What Does the G20 Do?
Backgrounder

What Does the G20 Do?

The Group of Twenty, an informal gathering of many of the world’s largest economies, is the premier global forum for discussing economic issues. But it has faced divisions over trade, climate change, and the war in Ukraine.
G20 officials meet in Jakarta, Indonesia.
G20 officials meet in Jakarta, Indonesia. Hafidz Mubarak A/Reuters
Summary
  • The G20, formed in 1999, is a group of twenty of the world’s largest economies that meets regularly to coordinate global policy on trade, health, climate, and other issues. 
  • Previous summits have addressed the COVID-19 pandemic, 2008 financial crisis, the Iranian nuclear program, and the Syrian civil war.
  • The Russian invasion of Ukraine deepened divisions within the group, reducing the chance it will find consensus on economic issues at its 2022 summit in Bali, Indonesia.

Introduction

The Group of Twenty (G20), a collection of twenty of the world’s largest economies formed in 1999, was conceived as a bloc that would bring together the most important industrialized and developing economies to discuss international economic and financial stability. Its annual summit, a gathering of G20 leaders that debuted in 2008, has evolved into a major forum for discussing economics as well as other pressing global issues. Bilateral meetings on the summit’s sidelines have occasionally led to major international agreements. And while one of the group’s most impressive achievements was its robust response to the 2008 financial crisis, its cohesion has since frayed, and analysts have criticized its lackluster response to the COVID-19 pandemic.

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Under President Donald Trump, the United States clashed with the rest of the group on trade, climate, and migration policy. President Joe Biden promised a return to multilateral cooperation, achieving a new global agreement on corporate taxation, but tensions have continued to grow as high- and low-income countries have increasingly diverged on major issues. The 2022 summit in Bali, Indonesia, meanwhile, could be dominated by divisions over Russia’s participation and the ongoing economic and humanitarian fallout of the war in Ukraine.   

Who is in the G20?

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The G20 is a forum comprising nineteen countries with some of the world’s largest economies, as well as the European Union (EU). The countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom (UK), and the United States. Spain is invited as a permanent guest.

Every year, the leaders of G20 members meet to discuss mainly economic and financial matters and coordinate policy on some other issues of mutual interest. Examples include when the G20 discussed how to address a covert Iranian nuclear plant at the 2009 summit and when the forum debated how to administer a partial cease-fire in Syria at the 2017 summit. The G20 is not a permanent institution with a headquarters, offices, or staff. Instead, its leadership rotates on an annual basis among its members, its decisions are made by consensus, and implementation of its agenda depends on the political will of the individual states. 

Why does the G20 matter?

Together, the nations of the G20 account for around 80 percent of global economic output, nearly 75 percent of global exports, and about 60 percent of the world’s population. These figures have remained relatively stable while the corresponding rates for Group of Seven (G7) nations, a smaller group of advanced democracies, have shrunk, as larger emerging markets take up a relatively greater share of the world’s economy.

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The G20 was formed in 1999, in the wake of the Asian financial crisis, to unite finance ministers and central bankers from twenty of the world’s largest established and emerging economies. A decade later, at the height of the global economic crisis, the G20 was elevated to include heads of state and government. Many experts credit the G20 with quick action; former CFR fellow Stewart Patrick said the group “rescued a global financial system in free fall.” In 2008 and 2009, G20 nations agreed to spending measures worth $4 trillion to revive their economies, rejected trade barriers, and implemented far-reaching reforms of the financial system.

Since then, Patrick and other observers say, the G20 has struggled to achieve similar success on its goals of coordinating monetary and fiscal policies, achieving higher growth, and rooting out corruption and tax evasion. Geopolitical analysts Ian Bremmer and Nouriel Roubini have argued against the G20’s utility, saying that a “G-Zero” world is emerging instead—one in which countries go it alone or form ad hoc coalitions to pursue their interests. In 2021, CFR’s Richard Haass and Charles A. Kupchan called for a new concert of powers, contending that “fly-in, fly-out” G20 summits are often bogged down by “haggling over detailed, but often anodyne, communiqués.”

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But many observers point out that the G20’s membership is still more representative of the current international balance of power than blocs of countries formed earlier, such as the G7. Several rising democracies, including Brazil, India, and Indonesia, belong to the G20, as do other influential autocratic countries, such as China, Russia, and Saudi Arabia. (Russia’s G7 membership was suspended indefinitely in 2014 following its annexation of Ukraine’s Crimea region.) For this reason, Patrick described the 2008 elevation of the G20 as a watershed moment in global governance and argued that the group was the best-suited forum for tackling the challenges of the COVID-19 pandemic.

What’s been on the agenda?

The G20 initially focused largely on broad macroeconomic policy, but it has expanded its ambit. The 2018 summit in Argentina focused on fair and sustainable development, while the previous summit in Germany drilled down on issues including corruption, money laundering, and international tax havens. Some agendas have had even less to do with macroeconomics: the 2016 summit in Hangzhou, China, was where U.S. President Barack Obama and Chinese President Xi Jinping formally announced their countries’ accession to the Paris Agreement on climate.

Economic and financial coordination remains the centerpiece of each summit’s agenda, but issues such as the future of work, terrorism, and global health are recurring focuses as well. Broader agendas became more common in the decade following the global financial crisis, when the G20 was able to turn its attention beyond acute economic crisis management. But at recent summits, countries have struggled to reach a unified consensus—the hallmark of previous iterations of the conference—as the interests of high- and low-income economies continue to diverge.

The COVID-19 pandemic posed a major test for the group, which Patrick has criticized for largely failing to move beyond “uncoordinated national policies.” However, G20 countries did agree to suspend debt payments owed to them by some of the world’s poorest countries, providing billions of dollars in relief.

Although climate change was a focus of the 2021 Rome summit, the meeting yielded few concrete commitments on the issue. The countries agreed to curb emissions of methane and end public financing for most new coal power plants overseas but said nothing about limiting coal use domestically. G20 leaders also endorsed an agreement among nearly 140 countries to overhaul the system of international corporate taxation, paving the way for a 15 percent minimum corporate tax.

As the 2022 host, Indonesia has sought to frame the agenda around three pillars of postpandemic macroeconomic policy: global health architecture, digital transformation, and the sustainable energy transition. Some experts say, however, that Russian President Vladimir Putin’s war in Ukraine and fears over nuclear confrontation could dominate deliberations and derail consensus on other issues. 

What have been the main points of contention?

Geopolitical tensions, heightened by the Russian invasion of Ukraine but also spurred by strategic competition between China and the United States, have increasingly threatened cooperation. In the United States, bipartisan legislative efforts have aimed to deny Russia standing in the World Trade Organization (WTO) and other international institutions. Russia’s participation in the G20 has grown contentious, with some Western countries seeking to exclude Moscow, though members including China and Brazil have opposed that idea.  

G20 members could also face divisions over how to address the economic shocks disproportionately affecting emerging economies. The energy crisis resulting from the war in Ukraine has led to food scarcity and soaring energy prices, as well as inflationary pressures that have engendered a stronger U.S. dollar at the expense of depreciating currencies in emerging economies. As a result, more countries are turning to international lenders for bailouts; over one hundred countries have requested emergency assistance from the International Monetary Fund (IMF) since the beginning of the pandemic. IMF lending to distressed economies soared to a record high of $140 billion in 2022 and is expected to rise. The G20 introduced a common framework for debt treatment ahead of its 2020 summit, but only three countries—Chad, Ethiopia, and Zambia—have requested debt relief under the framework.

The group’s long-standing commitment to an international order based on WTO principles of reducing tariffs and other trade barriers has in recent years collided with growing economic competition between great powers. President Trump launched a multifront trade war involving several G20 members, imposing a suite of tariffs on China that the Biden administration has largely left in place. Biden has also pursued other measures meant to accelerate economic “decoupling” from China. In August 2022, he signed the CHIPS and Science Act, which encourages advanced technology manufacturing to move back to the United States. That measure was followed by strict export controls [PDF] that restricted China’s ability to buy certain chips made anywhere in the world with U.S. inputs. 

There is also still friction within the group regarding climate change. China, India, Russia, and Saudi Arabia reportedly blocked an agreement on phasing out coal use and fossil fuel subsidies at a July 2021 meeting of environment ministers. And following the invasion of Ukraine, Germany and other G20 countries have reneged on previous promises to stop financing fossil fuel projects overseas.

What happens on the sidelines of the summits?

Patrick has emphasized the G20’s flexibility compared with other multilateral institutions, writing that it transcends “stultifying bloc politics” and could help shake up a sometimes rigid geopolitical order. This flexibility extends to the summits themselves, where bilateral meetings between heads of state and government often focus on issues outside the formal agenda.

These tête-à-têtes, whether planned or impromptu, often grab headlines due to their diplomatic gravity. In Hamburg, Germany, in 2017, Trump met Putin for the first time, holding multiple meetings that lasted several hours each and sparked concerns among U.S. allies within the G20. The following year, a bilateral meeting again overshadowed the G20 summit, this time between Trump and Chinese President Xi Jinping. The two leaders agreed to delay threatened tariff hikes. 

The 2022 Bali summit is expected to host the first in-person meeting between Biden and Xi since Biden was elected in 2020. And if Putin attends the summit, any meetings between him and Xi, Biden, or other major leaders will attract outsize attention.

Many experts stress the substantial effects of personal relationships among leaders on the creation of foreign policy. By gathering so many leaders together, G20 summits offer rare opportunities to develop such relationships and recast bilateral ties.

Recommended Resources

For Foreign Affairs, CFR’s Richard Haass and Charles A. Kupchan make the case for a new concert of powers.

Experts from across the world weigh in on the challenges facing the 2022 G20 summit in this Council of Councils memo.

This Backgrounder explains the recent international agreement on a new framework for corporate taxation

This In Brief breaks down the progress countries made at the ​​twenty-seventh Conference of the Parties (COP27) climate summit.

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Andrew Chatzky contributed to this report.

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