The United States endorsed the G-20 or Group of 20 countries as the permanent council for international economic cooperation among industrialized nations. Previously, the G-8 served in this role. The G-8 will continue to meet on security issues.
What Is the G-20?
The leaders of the G-20 countries meet annually in a summit to discuss international policy issues ranging from the economy to climate change. In response to economic crises, the seven leading industrialized nations plus Russia, better known as the G-8, invited twelve additional emerging economies in 1999 to join their forum and become the G-20. The G-20 represents 90% of the world's economic output.
Both the G-8 and the G-20 have co-existed since 1999. The G-20 should not be confused with the original G-7, established in 1976, which is a forum of finance ministers and central bankers from US, Japan, Germany, UK, France, Italy and Canada.
Members of the G-20
The members of the G-20 are:
- Saudi Arabia
- South Africa
- South Korea
- European Union
The first eight countries listed are the members of the G-8.
What It Means
The significance of the G-20 supplanting the G-8 is that emerging countries like China, India and Brazil will have a stronger voice in how the global economy is run. The original industrialized nations understand that the emerging economies need to play a greater role in combating the global economic crisis and climate change.
During the global financial and banking meltdown of 2007-08, the G-20 called for greater fiscal transparency and regulation in the global financial system by implementing measures such as a Financial Stability Board and a Global Forum on Transparency and Exchange of Information. Having the support and participation of countries like China is necessary to make new financial systems effective.
The US Viewpoint
President Obama supports the G-20 as the "premier global economic forum." A White House Fact Sheet said, "This decision brings to the table the countries needed to build a stronger, more balanced global economy, reform the financial system, and lift the lives of the poorest."
The US is also advocating for China, India and Brazil to have greater voting power at the World Bank and International Monetary Fund. The US supports a greater leadership role for the emerging economies, particularly China, and greater responsibility. President Obama would like China to spend some of its US$2 trillion dollar reserves to help stimulate the global economy.
During the 2009 G-20 Summit in Pittsburgh, Obama announced a Framework for Sustainable and Balanced Growth. The framework outlined measures for the G-20 members to restore economic growth as the economic crisis subsides. For example, the US is advised to reduce its budget deficit and save more. Europe is advised to increase business investment. China is asked to reduce its reliance on exports and increase its domestic consumption.
In order to gain cooperation from China and other fast-growing nations on his Framework for Sustainable and Balanced Growth and on economic restructuring, the US realizes that these nations must have a greater say in policymaking.