Following Turkey's Lead

Turkey’s Prime Minister, Recep Tayyip Erdo?an, has said to judge the G20 Summit in Antalya on Sunday 15 November based on three words: inclusiveness, implementation, and investment.

In 2015, implementation for the G20 is most importantly about ensuring carrying out of the Brisbane Action Plan. At the Brisbane summit, globe leaders agreed to work together to create a ‘Two-in-Five’ outcome. Countries committed to actions which, taken together, could be expected to raise globe GDP by two percent inside five years (by 2018). However, the framework will be difficult to handle, because the world is growing a lot more slowly than was anticipated a year ago, when the commitments originated. As a result, implementation of the guarantees might still give rise to a level of global output much lower than what had been expected. There will need to be considerations for this.

Investment lies at the core of what Turkey hopes to achieve. There’s a widespread wish — worldwide — to achieve a very large increase in facilities investment immediately. Turkey promises to do something about this at the G20 Summit by forging agreement on the number of forms of international co-operation to promote such investment. It was one of the great successes associated with Australia’s presidency of the G20 that there was agreement to a strategy of stimulating investment in infrastructure, included in the Brisbane Action Plan. Whatever is actually agreed at Antalya, there needs to be many more reforms in international markets, and in international policy regimes, before investment in infrastructure raises to the extent that is needed.

Inclusiveness is all about helping the poorer members of society take advantage of the process of economic growth. Nevertheless, inclusiveness also has an international dimension: it’s about helping all countries take advantage of the global growth process. It is vital to include emerging market economies in the global financial back-up. This safety net exists to protect nations from the threat of international financial instability.

As Adam Triggs creates compellingly, there is need for further change of the IMF. The financial crisis came attention to the fact that the IMF is not able routinely to provide liquidity for countries threatened through the international withdrawal of funds funds. The IMF does have a Flexible Credit Line (FCL) and a Precautionary and Liquidity Credit Line (PLL). However, nations need to pre-register for these programs, based on having a strong policy framework in place and a good track record in economic performance. So far only three countries — Mexico, Mexico and Poland — have signed up for the FCL. This is essentially because there is a sense that if a country makes use of one of these credit lines after that that would signal to private markets that the country is in monetary difficulty.

All of this means that a crucial piece of the international financial architecture is missing. An invaluable international financial reform is always to manage central bank swaps like those extended in the global financial crisis multilaterally through the IMF, rather than getting such swaps arranged bilaterally between each country’s central bank and also the Federal Reserve. Beyond this, the IMF could greatly strengthen and expand both its FCL as well as PLL, and make these programs more attractive to countries

Leadership is important for each president of the G20, and Turkey is no exception. Good leadership will assist you to achieve follow-through on a range of problems going beyond those talked about above. For example, leadership is essential to ensure cooperation to bring down the costs of international payments through individuals — especially the remittances sent home by those people from very poor nations who are working abroad. The actual summit is also likely to make progress on outlawing the practice of tax shifting by large multinational corporations. In addition, hopefully, some form of consensus will emerge about what to do about global warming, in advance of the climate change meeting in Paris in Dec.

In 2016, China will be president of the G20. China is now the second largest economic climate in the world, but it is still finding out how to become a global leader. Leadership has numerous attributes. One can lead through example. This involves getting household policies right. China still has much to do in reorientating its growth model away from one, which relies on development of exports, and in ensuring that its financial sector acts in a sustainable manner.

One can lead, instead, by taking exercise power and forcing others to fall into line with your objectives. The US put together the ‘coalition’ of countries who recently signed the Trans-Pacific Partnership trade agreement in this manner. This may not be the best model with regard to China to emulate.

One may lead by nurturing a discussion board like the G20, in which there is an trade of information, discussions take place, choices are articulated, and compromises arrived at. These things really have happened this year as part of the G20 process, not just at the level of national leaders, but additionally at the level of the G20 Sherpas along with other officials who are involved in the procedure. These exchanges are extremely important.

The main hope for the next two G20 Summits arises from these observations regarding leadership. In 2015, Turkey has utilized its Presidency of the G20 to guide much consensus-building activity. It will be great if, in 2016, China does the same thing, and more.

Evaluating Turkey’s G20 leadership is republished with permission through East Asia Forum