Economic Outlook: G20 supplants G8
Senior U.S. government officials said the Group of 20 nations will eclipse the Group of 8 as the official forum for international economic policy decisions.
Officials said President Barack Obama will make an announcement Friday that the elite eight — Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States — that was formed in 1975 will continue to meet, but only to discuss international security matters, The New York Times reported late Thursday.
But economic times have changed in 35 years and those changes went into overdrive with the subprime mortgage crisis in the United States that triggered the Great Recession nearly two years ago.
Emerging nations, like China, Brazil, and India, less affected by the financial system meltdown — but clobbered in varying degrees by the recessions — have been seeking greater say on economic policy on the world stage, including a greater voting presence at the International Monetary Fund.
The United States, meanwhile, is seeking to correct an enormous trade imbalance in which developed nations with high standards of living watch manufacturing jobs and profits move to countries with subsidized raw materials and cheap labor.
At the G20 meeting winding up in Pittsburgh Friday the agenda was already full, and the pressure to produce was cranked up to high. The 27 member states of the European Union came prepared with a consensus agreement on bankers’ compensation. The United States is focused on improving capital requirements for banks to prevent, if possible, a repeat of the fiscal crisis of the past two years.
Lost in the shuffle, the Times said, would be the issue of when to wind down from the financial measures governments put in place to prop up markets. But,
we are not going to walk away from the worst financial crisis since the Great Depression and leave unchanged and leave in place the tragic vulnerabilities that created this crisis, U.S. Treasury Secretary Timothy Geithner said.
On Thursday, Geithner handed China a compliment.
You will see they have made a very substantial effort to increase domestic demand, he said.
Is this the carrot and the stick? China and Brazil arrived at the meeting ready to talk about open trade in a union city where job protection sounds frequently like protectionism.
But Obama pulled out the stick two weeks ago, announcing a tariff on Chinese tires.
Was that a negotiating strategy or a line in the sand?
With Obama’s move on the tire tariffs, the hypocrisy on trade pledges is really quite apparent. I would expect the other countries to beat up on the U.S., and they deserve it, C. Fred Bergsten, director of the Peterson Institute for International Economics told the Times.