Recalcitrance in ratifying IMF reform, hostility in Congress and geopolitical pressure over Ukraine may undermine the United States’ contribution to the G20’s process, assesses the US’s Bill Clifford.
The need for international economic cooperation has not diminished since the G20 first coalesced to help preserve a stable, open-world economy following the global credit crisis. But now, persistently high unemployment rates, the Ukraine crisis, environmental threats and rapid technological change call for even more engaged, collaborative leadership.
A focus on economic growth
The US views the Brisbane Summit as an opportunity to focus collectively on creating jobs and reversing sluggish growth: fitting goals for a G20 that President Barack Obama hailed for the “premier global economic forum.” The pledge to “develop ambitious but realistic policies” to raise collective GDP by more than two per cent over the next five years is critical. If achieved, US$2 trillion in additional economic output would spur jobs for millions of young people. The challenge is to produce detailed plans to turn ambition into reality, and to spell out consequences if the growth target is missed.
A prognosis for the US economy
While the American economy is strengthening, Obama is not complacent: his budget posits accelerated growth by investing in advanced manufacturing, infrastructure, job training, preschool and pro- work tax cuts. It aims to tame the national debt with tax hikes on the rich as well as healthcare and immigration reforms. But Republican opposition in Congress promises a mid-term election year debate that could impact the US part in a coordinated G20 effort to maximise growth.
Promoting international trade is critical to any growth strategy, and G20 credibility suffered with minimal progress in the Doha Round. Meanwhile, Obama seeks regional deals – the Trans-Pacific Partnership pact with Asia and a separate one with the EU. Yet the toughest obstacle is domestic: Obama’s fellow Democrats. Many say the deals undermine income inequality, and they don’t want to promote them in an election year.
Shared aspirations, shared concerns
As for monetary policy, G20 central bankers remain generally accommodative. Federal Reserve Chair Janet Yellen signaled a measured reduction in the pace of the US bond-buying program to help the economy return to full employment and targeting inflation at two per cent. The G20 Finance Meeting also maintained momentum on combating tax base erosion and evasion. Also, a greater effort to involve developing countries becomes important because as they strengthen their revenue-raising capacity growth prospects will brighten.
Of course, US failures have inhibited G20 effectiveness too. It is the only member yet to fulfill its 2010 commitment without IMF quota reform. At issue is a marginal adjustment in IMF shareholdings to reflect the size of developing economies, and it would increase funds available to stanch crises. Legislation to enact the quota reform should be a priority, especially now as the IMF is set to play a key role in aiding Ukraine. Ironically, the US is undercutting its ability to lead in Ukraine negotiations without it.
Bill Clifford isPresident and CEO, World Affairs Councils of America.
This is an extract from G20: Words into Action Brisbane 2014, to be published by Faircount Media in association with the Australian Institute of International Affairs in October 2014.