How Canada made the G20 happen

JOHN IBBITSON AND TARA PERKINS | Globe and Mail | June 18, 2010 

Paul Martin sat in Lawrence Summers' spacious office in the Greek-columned U.S. Treasury building in Washington, searching in vain for a piece of paper. With none in sight, the two men grabbed a brown manila envelope, put it on the table between them, and began sketching the framework of a new world order.

It was April 27, 1999. For the past five years, the global economy had shuddered under a string of massive debt defaults – first in Mexico, and then in Southeast Asia and Russia.

In each case, Western leaders and bankers responded by prescribing harsh fixes, throwing one developing economy after another into recession.

As crisis followed crisis, Mr. Martin, then Canada's finance minister, became convinced that major developing nations had to be given a voice – not just an ultimatum – when it came to discussing their place in the global economy. But in the capitals of Europe and the corridors of Washington, the answer was always the same: It's our club, and there are no vacancies.

Or at least it was the same answer until that April day when Mr. Martin visited Mr. Summers, then Bill Clinton's nominee for treasury secretary, to press his case. He argued that they couldn't keep imposing solutions on developing countries. The G7 had to be expanded – at least at the finance-ministers' level.

Mr. Summers quickly agreed. But that was the simple part. Much thornier was the issue of who would be admitted to the club.

With the manila envelope in hand, the two began jotting down countries. China, India, Brazil, Mexico – these were obvious choices. So was South Africa, the biggest economy on its continent. But who else?

“I felt very strongly that it had to be the regional powers,” recalls Mr. Martin. “Larry felt that, and then he also had geopolitical concerns. I would love to say we sat down and ran the numbers on whose GDP was bigger, but we didn't. We both had a pretty good perspective on where things lay.

Thailand was the nexus of the Asian banking crisis, but Indonesia was more influential in the region. Indonesia in; Thailand out. Chile was tempting, because it was democratic and well-run, but Argentina was a bigger player. Argentina got the seat. Saudi Arabia was strategically important and a good friend of the United States. The Saudis would get an invite.

So it went until they had compiled a working list of roughly 20 countries – literally, a back-of-the-envelope blueprint for what would become, today, the most powerful forum on economic and political matters in the world: the G20.

When the G20 convenes in Toronto on June 26, it will mark the culmination of a long, and unlikely story, one that began with an annual gathering of finance ministers and evolved into a semi-annual meeting of world leaders from 19 nations (yes, not 20 – see sidebar for the inside story). Collectively, they represent 70 per cent of the global population and 90 per cent of the global GDP.

The G20 enters its second decade with enormous potential but many unanswered questions. The world will watch as these leaders try to carry on the task of shepherding a fragile economic recovery: As a group, they have the power, but can they wield it?

Still, the meeting this month is only possible because a Canadian finance minister convinced leaders of the G7 consortium of developed nations to become a larger, more inclusive group. There has never been a proper accounting of how the G20 came to be: the struggles that led to its birth; the early failure of Paul Martin to convert it from a finance ministers' club into a leaders' forum; and then the sudden recognition, at the height of an economic crisis, that Mr. Martin's idea was one whose time had come.