G20 rises, G7 & G8 fall?

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The emergence of the G20 crystallises a power shift towards large emerging economies in global economic governance

Full print version, including charts and tables

The G20 is a forum for economic co-operation among its members’ finance ministers and central bank governors.  It was formed in 1999 in the aftermath of the Asian financial crisis.  Its chairmanship is passed annually between members, including the UK in 2009 and South Korea in 2010.  The G20 met at heads of government level for the first time in November 2008 and two further leaders’ summits, including in London April 2009, have since followed.

G20 leaders, including the Prime Minister, are scheduled to meet twice in 2010: in Canada in June and in South Korea in November.  Four G20 finance ministers’ meetings in 2010 are also planned.

Who’s in? Who’s not?

Though there are no formal membership criteria, the G20 comprises ‘systemically important’ countries: the ‘BRICs’ (Brazil, Russia, India and China), seven other emerging economies, the G7 group of developed economies and Australia.

The European Union is the Group’s 20th member, though four EU members are represented directly.  Spain and the Netherlands have also attended G20 leaders’ meetings but are not full G20 members.  Representatives of major international institutions – the UN, World Bank and International Monetary Fund (IMF) – and regional organisations also attend meetings.

The G20 is not simply the 20 largest economies

  • Five economies are larger than the smallest in the G20 – South Africa (ranked 32nd) – but are not G20 members
  • South Africa and Saudi Arabia are the sole representatives of Africa and the Middle East respectively

The G20’s membership has stayed unchanged since its establishment, and it is unclear if and how its membership might change in the future.  While the G20 is a broader forum than the G7 or G8, for non-members it represents a new exclusion, and it remains to be seen how smaller developing economies can be represented and heard at the G20.

What does the G20 cover?

The current G20 agenda is broad but economics-focused, including:

  • Co-ordinating monetary and fiscal stimulus packages to minimise the impact and duration of the global financial crisis, and coordinating ‘exit strategies’ for their withdrawal
  • Co-ordinating macroeconomic policies internationally and addressing persistent imbalances for ‘sustainable and balanced growth of the world economy’
  • Regulation and reform of financial services and the creation of a new Financial Stability Board
  • Increasing IMF, World Bank and regional development bank resources
  • Tackling tax havens, boosting global trade finance, resisting trade protectionism and promoting a multilateral Doha Round trade agreement

Implications for the G7 and G8

The G20 has proclaimed itself "the premier forum for our international economic cooperation".  There are also signs of broader G20 meetings: G20 employment ministers met in April 2010.  What then is the need for the G7 and the G8?  Brazil, China, India, Mexico and South Africa have already been increasingly involved in G8 meetings as the ‘Outreach 5’ or ‘Group of 5’.

There have been suggestions that the G8 could continue as a forum focusing on international security and development.  This was the focus of the March 2010 G8 foreign ministers’ meeting, and G8 Development Ministers met in April 2010.  The G7 could continue as a subset of the G20 on economic and financial issues, alongside the BRICs, which held their second summit in April 2010.

While the G20 continues to establish its role and issue focus in 2010, the critical year for the G8 is likely to be 2011, when France holds both the G8 and G20 presidencies.

The G20 is not simply the 20 largest economies: chart of the world top 40 economies (2009)

Related information

This briefing was written at the start of the 2010 Parliament; for more recent briefings from the Commons Library on this subject see Commons Library Briefing Papers 

Related information