G20 is eclipsing the G8 as world's 'steering committee'
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by L. IAN MacDONALD
The Gazette, Wednesday, June 9, 2010
Last Friday and Saturday, the media reported that Stephen Harper got nowhere in his efforts to persuade British Prime Minister David Cameron and French President Nicolas Sarkozy to give up on a global bank tax, an idea also supported by U.S. President Barack Obama.
But by Sunday, the media were reporting that the global bank tax was dead, killed off at a meeting of G20 finance ministers in Korea. In the space of 48 hours, Harper went from being snubbed by our three closest allies to taking a major issue off the table of the G20 summit in Toronto.
It was a big win for Harper, Finance Minister Jim Flaherty, and Canadian banks, which, under a global bank tax, would have been penalized for their stability and success, while British, French and American banks teetered on the brink of insolvency during the financial crisis triggered by their own incompetence and greed.
While their banks needed massive bailouts, ours never used a nickel of $150 billion of standby credit provisions in last year's budget.
Putting aside the notion of a global bank tax, as Flaherty and Bank of Canada Governor Mark Carney noted in speeches to the Conference de Montr»al on Monday, allows for a more sensible discussion on reforming financial services. Larger capital requirements and larger loan provisions would be two financial safety nets.
Leaving aside the quick fix of a global bank tax, the manner in which the issue was resolved signals a transition from the G8 to the G20 as "the world's new steering committee," as former prime minister Paul Martin puts it in an article in the current Policy Options.
Martin was present at the creation of the G20 at the finance ministers' level in the 1990s, but it took 2008's financial meltdown to bring G20 heads of government together in Washington, and subsequently in London and Pittsburgh. In the Pittsburgh communiqu» last September, the leaders declared the G20 "the premier forum for our international economic co-operation." Canada and South Korea were designated co-chairs for meetings in June and November, which is how the Toronto G20 meeting on June 26-27 got tacked onto to the Muskoka G8 meeting on June 25-26, creating huge security headaches and runaway costs.
It shouldn't cost $1 billion for security for a two-day meeting in two venues, when security for the Vancouver Olympics, over 17 days at two sites and many more venues, cost only $900 million.› Spending $57,000 for a fake lake, complete with Muskoka chairs, in the $1.9-million media centre, will give TV reporters a lovely backdrop for their stand-ups. Perhaps it will give Canadian tourism a boost worldwide, and in that sense could be a justified expense. But it's pretty hard to explain down at Tim Hortons, and there's no doubt the Conservatives are taking a short-term hit as sound stewards of taxpayer dollars.
But at the end of the day, the benefit of chairing the G8, and co-chairing the G20, is a measurable one for Canada, and a significant opportunity for Harper.
But the issue of the bank tax, and the way Harper and Flaherty enlisted other allies to make an end run around the G8, says a lot more about the arrival of emerging powers in the G20.
Think about it. The U.S., Britain, and France - three of the world's five great powers - all wanted an issue to go one way. The International Monetary Fund was also a proponent of a bank tax.
But China, India, Japan, South Korea, and Canada were all opposed to it. Normally, it wouldn't really matter what the Canadians thought, though as Harper and Flaherty have made clear for weeks, a bank tax is a complete non-starter with us.
But since Canada is the chair of the G8, and co-chair of the G20, it has something much more important than the gavel. It holds the pen.
Harper, in his pre-summit travels, is shaping the agenda for both meetings. And Canadian "sherpas" are writing drafts of the communiqu»s. Indeed, one version of the G8 statement has already been leaked, and in the reference to Harper's signature initiative of maternal health in the developing world, there is mention of family planning, but not to funding for abortion.
This is precisely the power of the pen.
As for fending off the very bad idea of a bank tax, it's nice to know Canada has other friends.