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Doubts G20 will deliver on promises -

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Doubts G20 will deliver on promises

Ashley Hall reported this story on Friday, September 25, 2009 12:14:00

SHANE MCLEOD: There's plenty riding on the outcome of this weekend's G20 summit.

As well as discussing financial market reforms there's hope the leaders will devise plans for
sustainable growth and dealing with climate change.

But the success of the meeting will rest on its outcomes and whether or not member countries carry
through on their commitments.

One analyst who doubts the summit is going lead to great changes is Fariborz Moshirian, a professor
of finance with the Australian School of Business at the University of New South Wales.

He's told Ashley Hall that while the G20 grouping is a better forum to get things done than the
United Nations or the International Monetary Fund, it still lacks teeth.

FARIBORZ MOSHIRIAN: What we need at the present time is more effective international institution
which has got executive power, which could ensure that international agreements could become part
of national laws and regulations.

For instance, I'll give you an example. Since the G20 summit in Washington DC the leaders committed
themselves to free trade. Now since the Washington meeting we have seen new protectionist measures.
Since the G20 summit in London according to the recent report from WTO 100 new protectionist
measures were introduced by the G20 group themselves.

In other words even if they committed themselves to free trade we are seeing more protectionism.
The Doha Round is not yet up and running and hence if this is the benchmark for the G20 we have to
say: can we do something better with the G20 to ensure that we have more effective international
fora?

ASHLEY HALL: The US has proposed a framework for sustainable and balanced growth. How hard will
that be to achieve?

FARIBORZ MOSHIRIAN: This is one of the challenges because the US would like to see China reduceS
her trade surplus, reduces if you like her massive foreign reserves. They want to see more flexi -
a more flexible labour market in Europe.

At the same time US itself should commit to a massive reduction in her trade, in her budget
deficit.

Now question here is, who is going to coordinate between the US, Europe and Asia to ensure that we
have what is called a balanced growth in the future?

And for that very reason we can see that China is reacting to this new framework because they don't
want basically the US or Europe or even the G20 to tell them how to run their foreign exchange
regime or their trade surpluses.

ASHLEY HALL: The US is also pushing for a new rule for bank capital as a way of reducing future
financial risk. How would that work? Would that work?

FARIBORZ MOSHIRIAN: Well this is one of the challenges of the G20 because the US is now pushing for
a new capital regime for banking system, whereas the Europeans would say: We have got good capital
adequacy in our banking system. What we need to have is a better system on bank bonuses.

And this is going to be an ongoing debate over the next year or so at the G20 forum.

ASHLEY HALL: So the next year or so. It's going to take that long to get some of these issues
nutted through?

FARIBORZ MOSHIRIAN: That is the very issue that we are talking about - the inadequacy of G20
because for instance Timothy Geithner is arguing that a new capital system that he's proposing
should be implemented by 2012 and he is looking for an agreement for 2010.

But we know that by 2012 global financial crisis might well be over and hence there will be less
willingness on the part of key players to come up with an international agreement.

ASHLEY HALL: Professor Fariborz Moshirian from the Australian School of Business at the University
of New South Wales speaking with Ashley Hall.