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The rise of the G20 and OECD’s role

17 November 2015
by Guest author
G-20 Summit in Antalya: Turkish PM Erdoğan and OECD SG Gurria

G-20 Summit in Antalya: Turkish PM Erdoğan and OECD SG Gurria

Noe van Hulst, Ambassador of the Netherlands to the OECD

With the eyes of the world on the G20 summit in Antalya, we are reminded how G20 has become a well-established ‘brand’ in the global governance landscape. Yet, it’s only as recently as 1999 that the G20 was created as an informal platform of “systemically significant countries” in response to the financial crisis in Asia and on the initiative of the US and Canada. For many years, the G20 remained below the radar screen, working quietly but effectively at the level of Ministers of Finance and Central Bank Governors, e.g. in the area of countering the financing of terrorism, which is still a very relevant topic. This situation changed completely in 2008 when the global financial crisis hit us all. On the initiative of French president Sarkozy and UK Prime Minister Brown, US president Bush called for the first ever G20 Leaders meeting to fight the crisis in a coordinated way and to avoid a global economic depression. What started as a one-off crisis summit, however, soon became a permanent tradition. In 2009, under the presidency of US president Obama, the Group declared that the G20 is henceforth “the premier forum for international economic cooperation”. Attention gradually shifted from fighting the crisis (2008-2010) to structural policies for a sustainable and balanced recovery of global economic growth. Although the legitimacy of the G20 as a ‘self-appointed club’ is periodically questioned, the G20 is today well-established as the only global forum where advanced and emerging economies cooperate on an equal footing.

Since 2010 the G20 agenda started to broaden to topics beyond strict financial and economic policy issues: e.g. agriculture and food security, trade, investment, employment, taxation, anti-corruption, energy, climate, SMEs. In parallel, we are witnessing a wider range of G20 Ministerial meetings beyond just Finance: Labour, Agriculture, Trade, Foreign Affairs, Tourism and under the current Turkish presidency recently the first ever Energy Ministers meeting.

What about the effectiveness of the G20 so far? On this key question, opinions among analysts differ. Most people agree that the G20 has been successful in tackling the global financial and economic crisis, with coordinated policies on aggregate demand, more stringent financial regulation and restraining protectionism. However, it is proving to be tougher to make significant progress on the more structural policy areas which often require sensitive domestic policy changes. A good example is the implementation of the Brisbane Growth Strategies, where the OECD Secretariat, in a joint report with IMF and World Bank Group for the Antalya summit, found that less than 50% of the policy commitments encapsulated in the National Growth Strategies have been fully implemented, raising G20 GDP by 0.8% by 2018, while the target is 2.1%. So much more needs to be done, as G20 Leaders acknowledge in their communique.

Although the G20 emphasizes its flexible and informal nature, we do see a certain degree of institutionalisation with (sous-) sherpas, working parties and expert groups. Furthermore, a growing group of stakeholders is trying to influence the G20 agenda. This group ranges from business (B20) to trade unions (L20), NGOs (C20), youth (Y20), think-tanks (T20) and since the Turkish presidency also women (W20).

The G20 doesn’t have a permanent Secretariat and instead relies on the support of established international organisations. Slowly but surely, the OECD Secretariat has evolved into what is increasingly referred to as the “quasi-Secretariat” of G20. To a certain extent, this is a natural development since the OECD has widely acknowledged strong competences in data collection, benchmarking and solid, evidence-based economic analyses in areas that are closely aligned with the broadening G20 agenda. Many of the other international organisations have a more limited mandate and competence base. Hence, OECD is uniquely positioned to make significant contributions to the G20 work on issues like (green) growth, financial regulation, climate finance, agriculture and food security, anti-corruption, employment and inequality, (green) investment and trade. The same applies to the IEA in the important field of energy which of course is closely linked to climate change. For non-G20 OECD countries, the OECD and IEA roles in the G20 provide a very important window of information and a channel for constructive engagement.

A great example of OECD’s important role in supporting the G20 work is the Base Erosion and Profit Shifting (BEPS) project. Mandated by the G20, OECD and G20 countries worked jointly for two years on an impressive set of new international tax standards and measures, addressing issues like preventing treaty shopping, country-by-country reporting, fighting harmful tax practices and many others. The final package has just now received the strong endorsement by G20 Leaders in Antalya. In my view the BEPS project is a game-changer because of the unprecedented process in which OECD and G20 countries worked on the development of new international tax standards on an equal footing. This has proven to be a very effective and inclusive way of dealing with a highly complicated and controversial topic. Even though the initial drive came from the G20, the technical work in an extended OECD Committee (with emerging and developing economies participating on an equal footing) created the necessary co-ownership from countries outside the G20. This may well provide an excellent best-practice model of how to proceed in equally complicated policy issues outside the tax area.

Turkey’s presidency of the G20 has consistently pursued the 3i’s of “Implementation, Investment, Inclusiveness”. The Antalya final communique is a clear testimony to this.

On a personal note, I want to thank the Turkish presidency warmly for including our Minister of Trade & Development Ploumen in the G20 Trade Ministerial meeting in October. As we are looking ahead to the Chinese presidency of the G20 in 2016, it seems that trade and investment cooperation will be one of the top priority areas. In the light of the worrying projections on trade growth in OECD’s latest Economic Outlook, this is highly appropriate and very welcome indeed. Surely, the OECD Secretariat can play a key role here in supporting the G20 to make tangible progress in boosting global trade and investment, which is so critical to restoring healthy growth of the global economy.

Useful links

Read the Ambassador’s blog (in Dutch)

OECD and the G20


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