(LEAD) Pittsburgh summit annualizes G-20 as premier forum for global economic governance

(ATTN: UPDATES with more details, background throughout)
By Hwang Doo-hyong
WASHINGTON, Sept. 25 (Yonhap) -- Members of the Group of 20 agreed Friday to make
their summit the premier forum for international economic cooperation,
annualizing it from 2011, the forum's communique said.

The statement, released after a two-day summit to reflect the power shift to
emerging economies after decades of dominance by the rich G-8 nations, also named
Canada and South Korea as hosts of next year's summit in June and November,
respectively.
"We designated the G-20 to be the premier forum for our international economic
cooperation," according to the statement released by the White House. "They also
announced the G-20 will replace the G-8 as the main forum for steering the global
economy. We agreed to meet in Canada in June 2010 and in Korea in November 2010.
We expect to meet annually thereafter and will meet in France in 2011."
Next year's G-20 summits reflect a much-discussed power shift to South Korea,
China, India and other emerging economies from the eight advanced economies. The
traditional powers came under fire, along with the International Monetary Fund
and World Bank, for their lack of action to head off the ongoing economic crisis
-- which stemmed largely from relaxed financial regulations on Wall Street.
"The G-20 should eclipse the G-8 as the informal steering committee of the world
economy," said Marcus Noland, a senior researcher at the Washington-based
Peterson Institute for International Economics. "From now on, the G-8 should meet
on the sidelines of the G-20."
The G-8 nations now represent about half the global economic production, down
from more than 80 percent, while the G-20 economies contribute more than 85
percent. That prompted the previous George W. Bush administration to organize the
G-20 in November last year after the subprime mortgage crisis triggered the worst
recession in decades.
Barry Bosworth, senior research fellow at the Brooking Institute, said the G-20
"is more representative of the participants in the global economy."
"Personally, I would abandon the G-8 on the grounds that there are too many
summits and it looks too much like a cabal of the rich countries," the scholar
said. "There are many financial and NATO issues that the U.S. needs to coordinate
with Europe and Japan, but that can be done at a lower level than national
leaders."
In a joint news conference with South Korean President Lee Myung-bak earlier in
the day, Canadian Prime Minister Stephen Harper said Canada will host the G-20 on
the margins of the G-8 summit in June, adding G-8 will focuses on security
issues.
The G-20 is said to have played a greater role in helping the global recovery
through coordinated measures against protectionism and implementing expansionary
fiscal and eased monetary policy, although its efforts against protectionism were
tarnished by U.S. punitive tariffs on Chinese tires and an ensuing attempt by
China to retaliate.
In a major concession to power to developing economies, the G-20 nations also
concurred that they will transfer at least 5 percent of the equities of the
International Monetary Fund "from over-represented countries to under-represented
countries using the current quota formula as the basis to work from."
The G-20 leaders agreed to "generate an increase of at least 3 percent of voting
power for developing and transition countries, to the benefit of
under-represented countries."
China and other major emerging economies have called for an IMF quota increase of
up to 7 percent, complaining they have been underrepresented compared with their
economic growth.
China's output is expected to surpass Japan's by the end of this year to become
the world's second biggest economy after the U.S. Some reports say China will
outperform the U.S. in a couple of decades.
"The growth of India and China is a wonderful achievement of the recent quarter
century, but it is not a zero sum game in which their gains are offset by others'
losses," Bosworth said. "I think Asia has emerged as a greater influence on the
global economy and I expect to see the development of a strong regional economy
that will provide a more diversified global economy, balancing the United States
and Asia."
The G-20 leaders also came up with a plan to force banks to tie bonuses to
long-term performance and raise the amount of capital at financial institutions,
and vowed to maintain stimulus measures until growth takes hold.
"Where reckless behavior and a lack of responsibility led to crisis, we will not
allow a return to banking as usual," the leaders said, committing to "raise
capital standards, to implement strong international compensation standards aimed
at ending practices that lead to excessive risk-taking, to improve the
over-the-counter derivatives market and to create more powerful tools to hold
large global firms to account for the risks they take."
Derivatives are said to be the major culprit for the subprime mortgage crisis.
The International Monetary Fund has forecast that the global economy will shrink
by 1.4 percent this year, and predicted next year will witness a growth of 2.5
percent, up from an earlier projection of 1.9 percent growth.
In the April G-20 summit in London, the leaders agreed on an anti-protectionist
stance and to push ahead with stimulus measures to prop up the struggling
economy.
"It worked," the statement said, but warned "A sense of normalcy should not lead
to complacency."
"The process of recovery and repair remains incomplete," the statement said. "In
many countries, unemployment remains unacceptably high. The conditions for a
recovery of private demand are not yet fully in place. We cannot rest until the
global economy is restored to full health, and hard-working families the world
over can find decent jobs."
The leaders pledged to "sustain our strong policy response until a durable
recovery is secured," and "avoid any premature withdrawal of stimulus."
They, however, also agreed to prepare "exit strategies" so they could use them
"when the time is right."
On the fight against protectionism, the leaders agreed to "maintain our openness
and move toward greener, more sustainable growth."
They also concurred on phasing out over the medium term inefficient fossil fuel
subsidies and to provide targeted support for areas most in need.
"Inefficient fossil fuel subsidies encourage wasteful consumption, reduce our
energy security, impede investment in clean energy sources and undermine efforts
to deal with the threat of climate change," they said.
hdh@yna.co.kr
(END)