Where was Europe?
Where was Europe?
The role that Europe should play, and is expected to play, is greater than was evident at the G20. There are four areas where Europe where could now move the agenda forward.
At the end of the inconclusive G20 summit in Toronto, everybody looked like a winner. Germany and the UK gathered support for their austerity measures, Canada and the United States fended off the bank levy tax and China was praised for making its currency more flexible.
But rather than a triumph of diplomacy and co-operation, the Toronto summit will probably be remembered as a non-event with too many pledges and few deliverables. Most of all, it was another missed opportunity for Europe – that is, the European Union, as opposed to the European member states of the G20 – to speak with one voice and provide a systemic and overarching view of global economic issues.
Just as 2009 was Europe’s summit year, 2010 has turned Asian-American. This is not only because Canada and South Korea chaired the G8 and the G20 respectively. With the exception of Germany and the UK trumpeting their budget-reduction plans, Europe’s voice remained largely unheard in the run-up to Toronto. Since the beginning of the year, domestic concerns and the eurozone’s sovereign-debt crisis have taken priority over global issues and have dominated the policy debate. And, indeed, discussions in Toronto reflected those concerns. The ability to think broad and bold was what was missing.
A global forum such as the G20 makes more evident the mismatch between Europe’s aspiration to be a global leader and its capacity to respond to such an aspiration. The bar was raised considerably when the dialogue on global economic issues was broadened to the leaders of the G20 group – a European initiative led by France at a time, autumn 2008, when it held the EU presidency. Competition for attention has since become fiercer, while power has become more fragmented. Even if it is broadly assumed that Europe is a key pole in the new multipolar world, this new configuration inevitably implies some dispersion of influence and weight.
If the broadening of the G20 has given some countries the ability to be heard beyond their region, it has certainly watered down Europe’s influence. In addition, the differing pace of the economic recovery around the globe is setting developed and developing countries apart. For the former, more modest growth, coupled with critical fiscal positions and the need for credible policies aimed at deficit reduction, translates into patchy and indecisive leadership. In addition, domestic pressures contribute to the building up of inward-looking agendas that are increasingly driven by national interests. The role that Europe should play, and is expected to play, should be broader than just reflecting the domestic agendas of the European member states of the G20. For this, it is imperative for Europe to find a new role, and a new voice, in multilateral forums.
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This is likely to be a long and gradual process. However, there are a number of areas where Europe can move the agenda forward ahead of the G20 summit in Seoul in November.
First, Europe can help the resumption of the Doha Development Agenda, as suggested by US President Barack Obama, perhaps by hosting the next round in Brussels. In addition, the European Commission’s trade directorate-general could work with the US to deepen talks on liberalising services, so that industrial associations provide greater support to the Doha talks. This would increase political capital that could be used, eventually, to cut agricultural subsidies to satisfy the developing countries and then to get developing countries to liberalise services. The Doha round of trade talks may be Europe’s ace in the game of global governance. It is the one area where Europe speaks with one voice, and it can use its market size as leverage. Progress on Doha would help Europe regain some visibility.
Second, Europe could help switch attention from the aid agenda, a typical G8 concern but one that the G8 has not made a success of, to the development agenda that South Korea is keen to include in the Seoul programme. Embracing the development agenda would align Europe with the thinking of many G20 countries, including the UK.
Third, Europe should address the issue of rebalancing the world economy and perhaps suggest some burden-sharing with the US. In Toronto, Obama stressed that the US can no longer be the main engine of growth – in other words, the US is unwilling to take on the debt that comes with being the consumer of last resort. These remarks were met by deafening silence from the European leaders.
Finally, by addressing the issue of its own representation, Europe can help the G20 leaders make a significant step towards their immediate goals for the reform of the international economic institutions by November. This implies accepting collapsing the four European seats into an EU one, undoubtedly a hard action to initiate and implement but one that is necessary in order to give developing countries a stronger voice and greater representation. Europe’s representation would, of course, have to be adjusted to reflect the EU’s economic weight, so that what is subtracted from the European members of the G20 will be regained in terms of more concentrated weight.
The sooner this can be started, the better, because it would be better for Europe to lead this process rather than being dragged along. The alternative – a stubborn defence of power – would be a long and messy business with no long-term benefits.
Paola Subacchi is the research director in international economics at Chatham House in London.