G20 Membership Reform

– in the House of Commons at 2:30 pm on 13 September 2013.

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Motion made, and Question proposed, That this House do now adjourn.—(Mr Swayne.)

Photo of Henry Smith Henry Smith Conservative, Crawley 2:34, 13 September 2013

Thank you very much, Madam Deputy Speaker, for this opportunity to debate the reform of the G20 membership. This is the last debate of the week, and the last before the conference recess.

Unlike the G8, which broadly consists of the world’s largest economies, the G20, which was proposed by former Canadian Prime Minister Paul Martin, is a forum for co-operation and consultation on matters of concern to the international financial system. It was formally inaugurated in 1999. It studies, reviews, and promotes high-level discussion of policy issues pertaining to the promotion of international financial stability, and seeks to address issues that go beyond the responsibilities of any one organisation.

In the debate this afternoon I want to focus on questioning Argentina’s status as a G20 member, on the basis that it has failed on all three of the organisation’s primary objectives—namely, restoring global financial growth, strengthening the international financial system, and reforming international financial institutions. With non-members, including countries such as Malaysia, Norway, Singapore and Switzerland, contributing far more to our global economic well-being, one has to question the benefit of Argentina’s presence in the G20.

When Argentina appears in British public discourse, it is normally in relation to one of the two Fs—football or the Falklands. The behaviour of President Cristina Kirchner’s regime towards the islanders is nothing short of disgraceful, and it is extremely encouraging to see the British Government supporting the islanders in the strongest possible terms. The Falklands, for obvious reasons, are top of our agenda when it comes to discussion of Argentina, but that issue should not blind us from other major problems affecting this country as a result of Kirchner’s belligerence.

Kirchner makes no secret of her refusal to play by the same rules as everyone else. Let me start with a few examples. Argentina has expropriated the property of European companies. It provides a safe haven for drug dealers bringing methamphetamine to Europe. It is developing a strategic relationship with Iran. It deliberately falsifies its economic statistics. It refuses to abide by international court judgments. It refuses to pay its debt to other nations and institutions, and even refuses to honour the most basic laws of contracts.

A major increasing concern is that of drug trafficking. A recent research paper from the International Assessment and Strategy Centre found that Argentina currently imports 30 times more ephedrine than is needed for its legitimate pharmaceutical industry. Ephedrine is a key ingredient in the production of methamphetamine, commonly known as crystal meth, which is a brutal and destructively addictive drug that ruins many lives on the streets of Europe and north America. That is not all. Argentina is now estimated to supply 70 tonnes of cocaine to Europe, which represents a third of the entire usage by volume.

Equally worrying is Argentina’s growing friendship with Iran, a country that is a major strategic threat to the interests of the UK and of the west more widely. The Argentine Government’s blossoming relationship with Iran has been highlighted in the US Congress, and was evidenced recently when President Kirchner refused to allow a senior Argentine investigator to travel to Washington to testify before Congress on Iran’s role in the 1994 Buenos Aires bombing of the Argentine Israelite Mutual Association, presumably for fear of what the expert might reveal.

Argentina’s refusal to repay its debt obligations, even though it has billions of dollars in reserves, sets a terrible precedent for other nations, such as Greece, which might be tempted to follow that path of irresponsibility. Courts have previously ruled that the Argentine Government needed to pay all its creditors, which is exactly the kind of sound legal principle that we in the developed world should uphold and support, even if the Kirchner Administration have chosen not to do so.

On every conceivable level, Kirchner’s actions are endangering the interests of Great Britain. So what can we do? Following a public campaign, in which I was involved, the Secretary of State for International Development took the important step earlier this year of stating that the UK would vote against future loans to Argentina from international institutions such as the World Bank and the Inter-American Development Bank. US President Obama’s Administration is also voting against new loans. No more should Kirchner’s Government be allowed to threaten and denounce the international community on one day, then effectively cash our cheques on the next.

There is more we need to do: other European nations must be encouraged to join the UK and the US. It is simply unacceptable for a country that is a member of the G20—one of the most important and prestigious international bodies—to behave in this manner. I believe that Argentina’s membership of the G20 should be revoked. The country has been named and shamed by Transparency International as one of the worst in Latin America—even outstripping Venezuela—for corruption, while the International Monetary Fund has starkly stated that Argentina’s Government are lying about their economy and cannot be trusted. We cannot, and should not, allow Cristina Kirchner to be rewarded with a welcome at the world’s top table.

Argentina is an international outlier. No other country, including those in Europe, is behaving so irresponsibly in relation to its debts. No other country is in receipt of an IMF censure for falsifying inflation figures. We should stand up for the rule of law, sanctity of contract and respect for international legal and financial obligations. We should not stand with those who refuse to abide by court judgments or who steal private property. We should certainly not stand with those who ally themselves with drug traffickers and Iranian extremist groups.

We stood firm on the Falkland Islands, and we now have a strong stance on international loans. It is time to take a tough position on Argentina’s membership of the G20, too. I believe that this issue is becoming ever more pertinent following the meeting of the group in St Petersburg, Russia just last week.

Photo of Alistair Burt Alistair Burt The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs 2:41, 13 September 2013

I congratulate my hon. Friend Henry Smith on securing this valuable and topical debate. I will respond his points as we go along. I would like to say a little bit about the G20, its purpose and evolution, and our relationship with it. I shall then come on to discuss how we view Argentina’s role.

This is an important debate on an important international grouping. The G20 is the United Kingdom’s premier forum for international economic co-operation. It represents over 85% of global GDP and economies from all regions of the world, and it balances the interests of the advanced with the emerging economies. The G20 also ensures that the views of non-members are represented: the leaders of Spain, Singapore, Brunei, Ethiopia, Senegal and Kazakhstan attended as guests at the most recent summit in St Petersburg, as did leading representatives of the United Nations, the International Monetary Fund, the World Bank, the OECD, the Financial Stability Board and the International Labour Organisation.

Since its creation at Finance Minister level in 1999 and at leader level since 2008, the G20 has provided the space for key global economies to come together on an equal basis to discuss and resolve economic issues openly and by consensus. I believe that it can point to an impressive range of achievements, agreed by all G20 members, including Argentina. For example, in the midst of the financial crisis in 2009, the G20 trebled resources to the IMF to $750 billion, supported $100 billion of additional lending by MDBs—multilateral development banks—and took action to avoid a slide into protectionism. As the immediate crisis passed in 2010, the G20 put in place credible plans for fiscal sustainability, agreed to a moratorium on new protectionist measures and agreed reforms to safeguard the international financial system. Progress has continued in the last two years, too. In 2011-12, we provided much-needed impetus to policy makers solving the eurozone crisis, and boosted the IMF’s emergency funding by $456 billion. Thus the reasons for setting up the G20 include the coming together of nations to combat problems collectively, and its achievements are by no means small.

Most recently, in St Petersburg, where the Prime Minister led the UK delegation, all G20 countries signed up to the St Petersburg action plan for strengthening growth and creating jobs, which contains all the features of the economic plan that we have been following in Britain since the coalition Government came into office. It also took forward the agenda that we and the Prime Minister set at the G8 in Lough Erne—the agenda that we call the three Ts.

On tax, the whole G20, including Argentina, adopted the Lough Erne vision of automatic sharing of tax information, with a single global standard to be finalised by February next year, and with a clear commitment to show how developing countries can participate in sharing tax information and build their capacity to collect taxes in the process.

On transparency—the second T—the whole G20 is now taking forward international standards on company ownership to help to ensure that people cannot avoid taxes by using complicated and fake structures. On trade— the third of the three Ts—the G20 extended its commitment to resist protectionist measures until the end of 2016: a hard-fought commitment that will open the way to more British exports and safeguard British jobs. G20 leaders also committed to show the necessary flexibility to secure a deal at the World Trade Organisation ministerial in Bali in December which will reduce red tape at borders, worth £70 billion to the global economy. As the WTO ministerial approaches, the Government will do all that we can to ensure that it is a success.

Importantly, all that has been achieved without a formal legal basis setting out the rights and obligations of member countries, and that is for good reason. As the Prime Minister noted in his report “Governance for growth”, the G20’s informal quality, combined with its flexibility, has been its comparative advantage and its greatest strength. It allows leaders to explore the scope for political agreement outside the constraints of more formal, binding institutions. It allows the G20 to work within the existing international governance system rather than having to rebuild it. Importantly, it provides the space for key global economies—advanced and emerging alike—to come together on an equal basis to discuss and resolve economic issues openly in the spirit of enlightened self-interest, without the historical legacy of north-south divisions. Those features have been the G20’s greatest assets, and accordingly we believe that it should maintain its informal, consensus and leader-driven character for the foreseeable future. That has a bearing on G20 membership.

The G20’s place as a consensus-driven forum where major and diverse economies come together on an equal footing means that there are no formal criteria for membership, nor any means of ejecting a member. Indeed, the membership of the G20 has remained unchanged since its beginnings in 1999, and there are no plans to change it. My hon. Friend makes valuable points, and he is right that we should strive for all G20 members, including Argentina, to be responsible players and to uphold their commitments. We advocate a strengthened accountability process for the G20, which will ensure that G20 members have stronger incentives to live up to their commitments and play by the rules. We also welcome the continued effective participation of non-members, international institutions and others in the G20’s work, while maintaining its efficiency. International organisations make a valuable contribution to the G20, and we believe that the G20 should continue to work with them in a transparent manner, respecting both those international organisations’ own governance structures, as well as their processes for dealing with members who do not fulfil their commitments.

However, we judge that maintaining the space for leaders from key global economies to come together on an equal and flexible basis is central to the G20’s success. We therefore would not support more formal structures for the G20, or propose a mechanism by which we would eject, or seek to eject, one of its members. We would not of course rule out changing the membership of the G20 in the future, but any proposed change would need to have consensus agreement by all members of the G20, balance the need for representation with the need for effective decision making by leaders and Ministers, and retain the power of informality and political consensus that has been the G20’s greatest strength.

Having set out the background of the purpose of the G20, the way in which it works, its informality and the lack of formal procedures, let me turn to the points made by my hon. Friend on the specific question of Argentina. I am grateful to him for making the Foreign and Commonwealth Office aware of some of the key points of his speech in advance.

The Government have always been clear that it would like a full bilateral relationship with Argentina. As a country rich in natural resources, Argentina has the potential to be a key trading partner for the UK in the future. The people of the Falklands are British and wish to remain British as clearly demonstrated by the referendum held in March. We remain disappointed that, more than 30 years after their unjustified and illegal act of aggression against the Falklands, the Government of Argentina continue their policy of hostility towards the Falklands people with attempts to strangle the economic livelihood of the islands, and in their refusal to co-operate with the Falklands on a range of issues that are for the common good of the region. None the less, the United Kingdom continues to enjoy a healthy trade with Argentina, amounting to £1.3 billion according to the last count, and many well-established British companies currently operate there.

My hon. Friend made a series of very important points. Let me make it clear to him and to the House that the UK is well aware of some of the deficiencies to which he drew attention. Argentina has taken a number of trade and investment actions which are damaging to business interests and which, in our view, undermine its economy by reducing its attractiveness to international investors. We are taking action with other partners to encourage it to adopt a different approach. The key point that I should make to my hon. Friend is that, notwithstanding the difficulties that he has raised in relation to Argentina, there are forums other than the G20 in which it would be more suitable to take appropriate action. However, none of the points that he has made are minor. They all need to be addressed.

We have fully supported the EU’s action against Argentine restrictions on imports within the World Trade Organisation. We have also played an active role within the International Monetary Fund, alongside key partners, to ensure that any action against Argentina for its non-compliance with its data obligations under the IMF’s articles of agreement is taken proportionately and appropriately. The world must of course deal with honest and straightforward trade figures and other economic data, and it is the IMF’s responsibility to ensure that that happens.

As my hon. Friend said, in February this year our right hon. Friend the Secretary of State for International

Development informed Parliament that she had instructed the UK’s representatives at the Inter-American Development Bank and the World Bank to vote against all new proposals for financial support for the Government of the Republic of Argentina presented by those institutions. The same approach has been adopted by the US and other key partners.

We are aware that Argentina ranks 102nd in Transparency International’s corruption perceptions index. We believe that bribery and corruption present one of the most significant barriers to trade and investment. It is estimated to cost the global economy 5% of GDP each year. We continue to push for G20 countries to set high standards in line with international best practice, and we encourage continued implementation of the G20 action plan that we agreed in 2012.

Let me emphasise that the UK Government believe in the importance of a rules-based international system, based on collective decisions made in enlightened self-interest. We firmly believe that the G20, representing large, diverse economies from all the regions of the world, should work across its differences in the interests of securing strong, sustainable and balanced growth. It is for that reason that many of our concerns about the attitude of the current Government of Argentina to the international community should not be addressed within the G20. We believe that it is better to have Argentina in the G20 than outside. We may not always agree with Argentina, but we can use the G20 to sign up collectively to important global rules and standards, and still put pressure on Argentina through the appropriate forums outside the G20.

We therefore do not believe that we should seek reform of the G20’s membership. The nature of the G20 as an informal, flexible group in which economies can come together in the spirit of enlightened self-interest is its key asset, and we should ensure that we retain that. As the recent G20 summit shows, the G20 continues to build consensus, strengthen the global economy, and make progress on our key trade, tax and transparency priorities.

My hon. Friend has raised serious issues in relation to Argentina. He should be in no doubt of the fact that the UK has noted those issues and is addressing them, with partners, in the appropriate places. The G20 performs a different role, and it is through that role that the UK and Argentina will, we believe, develop a full bilateral relationship. That is what we wish for, and we believe that it will be very much in our interests and those of the people of Argentina.

I thank my hon. Friend for raising this issue today.

Question put and agreed to.

House adjourned.