For the last week, the world has watched as the leaders of its twenty most powerful nations (the G20) have met to try to agree a co-ordinated response to the global economic crisis.
After much debate, compromises were reached and a package of measures was agreed that in the medium term may ensure a better regulated international financial environment and a world economy stimulated to the tune of US$1,100B.
For the Caribbean, at the level of generality, the outcome of the summit was largely helpful. Governments will no doubt be relieved that the G20 agreed a stimulus package intended to lift global economic activity and are to provide increased resources for the IMF, but will wish to know more about the fine print; that is say, where it relates to its offshore business centres or, for instance, whether the IMF will adapt its funding criteria to support a region like the Caribbean.
At the G20 meeting it was agreed that sanctions would be imposed on financial centres that failed to agree to the exchange of tax information under rules established by the OECD. Over simplified, OECD rules require the exchange of information, on request by governments, in all tax matters for the administration and enforcement of domestic tax law. This means that if the G20 pursue enforcement, only those nations that have not substantially implemented such internationally agreed tax standards could be subject to sanctions. According to the OECD, in the Caribbean, only Barbados and the US Virgin Islands fall into this category. All other regional states are listed in a lower category, being committed to the OECD’s internationally agreed tax standard but yet to substantially implement.
More generally, the G20 heads of government agreed that they would remain committed to maintaining previous commitments on development goals and to sustaining present levels of assistance. However, they made clear that their focus remains on the poorest, raising questions about the extent to which diminishing flows to the region like the Caribbean will continue in the medium to longer term.
Irrespective of these outcomes, the final communiqué is at its most interesting for what it does not say.
Although the intent of G20 leaders is to restore confidence, repair the world financial system and strengthen financial regulation, there is little to indicate how this will be achieved.
For example there is much about a commitment to regulate, but there was no agreement on an enforceable global regulatory system. There was also no indication as to how or when the process of multilateral trade liberalisation at the WTO might again move forward and no agreement on what to do with the so called toxic assets that are still within the global banking system.
Moreover, there was little sign that the leaders of the world’s most powerful nations were ready to ensure that there was no repetition of the present crisis.
Placing their emphasis on renewed growth they provided few indications as to how global institutions were to be reformed so as to rebalance power between them; any indication as to how a new balance should be struck between developed, emerging and developing nations; or how they intend bridging their philosophical differences to agree the ambitious objective of a charter that the communiqué suggests will establish “a new global consensus on the key values and principles that will promote sustainable economic activity.”
But by far the biggest omission from the G20 communiqué was any practical language seeking to link measures aimed at stimulating growth to the now pressing issue of the environment and climate change.
True there is language committing the G20 to build a green and sustainable recovery, a commitment to make the transition to low carbon technology and infrastructure, and a recognition of the threat of climate change. But this aside there is little to convince in the communiqué that the leaders of the world’s most powerful economies will really take action on such issues until the global economy and their nations in particular, are again experiencing sustained growth.
This is important as in December, in Copenhagen, Denmark, an international conference on climate change will take place. This is intended to lead to the signing of a new international climate change agreement. This agreement and the parameters it establishes for the reduction of carbon emissions, related licensing systems and the hoped for inclusion of a differential approach for low carbon emitters in the developing world, has substantial implications for the Caribbean. The region has everything to lose if, as the latest predictions suggest, sea levels will now rise by as much as one metre (approx 3.28 feet) by the end of this century as a result of global warming and the arctic ice cap melts completely within the next forty years as a recent US supported scientific study suggests. It takes little imagination to see the implications.
With very few exceptions the majority of the Caribbean’s major investment is in infrastructure − roads, airports, ports, capital cities, utilities, the economically vital facilities for the tourism industry − located at or slightly above sea level. This means that well before any sea level change of such magnitude occurs, sea surge and changing tidal patterns, to say nothing of the likelihood of more severe weather events could remove first the reefs, then the beaches and after that the wherewithal that provides the employment and finance for most Caribbean economies.
This is not to be alarmist, but to suggest that this needs to be better understood by the developed world as they come away from the G20 meeting in London believing that their overriding objective is to restore capital based growth.
The issue of climate change has been obscured by the global financial crisis. Finding solutions and having robust and well co-ordinated positions with other similarly affected developing countries will be vital if the Caribbean economy, quite literally, is not to be swept away by climate change and the G20’s overriding concern about maintaining previous levels of growth.
Previous columns can be found at www.caribbean-council.org
(Editor’s note: The next column by David Jessop will appear on Sunday, April 19.)