At their next meeting, the G20 finance ministers and central bank governors will need to address the global rise in food prices, which in turn will require acknowledging the facts about Russia’s invasion of Ukraine. A statement that papers these realities would cast additional doubts on the future of the group.
BERKELEY – The next big test of the G20’s credibility will be (if there is no change) when the group’s finance ministers and central bankers meet at the World Bank and International Monetary Fund meetings scheduled for April 18-24. . As the current main forum for international economic policy cooperation, the G20 will have a packed agenda. Some of the most important questions will be the response of central banks to the global rise in inflation; the accumulation of evidence of accelerated climate change; and the coordination of fiscal and health policies. But there will also be a bear in the room: Russia’s brutal attack on Ukraine and its economic repercussions, starting with its effect on world food prices.
Beyond some important achievements, the credibility of the G20 has been undermined in recent years by a series of visible failures. During Donald Trump’s presidency in the United States, the G20 communiqués were so watered down that they said almost nothing. And closer in time, the group failed to formulate an effective global response to Covid-19, let alone prepare for future pandemics.
The credibility of the G20 is an important asset in a world of increasingly globalized challenges. But gaining credibility is hard and losing it is easy; therefore, this month’s meeting may be a turning point. Until now, the members of the G20 have approached the Ukraine crisis in very different ways, both in terms of official communications and policies.
The United States and its allies responded with significant sanctions, but last week China, India and South Africa refrained from endorsing a United Nations General Assembly resolution criticizing Russia and calling for humanitarian access to Ukraine to be freed up.
According to sanctions monitoring by Chad P. Bown (Peterson Institute for International Economics), eight G20 members (all middle-income) have declared they will not participate in economic sanctions against Russia; and Saudi Arabia (an ally of the United States but a partner of Russia within OPEC+) has not been very willing to do so either. It is clear that the group will not be able to agree even on how to describe the Russian war or its effects on world markets. But minimizing Russian aggression in an attempt to achieve unanimity for the communiqué may end up destroying the credibility of the G20.
In any case, the G20 is sure to comment on a prominent and direct impact of the Russian invasion: a possible reduction in global food supplies. Even before February 24, world food prices were approaching historical highs, due to a confluence of factors similar to those that generated the price increases of 2007-08 and 2010. Those previous episodes produced social instability in some poor nations; Now that many low- and middle-income countries face inflationary pressures and high levels of debt, and remain vulnerable to disease and climate change, the effects can be explosive.
Ukraine and Russia are major exporters of wheat, corn, and sunflowers (in the form of seeds and oil). According to recent projections by the Food and Agriculture Organization of the United Nations (FAO), food and feed prices (already high) may increase between 8 and 22% over the course of this year and the next. , due to the destruction of the Ukrainian production, storage and transportation infrastructure, added to the possible effect of sanctions on Russian grain and fertilizer exports, high world energy prices and higher freight and insurance policies. The number of malnourished people worldwide is likely to grow to between 8 and 13 million.
As in past food price crises, the current one increases the importance of international policy coordination. Above all, as the FAO and the WTO have urged, the G20 must raise a collective rejection of the competitive use of controls or taxes on food exports. There is already a proliferation of measures of this kind that in the past caused enormous food price increases.
But there is something else that the G20 must do. Asking for palliative measures is fine, but if it is not accompanied by a frank statement of the original cause and the remedy, there is a risk of condoning inappropriate behavior. Today the threats to the global food supply have been compounded as a result of a war of aggression and other violations of international law by a single member of the G20.
Russia can easily and unilaterally defuse the crisis by ending its bloody assault, especially attacks against the population and civilian infrastructure.
It is true that part of the global economic impact of the war is due to sanctions; but these will be reduced if Russia withdraws its forces and stops the bombing. Meanwhile, Saudi Arabia (along with the United Arab Emirates) can temper rising global energy prices by increasing oil extraction (something it has so far refused to do).
Although the existence of deep disagreements between the G20 members will be inevitable, the meeting should not be canceled, because doing so at this time would further increase the group’s loss of credibility. The G20 must show that it is capable of confronting the realities of an uncomfortable situation.
This requires that a majority of its members attempt to draft and endorse a communique that candidly identifies Russia as the obvious source of the problem and its solution. A simple statement of facts is enough, without terms that openly condemn anyone.
Of course, Russia steadfastly refuses to acknowledge the facts, arguing that “the possibility of a food crisis is not the result of Russia’s special operation in Ukraine but of illegal unilateral sanctions by the West.” But the signing of a communiqué by a considerable fraction of the G20 will preserve a credible remnant of countries that can sustain multilateral cooperation in the future. It is better to let some countries not participate if they don’t want to, instead of feigning unity that doesn’t exist.
The members of the G20, including Russia, are the main actors with an impact on the global commons. It remains important that they speak up in all the critical areas they influence, including nutrition, health and climate. A substantive agreement, wherever possible, will be favorable to global welfare. But the fundamental disagreement can and should be acknowledged, so that subsets of members can still pursue initiatives of their own.
The author
A former Senior Economist at the International Monetary Fund, he is a Professor of Economics at the University of California at Berkeley and a Nonresident Senior Fellow at the Peterson Institute for International Economics.
Translation: Esteban Flamini
Copyright: Project Syndicate 1995–2022