G20 Members Will Subject Economic Policies to “Peer Review”
September 25th, 2009Via: Wall Street Journal:
The Group of 20 nations is close to an agreement that would require members to subject their economic policies to a type of “peer review,” according to several senior G-20 officials, in a shift that would expose the U.S. and China to broad scrutiny of the way they run their economies.
Also, the G-20 heads of state will announce on Friday that the G-20 will become the permanent council for international economic cooperation, eclipsing the Group of Eight, a senior U.S. administration official said.
“It’s a reflection of the world today,” the official said Thursday night. “It’s basically pulling international cooperation into the 21st century.”
The G-8 will continue to meet on matters important to the most-developed economies, such as international security issues. But those meetings will come as world leaders converge for other events, not in major summits.
The initiative was pressed by U.S. President Barack Obama, but it satisfied the demands on Brazil, China, India and other large developing countries, which have bristled at being left out of G-8 conclaves.
Under the G-20’s proposal aimed at improving coordination of global economic policymaking, the world would reduce its reliance on U.S. consumers. The Chinese would boost domestic demand, the U.S. would trim its borrowing from overseas, and the Europeans would encourage investment, said a number of G-20 officials involved in the talks.
The scope and effectiveness of the agreement — which was expected to be signed off on by G-20 leaders on Friday — will depend on whether and how it is enforced. The potential agreement envisions a procedure where G-20 countries assess whether each others’ policies are working, and the International Monetary Fund provides technical help. Not included are any enforcement mechanisms such as sanctions or other penalties.
The reviews will assess how the policies contribute to “strong and balanced growth” of the world economy, a senior G-20 official said. “Who would have thought that the Chinese would have signed up to that?” Germany and China had expressed strong reservations about the concept.
