World Bank President Calls For New Multilateralism To Face Crises

By Tom Barkley

Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- World Bank President Robert Zoellick called Monday for the Group of Seven industrialized nations to be expanded to include major developing countries, saying the current world leadership structure is ill-equipped to deal with global crises.

Laying out a broad vision for a "new multilateralism," Zoellick pushed for greater cooperation in everything from financial and economic issues to energy and trade.

"Our New Multilateralism must build toward a sense of shared responsibility for the health of the global political economy," he said in prepared remarks for a speech to the Peterson Institute for International Economics. "This means - chiefly and critically - that it must involve those with a major stake in that economy, those willing to share in the responsibilities along with the benefits of maintaining it."

Speaking in the run-up to the G7 summit and fall meetings of the World Bank and International Monetary Fund later in the week, Zoellick said the G7 has put a priority on "ceremony over policy."

"The G7 is not working. We need a better group for a different time," he said, adding that the G20 is too unwieldy.

Zoellick argued the G7 should be doubled in size to include rising powers like China, Russia, Saudi Arabia, Brazil, India, Mexico and South Africa. Along with the G7 countries of the U.S., U.K., France, Germany, Italy, Japan and Canada, the new group would account for over 70% of the world's gross domestic product, 62% of its energy production, as well as the biggest greenhouse gas emitters and donors.

"Ours must be globalization where both the opportunities and the responsibilities are more widely shared," he said. "Without that, we may design a new architecture but it will be a house of cards."

But instead of just a G14, the new "steering group" would have a more flexible makeup and coordinate more actively with public and private institutions, he said.

"We need a Facebook for multilateral economic diplomacy," Zoellick said, referring to the online social networking site.

Similarly, the Financial Stability Forum, which has been tasked with coming up with global responses to the financial crisis, is too centered around advanced economies, he said.

"Whether through an expanded FSF, a stronger FSF-IMF linkage, or the Steering Group, these financial supervisory issues will need to be addressed in a broader multilateral context," said Zoellick.

Lending his support to the idea of elevating the IMF's role as an early warning system focused on crisis prevention, Zoellick said the fund should also get more involved in helping more developing countries move toward more flexible currency policies.

"The IMF, backed by the Steering Group, can offer more options, including pegs linked to currency baskets or commodities," he said. "Over time, we need to prepare for an international finance system with multiple reserve currencies, with others connected by various pegs."

Looking ahead to the next U.S. administration, he said the next president will have to move beyond "the fire-fight of financial stabilization" to address the "economic aftermath."

Zoellick, whose name has been mentioned in some media reports as a possible Treasury secretary pick if Republican Sen. John McCain wins the Nov. 4 vote, said the next president needs to work with the international community in overhauling its "failed" regulatory structure.

"Just as the crisis has been international because of interconnectedness, the reforms will need to be multilateral," he said.

While developing countries have so far weathered the financial turmoil relatively well, the bank failures and freezing up of credit markets last month could prove to be the "tipping point" for many of them, said Zoellick.

Following a record average of 7.9% GDP growth last year, developing countries could still register an "impressive" 6.6% this year, he said.

But he warned that "the stark reality is that developing countries must prepare for a drop in trade, capital flows, remittances, and domestic investment, as well as a slowdown in growth."

He urged developing countries with solid fiscal and balance of payment positions to use consumption and investment to boost demand, but said others may need help from the IMF and developing banks.

"For some larger countries under threat, the Steering Group and friendly countries should act in concert with the Fund and the Banks to offer support linked to policy reforms that will return the country to sustainable growth," he said.

Calling energy markets a "mess," Zoellick urged energy producers and consumers to make a "global bargain" to find a right balance between supply and demand, and to take into account global warming.

"There could be a common interest in managing a price range that reconciles interests while transitioning toward lower carbon growth strategies, a broader portfolio of supplies, and greater international security," he said.

Noting that the Doha round of global trade talks has "hit the rocks," Zoellick also called for a more cooperative environment on the trade front, with a focus on trade facilitation.

The "new multilateralism" must also give equal weight to development issues, he said, "otherwise the world would remain an unstable place."

For the World Bank's part, Zoellick announced the creation of a commission led by former Mexican President Ernesto Zedillo to make recommendations on modernizing the institution.

The bank needs to "operate more dynamically, effectively, efficiently, and legitimately in a transformed global political economy," said Zoellick.

-By Tom Barkley, Dow Jones Newswires; 202-862-9255; tom.barkley@dowjones.com

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=p6N7fvxBgNVlFcXE2xeYCg%3D%3D. You can use this link on the day this article is published and the following day.

(END) Dow Jones Newswires

October 06, 2008 12:15 ET (16:15 GMT)


Copyright 2008 Dow Jones & Company, Inc.

The Dow Jones content is the property of Dow Jones or its licensors, and is protected by copyright and other intellectual property laws. If you are an individual, you agree not to store, copy, reproduce, modify, distribute, transmit, display, perform, publish, transfer, create derivative works from, broadcast or circulate any Dow Jones content to anyone, including but not limited to others in the same company or organization, without the express prior written consent of Dow Jones. If you are an entity, you agree not to permit access to the Dow Jones content by anyone other than an employee of you.

Notwithstanding the foregoing, the Dow Jones content may be copied and sent without charge in the ordinary course of business provided all copyright and other proprietary rights notices, the original source attribution, and the phrase "Used with permission from Dow Jones & Company” are included. Dow Jones content may only be used in this way for a non-commercial purpose, meaning such copying:
(i) is made on either an infrequent or irregular basis to a limited number of individuals;
(ii) is incidental to the purpose of your principal business;
(iii) cannot be used as a substitute for any Dow Jones content or any substantial part of it;
(iv) has no independent commercial value;
(v) is not separately charged for; and
(vi) is not made in connection with commercial information broking, information vending, publishing or credit rating, nor for substantial reproduction through the press or media, nor for transmission via any private or public network, cable or satellite system.

You may not post any Dow Jones content to forums, newsgroups, mail lists, electronic bulletin boards, or other services, without the prior written consent of Dow Jones. To request consent for this and other matters, you may contact Dow Jones at djnewswires@dowjones.com .

The Dow Jones content is not intended for trading purposes. The Dow Jones content is not appropriate for the purposes of making a decision to carry out a transaction or trade. Nor does it provide any form of advice (investment, tax, legal) amounting to investment advice, or make any recommendations regarding particular financial instruments, investments or products. Dow Jones may discontinue or change the Dow Jones content at any time, without notice.

The Dow Jones content includes facts, views, opinions and recommendations of individuals and organizations deemed of interest. Dow Jones does not guarantee or warrant the accuracy, completeness or timeliness of, or otherwise endorse, these views, opinions and recommendations.

DOW JONES IS NOT RESPONSIBLE FOR ANY DELAY IN YOUR RECEIPT OF THE DOW JONES CONTENT RESULTING FROM THE INHERENT LIMITATIONS OF INTERNET TRANSMISSION VIA THE WORLD WIDE WEB. DUE TO THE NUMBER OF SOURCES FROM WHICH THE DOW JONES CONTENT IS OBTAINED, AND THE INHERENT HAZARDS OF ELECTRONIC DISTRIBUTION, THERE MAY BE DELAYS, OMISSIONS OR INACCURACIES IN THE DOW JONES CONTENT. THE DOW JONES CONTENT IS PROVIDED “AS IS”, WITHOUT ANY WARRANTIES. DOW JONES AND ITS AFFILIATES, AGENTS AND LICENSORS CANNOT AND DO NOT WARRANT THE ACCURACY, COMPLETENESS, CURRENTNESS, TIMELINESS, NONINFRINGEMENT, TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE DOW JONES CONTENT, AND DOW JONES HEREBY DISCLAIMS ANY SUCH EXPRESS OR IMPLIED WARRANTIES. NEITHER DOW JONES NOR ANY OF ITS AFFILIATES, AGENTS OR LICENSORS SHALL BE LIABLE TO YOU OR ANYONE ELSE FOR ANY LOSS OR INJURY, OTHER THAN DEATH OR PERSONAL INJURY RESULTING DIRECTLY FROM USE OF THE DOW JONES CONTENT, CAUSED IN WHOLE OR PART BY ITS NEGLIGENCE OR CONTINGENCIES BEYOND ITS CONTROL IN PROCURING, COMPILING, INTERPRETING, REPORTING OR DELIVERING THE DOW JONES CONTENT. IN NO EVENT WILL DOW JONES, ITS AFFILIATES, AGENTS OR LICENSORS BE LIABLE TO YOU OR ANYONE ELSE FOR ANY DECISION MADE OR ACTION TAKEN BY YOU IN RELIANCE ON SUCH DOW JONES CONTENT. DOW JONES AND ITS AFFILIATES, AGENTS AND LICENSORS SHALL NOT BE LIABLE TO YOU OR ANYONE ELSE FOR ANY DAMAGES (INCLUDING, WITHOUT LIMITATION, CONSEQUENTIAL, SPECIAL, INCIDENTAL, INDIRECT, OR SIMILAR DAMAGES), OTHER THAN DIRECT DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL THE LIABILITY OF DOW JONES, ITS AFFILIATES, AGENTS AND LICENSORS ARISING OUT OF ANY CLAIM RELATED TO THIS AGREEMENT EXCEED THE AGGREGATE AMOUNT PAID BY YOU FOR THE DOW JONES CONTENT IN THE 12 MONTHS IMMEDIATELY PRECEDING THE EVENT GIVING RISE TO SUCH CLAIM. BECAUSE SOME STATES OR JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR DAMAGES OR THE EXCLUSION OF CERTAIN TYPES OF WARRANTIES, PARTS OR ALL OF THE ABOVE LIMITATION MAY NOT APPLY TO YOU.

These Terms of Use, your rights and obligations, and all actions contemplated by these Terms of Use will be governed by the laws of England and Wales, and You and Dow Jones agree to submit to the exclusive jurisdiction of the English Courts.
If any provision in these Terms of Use is invalid or unenforceable under applicable law, the remaining provisions will continue in full force and effect, and the invalid or unenforceable provision will be deemed superseded by a valid, enforceable provision that most closely matches the intent of the original provision.