The world is getting ready for another edition of the G20, the regular confab where world leaders from 19 developed and developing countries discuss the hot issues of the day. (Seat number 20, if you were wondering, belongs to the European Union, represented as its own entity.) The next meeting will take place on Sept. 5-6 in St. Petersburg, Russia — and it will probably be a rocky one.
The White House has called off a scheduled bilateral meeting between U.S. President Barack Obama and Russian President Vladimir Putin after Moscow granted Edward Snowden temporary asylum. The acrimony is compounded by Russia’s obstruction of any kinds of UN resolution endorsing a U.S. military strike against Syria. One U.S.-Russia analyst recently described the relationship between Putin and Obama as a “slow moving train wreck.”
Also, a number of emerging markets have grievances about plans by the U.S. Federal Reserve to wind down its $85-billion a month bond buying program. Expectations of tighter monetary policy in the U.S. is pushing up interest rates in advanced economies, prompting some investors to pull their money from developing countries and move it to the U.S. and Europe. Countries like India and Brazil have been experiencing massive capital outflows and rapid currency depreciation in recent weeks. The U.S., Europe and Japan, on the other hand, have retorted that India and Brazil would do better to focus their energies on revamping their slowing economies and closing widening fiscal deficits, which have foreign investors concerned. The International Monetary Fund has urged coordinated action among the world’s leading central banks to soften the spillover effects of big monetary policy adjustments in the rich world, but it’s unclear whether there is enough support for the idea.
In addition, there are points of friction between the U.S. and Europe as well. Washington is concerned that a stubborn attachment to austerity is slowing down the recovery in the Old Continent, leaving the U.S. as the only engine of global growth now that even China and the rest of the BRICS are slowing. The Europeans, on the other hand, aren’t exactly thrilled with what the Snowden leaks revealed about U.S. surveillance activity overseas.
Besides bickering about all of the above, these are likely to be the main topics of discussion in St. Petersburg:
Taxes. In July, Minister Jim Flaherty and the other finance chiefs of the G20 endorsed a 15-point plan by the Organization for Economic Cooperation and Development to curb corporate tax avoidance and evasion. The OECD has been pushing hard for countries to reform and harmonize their tax legislation and step-up information sharing in order to curtail multinationals’ ability to shrink their tax bills. Thought a breakthrough agreement doesn’t seem to be in the cards, this will be a major issue on the agenda.
Trade. In the rooms with the microphones, there will be discussions about multilateral initiatives to revive international trade. In the corridors outside, there will be a number of one-on-one conversations about narrower trade deals and ongoing negotiations. Prime Minister Stephen Harper will likely be one of the ones having these sotto voce discussions as he lobbies for Canada’s numerous trade agreements in the works.
Syria. Syria, of course, will be the elephant in the room. The G20 was set up to discuss global financial and economic issue so there is no formal venue to discuss a possible U.S. strike against Damascus. Still, Syria is sure to dominate the hallway buzz.