G20 - The Beginning of a New World Economic Order, After All?
On Thursday, U.S. Treasury Secretary Tim Geithner unveiled the Obama administration’s comprehensive framework for reforming the regulation of the financial system. The plan will be a hot topic ahead of next week’s G20 summit in London and is being closely scrutinized in capitals worldwide.
In his testimony yesterday before the House Financial Services Committee, Geithner told the panel,
“Our hope is that we can work with Europe on a global framework, a global infrastructure which has appropriate global oversight, so we don't have a Balkanized system at the global level, like we had at the national level."
He added that that the financial sector needs to be tightly regulated so that it can never again threaten the collapse of the wider economy.
Geithner said the administration is first focusing on systemic risk because the issues around it require the most global cooperation and will be at the center of the G20 agenda. Clearly, the Obama administration is moving towards a position that would enable substantive discussions with European leaders. Such discussions may result in new roles and powers for international organizations, including the Financial Stability Forum and the International Monetary Fund (IMF).
Dominique Strauss Kahn, the Director General of the IMF, speaking on French television on Thursday night laid out the significance of global coordination in addressing the crisis and also emphasized the need to adapt existing international organizations to take on new responsibilities. To that end, Strauss Kahn a few days ago had welcomed the proposal for the Committee on IMF Governance Reform that moves in that direction.
The benefits of emphasizing international cooperation have also been highlighted by Pascal Lamy, Director-General of the World Trade Organization (WTO), who, like Strauss Kahn, will be present at the G20. According to the WTO, tariff and subsidy cuts for trade in goods already on the table in the Doha global trade talks were equivalent to a new stimulus package of $150 billion. Other trade liberalizing moves under discussion could more than double that. However, in the absence of a Doha deal, average tariffs worldwide could legally be doubled, slashing the value of world trade.
The historic importance of the road to the G20 in London, and beyond, was also emphasized by British Prime Minister Gordon Brown, who spoke at New York University on Wednesday, 25 March:
“Think back to the 1940s. In the era after the Second World War people saw the need to create global institutions to deal with the global problems, and the national problems at that time, so in this massive work of visionary leadership, Americans in particular created an International Monetary Fund, a World Bank, a United Nations, the World Trade Organisation, which was to be the world trade organisation GATT, and the Marshall Plan, which reconstructed the whole of Europe. We need the same vision and leadership now to enable us to solve problems, without which you cannot have the progress in each of our countries that we need for the future.”
