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In effect, the G-20 has replaced the G-8 that was hitherto dominated by the US and European powers. Making G-20 the top decision-making forum marks the arrival of emerging powers like India, China, South Africa and Brazil on the global economic front.
"G-20 will henceforth be the premier forum for international economic issues. This is an important development broadening the governing structure," Prime Minister Manmohan Singh said at a post G-20 summit news conference.
The decision at the G-20 to increase the quota for developing countries in the International Monetary Fund (IMF) by five per cent also marks the emergence of Asia, led by India and China, as key to world economic management. While developing countries pressed for an additional seven per cent quota, they had to settle for five per cent, at least for now. "This is obviously a compromise figure we agreed upon. We have agreed to shift a five-per-cent share to countries that are underdeveloped," said Dr Singh.
A seven per cent additional quota would have meant that developing countries would have for the first time cornered a major 51 per cent quota. But, for the time being, they will have to limit themselves to a 49 per cent quota on drawing and commensurate voting rights.
The Inclusion of the four nations in vital economic decision-making processes also points to the axis between these countries and the emergence of a powerful ginger group within G-20 to take on the US, Japan, France and Germany on the world stage.
Already, the foursome has taken a similar line, voicing their opposition to "protectionist measures being imposed by the US and other European countries. It is by design, not coincidence, that Prime Minister Manmohan Singh and Chinese President Hu Jintao, along with their Brazilian and South African counterparts, resisted the move by US and European countries to put up tariff and non-tariff barriers to block market access.
"We reject protectionism of all forms on the economic and trade fronts. We have evidence of creeping protectionism in many European countries and the US," said the Prime Minister. He made it clear that this was with reference to steep duties slapped by President Obama on Chinese tyre exports. The move is also against non-tariff barriers being put up by Western countries against exports from countries like India.
The third major decision at Pittsburgh that marks a shift in balance of power is the strong political signal sent out to conclude the Doha round of trade negotiations. "We have agreed that we should work for an early resolution of Doha (Doha negotiations at WTO) to counter protectionism," said the Prime Minister. He referred to the progress at the Delhi ministerial conclave earlier this month where key trade negotiators from 37 countries set time lines to re-commence trade talks for conclusion by the end of this year.
In this context, India lobbied hard at the G-20 to immediately put in place "an open, balanced and equitable" multilateral trade mechanism. Prime Minister Singh was scathing at the G-20 plenary, saying that non-oil developing countries lost exports worth $900 billion in just one year for no fault of theirs following the collapse of the US’ financial markets.
The G-20 also completed the "emergency financing plan" of the IMF by mobilising $500 billion towards additional capital. Brazil, Russia, India and China have taken a commitment to contribute $70 billion additionally to the IMF by agreeing to buy credit notes and against the gold reserves the fund holds.
The decision to expand the capital base of the World Bank and other regional bodies like ADB also marks a shift in the governance of these institutions. Apart from a host of reform measures, these institutions’ boards would also be reconstituted to reflect the economic prowess of emerging economies, including India and China.
President Obama’s proposal to "re-balance the world economic order" has met with partial success as the G-20 leadership agreed on a new framework to discuss global macro-balances, country-level policies and to use the top forum for discussion. However, emerging economies led by the BRIC nations seem to have put up a united front to resist the Obama proposal.
The US and Europe also did not succeed in making G-20 the forum for clinching a deal on climate change and a carbon emission reduction plan. The joint communiqué adopted by G-20 limited itself to calling for a successful outcome of a climate change work plan at the United Nations Framework on Climate Change at Copenhagen in December this year.
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