Rhein on Energy and Climate

In the aftermath of the first oil crisis, 1975, the French President Giscard d`Estaing had the clever idea to invite the heads of government of what were then the major economic powers – USA, Japan, Germany, UK and Italy – to an informal fire chat at Rambouillet Castle to discuss about the global economic system. This meeting laid the foundation for more than 30 years of annual summitry in ever-widening fora: G6, G7 and G8, comprising today EU, Germany, France, Italy, UK, USA, Canada, Japan and Russia.

As time went on, these summits have developed into a ritual with months-long preparations by personal “sherpas”, photo opportunities, huge press attendance and a 10-20 pages final communiqué. The number of participants has steadily increased, while the impact on global affairs declined, largely because the eight countries became less and less representative of the global economy.

For practical work, the G 8 has been more and more eclipsed by the G 20, formally launched in 1999 in Berlin. It also meets annually, but more business-like and with little publicity, at the level of finance ministers and central bank governors.

Its 20 member countries ( USA, Canada, Mexico, Brazil, Argentina, EU, France, Germany, Italy, UK, Turkey, Russia, South Africa, Saudi-Arabia, India, China, Indonesia, Japan, South Korea and Australia) represent some 75 percent of the global population and almost 90 percent of the global product. It is neither a rich men’s club nor a lobby for the poor. Democratically elected ministers and their colleagues from rather autocratic regimes share the same table. The 20` thus constitute a balanced mix of today’s world. Thanks to their economic weight, their expertise of global issues and the number of people they represent, the
G 20 members have economic clout. What they decide has a bearing for the international community, even if their decisions do not bind the 175 odd other countries on earth.

Thus, if the G 20 is determined to bring the Doha Trade Round to a successful end or to negotiate an effective international agreement on climate change, they will be able to take the rest of the international community along.
Of great importance presently, they wield the tools for an adequate monitoring of international financial markets.
As a group, they have failed for not imposing adequate supervision on their banks and insurance companies and preventing the present financial crisis.

It was therefore wise for the US President to invite the presidents/prime ministers and finance ministers of the G 20 to Washington, November 22-23, 2008 to debate the serious situation of global financial markets and the world economy.

There will be a concrete follow-up: The finance ministers and central bank governors will prepare concrete proposals for more effective management and supervision of national and international capital markets, to be approved by another summit meeting to be held in London, April 30, 2009.

The time has come for the G 20 to take over from the G8. There is no room for two summits every year, one grouping the wealthy industrial countries and another encompassing all the key players in tomorrow’s global economy, in particular China, India, Brazil, Saudi-Arabia, Indonesia and South-Korea, which have increasingly felt slighted by the G8.

Unlike the G8, the G20 can have a decisive influence on the world economy. It could hopefully develop into an informal “Economic Security Council”, allowing the G 20 leaders to regularly assess the major global issues, like monetary and fiscal policies, balance of payments problems, demographic, energy and climate issues. Meetings in this wider circle should help build mutual confidence and prevent tensions and conflicts. Any decisions would, of course, have to be taken by consensus.

In its capacity as G 8 Chair, the UK will convene the follow-up meeting in London, April 30, 2009. It should wisely decide not to hold another G 8 meeting two months later. The G8 should simply become obsolete.

This institutional reform should go along with two more changes in global governance, which are overdue:

• OECD and IEA should expand their membership to all G 20 member countries. OECD and IEA would become more influential if countries like Brazil, China and India, representing one third of humanity, were to share their analyses and recommendations.

• The EU should no longer take five seats (EU, France, Germany, Italy, UK) in the G 20, but only one, to be shared among the Presidents of the European Council and the Commission. According to the Lisbon Treaty, the EU will have to streamline its external representation anyhow. This will enable it to finally speak and act with one voice, and force all member countries to devote much more hard work to defining common EU positions, as has been practiced for more than 40 years in trade negotiations.

The EU can no longer eschew the issue of international representation, however painful it will be for the “big” member countries. Considering its demographic and economic weight in the world, it can simply not claim five of the twenty G 20 “seats”. The sooner the EU will adjust to the shifting realities at global level, the better: it will put an end internal jealousies with Spain or Poland about the proper representation and open the way for third country contenders, e.g. Egypt or Bangladesh, to join the G 20 in due time.

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