Upon finishing two days of high-level talks in Cannes, France, leaders from the Group of 20 major economies have instructed their trade ministers to pursue “fresh, credible” approaches to resolving the impasse in the WTO’s Doha negotiations at the upcoming December ministerial.
At the 3-4 November Cannes summit, which took place against the backdrop of Greece’s worsening political and economic woes, leaders also decided to strengthen the resources of the International Monetary Fund, rather than provide the struggling eurozone directly with funds to address the financial crisis in Europe – a move that drew both praise and concern.
The meet also saw China make a commitment to become more flexible in its valuation of its currency – a decision that was lauded by some of its major critics in this field, notably the US.
World Bank Group President Robert Zoellick, while praising leaders’ overall agenda for restoring confidence in the global economy, in particular their decision to review IMF resources as a response to the crisis, cautioned that, “as with all summit declarations, the proof will be in the implementation.”
The eurozone-heavy focus of the Cannes summit drew criticism from some developing countries, which cautioned that the financial crisis should not eclipse developing country issues. Concerns over the impact that the crisis could have on developing countries have already been raised on various fronts in recent months (see Bridges Weekly, 28 September 2011).
In a reference to the ongoing Doha negotiations, which are now finishing their tenth year, G-20 heads of state reaffirmed their commitment to the Round’s mandate, while alluding to the talks’ struggles. “It is clear that we will not complete the
In a tacit acknowledgement that last year’s G-20 push for finishing the Doha Round in 2011 had failed, leaders called for “fresh, credible approaches to furthering negotiations” in the coming year. In particular, they asked that such approaches be geared toward issues relevant to least developed countries (LDCs) and, “where they can bear fruit, the remaining elements of the [Doha] mandate.”
However, the idea of an “early harvest” for some Doha issues is not new, with WTO members having spent the summer examining the feasibility of preparing an “LDC-plus” package of items for the December ministerial.
Having reached the August recess without being able to agree either on LDC issues or non-LDC issues to be included in such a “mini-package,” members have since been exploring the option of taking “smaller steps” to move past the negotiating impasse in the Doha talks (see Bridges Weekly, 26 October 2011).
China currency commitment
With the past several months seeing tensions ramp up over Beijing’s valuation of its currency, many were watching to see how China would respond to criticism of the yuan at the summit.
Prior to the summit, the US had promised to put pressure on China to allow its currency, the yuan, to move more freely. China’s valuation of the yuan has been the subject of heated debate in Washington circles, with the US Senate voting earlier this fall in favour of a bill that would target countries undervaluing their currencies. The Senate move had spurred talk of a possible trade war between the countries, should the bill eventually become law.
China Commerce Minister Chen Deming told reporters on Thursday that calls for the yuan’s appreciation mean “large capital inflows, causing major difficulties for us.”
In their action plan, leaders jointly welcomed “China’s determination to increase exchange rate flexibility consistent with underlying market fundamentals.” Details on a timeline for pursuing this goal were not outlined, however.
China’s decision notably drew praise from US President Barack Obama. Speaking to reporters after the summit, Obama “welcome[d] China’s determination to increase the flexibility of the [yuan]. This is something we’ve been calling for for some time, and it will be a critical step in boosting growth.”
Meanwhile, the group as a whole repeated language from previous summit statements affirming their “commitment to move more rapidly toward more market-determined exchange rate systems and enhance exchange rate flexibility to reflect underlying economic fundamentals.”
More resources promised to IMF, though details remain vague
World economic leaders promised to ensure that the IMF would “have resources to play its systemic role to the benefit of its whole membership,” adding that the G-20 would be ready to mobilise additional funds. IMF Managing Director Christine Lagarde had cautioned in September that the international lender’s currently available resources might not be enough should the global economy take a turn for the worse.
The decision to focus on IMF funding, rather than provide money directly to EU members, was widely blamed for European stock markets struggling on Friday. Brazil and Russia were among those countries that promised to help the eurozone on the condition that such funds be channelled via the Fund.
The lack of details on how the IMF’s resources will be increased also drew criticism after the Cannes event.
On Friday, German Chancellor Angela Merkel told reporters that, while G-20 leaders have agreed that the IMF and the European Financial Stability Fund (EFSF), more commonly referred to as the euro zone bail-out fund, could work in concert, details on how this would be achieved have yet to be decided.
“In the next period we will work out the guidelines for the EFSF and then all IMF members are invited to voluntarily participate [in the fund] in a way that is appropriate for them,” Merkel said.
Commitments on protectionism, export restrictions reaffirmed
The use of protectionist measures and export restrictions, particularly with regards to agriculture in the latter case, have been on the rise in G-20 countries over the last several months, according to a WTO report released in late October (see Bridges Weekly, 2 November 2011). The recent increases in food prices also drew calls from the World Bank asking that world economic leaders act on the food security front.
Leaders of the world’s largest developed and developing economies responded to these findings in their final communiqué, echoing a pledge made at the Toronto G-20 summit in 2010 to refrain from raising or imposing new barriers to trade and investment in goods and services.
They also committed to “roll back any new protectionist measure that may have risen, including new export restrictions and WTO-inconsistent measures to stimulate exports.”
Agriculture ministers at a meeting in June had agreed to remove export restrictions on food destined for humanitarian purposes via the UN World Food Programme. Leaders at the Cannes Summit endorsed this decision, along with agreeing to “act in the framework” of the action plan outlined by agriculture ministers in June.