The G20 (or Group of Twenty) is an international forum for the governments and central bank governors from 19 countries and the European Union (EU).
- Founded in 1999 with the aim to discuss policy pertaining to the promotion of international financial stability, the G20 has expanded its agenda since 2008 and heads of government or heads of state, as well as finance ministers and foreign ministers, have periodically conferred at summits ever since. It seeks to address issues that go beyond the responsibilities of any one organization.
- Membership of the G20 consists of 19 individual countries plus the European Union. The EU is represented by the European Commission and by the European Central Bank.
- 20 members of the group: Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States. Spain is a permanent guest invitee
- The heads of the G20 nations held summits twice in 2009 and twice in 2010. Since the November 2011 Cannes summit, G20 summits have been held annually.
Significance of G20
- Collectively, the G20 economies account for around 90% of the gross world product (GWP), 80% of world trade (or, if excluding EU intra-trade, 75%), two-thirds of the world population, and approximately half of the world land area.
- The G20 is the latest in a series of post–World War II initiatives aimed at international coordination of economic policy, which include institutions such as the “Bretton Woods twins”, the International Monetary Fund and the World Bank, and what is now the World Trade Organization.
- Because the G-20 is a forum, its agreements or decisions have no legal impact, but they do influence countries’ policies and global cooperation.
History and Genesis
- The G20 was foreshadowed at the Cologne summit of the G7 in June 1999, and formally established at the G7 Finance Ministers’ meeting on 26 September 1999 with an inaugural meeting on 15–16 December 1999 in Berlin.
- In a meeting of finance ministers and presidents of central banks of the G7, it was decided to expand the group and make it more representative in order to generate policies that have an impact in the economy.
- They decided to invite a group of key emerging economies to a new forum of finance ministers and presidents of Central Banks, which would later become the G20.
- the G20 was conceived in response to the series of massive debt crises that had spread across emerging markets in the late 1990s,
- beginning with the Mexican peso crisis and
- followed by the 1997 Asian financial crisis,
- the 1998 Russian financial crisis, and eventually impacting the United States,
- most prominently in the form of the collapse of the prominent hedge fund Long-Term Capital Management in the autumn of 1998
- In a rapidly globalizing world, the G7, G8, and the Bretton Woods system would be unable to provide financial stability, and G20 was conceived as a new, broader permanent group of major world economies that would give a voice and new responsibilities in providing it.
G20 work methodology
- The G20 agenda is annual and includes more than 50 meetings, enhanced by working groups and discussions between permanent members and guests.
- The cycle concludes with the Leaders Summit, where a final declaration is signed by which the leaders commit themselves to address and collaborate on the issues addressed.
- For example: At the Hamburg Summit in 2017, the leaders agreed to limit protectionism, commit to a system of regulated international trade and favor policies that spread the benefits of globalization.
- There are 2 working channels of G20
- Finance Channel and
- Sherpas Channel
G20 Agenda-Main focus Areas
A) Financial focus
- The initial G20 agenda, as conceived by US, Canadian and German policy makers, was focused on the sustainability of sovereign debt and global financial stability, in an inclusive format that would bring in the largest developing economies as equal partners.
- During a summit in November 2008, the leaders of the group pledged to contribute trillions to international finance organizations, including the World Bank and IMF, mainly for reestablishing the global financial system.
- Since inception, the recurring themes covered by G20 summit participants have related in priority to global economic growth, international trade and financial market regulation
B) Inclusive growth
- Traditional topics include the global economy, financial markets, fiscal affairs, trade, agriculture, employment, energy and the fight against corruption.
- After the adoption of the UN Sustainable Development Goals and the Paris Climate Agreement in 2015, more “issues of global significance” were added to the G20 agenda: migration, digitization, employment, healthcare, the economic empowerment of women and development aid.
- Other recent additions include participation of women in the labor market, sustainable development, global health, fight against terrorism and inclusive ventures, among others.
C) Interrelated themes
- the interconnected nature of the issues facing G20 nations, be they purely financial or developmental, and the need to reach effective, cross-cutting policy measures
- Globalization has lifted hundreds of millions out of poverty, but there is also a growing rise in frustration in some quarters
Impact of G20
The G20 is the most important forum for international cooperation. During the meetings, the main challenges of the world are discussed and the main policies are coordinated at the global level.
- In the face of an uncertain international context, international cooperation is key, and thus the G20 acquires even more relevance.
- G20 has led to an increased participation of emerging countries in global issues, through
- Reform of international financial institutions,
- Monitoring of national financial institutions,
- Improvement in the regulations of the economies whose problems led to the crisis and the creation of safety nets to prevent problems in the future.
- The G20 also specifically helped to provide emergency funds during the 2008 crisis and plays an important role in financing for development.
- To increase the scope and impact of the G20, and to ensure that the approach is truly global, the main international organizations are invited to participate in the meetings and the Leaders’ Summit.
- The G20 seeks to enrich the content of its dialogues by encouraging the participation of civil society through affinity groups.
- Each of them focuses on an issue of global importance and meets independently throughout the year. From the dialogue in the various meetings, each group delivers a series of recommendations to the G20.
- Although the G20 has stated that the group’s “economic weight and broad membership gives it a high degree of legitimacy and influence over the management of the global economy and financial system”, its legitimacy has been challenged.
A) Exclusivity of membership
- G20’s exclusivity, particularly its underrepresentation of African countries and its practice of inviting observers from non-member states as a mere “concession at the margins”, which does not grant the organizationrepresentational legitimacy.
- Condemned an “organizational mess” in which a few European leaders speak in the name of all the EU without legitimate authorization in cases which belong to the European Commission.
B) Accused of undermining other Legitimate International Organizations
- The G20 is a self-appointed group. Its composition is determined by the major countries and powers. It may be more representative than the G7 or the G8, in which only the richest countries are represented, but it is still arbitrary.
- G20 undermines the legitimacy of international organizations set up in the aftermath of World War II, such as the IMF, World Bank and United Nations
C) Ineffective and Poor efficiency
- With the effects of the Great Recession still ongoing, G20’s efforts to implement reforms of the world’s financial institutions, have been criticized to being ineffective
- The G20’s prominent membership gives it a strong input on global policy despite lacking any formal ability to enforce rules.
- There are disputes over the legitimacy of the G20, and criticisms of its organization and the efficacy of its declarations.
D) Transparency and accountability Issue
- The G20’s transparency and accountability have been questioned due to the absence of a formal charter
- Most important G20 meetings are closed-door.
E) Protests and Cost Issues
- The cost and extent of summit-related security is often a contentious issue in the hosting country, and G20 summits have attracted protesters from a variety of backgrounds, including information activists, opponents of fractional-reserve banking and anti-capitalists.