Date: 13/09/2012

Politics Department

Birkbeck College

University of London

Title: Emerging Economies as Global Governance Agenda Setters or Spoilers? How Historical Institutionalism can explain the behaviour of Brazil, China and India in the G20

Student Number: 12630746

Dissertation submitted in partial fulfilment of the requirements for the MSc in Global Politics

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Emerging Economies as Global Governance Agenda Setters or Spoilers? How Historical

Institutionalism Can Explain the Behaviour of Brazil, China and India in the G20

he global financial and economic system suffered a near death experience in

2008. Under the behest of French President Nicholas Sarkozy and US

President George W Bush, the first G20 summit was convened at the level of

heads of state in Washington DC to strive for a multilateral response to the crisis

consuming the global system. Followed by summits in London (2009), Pittsburgh

(2009), Toronto (2010), Seoul (2010), Cannes (2011) and more recently in Cancun

(2012) the G20 is seen by many as the most significant institutional development in

global governance since the 1970’s and indicative of the tectonic shift in economic and

geopolitical power from the core triad of the US, EU and Japan toward the emerging

economies of Brazil, China and India amongst others. The G20 was now to act as an

informal “steering committee” not just for the monetary issues and economics but also in

issues as diverse as development, climate change and international security. At the

Pittsburgh summit, newly elected US President Barack Obama confirmed in a press

statement that the G20 was the newly assumed “premier forum for their international

economic cooperation”- superseding the G8 group.

Originally formed in 1999 as a US initiative to convene the finance ministers of the top

twenty systematically significant economies in response to currency crises in Asia,

Russia and Latin America, the network was relatively low key in comparison to the G8

in its first decade. Elevated to the level heads of states in 2008, the forum promised to

be a watershed in global economic governance; an inclusive and informal forum for the

management of global affairs. Advocates believe the G20 holds the potential to become

the key platform for global governance as the body moves from Crisis Committee to

Steering Committee (Cooper, 2010) and its agenda develops and evolves to encompass

an ever wider set of issues. A stable relationship among established and emerging

powers is a key foundation of the G20, and it can serve as a platform to enhance mutual

understanding and cooperation among key political and economic actors. The public

rhetoric from leaders has reflected this notion, with Chinese premier Hu Jintao stating:

“The G20 is now transforming from an effective mechanism in tackling the financial

crisis to the premier forum for international cooperation” (Huang, 2011)

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With the precedent already set in motion by the G8 Heiligendamm Process, the leaders’

summits saw for the first time emerging economies such as Brazil, China, India amongst

others yielding diplomatic and economic power at the highest level, and is arguably the

major institutional outcome of the global financial crisis. With the addition of South

Korea’s hosting of the G20 summit in 2010 and Mexico in 2012 a geopolitical milestone

was reached and demonstrated the internalisation of this shift in global economic and

political power from the G8 core of developed and industrialised nations to the new

emerging economies, reflecting the realities of the global economy at the start of the

new millennium.

The emerging economies such of Brazil, China and India were crucial to the stated goal

of restoring growth and refraining from a reversion to protectionism in the midst of

crisis; and it was the buy-in from such nations and leaders that was the key to global

economic recovery. As the focus of G20 summitry evolved from fire fighting recession

and financial crisis management in 2008, it turned its focus on the creation of a new

international regulatory framework for global financial activities and a more ‘risk-

management’ role. Members of the Basel Committee noted how it was the emerging

economies that were crucial in averting a backsliding on commitments pledged by the

G8 nations, under pressure by the lobby of powerful domestic financial institutions

whose profits recovered swiftly following the crisis, to resist implementation of new

financial regulation. (Woods, 2010)

Following the end of the cold war, global forums had consistently failed to reflect the

shifts in global geopolitical and economic power. The emergence of governance fora

such as the G20 reflects the realisation that the solutions to global problems could not

be achieved by Western states alone. Breaking old bonds of the ‘G8 versus the G77’

entrenched in institutions such as the UN and WTO, the institutional form of the G20,

through informality, unleashed greater flexibility into global diplomacy and breathed

new life into previously stultified bloc politics created by formal, treaty based

institutions. (Patrick, 2010)

The non-G8 emerging economies outnumber their G8 rivals by roughly two to one

within the G20, yet despite this, many scholars and commentators are critical of the

view that the numerical advantage of these states and a shift in public rhetoric has

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translated into credible policy outcomes. The criticism levelled against the forum is that

the G20 is, despite all the above, still dominated by the preferences, doctrines and self-

interest of G8 states. In effect G20 commitments, communiqués, agendas and tangible

goals are the product of the neoliberal doctrine that retains its dominance through the

policy preferences of G8 states. After years of summits and communiqués there is little

consensus about the achievements of this ‘premier forum for their international

economic co-operation’ and what in practice it has meant for the voice of developing

and industrialising economies in shaping global economic governance (Martinez-Diaz,

2010). To a degree, there is a neglect by researchers of the issue of developing countries

participation, focusing their attention instead on the dynamics that drove the

emergence of the G20 and assessing its performance in terms of providing a new

international financial architecture and reform of associated organisations such as the

Financial Stability Board (FSB), World Bank and the International Monetary Fund (IMF).

Much of the literature on the G20 by Kirton et al is highly descriptive, focusing on

current policy issues that, by the very nature of ongoing G20 leaders’ summits, change

on an almost daily basis. Liberal Institutional approaches have focused on the formation

of the G20, underlying the need for a reduction in transaction costs in international

cooperation to explain the formation of the G20. (Porter, 2000) The aim of this

dissertation is to take a step back and critically use theories of political science to

explain the changing nature of state behaviour within these summits. Underlining the

key role that the emerging economies of the Brazil, China and India have played in the

management of the global economy, I will analyse their participative behaviour in the

G20 and question if as a group they are they global governance ‘spoilers’, ‘agenda

setters’ or simply ‘bandwagoners’?

I utilise the analysis of the Munk School of Global Affairs based at the University of

Toronto to analyse compliance performance of G20 member states. I attempt to

discerning patterns of compliance or institutional ‘cheating’ by emerging economies.

The comparison of the performance of Brazil, China and India against that of G8

member states is to ascertain a convergence or divergence of developed and emerging

economy preferences, and how these are expressed through the G20 communiqué

commitments and implemented by emerging economies.

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I conclude that emerging economies participation in global governance through the G20

is in fact constantly in flux, and their compliance is dependent not on their willingness

or otherwise to support multilateral global governance, but is rather dependent on the

degree of policy coordination that exists between this grouping, in addition to their

historically and socially constituted policy preferences on recurrent issues at summits.

I show that as the agenda of the G20 expands to include issues not traditionally

deliberated by G8, their engagement and compliance increases. This phenomenon

coincides with a degree of institutional and discursive learning as predicted by theories

of Historical and Sociological Institutionalism, and that over the period 2008 to 2011,

these emerging economies had ‘learned’ to better engage the prevailing global

governance agenda.

I focus on Brazil, China and India as case studies, aggregating their state preferences as

proxy for non-G8 developing economies engagement with global governance. Though

often labelled as ‘BRICs’ by the media and policy communities, I intentionally exclude

Russia and South Africa from my analysis. Firstly, given Russia’s membership of the G8,

it would be difficult to thus contrast G8 and G20 positions, and in addition its history as

a geopolitical superpower under the Soviet Union gives it a distinct historical

perspective on its role in global affairs, and one which is highly differentiated from that

of other BRICs. South Africa’s exemption from this debate is due to its relatively small

share of global economic output, trade and financial services. Given the centrality of

economic and monetary governance to the raison d’être of the G20, I felt it pertinent to

limit my analysis to the systematically significant economies of Brazil, China and India.

In addition to high GDP growth rates, their self-identity within the global community is

formed around the very notion of their emergence as global economic and geo-political

powers.

The case for Historical Institutionalism

How do theoretical approaches in political science help us explain the changing

behavioural patterns of countries such as Brazil, China and India within the institutional

setting of the G20? In political science today many scholars analyse how institutions

influence political behaviour and shape processes ranging from legislative decision

making to social movements (Hall and Taylor, 1996). Defining institutions as formal or

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informal procedures, rules, norms and conventions embedded within structures of

organisations of the domestic or global political economy, institutions are intervening

or structural variables through which there is discursive interaction between political

actors. (Steinmo, 2001)

Historical Institutionalism (HI hereafter) assumes that organisationally embodied

routines play a crucial role in allocating resources and structuring the incentives,

options and constraints faced by political participants. In this sense, institutionalism is

indeed a broadly shared approach in contemporary political science. (Thelen, 1999)

The most fruitful insights generated by social sciences of recent decades flows from the

analysis of how regularised and rule-like properties of institutions structure and frame

the behaviour of system actors. Citing HI as a reaction against the structural

functionalist approaches of the 1960’s and 70’s that viewed societal, psychological and

derived cultural norms as motivating dynamics of actors in systems, HI scholars rather

saw the organisation and structure of institutions themselves as generating particular

actions and outcomes in group behaviour. (Hall, 2009)

In contrast to the liberal institutional model, institutions influence behaviour not

through the reduction of transaction costs (see Porter, 2000) but by influencing the

degree of uncertainty that actors must utilise in their calculated strategic interactions.

The logic of HI models state that if institutions can contribute to the resolution of

collective action problems then the robustness of the institution is self-fulfilling. HI

scholars emphasise the relationship between institutions and individual behaviour in

broad terms, emphasising and the contribution of a multitude of factors in shaping

actors behaviour. (Pierson and Skocpol, 2002) Following from this is the second-order

problem in explaining how, why and when institutions change. The approach adopted

by HI is the most attentive to the issue of institutional stability and change, with

particular emphasis on ‘critical junctures’. (Hall, 2009)

Three important features characterise HI scholarship in contemporary political science.

They address big, substantive questions of interest to researchers taking the issue of time

as a significant as a factor, specifying sequencing in tracing transformations and

processes of change and temporality. HI likewise hypothesises about the combined

effects of institutions and processes rather than examining just one institution or

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process at a time. (Pierson, 2000) HI utilises theories of institutions in order to find

sequential relationships between social, political and economic behaviour with

institutional change across time. Thus, this thesis utilises such an approach in analysing

the changing institutional dynamics and behaviour of actors in the G20. Taken together,

HI amounts to an arguably distinct approach that makes powerful contributions to

political sciences understandings of how governments, governance and international

relations work in public spheres. (Pierson and Skocpol, 2002)

Institutional change in the HI model is rare, non-incremental and relatively inelastic to

changes in domestic and international political changes. (Krasner, 1984) According to

this analysis only major shocks such as the 2008 global financial crisis can act as

catalysts that precipitate changes in institutional structures. Institutional inelasticity

can also be derived from problems of coordination, veto powers and positive historical

feedback. (Praca, 2009) For example, the G20’s initial formation was following the

financial crisis of 1997, yet the global economy did not suffer a financial crisis between

1999 and 2008, creating an illusionary positive feedback that such a system of

governance was legitimate and effective.

Fioretos emphasises historical efficiency in addition to path dependency - the sunk cost

of history and increasing returns in institutional design is significant in current

emergent formations, and this contrasts sharply to rational choice and sociological

approaches:

“Historical Institutionalist point to such costs and other legacy effects as key factors that

shape the evolution of designs” (Fiertos, 2011)

Recent research in economics suggests extensions to the world of political science.

Temporality being at the heart of the analysis, the increasing returns dynamic captures

two key elements central to path dependency. Pinpointing how the costs of switching

from one alternative to another can increase over time and drawing attention to the

issue of timing and sequencing, with increasing returns processes, what happens is as

important as when it happens. (Pierson, 2000)

HI predicts that institutional development will therefore be slow and less extensive than

predicted either by sociological or rational choice approaches. (Pierson, 2000) The

continuation of the G8 as a partner institution and the extension of its institutional

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framework to the G20 show in practice how emergent institutional forms will be

‘isomorphic’ with existing institutions; transplanting their operational logic to the new

framework because actors extract causal designations from the world round them:

“This means that even when policy makers set out to redesign institutions, they are

constrained in what they can conceive of by these embedded, cultural constraints”

(Thelen, 1999)

The 2008 global financial crisis is a vivid example of incremental reform where gradual

conversion occurs as opposed to radical change with an old institutional designs

rebranded for new purposes and challenges. Faced by the biggest economic crisis since

the Great Depression, the world’s leading economies opted to respond by expanding the

scope of an already established institutional format. Despite its roots in the financial

crises of the late 1990’s, the G20 had laid dormant for the best part of a decade. The G20

leaders summits that was a flexible institutional structure that adapted for the new

crisis.

It had become increasingly clear that actors in international policy settings are

themselves constrained by the historically constituted institutional structure of

domestic policy actors (such as civil service, civil society, media etc) in heterogeneous

economies. In recent years, through the strength and inter-linkages of epistemic

communities, national authorities have enhanced their character and increasingly play

significant roles in shaping international agreements through transgovernmental

networks. The cooperation fostered by such organisations as the G-20 is evidence and

manifestation of the difficulties of states in coordinating agreed international standards

due to historically formed variations in national forms of regulation (Gilpin, 2001)

“This approach holds a valuable key to theorizing finer variations in how states engage

international institutions….The approach provides a more nuanced and more

comprehensive explanations for why states respond differently to the same

international challenges and also explain when they exhibit continuity” (Fiertos, 2011)

Praca supports the centrality of ideas in studying institutional change but this he applies

only for institutions that are clearly identifiable with prevailing orthodoxies or

associations with certain political results (i.e. Central Banks that maintain low levels of

inflation). Furthermore, the presence of a particular institutional formation is key to

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whether new ideas are significant, and that they matter to political actors. Firoretos

asserts:

“Studies of the role of ideas have focused on the conditions under which ideas get

embedded within institutions in politically consequential ways and they often give more

attention to ideas as policy paradigms than as principled beliefs” (Fiertos, 2011)

Similarly to sociological and rational choice institutionalism, HI places great importance

on socialization and a dynamic, interactive learning process that shapes actors

preferences on institutional formation. The notion of institutions working as a shared

script between political actors obscures the conflicts among them and dominant

cultural norms emerge out of political conflicts. (Katzenstein, 1978)

One of the unique aspects of the G20 is its institutional thinness and fragility (Cooper,

2010) a result of the absence of a permanent secretariat and ill-defined membership

criteria. Mahoney and Thelen (1999) incorporate informality into the HI analysis and

shed light on an understanding of how certain actors have variable compliance to

agreements and agendas over time and in addition Mahoney and Villegas (2011) argue

that it offers specific analytical tools that are useful in studying institutional change,

with a robust ability to test hypothesis against empirical material.

Given the strong theoretical inter-linkages between constructivism and institutionalism,

the influence of norms on political actors is prevalent and can be understood to

influence political actors in a three-stage process. Stage one describes the inevitable

‘norm emergence’, which can be derived from the emergence of new schools of thought

or research, such as the rise on neoliberal research in the 1970’s. This is followed by a

‘norm cascade’, where these emergent norms start to intersperse though the network,

leading ultimately to an internalisation of normative beliefs in participative actors

through the ‘tipping point’. Finnemore and Sikkink (1998) argue that while little

theoretical work has focused on the emergence of norms, they recognise that the

building and cascade of normative values relies heavily on ‘norm entrepreneurs’ and the

organisational platforms from which they act. Socialisation is a dominant mechanism

for norm cascade in an international setting and empirical evidence suggests that

international or transnational norms influence political actor’s behaviour to a greater

degree than domestic factors and can be a greater catalyst to the changes in normative

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outlooks. In the context of leaders summits, many commentators have noted how

diplomatic breakthroughs are often by leaders, finance ministers or their Sherpa’s who

build up strong personal relationships with their counterparts over numerous summits,

exchanging personal phone numbers and emails, garnering a sense of trust and

professional approach to what are essentially the finer technical points of policies.

Indeed it was often personalities and good relationships that often drove policy

breakthroughs. Consequential individuals inside the G20 itself, such as President Lula of

Brazil, were credited with making the G20 “more of a personal club of leaders and

helping broker the deals to modernise the IMF and liberalise trade”

(Kirton, 2011)

Emerging economies, they like their developed counterparts, conceptualise their role in

global governance:

“To the degree that states and state elites fashion a political self or identity in relation to

the international community, the concept of socialisation suggests that the cumulative

effect of many countries in a region adopting new norms may be analogous to ‘peer

pressure’ among countries” (Ramirez, Soysal, Shanaham in Finnemore and Sikkink 1998)

Institutionalists in sociology have made these internalised norms the centrepiece of

their research and they have shown how prominent norm cascades are in establishing

the aforementioned isomorphism’s in international institutional frameworks and

discourse - iterated and habitual behaviour are powerful mechanisms for the

internalisation of these norms:

“Diplomatic tools such as confidence building measures and track-2 diplomacy may

follow a similar logic. Generalized, this argument suggests that routes to normative

change may be similarly indirect and evolutionary: procedural changes that create new

political processes can lead to gradual and inadvertent normative, ideational, and

political convergence” (Rosenau in Finnemore and Sikkink, 1998)

Institutions confer power on to participants, but in an unequal fashion. (See Bremmer,

2010) It is increased for some, but diminished for others. The notion of institutions as

shared narrative spaces often obscures underlying conflict between actors (Streek and

Thelen, 2005). Cognitive dimensions of institutional change therefore should not eclipse

the strategic and political conflict dimension:

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“Both the economic-technological and the sociological-institutional perspectives

provide strong tools for understanding continuity, but by stipulating and privileging

particular mechanisms of reproduction....they have a hard time incorporating notions of

conflict and power, and they are not particularly helpful in talking about change”

(Thelen, 1999)

Can we reduce our theoretical approach solely to the explanatory power of HI alone?

How can other institutional approaches in political science be utilised in analysing the

G20, and to what extent do these approaches undermine or validate the historical

approach? Absent from HI analysis is an endogenization of agency in a way that explains

the dynamics of institutional change. Schmidt and others argue that sociological

institutionalism, is the missing framework that can provide this. (Schmidt, 2010).

Sociological institutionalist approaches focus on the power of ideas. Cognitive processes

and normative behaviour, including in the setting of international institutions,

discursive interactions between actors is the generator of ideas – whom, where, when

and why are key in producing institutional change.

Schmidt’s paper seeks to demonstrate that both sociological and HI approaches are in

fact complementary, and that both schools can learn a great deal from each other. While

HI approaches can be complemented by a greater focus on discursive interaction,

sociological institutionalism can broaden its explanatory power by adopting the insights

provided by historical institutional constraints (Schmidt, 2010). Leading HI theorists

such as Pierson take an approach that focuses on institutional continuity. In their model,

critical junctures set in motion patterns of ‘deep’ equilibrium, an institutional

architecture that is highly resistant to change. (Pierson 2000) Schmidt argues that we

need to get beyond such static interpretations and points to more recent HI theorists

who look beyond linear models of incremental change. They intend to put the history

back into HI.

Schmidt argues that sociological approaches are more effective in explaining why

‘programmatic ideas’ can be transformative. Schmidt however does also concede that

sociological approaches have a fundamental flaw; not least the difficulty in pinpointing

in detail ‘critical junctures’ and what exactly constitutes defining moments.

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How do we bridge the theoretical divide between these approaches? Interestingly, in

recent article Schmidt alludes to a cross fertilisation of all strands of institutionalism. All

three of the traditionally recognized new institutionalisms – rational choice, historical,

and sociological – have increasingly sought to ‘endogenize’ change, which has often

meant a turn to ideas and discourse. The emerging approach of each of these three

institutionalist traditions that take discourse seriously can best be grouped as part of a

new institutionalism known as discursive institutionalism which aims to interweave

substantive content of ideas and the interactive processes of discourse in institutional

context. It argues that this newest of the ‘new institutionalisms’ has the greatest

potential for providing insights into the dynamics of institutional change by explaining

the actual preferences, strategies, and normative orientations of actors. (Schmidt, 2010)

To get a sense of where each of the authors cited in this analysis lies on the spectrum of

institutionalism, see Picture 1 for a breakdown, which able demonstrates the merging

and cross fertilisation of three approaches, rational choice (RI), historical (HI) and

sociological (SI):

Picture 1: Discourses in Institutionalism

I have aimed to demonstrate that HI is not without its limitations and indeed many of

the tenants of this school have in practice adopted and subsumed many of the

underlying assumptions or analyses of other schools of institutionalism in order to

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further bolster their explanatory power. Sociological institutionalism re-injects actual

preferences and agency into HI analyses - the strategies and normative orientation of

actors are key at critical junctures in determining where the equilibrium path may settle

(Schmidt, 2010)

The G20 initial institutional framework was isomorphic to that of the G8 and earlier G20

finance minister’s summits. As we shall see, there was early domination of the agenda

by the preferences of G8 members. Excluding the exceptional circumstances in late

2008 and early 2009 which saw universal commitment to avert a global meltdown with

a coordinated fiscal stimulus package, over the next set of summits considerable

backsliding was observed on compliance with the commitments made in communiqués.

Over time however, with both confidence building, institutional and iterated

behavioural learning, these emerging economies came to G20 summits with a greater

sense of determination and engagement, better prepared to articulate their national

interests. This translated into communiqués that better reflected their preferences and

as a result witnessed greater policy compliance and engagement in global governance.

The G20 Literature

As evidenced by the BRICs forum joint communiqué of March 2009, the three emerging

economies analysed here have used the G20 forum to call for a stronger voice in

international institutions. Indeed, they are already engaged in global governance

through membership of the UN, WTO and the IMF.

In a recent paper by Hazakis (Hazakis, 2012) he evokes Germain’s 2001 analysis of the

G20 and questions whether it as mechanism through which emerging market

economies are able to affect the way in which the global financial system is governed.

(Germain, 2001) By analysing the conception of causality in explaining the G20’s

decision making dynamics with specific regard to cooperation in monetary policy he

asks if the G20 a genuine mechanism through which emerging economies are to be fully

integrated into the management of the global economy, providing a platform for long

term embedded structural reforms? Tiberghien argues that the G20 process represents

the most systematic effort since 1971 and the collapse of the Gold Standard to rebalance

the relation between market and governance establishing an integrated structure of

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global governance, becoming the key focal point of the geopolitical “Great Game”

(Tiberghien, 2010)

Gnath and Schmucker focus on systematically analysing and assessing the preferences

of G20 members based upon official statements, press coverage and interviews with key

BRIC delegates and comparing and contrasting them with official G20 communiqués.

Their model takes the preferences of the US and EU member states as proxy for the

preferences of the G8 as a whole, and in doing so they highlight any juxtaposition

against the preferences of states such as Brazil, China and India. They identify a number

of variables that are historically replicated from the G8 and G20 finance ministerial

meetings with the upgraded G20 leader’s summits. In addition, they assess whether

emerging countries exercise agenda setting power or implicit veto powers at G20

summits or act as institutional ‘free-riders’. They conclude that in contrast to the

perception of the G20 as “G7 with extra chairs”:

“We argue that all the emerging countries are interested in participating as equal and

permanent members in the G20 as the premier forum for international economic

governance” (Gnath and Schmucker, 2010)

The establishment of the G20 was a key objective of the G8 in order to manage the

global financial crisis of 2008. While the emerging countries were less exposed and

vulnerable to the vagaries of the financial markets, they were less interested in engaging

in the governance of such systems. China’s attempt to bandwagon on the initial G20

agenda was based on its willingness to cooperate for reputational enhancement. In

addition it was seen as an instrument to consolidate the G20 as an alternative to the G8

and thus to secure greater influence for developing countries in global economic

governance. (Gnath and Schmucker, 2010)

Whilst emerging countries share some general preferences, in particular their desire for

major institutional reform of international financial institutions, a ‘joint BRIC position’ is

not discernible. Short of a ‘new Bretton Woods’ sought by the likes of Nicholas Sarkozy

and Gordon Brown (Financial Times, 2008) minor institutional changes set within a

‘neoliberal’ policy paradigm framework cannot be the catalyst for a new global financial

architecture. The G20, far from being an independent and innovative institution:

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“{the G20 is} Closely associated with a particular set of ideological assumptions and

policy prescriptions, promoting the sets of implicit/explicit norms, principles, rules and

decision making procedures of the dominant neoliberal paradigm” (Hazakis, 2010)

Multilateral global governance was witnessing resurgence at the time 2008 Washington

summit:

Reform of voting system at the IMF under Dominique Straus-Khan as well

as increased resources for it and its sister organisation the World Bank

The G20 pledge to revive the Doha Round WTO trade negotiations in

2009

Resurgence of United Nations activism on many issues including climate

change and international security and the World Health Organisation

(WHO)

Despite these elements, Woods argues that what we are witnessing is not resurgence of

multilateralism, dragged from the doldrums of the Iraq war or the failure of the Doha

trade talks, but rather “the last gasp of an old fashioned concert of great powers”

embodied in both the G8 and G20. (Woods, 2010)

The original grouping of G20 finance ministers was in part a response to the perceived

failings of the IMF following the 1997 financial crisis. Woods asserts that failure to

reform the IMF following this crisis lead to greater global imbalances and was

significant in promoting regional bilateralism between Asian economies rather than

encouraging multilateralism through the IMF. Rather than honing criticisms of the IMF

and its legitimacy into a constructive reform agenda at the G20 finance ministerial

meetings, in its early years, the position and communiques of the G20 differed little

from that of the G7. The IMF governance reforms of 2008 were perceived as being

insufficient to sway the perception that it is an organisation dominated by the US. Its

governance reforms have not yet gone far enough to win the confidence of emerging

markets or transform its relationship with them, especially with regard to the

nationality and selection process of managing directors.

“The result is that different regions of developing countries, led to some degree by their

emerging economy neighbours, are finding regional solutions….far from witnessing a

new resolve by the G7 to open up and strengthen multilateral institutions….they have

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not relinquished their command of the tiller of the main multilaterals – the IMF and the

World Bank – even as it becomes clear that the future efficacy of these institutions

requires them so to do” (Woods, 2010)

Networks of governance such as the G20 emerge in response to the perceived

illegitimacy and lack of credibility of formal international institutions. Woods and

Martinez-Diaz in their work Networks of Influence describe how the G20 leaders’

network may affect associated international organisations by providing non-

bureaucratic and flexible institutional environment to create complementary effects,

generating political support. To some degree it may hold competitive effects, subsuming

responsibilities from subsidiary bodies of the IMF, World Bank and G8 and finally it may

also instigate a rebalancing effect in global governance where emerging economies, once

brought into the fold, may wield agenda setting powers – but Woods and Martinez-Diaz

make explicit in their model the degree of information sharing, strategy and policy

coordination that would be required by emerging economies in order to attain the

desired influence over the network.

Acknowledging significant ‘capture’ of the G20 finance agenda by G8 members early on,

the G20 is a forum where developing countries can experience more influence and

power on agenda setting. (Martinez-Diaz and Woods, 2009). Significantly for the

utilisation of institutionalism in explaining the changing nature of emerging economies

participation in global governance, they emphasise the importance of institutional

learning:

“As our study on the G20 finance networks show, emerging economies have used the

last decade of G20 summits to learn how to use a forum of this nature to their

advantage. Over time, emerging economies have adapted to the rhythm of G20

summitry and have built up specialized capacity in their ministries of finance and

central banks to deal with G20 issues. They have also grown more confident and

assertive using the network to put on the agenda issues of interest to them”

(Martinez-Diaz and Woods, 2009)

Ten years of practice and institutional experience in the G20 finance network allowed

leaders of emerging economies to be much better prepared for global summitry of 2008

than in 1999. At the level of leaders’ summit, there was a repeated process of

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institutional learning from the summits of Washington in 2008 to Seoul in 2010, and

Cannes in 2011.

Emerging economy governments display heterogeneous policy preferences and the

catch all terms such as ‘BRICS’ belie considerable variance in economic models and

strategic aspirations. What elements can we extract from the modern economic

histories of these countries to explain the nature of state actors preferences and the

inherent character of the economic diplomacy of states in international institutions?

How does history shape their conceptions of effectiveness and legitimacy? If we are to

ascertain how HI can explain the patterns of behaviour observable in international

summitry, and effectively legitimise this analysis, we need to accommodate for a

narrative of how history shapes the behaviour of actors within institutional

frameworks.

Brazil

"We are talking about the G20 because the G8 doesn't have any more reason to exist, in

other words, the emerging economies have to be taken into consideration in today's

globalised world”

Luiz Inacio Lula Da Silva, Former President of Brazil

Throughout much of the inter-war and post-war era, the development strategy of the

Brazilian economy was a state centric approach of import substitution, protectionism

and market dominance of state enterprises. This was reversed in the 1990’s with

comprehensive liberalisation of trade, privatisation of state firms and a tentative

opening up of financial markets. Brazil’s participation in international trade has seen

promising growth over the 1990’s, despite this compared to the emerging economies of

Asia, Brazil’s integration into global trade markets has been comparatively modest.

Successive governments have overseen profound changes in its economic and political

position, especially in the decade following from the financial crisis of 1997. Brazil’s

external image as a vibrant emerging power is consolidated by strong economic

performance, with large and stable internal market conditions (despite the crisis of

2008) with a vibrant, pluralistic and democratic society. As a result, Brazil’s

participation in global economic and political forums should be understood as a

18

consolidation of its long garnered “soft power”; leveraged by it moral capabilities as a

confident advocate for Latin American interests, distinctive social-economic model and

material capabilities buttressed by accumulated budget and trade surpluses.

Brazil’s increasing political weight in the G20 and its relative position are resultant from

the changes in its economy and its strength vís-a-vís other states. Recent economic

success had been determined not only by exogenously factored economic growth, but

also by institutional factors – the presidency of Lula da Silva was striking in its

commitment to macroeconomic stabilisation. Equally, conservatism in the regulation of

relatively closed financial markets with limited operations in foreign denominations

limited its exposure to international fluctuations and crises. (Lins and Silva, 2011)

The Brazilian government responded to the world recession with a set of strong

expansionary measures, in line with other systematically significant economies as

agreed and coordinated in the G20. Given that the source of the global crisis was laxly

regulated US financial institutions, negotiations on the regulation of financial markets of

the most developed countries were at the very least expected to be on the negotiating

table. The crisis of 2008 was quantitatively and qualitatively different to that which

precipitated the creation of the G20 in 1999. Unlike the G20 finance ministers’ summits,

emerging economies gained broader room and a louder voice in the international arena

for these very reasons. (Lins and Silva, 2011) While the G20 has become the main forum

for international economic cooperation, many observers state it has done little to face

up to the crucial issue of global imbalances of vast accumulations of reserve currency

(mainly $US) in countries with trade surpluses. Within the international institutional

framework of monetary governance, the ‘BRIC’ countries were integrated through

membership of the Financial Stability Board.

Some question how loud is their voice within this club. Brazil’s prominence and

participation in a new global monetary order is hard to dispute, but Brazil has no

definite strategy for the G20:

“Brazil has been waiting for the big powers to disclose their positions, thus avoiding

previous alignments with any specific country, including the BRICs” (Barbosa and Mendes, 2010)

Though strategies and aims of reform for Bretton Woods institutions exists across

emerging nations, the acronym ‘BRICS’ coined by Goldman Sachs’ Jim O’Neill masks

19

highly heterogeneous economies, societies and polities, each with their own historically

constructed notions of legitimacy and effectiveness, backed up by differing material

capabilities. Brazil, for its part, was aligned to the overall objectives and agenda of the

creation of the G20, ensuring the mandate was adequately elevated from the G8, and

ensuring the centrality and primacy of the former institution in global governance.

Brazilian participation in the G20 was vital to the incremental remodelling of the

Bretton Woods institutions. (Tedesco Lins and Pignatari Silva, 2011) Brazil avoided the

typical ‘north-south’ confrontational dialogue, adopting instead a moderate position;

they ensured that a Brazilian presence was ever present at FSB and Basel Committee

summits. (Barbosa and Mendes, 2010)

By contrasting the language employed in policy positions of Brazil’s government

through official statements and G20 summit communiqués, Brazil can be seen as

bearing a cautious and pragmatic approach, and only from Pittsburgh onwards is it

possible to identify a louder Brazilian voice. As a historic beneficiary of the Bretton

Woods system, there was less incentive for them to demand its reform in contrast to the

position of India and China. In addition, conflicting interests in the ‘currency wars’ over

exchange rate policies, which came to dominate the agenda in 2010, demonstrate how

easily cracks may appear in the coalition of emerging economies in international

diplomacy.

In an address to the 2011 ENERI conference in Brasilia, Kirton stated how Brazil had

been pivotal form the start of the G20 leaders’ summits, and how their contribution to

the meetings at finance ministerial level grew over successive summits. When the 2008

crisis came, it was Guido Mantega as Brazil’s Finance Minister who hosted the first

emergency ministerial meeting in Washington in October 2008, to which US President

George W Bush was a guest. As Kirton states:

“(Bush) acknowledged that the financial crisis had been born in the USA. He noted that

they were all in this crisis together and needed to work through the G20 to get it solved.

The meeting clearly showed that leadership was passing to a new generation of

emerging powers with Brazil at the head” (Kirton, 2011)

Initially a hesitant and reluctant participant due fears of the G20 undermining

traditional multilateral forums such as the UN, Kirton notes how President Lula was key

20

in galvanising the G20 into a more personal club of leaders and helping broker the deals

to modernise the IMF and liberalise trade. Brazil’s compliance to G20 governance is

evident by its strong record of compliance. With an overall score of 81% it is well above

the average compliance score, ranking as high as G8 members. It’s highest compliance

scores are in the areas of energy (100%), food and agriculture (100%), climate change

(50%) and macroeconomics (50%) – these are policy areas where Brazil has

traditionally been most active and capable. (Kirton, 2011)

China

“The G20 is now transforming from an effective mechanism in tackling the financial

crisis to the premier forum for international cooperation”

– Chinese Premier Hu Jintao

Given the informal secretariat and institutional frailty of the G20, it is not surprising

that the Chinese approach to this forum of global governance is “keeping a low profile

and taking a proactive role when feasible.” (Huang, 2010) Observers note how emerging

countries like China continue to play the ‘long-game’ in international relations, hedging

its bets on instrumental outcomes and taking a cautious approach that mask

geopolitical strategies. (Cooper, 2010) Huang’s assessment of Chinese participation in

the G20 argues that the general attitude of Chinese government towards the G20 is

positive. The forum offers an ideal opportunity for China to give emphasis to its ‘soft

power’ and play a participative role in global governance, and ensure the peaceful

nature of its rise as a global power:

“China has changed from passive state to proactive state, from peripheral to core. China

looks to the G20 as the most important and representative multilateral global

governance platform” (Huang, 2010)

HI approaches emphasise institutional learning as a process that defines the parameters

of path dependency and the period of China actively participating in the top tier level of

governance is historically very brief. In contrast to members of the G8, the official

representatives from the G20’s emerging economies have less experience with the peer

review process, including the ‘Mutual Assessment Process’, which have allowed a

facilitation of the policy process. Being an inexperienced player in global governance,

21

despite its economic clout, China is a very cautious at every stage of negotiation. As

Bremmer (Bremmer, 2012) and others lucidly argue, institutions create winners and

losers, and as a result are not viewed as ‘non-neutral entities’ and China’s reticence

stems from this perception.

In contrast to Brazil’s new found confidence in playing an international role, China will

continue to focus on primarily on domestic issues, including the maintenance of

domestic growth rates, including the target 8% GDP growth rates that are needed in

order to sustain social cohesion (BBC News, 2012) and thus China’s primary strategy

within the G20 is cost minimization rather than benefit maximisation.

Scott and Wilkinson’s analysis of China’s trade diplomacy in ascension to the WTO as an

example of how the HI theoretical framework can complement our understanding of

how institutions can help shape China’s capacity to act in international institutional

settings, an analysis which is possible to replicate for the G20. Admitted in to the WTO

in December 2001, the accession negotiations being a long and arduous process given

the specific nature of the Chinese economy. In their case study, the WTO was a key

mediating variable for a number of reasons:

Trade has become a fundamental driver of Chinese growth

Trade is a highly institutionalised realm of international relations

Governance systems in global trade are multilateral

China is a relatively recent user of such systems and have undergone

significant learning processes in becoming accepted into the

organisations

China’s participation in WTO negotiations can be split into an early ‘low profile’ phase

and a later, more assertive phase. The WTO’s institutional practices, procedures and

working culture influence Chinese diplomatic strategies and behaviour through a

“learning the WTO ropes” phase (Scott and Wilkinson, 2011). Citing domestic political

pressure as a factor in explaining Chinese policy preferences, they emphasise:

“The complex, reciprocal relationship between domestic factors affecting the WTO, and

the WTO as an institution in turn affecting its member states….an appreciation of how

the institutional character of the WTO impacts on its member states is necessary”

(Scott & Wilkinson, 2011)

22

India

“We have come here not as petitioners but as partners”

– Dr Manmohan Singh, Heiligendamm G8 Summit, 2007

Measured at purchasing power parity, India is now the third largest economy in the

G20. It accounts for just 2% of global GDP and an even smaller share of trade. When

accounting for GDP per head, it is the poorest in the forum, with income per head at

$1,389 per annum, compared to the G20 average of $23,000. (IMF, 2012)

India’s public and political elite are mostly indifferent to the G20 (Cox, 2009). However,

at the G20 summits in Washington and London, India was finally welcomed as a partner

in global governance. India’s delegation to early summits, including Prime Minister Dr

Manmohan Singh (with a doctorate in Economics from Oxford) and his ‘Sherpa’

Monteck Singh Ahluwalia, Deputy Chairman of India’s Planning Commission (and

former World Bank Director) and the highly effective Rakesh Mohan, deputy governor

of the Reserve Bank of India, meat that India was well served in G20 summits. (Cox,

2009)

India derived much ‘soft’ power from the cautious, even conservative, central bankers

who were derided by their western peers prior to the crisis. With hindsight, they came

to be seen as an example of sound and prudential monetary management. Once granted

membership of the Financial Stability Board (FSB) by the G20, India was represented

not only by its finance minister and financial regulator, but also by its Reserve Bank

governor. Its contingent of three was exceptional, and put it on parity terms with the

largest economies such as the US. (Cox, 2009)

At the London summit, the Indian delegation favoured a ‘concerted’ initiative to

alleviate the global recession with both monetary and fiscal stimulus, arguing that the

dangers of doing little were greater than too much. Indeed, India would be of

considerable direct benefit from the vast increases in IMF, World Bank and Asian

Development Bank funds and lending, and so naturally it was supportive of moves to

achieve this. (Cox, 2010)

The contribution of Indian delegates lead to some key successes at the G20 summits

including IMF quota reform by January 2011 and extra funds for the Multilateral

23

Development Banks (MDB). Its economy was not central to the 2008 crisis or its

resolution. Like China and Indonesia, its economy continued to grow throughout this

period despite the crisis.

The communiqué published at the London summit in 2009 largely reflected Indian

concerns, with one Indian journalist noting how closely the communiqué matched the

speech given by Dr Singh at 10 Downing Street the evening before its publication. (Cox,

2010) Regardless, policy makers and the public back home showed little enthusiasm

and interest in the G20. India has been here before. India’s attitude to the G20 in 2008 is

similar to how it perceived the General Agreement on Tariffs and Trade (GATT) 15

years ago. Despite India being a founding member of GATT, it was not an agenda setter

or active participant for the first eight trade rounds. (Bery, in Cox 2010) Rather than

trying to mould a global agenda for trade, it was interested only in preserving its

freedom to shelter domestic industries. After the Uruguay Round, it realised it could no

longer insulate itself from global trade rules and WTO rulings. India realised that if it

wished to retain sovereignty in its policy space, then it needed to actively define and

defend it. The 2008 crisis demonstrated that it could not insulate itself from the global

economy or financial markets as it had done in the Asian financial crisis ten years

previously. India’s major companies were globalising fast, even if its financial system

remained relatively closed. And in the midst of the crisis, these companies were shut out

of global capital markets - it demonstrated to India that it could not turn its back on the

reform of global financial regulation.

“The crisis....may force India to rethink its position on international finance, much as it

rethought its stance on trade 15 years ago” (Bery, in Cox 2010)

From the end of the 1990’s onwards it was clear that G8 was no longer a capable and

legitimate forum for managing the global economy. The importance of emerging and

developing nations had accelerated markedly in the 1990’s and early 2000’s. In fact as

one can see from the Figure 1 their share of global GDP, measured at purchasing power

parity, had increase from 31% to 48% over the period 1990 to 2009.

24

Table 1 (Angeloni and Pisani Ferry, 2012)

Until the 1990’s global trade routes were still dominated by north-north exchange

amongst developed economies. Emerging economies have since seen both a surge and a

transformation in their share of global trade and the extent to which their economies

are integrated and reliant on trade for growth. This is shown in Table 2. In addition,

recent research by Kubelec and Sa (2010) on bilateral trade and financial networks

demonstrate the systematic significance of these economies in global trade and finance

flows. As can be seen from Figure 1, China stands out as a major trading power with

Brazil and India, though to a lesser degree, commanding considerable space in these

networks.

Table 2 (Angeloni and Pisani Ferry, 2012)

25

Figure 1 (Kubelec and Sá, 2010)

It is therefore apparent that China, India and Brazil are countries are of systematic

significance in global trade. What of global finance? While the G7/G8 economies

completed their financial account liberalisation in the early 1990’s, emerging economies

of the G20 have had a significantly different and heterogeneous experience of capital

account liberalisation. IMF data up to 2009 shows that assets and liabilities of

developed economies were at an excess of 400% in comparison to just 100% in

emerging and developing countries as shown in Figure 2.

Figure 2 (Angeloni and Pisani-Ferry, 2012)

26

Figure 3 (Kubelec and Sá, 2010)

Figure 3 above, similarly to Figure 1, shows the network significance of economies with

regard to international financial flows in the global economy. Though the emergence of

financial centres in mainland China, Hong Kong, Korea, Singapore, India, Argentina,

Brazil and Mexico are observable; the pivotal roles are still played by the worlds five

dominant financial hubs: the US, UK, Germany, France and Japan – all G8 members.

What can this data then help explain about the compliance performance of Brazil, China

and India in the G20? As I will show, the agenda of G20 finance summits and early

leaders’ summits were dominated by issues of ‘G7-esque’ paradigms. The dissonance

between emerging economies as reluctant participants in global financial governance

can be in part attributable to this dichotomy. Emerging economies have gained

considerably from the boom in global trade over the last three decades – they have a

vested interest in preserving global aggregate demand and maintaining trade

liberalisation. While their economies are little exposed to the vagaries of global

liberalised capital they have comparatively less to gain in comparison to their G8

counterparts in complying with greater regulation of their financial industries. As we

shall see, the compliance performance of Brazil, China and India from Pittsburgh, and

especially Seoul onwards steadily increases. This was in great part due to the expansion

27

of the summit agenda to include issues more akin to the G77 – financial safety nets to

reduce the reliance upon trade and currency imbalances, economic development and

food security. (Gnath and Schmuker, 2011) These emerging economies were less

affected by the financial crises during the period 2008 to 2011 and thus showed

different priorities and preferences to their G8 counterparts. Indeed, while these

emerging economies share some general preferences with regard to increased voice in

global economic governance, a joint stance on policies at the G20 is difficult considering

the wide variation in preferences on a range of policies. (Gnath and Schmuker, 2011) In

addition to the issues of institutional learning and policy coordination, despite the G20’s

consensus based decision making structure (as opposed to vote based structure in the

UN for example) a numerical advantage of developing and emerging economies does

not translate to greater influence – G8 states simply have more staff and resources

available at their central banks and finance ministries devoted to the G20 matters, thus

enabling a greater degree of informed policy coordination. (Gnath and Schmuker, 2011)

G20 Compliance

Table 3 outlines a broad overview of the main topics and issue areas discussed at G20

summits and appear as significant policy announcements in G20 communiqués.

Table 3: The G20 agenda at each summit

28

Both the G8 and G20 at each summit produce a communiqué (or written declaration)

for the public and can be seen as a kind of highly visible public contract which holds

their members to commitments endorsed and negotiated behind closed doors.

Compliance reports therefore allow us to asses empirically the value of communiqués,

the credibility of policy announcements and with cross sectional data analysis on a

country by country basis we can garner a proxy indication of countries compliance to

the global governance paradigms prevalent at G20 summits. Empirical approaches to

summitry compliance analysis, as opposed to reportage or eye witness accounts, can

explicate the measurable trends in such institutional environments. Further, they can

offer insight into three key questions: To what extent and under what conditions do G20

states live up to their commitments? How does the pattern of summit compliance vary

over time, issue area and by member? What causes high and low summit compliance?

The key variable under scrutiny then is the deviation from the commitment.

Commitments are defined as a:

“Discrete, specific, publicly expressed, collectively agreed to statement of intent; a

‘promise’ or ‘undertaking’ by summit members that they will undertake future action to

move forward, meet or adjust to meet an identified welfare target.”(G20 Research Group)

Firstly, commitments must be discrete, in that each specified action represents a

separate commitment. In addition, commitments must sufficiently specific that targets

must be identifiable and measurable in some form. Finally, commitments must future

facing and not simply a reaffirming past policy actions. While it could be argued that

that a summit that produces a great number of commitments can be indicative of a

productive summit, we must be wary of the trade off between quality and quantity.

Some summits may have provided fewer commitments only because each individual

commitment was qualitatively more ambitious. So it is important to acknowledge this

variation, which is the difference in individual and overall ambitions. By looking at an

average compliance score, in each distinct policy field, we ascertain a common indicator.

The study of G20 compliance has a comprehensive methodology of monitoring and

assessing the G20 members’ compliance performance with summit commitments.1

1 An overview of this methodology can be found here: http://www.g20.utoronto.ca/analysis/#summits

29

Every G20 member receives a score of either -1, 0 or +1. The scores are broken down as

follows:

+1: Indicates full compliance with the stated commitment

0: This mark is awarded for partial compliance, or if policy is in progress, with

initiatives already launched

-1: This is awarded to countries who fail to comply or take action

Hence, all countries within the G20 receive a mark between -1, 0, or +1 for each policy

commitment they collectively pledge. Time consistency in the analysis is maintained by

compliance period between the publication of the communiqué of the summit under

scrutiny and the beginning of the subsequent leaders’ summit.

Washington D.C. (2008)

Despite conflicting interpretations of which country undertook the initiative of

establishing the Washington summit, it was for all intents and purposes unexpected and

well received by the international financial markets and public opinion. (Angeloni and

Pisani-Ferry, 2012) The Washington summit was pivotal in establishing the G20 as a

forum of global importance and though the communiqué was brief (the concluding

statements at five pages long were considerably shorter than those that were to follow)

it concentrated on the situation in the financial markets and on the actions to be taken

to stabilise them. The communiqué at Washington conveyed a sense of urgency, focus

and action that read “like an extremely focused action plan”. (Angeloni and Pisani-Ferry,

2012) The communiqué focused on financial markets and institutions, transparency and

accountability; financial regulation, reinforcing international cooperation and reforming

the international financial institutions (IFI’s). Two of the key commitments made at the

summit were coordination of macroeconomic stimulus packages and the commitment

to reject protectionist trade policies.

The commitment of rejecting protectionism or reaffirming their commitment on

maintaining trade liberalisation specifically aimed at binding countries to not raise any

new barriers to investment and trade in goods and services, imposing any new export

restrictions, or for that matter implementing any measures inconsistent with WTO

rulings. Table 4 below shows the compliance scores of all G20 nations. The average

30

score on compliance in regard to protectionist measure is 0.58. Taken as a group, Brazil

India and China score 0.33 with only Brazil yielding compliance scores in the positive

range. Brazil, while not undertaking any new measures to raise barriers to investment

or trade, had made substantial progress in bilateral trade negotiations, especially with

the EU. China on the other hand has breached several conditions of the commitments,

raising barriers on goods from the EU, while promoting exports with VAT rebates and

fiscal measures; a record number of anti dumping lawsuits were filed against China in

this period. (G20 Research Group) Meanwhile, India has introduced a range of tariff and

subsidy measures in the compliance period of 2008-09, including tariffs and import

restrictions on steel products and anti dumping duties on medium density fibre

products.

Table 4: Compliance Scores: Rejecting Protectionism” Compliance Performance

The commitments made in macroeconomics focused on an immediate stimulus of

domestic demand and address longer-term fiscal sustainability in policy frameworks.

Brazil fully complied with this commitment (+1) to use fiscal measures to rapidly

stimulate domestic demand while maintaining a fiscally sustainable policy framework.

Brazil’s fiscal plans to increase domestic demand have been primarily tax reductions

and fiscal measures amount to 0.5 per cent of Brazil’s GDP. (G20 Research Group)

China partially complied with its commitment (0). Despite a stimulus package at

$586bn announced on 10 November 2008, China had not published how it would

consolidate this cost, therefore unable to confirm how it would make this investment

31

sustainable in the medium to long term. India fully complied with its commitment (+1)

passing three stimulus packages during this period, allowing the state to deviate from

its fiscal consolidation targets of 0.5 per cent but expected a return as outlined in the

2001 Fiscal Responsibility Bill. (G20 Research Group)

Table 5: Compliance Scores Washington 2008: Fiscal Stimulus

London (2009)

The London summit of April 1st and 2nd 2009 is likely to remain in history as the

moment when the international community united to stave off a global depression and a

return to inter-war era protectionist ‘beggar-thy-neighbour’ policies. On financial

regulation the London summit maintained the momentum launched in Washington and

world leaders committed to reshape the FSF into the FSB with an enhanced mandate

and broader representation. In addition, one of the main innovations of the summit was

the strengthening of resources available both to developing and emerging economies

through the IFI’s with a $750bn boost to resources available to the IMF. (G20 Research

Group) The average compliance score of the G20 member states with the London

summit commitments is 0.23 as demonstrated in Table 7.

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Table 7 - G20 members’ compliance with 2009 London summit commitments

If we break down this analysis we can see that high levels of compliance have been

demonstrated by Canada, Australia, and the EU (0.6) and in particular Germany and

France (0.8). Russia, the US and Japan demonstrated rather lower compliance

performance scores at (0.4) and (0.2). Of particular note however are the other

industrialising G20 members, including India and China, who manifestly failed to

comply with the London commitments. Brazil meanwhile, whose compliance behaviour

as in the positive range, at 0.2 was less than the G20 average of 0.23. With an overall

score of -0.2 for China, India and Brazil against the average score of 0.23 for the G20 as a

whole, we can argue that these countries were not contributing to the commitments

made at London. The analysis presented by the Munk School highlights a significant

pattern of compliance from G8 members while the average compliance performance of

non-G8 members at the London summit compared to the G20 average is -2%.

The research conducted by the Munk School does however raise interesting analysis

when looking at cross sectional data of compliance performance by policy issues. The

highest level of compliance is registered in the resisting of protectionism and

maintaining global trade and investments. See Table 8.

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Table 8 - G20 compliance with 2009 London summit commitments

(G20 Research Group)

Reiterating the commitments made at the Washington summit in 2008, the aim of

averting economic protectionist policies was at an average compliance of 0.58. A

minimal level of compliance was observed on pledges on the Millennium Development

Goals (MDG), Overseas Development Aid (ODA) and investment in the World Bank’s

Vulnerability Framework. In this sense the priority for the G20 was simply as a

“recession buster”. While countries such as Brazil, India and China had substantial trade

and budget surpluses, the agenda was distinctly G8 one, with little ‘buy in’ from

emerging economies.

Pittsburgh (2009)

The Pittsburgh summit was highly significant. In a climate of low expectations the

summit achieved important results, despite what many observers noted as a slowdown

in the productivity of the G20. The sense of urgency that had characterised both

Washington and London summits had abated and the focus of policy formulation

became open to more contestation. A key challenge was to maintain reform momentum

while avoiding micro management and an excessive top-down approach to financial

reform when at the very moment it was about to get increasingly technical. (Angeloni

and Pisani-Ferry, 2012)

34

The first important result achieved at Pittsburgh concerned institution building where

the communiqué published set out the G20 as the “premier forum for their international

economic co-operation”, becoming not only a regular event, but also replacing the G8 at

the top of the international financial architecture. Significantly, the leaders pledged to

strengthen the voice of emerging and developing economies in the IMF through shifting

at minimum 5% of voting quotas from overrepresented countries to underrepresented

countries by January 2011. The Pittsburgh summit was also characterised by a

broadening of the G20 agenda to include energy security, climate change, poverty, jobs

quality and trade and investment.

Where Pittsburgh made the most important headway was in the issue of global

imbalances. Previous chairs had sidestepped this issue at both Washington and London

so as to avoid the issue becoming focal point of US-Chinese confrontations over the

valuation of the Renminbi. Not only was the concept of global imbalances as a

significant cause of the 2008 crash gaining traction following the publication of reports

by both Jacques de Larosiere (2009) and Adair Turner (2009), the IMF was projecting

for a rebound in global balances and the feared effect on demand in future years of

deleveraging and fiscal consolidation. On the eve of Pittsburgh, many commentators

saw it as unlikely that the leaders would entertain discussions in this sensitive area, yet

at the initiative of the US, an agreement was reached on macroeconomic frameworks

that included fiscal, monetary, trade and structural issues and finance ministers

established the ‘Mutual Assessment Programme’ (MAP) to evaluate their collective

compliance to the framework.

The average compliance of the G20 members is 0.24 (See Table 9) The compliance

performance to the Pittsburgh summit is marginally better than that of London (0.23).

35

Table 9 - 2009 Pittsburgh G20 Summit Compliance Scores

(G20 Research Group)

When comparing the London and Pittsburgh summits, one can discern a pattern of

improved compliance performance from many of the countries under analysis. The

most significant positive change was demonstrated by South Korea (+0.75), China

(+0.53) and Argentina (+0.48). India gained a modest +0.02 while Brazil saw one of the

most significant decreases in compliance with its score decreasing by -0.83. According

to the G20 research group, the analysis reveals substantial differences in compliance

between non-G8 and G8 members of the G20. The average compliance scores for non-

G8 members of the G20 have changed from a negative of -0.02 to a positive of 0.01. The

authors note the average compliance performance for non-G8 members of the G20 has

changed from the negative score of -0.02 in 2009 to a positive of 0.01. Further if we look

at China, India and Brazil specifically we attain a compliance rate of -0.29. See Table 10.

Table 10 - 2009 Pittsburgh and 2009 London G20 Summits Compliance Scores

(G20 Research Group)

36

Similarly to the analysis of the London summit, the compliance monitoring reveals

substantial differences in compliance performance when we look at cross sectional data

by commitment, sector and country groupings within the G20. See Table 11:

Table 11: G8 and Non-G8 compliance with Pittsburgh summit commitments

(G20 Research Group)

In relation to commitments made on global economic issues, global balances in current

account and the promotion of open trade regime remained high at 0.70, with financial

and regulatory reform trailing at 0.15 and reform of international financial institutions

at 0.05. Non-G8 members were effective in complying to the commitment on balancing

current accounts and promotion of open trade and investment (average 0.73)

surpassing the compliance of the G8 members, in their course ensuring macroeconomic

stabilisation and promoting open markets in Foreign Direct Investment (FDI). The

report highlights how non-G8 countries failed to comply with commitments expressed

in the areas of regulatory reform (-0.27) and international financial institution reform

(-0.45). Similarly to the two preceding summits, the G20 performance, as a collective,

proved to be weak on producing and complying to commitments on issue of

international development, gaining a score of just -0.05, with G8 compliance at 0.33 and

non-G8 compliance at -0.36. In summary, the Pittsburgh report states that the G8

grouping demonstrates higher rates of delivery and effectiveness in commitment

compliance. They conclude however that:

37

“The rise in performance of non G8 members in the G20 is an important factor, which

gives hope that the institution can serve as a platform for their deeper engagement in all

global governance functions” (G20 Research Group)

Seoul (2010)

Seoul was the first G20 summit to be chaired by a non-G8 country and Korea was

especially keen on making it a success. (Financial Times, 2010) Like Pittsburgh, with the

easing of the financial crisis, normalcy brought with it the opportunity for conflict. The

‘Currency War’ was making headlines once more and the MAP was proving more

difficult than expected to implement, with countries only agreeing to policy agreements

that had already been agreed in previous summits. The very fact that all the participants

agreed to commit to headline goals vis-á-vis other nations were highly significant. Seoul

was also successful in delivering, ahead of schedule, the promised reforms of IMF

governance, with an overall shift of 6% in weighted voting rights to underrepresented

emerging economies, bettering the originally agreed 5% at Pittsburgh. (Angeloni and

Pisani-Ferry)

For the period under consideration in this compliance report between 13th November

2010 and Cannes summit on 19th October 2011 the G20 members attained an average

overall compliance rate of 0.5. At Seoul, the difference between the highest and lowest

performers is measured as +0.93.

Continuing the trends present through Washington, London and Pittsburgh, G8

members of the G20 yet again achieved a greater average compliance rate in contrast to

non-G8 members who achieved, in this instance 0.66 against 0.36 respectively.

However, the research stresses the narrative of a convergence in the patterns of

compliance performance over the period 2008-2010:

“This difference of 0.30 points has significantly decreased since 2009 as the compliance

performance of non-G8 members has increased. The gaps in compliance between G8

and non-G8 members have been narrowing steadily, if slowly” (G20 Research Group)

Analysing compliance data by country, we can see from Table 12 that Brazil, China and

India are, at 0.42, not even in the top ten performing nations within the G20, coming

twelfth, thirteenth and fourteenth respectively.

38

Table 12: 2010 G20 Seoul Summit Final Compliance by Member Ranking

With an average compliance of 0.44 the BRIC countries taken together– Brazil, Russia,

China, India and South Africa – though not equalling the compliance rate of G8 states, is

significantly higher in comparison to that of other non-G8 member states.

Looking across policy areas, the highest scoring commitments were attained in fiscal

consolidation and improving infrastructure 0.89 and the lowest scores were recorded

for commitments on international cooperation 0.05 and trade -0.05. As noted

previously, South Korea as chair had made big strides in pushing development on to the

agenda. The average compliance rate by policy area and commitment was at 0.52. On

development, coming in at 0.6, is better than average compliance and thus represents a

qualitative improvement. See Table 13.

Table 13: 2010 Seoul Summit Final Compliance by Commitment

39

The research surmises that G20 compliance performance for the chosen priority

commitments, measured as a country average, have improved incrementally since 2009.

With an overall average score of 0.23 at London, 0.24 at Pittsburgh and 0.5 at Seoul, its

improving performance may validate its role and claim to legitimacy as the central

global governance institution.

Significantly for the emerging economies of Brazil, China and India at Seoul, South Korea

as chair of the summit was ambitious to open up new chapters in international

discussions and widen the agenda of the G20 to include issues of financial safety nets

and economic development, with clear substantive and political motivation for doing so

as a former developing economy and IMF structural funding recipient. (Angeloni and

Pisani-Ferry, 2012)

Cannes (2011)

The Cannes summit took place between the 3rd and 4th of November 2011. The French

Presidency started with an ambitious agenda at the beginning of 2011. However, the

crisis engulfing the Eurozone was soon to overshadow events and hijack the agenda at

Cannes. British broadsheet newspaper The Guardian reported on the eve of the summit:

“The G20 summit in Cannes is likely to turn into another eurozone crisis meeting amid

desperate attempts to avert a disorderly default by Greece” (The Guardian, 2011)

They also reported on the first day of the summit:

“The eurozone crisis has overshadowed Sarkozy's attempts to add his own personal

touch to the standard G20 agenda” (The Guardian, 2011)

The summit itself was dominated by developments on the Greek sovereign debt crisis

and disputes among EU leaders on the various proposals on the financial facilities

available to alleviate it. Nevertheless, the French did propose a theme of a successor to

the Bretton Woods system. France had hoped for considerable support from China on

these reform initiatives, but in the event the Chinese government maintained a very

cautious approach to these issues. (Angeloni and Pisani-Ferry, 2012) Meanwhile Brazil

caused headlines when its President Dilma Rouseff adopted a leadership role for BRIC

nations concerned about the deepening crisis in the Eurozone, and following from the

recent BRIC’s summit in Hainan, China, there was an agreed position that the Brazilian

40

delegation was able to press upon their European counterparts, in addition to the Sanya

Declaration calling for their greater voice and influence in international monetary

affairs. (BBC News, April 2011)

“Concern over ‘contagion’ meant the Brazilians were likely to arrive in Cannes with all

guns blazing. Rousseff, {I} believe, was likely to ‘provoke’ and ‘preach’ to the rich

nations – particularly the European powers and to a lesser extent the US. Rousseff

would point out that Brazil had learned from past financial crises and that ‘rich

countries should now do their homework’ to stop their crisis contaminating other

emerging economies. Whether Brazil is able to influence the outcome of the Cannes

talks or not....Brazil's leadership in uniting leaders from a variety of emerging

economies towards a common position was a positive sign of the country's growing

clout and reach on the global stage” (The Guardian, 2011)

For the first time these nations has made a strong effort to coordinate positions

between emerging economies prior to G20 summits and that this agreed common

position was key to their confidence and assertiveness in negotiations at Cannes.

At the summit a total of 282 commitments were made. The commitments identified by

the Munk School compliance report cover a range of issue areas - thirteen in fact.

Covering G20 institutionalisation, they also fell predominantly in the domain of

economics (32%), finance (13%) IFI reform (12%) and Trade (6%) with the remainder

split between development, agriculture, energy and development.

For their final compliance report, the research group produce an overall compliance

score for G20 members, measured for the period November 4th to June 1st 2012, of

+0.54. As the research group indicate, this final compliance score is a small increase

from the 2010 G20 Seoul Summit final compliance score off 75%. The UK saw the

highest compliance score at 0.87 while the country with the lowest compliance rate was

Argentina at 0. Looking at policy areas, the strongest compliance rates were recorded

for clean energy, food export restrictions and IFI’s, whilst the lowest three were

recorded for international cooperation, price volatility and fiscal consolidation. See

Table 14.

41

Table 14: 2011 G20 Cannes Summit Final Compliance: Members’ Ranking

As in other compliance reports, the report helpfully looks at compliance as a cross

sectional analysis of countries. G8 members of the G20 achieve a compliance rate of 0.68

whereas non-G8 members achieved a slightly lower score of 0.47. BRIC countries

achieved an average of 0.56 which while being lower than the G8 members’ compliance,

was higher than that of other non-G8 members. The BRICS compliance has been steadily

increasing since London (0.04) through Pittsburgh (0.03), Toronto (0.07) and Seoul

(0.44) and at 0.51 Cannes is its highest compliance performance by far. Brazil and India

both scored a compliance rate of 0.6 while China scored 0.53. As one can see in Table 14,

while these three countries still fail to enter the top 10 of compliant nations at the

Cannes summit, we can discern from Table 15 that Brazil, China and India have all seen

their compliance rates initially dip after the Washington summit, but thereafter steadily

rise (with the exception of India at Pittsburgh) and peak at the Cannes.

Table 15: G20 Final Compliance by Member, 2008-2011

42

The longer the continuation of G20 summitry, the greater is the scope not just of

institutional learning by diplomats and economic actors. In the conclusion to the Cannes

report, the authors make a significant contribution to understanding the changing

nature of observable compliance behaviour. What we must also consider is not the

compliance of actors within summits, but also the overlapping and interdependent

nature of policy coordination. A unique feature of the analysis offered by the Munk

School is the incorporation of deadlines for commitments monitored over multiple

compliance cycles. The raison d’être of the G20 as both ‘crisis committee’ and an

institution for the long term policy management of the global economy means the

convergence of both medium term and long term commitments in varying policy

spheres in overlapping time frames, illustrating the multifaceted nature of compliance

assessment. (G20 Research Group)

In addition to the reports provided by the Munk School, Angeloni and Pisani Ferry

(2012) provide an overview of compliance scores with their own calculations based

upon the data provided by the compliance reports and corroborate much of their

findings. In Table 16 below, we can see the distribution of compliance scores firstly by

topic and then by summit. With an average score of 0.11 for summit compliance, the

emerging economies (which include Brazil, China and India) have the worst compliance

scores of any of the set of economies under scrutiny only with the exception of deficit

emerging economies. That figure is in stark contrast to the average compliance rate of

0.63 for the G7. However, the compliance performance by the emerging economies

across time does see a considerable improvement, starting at 0.23, dipping to -0.14 after

London and rising again to 0.4 after Seoul.

As predicted by our analysis of the history and economic characteristics, when we look

at compliance by policy area the strongest compliance performance from the emerging

economies was with regard to macroeconomic policy (0.49) and the weakest in financial

reform (-0.05).

43

Table 16: Average compliance scores (GDP-weighted) [Angeloni and Pisani-Ferry 2012]

Conclusion

In this analysis our timeline has extended from the Washington Summit of 2008 to the

Cannes Summit of 2011; a space of only three years. Mexico recently hosted the Cancun

Summit (for which we are still within its compliance time frame and therefore

impossible to conduct a performance review) with Russia, Australia and Turkey all set

to host summits between now and 2015 – these will be the true tests of how far the

priorities, scope and implementation of the G20 will truly evolve from simply being a

“G7 with a few extra chairs” to a more inclusive and broad formulation of global

governance. I hope to have shown how, following the critical juncture of the 2008

financial crisis; historically constituted institutionalism saw an isomorphic replication

of the G8 structure in the G20. The agenda of G20 finance meetings was dominated by

G7 priorities, and continued during the early summits of the level of heads of state from

2008 onwards with a commitment to liberalised trade and macroeconomics. As the

crisis receded the compliance performance of emerging economies waned somewhat,

but from Seoul onward, compliance rates improved as the agenda of the G20 expanded

to include traditional non-G7 topics such as development and financial safety nets.

Consistent throughout is the degree to which these emerging economies acted in their

44

interests, often in coalitions of countries that continually shifted depending on the issue

at hand.

In this thesis I can identify three central flaws in the analysis. Firstly, the methodology

utilised by the Munk School of Global Affairs is at times inconsistent. Referring to the

methodology published, the analysts take a selective approach as to which policy areas

will be chosen as part of a weighted basket of commitments, and place a weighted value

for different commitments for different countries. (See compliance report

methodologies) Over a series of summits these commitments and policy areas change,

leading to insufficient like-for-like comparisons of the qualitative nature of policy

commitments though time. Secondly, the G20 leaders’ summits have existed for only

four years, and we have accounted for only five summits, with the exclusion of the 2010

Toronto summit due to a comparative lack of literature, meaning there is little

robustness in any statistical trends observable in compliance performance with such a

comparatively small data set. Finally, given the contested nature of intuitionalism as a

theory in political science with considerable cross fertilisation of underlying

assumptions between HI and sociological institutionalism (Schmidt, 2010) the

robustness of attempting to adopt a single theoretical approach may leave us with a

deficient model. As we have seen, it would be more appropriate to think of our approach

as being more akin to the new institutionalism of discourse. (Schmidt, 2010)

Given the successive crises that the G20 has dealt with, from the collapse of Lehman

Brothers to the Eurozone sovereign debt crisis, in all fairness it has had little time for

soul-searching its mission and role within the world economy. As a result, the only

systemic way to provide elements for a judgement of the G20 is to study compliance

with its own specific commitments. (Angeloni and Pisani-Ferry, 2012) Despite their

often narrow focus, especially in earlier summits, the communiqués published offer the

only primary explicit and detailed articulation of its agenda.

Despite the prevailing critiques of G20 inclusiveness as outlined in the literature, a

robust defence can be made. It openly debated crucial policy areas in the face of global

crisis and in some instances came to an agreement. In comparison to global governance

forums that came before, this was a major achievement. (Schirm, 2011) Several

unsettled agendas were finally agreed upon and several important steps were taken,

45

especially in the field of IMF reform, to the benefit of emerging economies. The ad hoc

groupings and alliances of states in negotiations superseded those previously seen in

other international institutional forums such as the G7, G8, BRICS summits and the UN.

On the major issues such as global imbalances, debt sustainability and the effects of

monetary policy, the emerging economies demonstrated behaviour akin to developed

economies. They articulated their national interest and beliefs in legitimate global

economic governance without being obstructive on certain issues or being unduly

animated on others. Devoid of antagonism between the two groupings, emerging

economies are pragmatically pursuing their economic interests in the same manner as

the G8 had for the three decades beforehand:

“Both emerging and industrialised countries were reluctant in compromising domestic

interests and ideational beliefs. Thus, emerging powers can be seen as stakeholders in

the G20 process in the same way as old industrialised countries” (Schirm, 2012)

If the tenants of discursive institutionalism hold, we are to see an ever changing

relationship between key stakeholders in global economic governance. Key to the

institutional approach, the Munk School Compliance report offers this lucid analysis,

arguing that, especially in regard to financial regulatory policy coordination:

“The difference in the levels of compliance with the G20 commitments can be attributed

to the commitments’ complexity as well as different nature of these institutions. The G8

is an established forum of the most developed economies with a history of more than

thirty years of collaboration aimed at resolution of acute problems and implementation

of long term programmes....Thus compliance performance indicates a higher efficiency

of the G8 in comparison to the G20 on the global governance function of delivery”

(G20 Research Group)

46

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