ISSN 2443-8030 (online) The G20 and the EU: A Win-Win Game Moreno Bertoldi, Heinz Scherrer and Guergana Stanoeva ECONOMIC BRIEF 009 | APRIL 2016 EUROPEAN ECONOMY Economic and EUROPEAN Financial Affairs ECONOMY European Economy Economic Briefs are written by the staff of the European Commission’s Directorate-General for Economic and Financial Affairs to inform discussion on economic policy and to stimulate debate. The views expressed in this document are solely those of the author(s) and do not necessarily represent the official views of the European Commission. Authorised for publication by Anne Bucher, Deputy Director-General for Economic and Financial Affairs. LEGAL NOTICE Neither the European Commission nor any person acting on its behalf may be held responsible for the use which may be made of the information contained in this publication, or for any errors which, despite careful preparation and checking, may appear. 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European Commission Directorate-General for Economic and Financial Affairs The G20 and the EU: A Win-Win Game By Moreno Bertoldi, Heinz Scherrer and Guergana Stanoeva Summary This article analyses the role played by the European Union in the G20 Finance Ministerial and Central Bank Governors process, the so-called "G20 finance track". Thanks to its experience in the coordination of economic policies and its important economic weight, the EU has been able to add significant value to the work of the G20. In return, it has been quite open in taking into account the suggestions of its peers in the G20 and translating some of them into policy action. We discuss some cases that demonstrate the important synergies that have been developed between the G20 and the EU and we conclude with suggestions for further developing the existing potential. Acknowledgements: The note benefited from comments by Elena Flores, Anne Bucher and Marco Buti. Contact: Moreno Bertoldi, EU Delegation to the United States, [email protected]; Heinz Scherrer, European Commission, Directorate General for Economic and Financial Affairs, [email protected]; Guergana Stanoeva, European Commission, Directorate General for Economic and Financial Affairs, [email protected]. EUROPEAN ECONOMY Economic Brief 009 European Economy Economic Briefs Issue 009 | April 2016 Introduction The EU in the G20 "finance track" This article analyses the role played by the EU in the How the G20 "finance track" works G20 Finance Ministerial process, the so-called "G20 finance track". The G20 was established in 1999 as a As the G20 is the main forum for international gathering of Finance Ministers and Central Bank economic and financial cooperation, inevitably the Governors in the context of the Asian financial crisis G20 finance track plays a crucial role in it. Still it is and upgraded to Leaders level in 2008 in reaction to not the only work strand of the G20. There is also the global financial crisis. The EU has been a the "non-financial track" that covers issues member of the G20 from the very beginning. Thanks concerning trade, employment, agriculture, to its experience in the coordination of economic development, climate change, etc. The issues policies, the EU has been able to provide significant discussed in the "finance" and "non-finance" tracks value added to the G20 work. In return, it has been are brought to the attention of G20 Sherpas who, as quite open in taking into account the suggestions of representatives of G20 Leaders, are in charge of its peers in the G20 and translating some of them in preparing the G20 Summits (see Table 1 for the policy action. main types of meetings under the 2016 G20 Presidency). Table 1: Main Types of Meetings and Working Groups under the Chinese G20 Presidency G20 Summit of Heads of State/Government G20 Finance Track G20 Sherpa Track Finance Ministers and Central Bank Governors Sherpas Finance and Central Bank Deputies Labour and Employment Ministers Framework for Strong Sustainable and Balanced Growth Working Energy Ministers Group (WG) International Financial Architecture WG Trade Ministers Investment & Infrastructure WG Agriculture Ministers Climate Finance Study Group (SG) Agriculture Deputies Green Finance SG Employment WG Energy Sustainability WG Development WG Anti-Corruption WG Trade and Investment WG Meetings of engagement groups: B20 (Business 20); L20 (Labour 20); T20 (Think 20); Y20 (Youth 20); W20 (Women 20) The agenda of the G20 "finance-track" is composed preparation of the finance track meetings, the G20 of (i) recurrent topics and (ii) special topics. Presidency prepares "issues notes" presenting the Recurrent topics include: the global economic main questions for discussion. situation and outlook; macroeconomic cooperation and coordination, policies aimed at fostering growth; The finance track work of each Presidency starts financial regulatory reform; tax transparency; and with a top down approach. Following the Leaders' the reform of the international financial architecture. Summit (which in general takes place in the Depending on the mandate provided by Leaders at autumn), the new Presidency normally organises their Summits other issues can be added to the before the end of the year a G20 Finance Deputy agenda. For instance, recognising the essential role meeting to discuss and define the priorities and the that the long-term financing of the economy plays in work programme until the next Summit. The supporting the G20 goal of strong, sustainable and working and study groups1 of the finance track then balanced growth, in February 2013 Finance meet and prepare a work programme that is Ministers and Central Bank Governors agreed to discussed and approved by Finance Ministers at their establish a Study Group on Financing for Investment ministerial meeting in February. On the basis of the which afterwards was upgraded to the G20 approved work programme, the working groups Investment and Infrastructure Working Group. In prepare reports and policy recommendations (for 3 European Economy Economic Briefs Issue 009 | April 2016 instance on the G20 growth strategies) that are then The role of the EU in the G20 transmitted to Deputies and Ministers that, once approved, become the core of the Action Plan for Examples of EU contributions to the the G20 Summit. economic policy coordination process in After each G20 Finance meeting, Finance Ministers the G20 and Central Bank Governors issue a carefully crafted The EU is the G20 member which by its own nature communiqué, where they state the consensus has decade-long experience in economic policy reached and possible policy actions to be undertaken coordination. Due to this and also to its important by G20 members. As the G20 works by consensus, economic weight (see Fig. 1) it is well placed to these documents generally are market-reassuring and provide constructive suggestions and proposals try to support global confidence. More importantly, regarding economic policy cooperation and they provide an indication of the level of ambition in coordination even in situations where G20 members the field of international economic cooperation have different views and positions. Three examples among G20 countries (most recently on tax 2 taken from the work of the G20 Framework for cooperation) , and are therefore carefully read by market participants. Strong, Sustainable and Balanced Growth illustrate quite well the originality of the EU contribution. Graph 1: G20 GDP Shares, USD bln, current prices, 2016 projections The EU in the G20 "finance track" At the Finance Ministers' and Central Bank Governors' meetings, the EU is represented by the Commissioner for Economic and Financial Affairs, Taxation and Customs, the Finance Minister of the rotating EU Council Presidency, and the European Central Bank Governor3 (this applies also for the Deputies meetings). The EU in the G20 represents all EU Member States. As some EU Member States are also G20 members (France, Germany, Italy and the UK) or permanent guests (Spain), EU representatives play a key role in the coordination process of the EU positions in the G20. The aim is to provide as much as possible a consistent message on the EU policy stance and actions to the rest of the world. Source: IMF, WEO, October 2015 The common European negotiating position on "finance track" topics is stated in so-called "terms of The first example concerns the correction of macro- reference". This is a short document which economic imbalances. This issue has been at the summarises the EU common view on the topics heart of the G20 policy agenda since 2009, when the present in the Finance Ministers' and Central Bank Framework for Strong Sustainable and Balanced Governors' agenda4. Growth was launched. However, as of the beginning of 2011, there was still not an agreed approach on The EU coordination process starts well in advance how to analytically identify and then tackle global of each G20 meeting. "Draft Terms of reference", imbalances. Because of an early unsuccessful jointly prepared by the European Commission, the attempt at reducing global imbalances through ECB and the EU Council Presidency, are first international cooperation within the IMF circulated for written comments and then discussed framework5 and the impossibility to reach by EU State Secretaries for Finance in the EU agreement within the G20 on "thresholds" above Economic and Financial Committee.