G20 Los Cabos Summit Meeting (Summary)

July 13, 2012

1. Schedule and participants

(1) Schedule and place

G20 Los Cabos Summit Meeting was held on June 18 (Monday) and 19 (Tuesday), 2012 in Los Cabos, Mexico.

(2) Participants from Japan

Prime Minister Yoshihiko Noda represented Japan on the first day of the Summit, and Deputy Chief Cabinet Secretary Hiroyuki Nagahama attended on behalf of the Prime Minister on the second day.

2. Major outcomes

(1) Overview

At the Summit Meeting, the Leaders held active discussions mainly on global economic issues, including measures needed to address the European debt crisis that has been destabilizing the global financial markets. The summaries of discussions on each subject are as follows.

(2) The Global economy

(a) Prime Minister Noda made remarks, whose summary is as follows.

1. (I) While pointing out that the increasing concerns over the European debt issue have destabilized the global financial market, the Prime Minister expressed strong concerns over the decline in Japanese stock prices despite the generally strong fundamentals of the Japanese economy and over yen’s rapid appreciation against the euro and the U.S. dollar, led by speculators.
2. (II) Regarding the re-election in Greece, he welcomed a wise choice made by the Greek people. He expressed hope that the new administration in Greece would secure continued support from the international community by closely cooperating with its ““Troikoa”” of lenders and therefore stabilizing the market.
3. (III) Concerning the situation in Europe, he stated that there is no moment to lose, and that Europe should promptly work on the strengthening of its financial sector and other measures to reassure global markets. He stressed that the nations concerned should cooperate in stabilizing markets affected by spillovers of the European crisis and other factors. He pointed to the need for the G20 Leaders to show a strong message to restore market confidence.
4. (IV) As Japan’s efforts, Prime Minister Noda cited such undertakings as the purchase of bonds issued by the European Financial Stability Facility (EFSF) and the commitment to contribute $60 billion for a new line of credit to strengthen the IMF resources. Referring to nations which have not yet announced amounts of their contributions to strengthen the IMF resources, he urged them to announce the amounts to reassure markets. He also explained Japan’s efforts to prevent spillovers of the European crisis into Asia, including its efforts to enhance the Chiang Mai Initiative.
5. (V) With respect to the Japanese economy, Prime Minister Noda stated that he views fiscal consolidation and economic growth as two wheels of a cart, and that in line with the commitment at the Cannes Summit, a package of bills for the comprehensive reform of social security and tax, which includes bills for raising the consumption tax rate to 10% in two phases by October 2015, was submitted to the National Diet in March 2012. He also explained that he is doing everything he can for the bills to pass. He stated that it would be possible to achieve economic growth of 2% or higher in fiscal 2012 by the revitalization of the Japanese economy through such efforts as the implementation of Strategy for Rebirth of Japan and the reconstruction of the regions severely hit hard by the Great East Japan Earthquake of 2011.

(b) The Leaders of many countries expressed concerns that the largest risks in the global economy lay in the European debt crisis and issues related to the financial sector as well as spillovers therefrom. They called on the European authorities to act imminently to stabilize the financial market. The European authorities responded by stating that it is important to take further actions to promote fiscal and financial integration.

(c) The relationship between economic growth and fiscal consolidation was also discussed. Many Leaders expressed the view that economic growth and fiscal consolidation are not mutually exclusive, but rather, complementary, and that it is necessary to achieve both at the same time. Regarding the United States and Japan in particular, the importance of achieving medium term fiscal sustainability was stressed. As for economic growth, it was pointed out that structural policies such as labor market reforms and service-sector regulatory reform are important.

(d) Many countries, including Japan, expressed concerns about the increasing volatility in financial markets including currency exchange, that results from such factors as the current situation in Europe. They stressed the importance of working toward market stabilization.

(e) Regarding situation in Asia, Japan and Cambodia noted that while the Asian economy growth as a whole continues to be robust, spillovers from the European crisis could pose a major risk, and that it is therefore important to strengthen the Chiang Mai Initiative as a safety net.

(f) In the Los Cabos Growth and Jobs Action Plan, which was released together with the G20 Leaders’ Declaration, the G20 Leaders committed themselves to work toward global economic growth through such means as fiscal consolidation, implementing structural reforms and rectifying global imbalances as well as responding to the European issue for regaining market confidence.

(3) International financial architecture, financial regulation and financial inclusion

(a) As described earlier, Prime Minister Noda spoke during the first-day discussions on Japan’s efforts on this matter, including strengthening of the IMF resources and prevention of the spillovers of the European crisis into Asia by enhancing the Chiang Mai Initiative.

(b) Concerning the international financial architecture, the following issues were discussed: 1) As a result of the announcement of concrete amounts of contributions to the IMF’s resources by China and many other emerging economies, the total commitments exceeded $450 billion; 2) with respect to the commitment to implement in full the 2010 Quota and Governance Reform by the IMF/World Bank Annual Meetings in October 2012, and the commitment to reach an agreement by January 2013 on the quota formula, which is now under comprehensive review, many nations indicated that they should be implemented by their respective deadlines.

(c) On financial regulation, the Financial Stability Board (FSB) reported on its work to strengthen its governance. It also made a status report on discussions on policy frameworks related to shadow banking, over-the-counter derivatives and domestic systemically important banks (D-SIBs), and it was confirmed that these efforts would be continued.

(d) Many emerging economies pointed out the importance of promoting financial inclusion, financial education and financial consumer protection so that consumers and Small and Medium Enterprises (SME) could benefit from financial services. Regarding these issues, there were remarks welcoming the efforts led by international organizations and Mexico.

(4) Development: inclusive green growth, infrastructure and food security

(a) Prime Minister Noda stated on the first day of the Summit that the development of developing countries is necessary and that from this point of view, development issues such as inclusive green growth and infrastructure should be considered as G20 agenda in order to achieve sustainable and balanced growth. He also noted that Japan would contribute to this cause through its Vision and Actions toward Low-Carbon Growth and a Climate-Resilient World, the assistance to the strengthening of ASEAN's connectivity, and knowledge on disaster management, among other things. Moreover, he added that Japan would provide $1 billion worth of yen credits through the EPSA scheme (Note) in five years, and that Japan would also discuss economic growth through private-sector investment during TICAD V to be held next year.

(Note) EPSA: Enhanced Private-Sector Assistance for Africa

(b) Deputy Chief Cabinet Secretary Hiroyuki Nagahama, present on behalf of Prime Minister Noda on the second day, introduced Japan's efforts to develop infrastructure for the strengthening of ASEAN's connectivity. Citing the Great East Japan Earthquake and floods in Thailand, which adversely affected global supply chains, he also emphasized the importance of disaster reduction and called on the G20 Leaders to participate in the World Ministerial Conference on Disaster Reduction to be held in July in the Tohoku region of Japan. Concerning food security, he called for the strengthening of supply capabilities with entire value chains in mind and for the promotion of the Principles of Responsible Agriculture Investment (PRAI). He also introduced Japan's efforts to assist the Agricultural Market Information System (AMIS) and the ASEAN Plus Three Emergency Rice Reserve (APTERR). Furthermore, he stated that he would attend the Rio+20, maintaining that it is important for the G20 to help developing countries make the transition to inclusive green growth.

(c) It was pointed out by many Leaders that developing countries are suffering the most from the economic crisis, and that the development assistance to their infrastructure was necessary for their economic growth. Also emphasized was the importance of implementing the Multilateral Development Banks’ (MDBs) Action Plan as well as the importance of Disaster Risk Management (DRM). The World Bank reported on country experiences in disasters, including the Great East Japan Earthquake.

(d) Concerning food security, discussions focused primarily on increasing agricultural productivity and measures against food price volatility. On increasing agricultural productivity, some Leaders pointed out the importance of agricultural research for development and the spread of technologies as well as the necessity of mobilizing private-sector investment. The launch of the ““AgResults”” Initiative aimed at promoting agricultural innovation was welcomed. As for food price volatility, the steady implementation of the Action Plan on Food Price Volatility and Agriculture, adopted in 2011, was welcomed.

(e) Regarding inclusive green growth, the Leaders expressed support for Mexico, this year’s G20 presidency, for setting this topic as a priority area, and showed the recognition that the transition of developing countries to inclusive green growth was essential for their sustainable development. Also, the Leaders shared the view that green growth should not be used to introduce protectionist measures. Furthermore, they pointed out the necessity of making the Rio+20 starting on June 20 a success, and of long-term cooperation geared toward the realization of inclusive green growth based on the outcomes of the Rio+20. They concurred on the view that the G-20 would continue to focus on this subject as a G20 agenda item.

(5) Trade, job creation and growth

(a) Prime Minister Noda, speaking on the first day, stated that growing protectionist measures associated with trade and investment are regrettable and called on the G20 to show its firm resolve against protectionist measures. He welcomed positive moves in the WTO talks such as the response to issues of concern for developing countries and trade facilitation, and asserted that these moves should be bolstered.

(b) Regarding trade, many Leaders expressed their concerns over rising instances of protectionism, and argued that the time limit to the standstill commitment, under which no new protectionist measures are to be adopted, should be extended. Some emerging countries expressed their views against extending the standstill commitment arguing that developed countries are still taking such protectionist measures as agricultural subsidies, and that the proposed extension lacks balance. However, the G20 Leaders agreed to extend the time limit from 2013 to 2014 in light of the importance of trade in growth and employment. As the importance of working towards concluding the Doha Round negotiations, which is currently at a stalemate, was pointed out, many countries expressed their views in favor of reaching an agreement on trade facilitation.

(6) Conclusion

Based upon the discussions above, the ““G20 Leaders Declaration”” and the ““Los Cabos Growth and Jobs Action Plan”” were issued.

3. G20 Summit Meeting in 2013

At the close of the meeting, Russian President Vladimir Putin stated that the next G20 Summit Meeting would be held in St. Petersburg next year.