 to strengthen the financial regulation systems, was endowed with a legal personality, improved governance and greater financial autonomy. The fight against uncooperative jurisdictions was strengthened and anti-money laundering practices were reviewed.
With respect to trade, the G20 members reaffirmed their rejection of any protectionist measures.
Lastly, the Los Cabos Declaration recognizes the importance of development for strong, inclusive, sustainable and balanced growth. It addresses the 3 priorities established by the Mexican presidency: food security, notably through the work undertaken on the commodity markets to combat price volatility, infrastructure, green and inclusive growth. The Los Cabos Declaration emphasizes balance between the three pillars of sustainable development (economic, social and environmental) and includes a commitment to continue the work on green and inclusive growth in light of the results of Rio+20 and the work on climate.
The G20 would like to strengthen its collaboration with the United Nations, a forum with universal membership (the “G192”). During its presidency, France paid particular attention to the complementarity between the G20 and the United Nations and wanted to build bridges between these two bodies, with the aim of strengthening the United Nations. The Mexican presidency continued the action of the G20 to that end.
Certain advances made by the G20 have been integrated into the work of the United Nations, notably in the resolutions adopted at the 66th General Assembly (the need for multilateral and bilateral supervision of the banking system; the issue of youth unemployment; the importance of implementing social welfare floors and the promotion of decent work; the consensus relating to the abolition of export restrictions on World Food Program humanitarian purchases; endorsement of the Agricultural Market Information System project; concerns about price volatility on food markets.
19 June 2012 - Los Cabos Growth and Jobs Action Plan
4 November 2011 – Cannes Action Plan for Growth and Jobs