all bilateral aid programmes under a new G20 entity with members closing ministries of development (with administrative savings possibly shared between the G20 pool and individual members).12 Another example might be the transfer of all anti-dumping penalties collected to the G20 pool. The resource increment would be small, but incrementally over time as an addition to existing multilateral flows it could grow.
On legal structure, the G20 could concentrate on having decisions in communiqués incorporated in some form into domestic law. The commitment made, several times, to complete the Doha Round of the WTO might be an example. But for such an evolution to occur, development of a greater degree of trust between the members of the G20 might be needed. This might also determine how actions in the area of development might proceed. These could be discrete steps in particular areas where there is agreement. More holistic approaches and actions might have to wait for greater agreement on how and through what policies development can be accelerated.
The Future of Development and the G20 Work Plan
For the G20 to be effective on development issues in the future, it will have to move at some stage to implementation of its recommendations and choose between the options provided by the international agencies. There is the even larger question of whether the G20 largely stays in its coordinating role across international agencies or becomes a more active actor focusing on incremental resource mobilisation for development and stronger global rules. Experience with the G7 is hopefully not a precedent. Despite repeated calls by the G7 to finalise the Doha Round, that has not happened. Studies paint a bleak picture of implementation of the recommendations of the G7.13
Developing countries for now remain dependent on access to OECD economies and growth of their trade with these economies to fuel their growth, part of which is also driven by inward FDIs coming from these economies. The recent slowdown of growth in many developing countries reflects the importance to them of strong growth in developed countries. How to negotiate and then enforce guarantees of openness for OECD markets is therefore a central issue for these countries. Strengthening trade rules by an addition, say, to WTO dispute settlement that now rests solely on bilateral retaliation in case of non-compliance with dispute rulings14 and maybe levying an additional G20 levy in case of non-compliance could be longer term approaches.
Small countries are at a disadvantage on trade issues. If a larger country loses a case and refuses to remove the WTO illegal provision, then the only remedy the small country has is WTO-anchored retaliation, which, as we know from trade theory, will hurt the small country. Neither is it clear how the G20 can deal with the attempt of the current administration of the US to move the terms of trade in their favour nor are the interest of developing countries well served by the current international financial system. When developing countries face a severe balance of payments deficit, they cannot borrow from private markets and loans from the IMF are accompanied by many conditions. This situation has resulted in reserve accumulation as self-insurance and an increasing focus on regional monetary coordination and cooperation.
Economies in Latin America and SSA started to grow rapidly in the couple of years before the financial crisis after a prolonged period of slow growth in the 1980s and 1990s. But these growth rates are still not high enough to substantially reduce poverty15 in these regions, and particularly in SSA. Furthermore, there is little likelihood of these countries achieving their MDG goals without a further substantial acceleration of growth. Achieving 7–8% growth would require investment to be 28–32% of GDP as capital output ratios in the developing world have been about 4 in the past 30 years. Therefore, the challenge for the G20 is not only to reduce the Chinese surplus or the surpluses of other countries but also to devise mechanisms to channel these savings to countries in Latin America and SSA to significantly reduce poverty and other social ills and narrow the gap between low- and high-income countries. Furthermore, substantial investments will be required in SSA in particular to mitigate the effects of climate change.
Conclusions
There seems to be little doubt that the G20 has begun its evolution from a crisis management entity to something more, which begins to incrementally reshape and recast global arrangements in a number of areas. In this chapter, we bring in both what has happened and what may be feasible in the area of development.
At first sight, one might think that the G20 has little to offer. With no formal budget control over resources and lacking a clear legal structure, the G20 is mainly a forum for high-level leadership to meet and discuss only at a general level. Also, in the development area, the G20 seemingly lacks legitimacy since most developing countries are not represented.
We have reviewed developments, thus far, and point to both adoption of a Development Consensus at the Seoul 2010 summit which set out achieving the MDGs as a priority, and the 2009 Pittsburgh declaration which points to reducing the high-/low-income country gap as an element in rebalancing the global economy. Add to this the consultative process with non-members, the feature that developing countries have a majority participation in the G20 on seemingly equal terms (unlike in many other international agencies), suggests that there are signs of forward movement.
The challenge for the medium to longer term is whether the G20 can move actively towards incremental resource mobilisation for development and strengthened global rules or whether its efforts on development remain more at the coordination across international agencies level Agarwal (2010).
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