The G-20 Gets Overambitious
Oxford AnalyticaWith economies around the world showing signs of recovery, the G-20 ran the risk of losing momentum and relevance. The Pittsburgh summit was successful in presenting a series of actions that should keep the need for dialogue on global economic coordination firmly in the spotlight.
Global economic framework. The G-20 officially launched a Framework for Strong, Sustainable and Balanced Growth, which is to be formally established on Nov. 6-7 during the G-20 Finance Ministers and Central Bank Governors Meeting. It aims to be a process of mutual assessment of policy frameworks and their implications for the pattern and sustainability of global growth, while trying to identify potential risks to financial stability. Supposedly, G-20 members will agree on shared policy objectives, with the aim of having collectively consistent policies, which receive constant IMF support.
However, it is unclear why such a scheme was launched, unless it aims to support "difficult" domestic policies, under a mantle of global cooperation. The only recent similar arrangement was the "multilateral consultation" on global imbalances, which the IMF launched in 2006, with participation from the United States, China, Japan, the euro-area and Saudi Arabia. This did little to push those consulted to address the problem--rather, imbalances have corrected due to the global financial crisis. It is telling that the IMF has not launched a second multilateral consultation.
Doha test. Successful conclusion of the Doha Round will be seen as one of the first challenges for the Framework. The stated G-20 aim is to conclude it next year, with trade ministers instructed to make significant progress by early 2010. However, the fact that the G-20 stated that it would review progress in its next meeting (in Canada in June) is not an encouraging indication of its expectations for relatively rapid progress.
IMF vote shift. A firm commitment was made to implement a shift in IMF quota shares of at least 5% from advanced to emerging economies by early 2011. This move was approved in 2008, and took several years to negotiate. This will imply a significant surrender of votes for some countries, mostly European. Yet no specifics were offered on the size and composition of the Executive Board, another thorny issue for emerging economies such as Brazil and India.
Strengthening financial regulation. In sharp contrast to the Framework, the G-20 was specific, and realistic, in its aim of strengthening the international financial system. The Financial Stability Board would play a central role implementing proposals to:
--develop internationally agreed rules by the end of 2010 to strengthen the quality of bank capital and mitigate pro-cyclicality, with the aim of implementing them fully by the end of 2012 (if the global economy has recovered fully from the crisis);
--improve over-the-counter derivatives markets, with all standardized OTC derivative contracts traded on exchanges or electronic trading platforms, where appropriate, at the latest by the end of 2012--non-centrally cleared contracts would be subject to higher capital requirements;
--develop internationally consistent firm-specific contingency and resolution plans by the end of 2010 for systemically important financial firms; and
--achieve a single set of high-quality, global accounting standards by mid-2011.
Bonus fudge. On the controversial issue of compensation for bankers, the G-20 adopted principles that bonuses should avoid excessive risk-taking; be aligned with long-term value creation and subject to clawback; and be transparent. More significantly, the G-20 may induce financial regulators to require corrective measures, such as higher capital requirements, to firms that fail to implement sound compensation practices.
Outlook. Even if the G-20 turns out to be something of a symbolic body rather than an organ of power, it should keep the need for global economic coordination in the spotlight. Its aim to spearhead unprecedented global economic cooperation is overambitious and may create excessive expectations. However, the strengthening of financial regulations, due to be implemented during 2010-12, is achievable.
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Labels: G20, Pittsburgh, United States of America
Singapore shoots down "rumor" of APEC attack plot
Singapore has downplayed media reports of a plot to attack an Asia-Pacific summit in the city-state in November, the Straits Times newspaper reported on Monday.
"The rumors are rumors. You check it, if it is unverifiable, you know you can't be chasing after every rumor,' Second Home Affairs Minister K. Shanmugam was quoted by the daily as saying during a mock terrorist attack exercise on Sunday.
The Singapore Police Force and the Ministry of Home Affairs were not available for immediate comment.
An intelligence analyst from the Center for Intelligence and National Security in Indonesia told Reuters last week probes into last month's bombings in Jakarta had uncovered a plot to target the Asia-Pacific Economic Cooperation (APEC) summit in Singapore.
U.S. President Barack Obama and other leaders of the 21-member APEC group will attend the mid-November summit in Singapore, a regional financial center and shipping hub.
The investigation also revealed that terrorists planned to use snipers to attack Obama's convoy during a planned visit to Indonesia around the same time.
Shanmugam said Singaporean authorities took security "very seriously."
"Wherever the President of the United States, or various heads of states visit, you obviously take the appropriate security precautions," he said. "For a small country like us, this is not just an issue of preparing against terrorist attacks, it's creating a mindset and understanding within our population that (in) any kind of emergency, we are all able to respond," Shanmugam said.
Labels: APEC, Obama, Singapore, United States of America
Europe, US split deepens before G20 finance talks
Who will remember the poor countries which the IFIs have pledged to help? They didn't when they could. Now they cannot even save themselves
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World finance chiefs prepared for a ministerial meeting of the G20 leading economies near London on Saturday that threatens to expose deep divisions over how to halt the raging economic crisis.
Just three weeks before a gathering of heads of state from the Group of 20, discord seems to outweigh lip service to coordination and a German-French drive to focus on cross-border rules for finance is further souring the air.
"We have agreed that Germany and France will send a common signal at this summit" on April 2, German Chancellor Angela Merkel said at a joint press conference with French President Nicolas Sarkozy in Berlin.
"The issue is not spending even more but to put in place a regulatory system to prevent the economic catastrophe that the world is experiencing from being repeated," Merkel said in a direct rebuttal to US calls for more spending.
There must be "regulation and transparency of financial markets," she said.
US President Barack Obama, who enacted a 787-billion-dollar stimulus bill last month, tried to bridge the gap on Wednesday, calling for a two-pronged G20 effort to fix the global economy: stimulus measures and regulatory reforms.
But after a meeting of eurozone finance ministers this week, their chairman Prime Minister Jean-Claude Juncker of Luxembourg rejected the US calls for more pump-priming by other G20 economies, declaring such proposals "do not suit us."
Juncker after conferring with Czech officials in Prague on Thursday again voiced opposition to any additional spending plan to combat the crisis.
"The European recovery programme represents a spending level of 3.4 to 4.0 percent of GDP," he said.
"Our public finances are beginning to suffer and we must take account of the effects these programmes will have in 2009 and 2010 before we undertake additional spending."
The US stimulus is substantially more than the 400 billion euros engaged by 27 EU countries. The two total economies are of comparable size, but the EU has not forged an integrated response.
US Treasury Secretary Timothy Geithner has also called for the International Monetary Fund's "New Arrangements to Borrow" credit programme to be boosted to 500 billion dollars -- far more than proposed by the Europeans.
For the whole of 2009, Britain is chairing meetings of the G20 -- a grouping of 19 developed and developing countries plus the European Union that includes China, Germany, Japan, Mexico, Turkey and the United States.
The main point of contention appears to be a push by the United States and Britain -- which have angled much of their rescue spending on boosting demand -- for some leading EU countries to do likewise.
The United States and Britain have included heavy demand-side measures, such as a cut in sales tax in Britain, because they stimulate activity quickly.
They argue broadly that some countries, principally Germany but also France, have focused unduly on increasing state spending on investment in industry and infrastructure and should now allocate extra funds to spark consumption.
However, leading countries in Europe face constraints on their big budget deficits, which are rising markedly above EU limits.
German officials have also begun to talk about "exit strategies" from the massive state spending and support programmes once the crisis begins to abate.
European Commission chief Jose Manuel Barroso on Thursday defended Europe's efforts to soften the blow of the global crisis.
"The social system of Europe is very different from the American one," he told a news conference in Brussels.
"We have, compared to the US, a very ambitious system of social safety nets, in terms of unemployment, in terms of public health and in many other areas.
"So when we talk about fiscal stimulus, it's not the same thing in the US and in Europe because the Americans usually think about discretionary additional fiscal stimulus," he said.
Finance ministers and central bankers from G20 economies, will begin arriving on Friday at a hotel in the small town of Horsham south of London where the meeting is to be held.
"Ministers will discuss medium-term regulatory frameworks, the need for improvements to the financial system and wider economic stimulus and speak out against protectionism," Investec Securities economist Philip Shaw said.
Labels: Crisis, Europe, G20, IFI, United States of America
South Koreans push back against Free Trade Agreements with Canada, US
An Interview by Stefan ChristoffSince the collapse of the last round of World Trade Organization (WTO) negotiations in Cancun, Mexico, in September 2003, Canada and the US have rapidly signed several bilateral trade accords.
South Korea, a major Asian economic power and the fourth largest in the region, has recently signed a major bilateral accord with the US and is currently negotiating a similar deal with Canada.
Social movements in Korea have vigorously opposed the country's succession into the WTO since the mid-1990s and have actively mobilized in opposition to the more recent bilateral trade initiatives.
Opposition from Korean peasant movements to 'free trade' policies gained international attention in the September 2003 Cancun meetings when Korean farmer Lee Kyung Hae took his own life in protest while holding a sign reading "WTO kills farmers."
Hundreds of thousands participated in street protests in Seoul this past summer to oppose recent changes to US-Korean trade policy that was to allow US beef to re-enter Korean markets. Sale of US beef had been banned in Korea since the discovery of Mad Cow Disease in some US cattle. Recent protests in Korea against US beef imports mark the largest anti-government protests in decades.
Opposition to US trade policy in Korea extends past US beef, to the recently negotiated US-Korea bilateral trade deal - after the North American Free Trade Agreement (NAFTA), the largest regional trade agreement signed by the US.
In December 2008, scuffles broke out at the National Assembly in Korea as opposition politicians attempted to enter a locked-door session of the parliamentary committee on trade discussing the US bilateral deal, which remains extremely controversial in Korea.
In parallel with the US-Korea deal, officials from the Conservative government in Canada have been pushing to sign a similar bilateral deal. Labour unions in both countries have opposed the deal, including the Canadian Autoworkers Union (CAW). The CAW stated, "We refuse to enter into a competition with Korean workers for future prosperity. Working people in all countries have the right to job security, fair trade, and economic and social development."
In an attempt to understand the drive from US and Canadian officials to secure bilateral trade deals with Korea, Stefan Christoff spoke with Christine Ahn of Korean Americans for Fair Trade on the bilateral trade accords and grassroots opposition in Korea.
Stefan Christoff: Concerning the Korea-US Free Trade Agreement and also the Canada-Korea FTA, can you outline how this agreement will impact environmental and labour standards in South Korea, Canada and the US?
Christine Ahn: Impacts on working people stemming from the North American Free Trade Agreement (NAFTA) in Canada, Mexico and the US make it clear that extending similar trade policies to Korea will only create further damage [for] all countries involved.
Essentially, economic and trade policy being pushed on Korea through the WTO and the IMF-imposed structural adjustment following the Asian financial crisis in the late 1990s have moved Korea from a relatively self-reliant, industrial and agrarian economy to an economy increasingly dependent on exports and international market trends. This economic transformation, led by structural adjustment, broke the backbone of the trade union movement. Today in Korea over 50 per cent of the workforce are now irregular workers.
Trade unions in Korea had succeeded in creating a situation in which workers' rights were beginning to improve in Korea in the early 1990s, whereas for decades under authoritarian regimes workers were seriously oppressed; now again under neo-liberal economic policies, workers' rights are being seriously undermined.
Past experiences of workers throughout North America under NAFTA and the plight of Korean workers under neo-liberal policies make it extremely clear that the Korea-US trade agreement, the second largest US trade deal after NAFTA, must be opposed.
Christoff: Can you outline how the US-Korea trade accord would impact different elements of Korean society, for example on the national healthcare system and also on the peasants which have a long history of political mobilization in Korea?
Ahn: Pharmaceutical provisions that are included under this US-Korea Free Trade Agreement are terrible. Korea does not have the best universal health care system but there is a public system intact. Under the US trade agreement the current list of medications that are available to people through public healthcare would be challenged.
US pharmaceutical companies have been trying to push for a new pharmaceutical list, which would stack the list with US-patented pharmaceuticals which are so much more expensive than generic pharmaceuticals, putting a major strain on Korea's healthcare system and ensuring profits for US pharmaceutical companies through Korea's national healthcare system.
Exporting the US model for healthcare is a disastrous idea. In the US, there are over 45 million people who do not have healthcare, which is certainly a scenario not to encourage in other countries.
Clearly workers' rights will be detrimentally impacted by this agreement both in North America and in Korea. Under such agreements corporations can simply pick up their operations and move them to other countries that have weaker environmental and labour standards, lower production costs, while [the same companies] have the ability to send their produced goods around the world without paying any tariffs.
Only 10 years ago, Korea once was a largely agrarian economy with around 10 million farmers and now there are only around 3.5 million farmers. A mass migration has taken place, people moving from the countryside into the cities, contributing to growing unemployment rates, as fierce competition has also driven down the wages in the country. Also, there is a massive depression of Korea.s rural economy due to the flight to urban centres. This mass internal migration has severely impacted the economy of Korea's non-urban centres.
Under NAFTA, the US ensured that agribusiness was subsidized with hundreds of millions to 'compete' with the small-scale South Korean farmers. It is positive that rice is not included in this agreement because in Korea rice farmers make up the largest number of peasants in the country, who would be seriously impacted by imports of cheap rice from the US. Under WTO regulations, however, Korea will eventually have to erase the tariffs on imported rice anyway, so even rice farmers will be hit by cheap imports.
The Korea-US bilateral trade agreement is worsening the situation for people in Korea and in the US. The agreement will eliminate tariffs that protect local industries while granting further rights to corporations to privatize further many social and public industries.
Christoff: Can you talk about some of the main issues that people highlighted on the ground in Korea as concerns this agreement?
Ahn: A major issue is beef, which isn't currently included in the agreement, however [it] has been used as a leveraging tool by the US.
US negotiators are pushing Korea to remove the 2003 ban on US beef imports, imposed after Mad Cow Disease was discovered in the US, seriously impacting US beef imports to Korea. During this process there were major education campaigns within Korea and also in Japan, educating the public concerning the potential harm stemming from US beef.
As a pre-condition to negotiations surrounding the US-Korea Free Trade Agreement, negotiators on the Korean side are being pressured to weaken laws concerning the imports of US beef. Essentially the US has been using the beef issue within the negotiations as an exchange to allow Korean industries to export greater amounts of electronics, conductor chips and automobiles into the US.
In the US and Canada, autoworker unions are highlighting the major imbalance between the number of automobiles being exported by Korea into the US and the limited number of automobiles that US manufacturers are exporting to Korea; a trade imbalance.
Autoworker unions in the US and Canada are saying that these bilateral accords should only be signed if a certain amount of automobile exports to Korea are secured. Actually, on the Korean side there is concern about importing larger numbers of US-manufactured automobiles because generally the engines are less environmentally friendly. So these bilateral agreements are flawed on both sides as they are fundamentally market-driven, agreements that don't prioritize other critical points such as the environment, health or labour standards.
People in Korea are very concerned that the US is using this agreement as a wedge to dismantle health, environment and labour laws, and also the national healthcare system. These are real concerns in Korea as opposition to this agreement and are being most strongly pushed by peasants and farmers who have direct, first-hand experience of the impacts of neo-liberal economic policies in Korea.
Korean peasants have really galvanized a strong opposition to neo-liberal economic and trade policies within peasant movements in the country, but also throughout the Third World. This opposition was strongly felt in Cancun, Mexico, during the WTO negotiations and again in Hong Kong.
Essentially these bilateral accords are viewed by Korean peasants as [leading to] a loss of their dignity and autonomy.
* Stefan Christoff is a journalist and community organizer. This interview was originally produced for the Fighting FTAs project, an international project that provides a global picture on free trade agreements (FTAs), and insight into struggles being waged by social movements fighting back.Labels: Beef, Cancun, South Korea, United States of America, WTO
