BRIC NATIONS GROW WEARY OF G20 RHETORIC / THE FINANCIAL TIMES GLOBAL INSIGHT ( HIGHLY RECOMMENDED READING )

Bric nations grow weary of G20 rhetoric


By Alan Beattie in Washington

Published: October 20 2010 19:34

If there is one consistent cliché in the cloud of platitudes that billows forth about the tremendous importance of the G20, it is that the grouping gives big emerging markets their long-awaited seat at the table.


So it is more than a little disturbing that India, one of the most important of such governments, thinks said table conversation is marked more by sterile dissent than constructive debate. It is even more disturbing that Brazil is prepared to leave its chair empty.






Senior officials from Manmohan Singh’s government told the Financial Times this week that the G20 was in “serious difficulties”, with no agreement on diagnosis. Guido Mantega, Brazil’s finance minister, the man who had the courage to call a currency war a currency war, decided not to attend this week’s meeting of ministers and central bank governors in South Korea at all. And on Wednesday Ali Babacan, Turkey’s deputy prime minister, weighed in with his own concerns that the positions taken by the grouping were sinking to a lowest common denominator.


Brasília insists that Mr Mantega will accompany his boss, Luiz Inácio Lula da Silva, the president, to the heads of government summit in mid-November. But showing such little faith in the planning stage does not inspire confidence in the main event.


If the G20 really is losing credibility with Brazil and India, it is in serious trouble. As a US Treasury official put it: “Brazilian and Indian officials are among those ... that have the most to gain from the G20, and have been its strongest supporters.”


India’s size, and its desire for a counterweight to China in the developing world makes the grouping a natural vehicle for New Delhi to pursue policy. Brazil, having pulled itself out of a death spiral towards sovereign bankruptcy less than a decade ago, has combined orthodox macroeconomic policy with poverty reduction to become one of the most emergent of the emerging markets. An aspirant permanent member of the UN Security Council, a tough and determined negotiator in global trade and climate change talks, Brazil is an essential part of most serious global conversations. If a forum cannot persuade Brazil it is credible, it will struggle to convince anyone else.


More and more, the story of the G20 is beginning to resemble that of the Doha round of trade negotiations and there can be few more insulting comparisons. Both were launched in the immediate aftermath of dislocating crises. The Doha Development Agenda, to give its full title, began in the aftermath of the September 11 2001 attacks. The G20 started as a finance ministers’ grouping after the 1997-1998 Asian financial crisis and became a heads of government affair after the 2008 collapse of Lehman Brothers. Both were supposed to address the needs of emerging markets in the world economy and had Brazil and India as participants in the inner core of negotiations.


But both had exaggerated claims made for their potential impact. Those, such as Gordon Brown, the former UK prime minister, who made a career out of overstating the potential for Doha to boost growth and reduce poverty, simply adapted that rhetoric to the G20, suggesting it heralded a new age of international co-operation. But what countries did reduced the credibility of what they said. Repeated protestations from all sides that Doha was on the brink of a deal were belied by the simultaneous pursuit of bilateral trade deals, particularly by the US and European Union. Similarly, the recent resort to unilateral actions by a string of emerging markets – Brazil, Thailand, Indonesia – to stem currency appreciation betrays a lack of faith that the multilateral process can induce China to increase exchange rate flexibility.


The problem with Doha and the G20 is that they were launched with a general idea of what they wanted to be but a woollier view of what they wanted to do and a conspicuous lack of consensus about how they were going to get there. Neither has managed to bridge stark differences of opinion, whether on how trade can help reduce poverty or on the importance of exchange rate flexibility to reducing global imbalances. When it came to the test, the frothy rhetoric of co-operation has been blown away and what remains standing is a considerably less impressive edifice.


Copyright The Financial Times Limited 2010.