by Sabina Dewan and Will Straw

The second meeting of the G20 leaders in London tomorrow provides an opportunity for key global leaders to agree on a set of tangible measures to break the downward economic spiral of shrinking growth, falling trade, rising unemployment, and declining wages.

In London, much of the focus will be on measures-some of which were outlined earlier this month by finance ministers and central bankers-to address the stasis in financial markets and the causes of the current crisis. But Obama and other leaders must not shy away from three additional critical challenges: (1) ensuring a green recovery; (2) assisting the developing world; and (3) preventing a further slide toward protectionism.

Several countries have announced recovery plans and some have effective automatic stabilizers such as progressive taxation and welfare state provisions-including programs such as unemployment insurance-that contribute to consumption smoothing while stimulating their economies and providing security to their citizens.

But some nations are doing less than they can afford while others are emphasizing short-term tax cuts over long-term investment. Unfortunately, this means that these countries are leaving out measures to address climate change in their recovery efforts. Taking steps toward a clean-energy future can offer opportunities for innovation, economic growth, and job creation for decades to come and can help reinvigorate the sagging world economy.

International development
Ahead of the Major Economies Forum on Energy and Climate Change in Washington, DC in late April, President Obama should ensure that measures to address global warming are not decoupled from the wider conversation at the G20 about restoring the global economy to a path of equitable expansion.

The G20 is the right place to design and resource a global fund for the transfer of technology related to combating global warming while obliging relevant institutions to work towards implementation. This kind of global fund has emerged as one of the biggest hurdles to a post-Kyoto agreement. Developing countries are resistant to accepting differentiated caps on greenhouse gas emissions without the support for a transition to a low-carbon energy infrastructure.

But in addition to long-term investments in low-carbon energy infrastructure, there is also a pressing need to assist developing countries which are hurt in the short run by the economic downturn.

The International Monetary Fund notes that the economic outlook for low-income countries has deteriorated dramatically in recent months and that many of the world’s poorest countries are likely to see incomes stagnate or even contract this year. The World Bank predicts that in addition to the 130 million to 155 million people pushed into poverty in 2008, as many as 53 million additional people could become trapped in poverty as global economic growth slows over the course of the downturn.

Assistance to developing countries is also in our economic interest. Raising living standards in developing countries creates a virtuous circle of development and growth by creating new markets for our own products and services, as well as by moving countries away from an export-led growth model toward greater reliance on domestic consumption. It is therefore critical that countries – including emerging economies such as China and South Korea – bolster the IMF’s reserves and stick to their development assistance commitments.

Trade flows
From 2000 to 2007, world trade flows grew at an annual rate of 5.5 percent, while world gross domestic product grew by 3.0 percent. The World Trade Organization now forecasts that global exports are likely to decline by approximately 9 percent in volume terms in 2009. This is the biggest such contraction since World War II.

The G20 nations should show they are serious about commitments made at last year’s meeting and not yield to domestic pressures to constrain trade. Protectionist measures may appear to make sense in the short term, but they will rebound to hurt everyone and have a devastating impact on the populations of poor countries.

The run up to this week’s meeting has been punctuated by protests on the streets of London and negative press reports about failed global deals. These can be avoided ahead of the next G20 leaders’ meeting in July in Sardinia if a genuine step forward is achieved this week.

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Sabina Dewan is Associate Director for International Economic Policy and Will Straw is Associated Director for Economic Growth at the Center for American Progress.

See also: The Case for Leadership: Strengthening the G20 to Tackle Key Global Crises by Will Straw, Matt Browne, Sabina Dewan, and Nina Hachigian

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