‘Peer review’ breakthrough expected from G20

The G20 summit in Pittsburgh is said to be close to a deal that will require its members to present their economic policies to unprecedented "peer review". The agreement would represent a significant shift in global economic co-operation and expose the economic policies of member countries to broad scrutiny.

Separately, the gathered heads of state have agreed that the G20 will become the permanent council for international economic cooperation, replacing the G8.

A US administration official said the group would still meet twice a year to discuss security issues. But for practical purposes, the smaller group will become more like a dinner club that defers to the broader group on the economic issues.

"It's a reflection of the world today," an official told the Wall Street Journal. "It's basically pulling international cooperation into the 21st century."

The move is a significant concession to large emerging economies, particularly members of the BRIC block - Brazil, Russia, India and China.

The more significant development - to give international oversight over sovereign economic policy making - is designed to help the global economy reduce its exposure to the US economy and its reliance on the mighty US consumer.

Under the plan, expected to be signed off today in Pittsburgh, China would boost consumer demand, the US would cut its borrowing from overseas, and the Europeans would encourage investment. It's a fine idea but of course it lacks any enforcement mechanism.

As well as the peer review plan, a draft communique expected later today is likely to include a tough new "name and shame" approach to tax havens as well as a compromise on regulating banker bonuses and an increase in the amount of capital banks must hold to be considered solvent.

Although the G20 has made progress, disagreements between the US and European nations over revamping the governance and structure of the International Monetary Fund (IMF) remain.

While Britain and Europe support giving China and India a greater say in IMF policy making, the US remains opposed. The Financial Times reports a growing sense of irritation between the major European countries and the Obama administration. "Imbalances are an issue, but we must look at all the factors," said Angela Merkel, Germany's chancellor. "We must talk about imbalances and name the reasons why they came into being."

The draft communique will also call for member states to move against oil-price speculation by strengthening regulation of oil futures markets.

Compared to previous, lacklustre summits, Pittsburgh may be succesful in establishing the G20 as the prime coordinating body for the world's largest economies and developing countries.

But questions remain. Europeans and Asians say they still cannot determine if President Obama wants to push for more open trade. Though He and his officials publicly reject erecting barriers to imports, only this month the administration triggered a dispute with China when the president approved new tariffs on imports of Chinese vehicles and tyres.

Global leaders, noted the New York Times, are keenly aware that Obama's words are not always in sync with his actions. ·