The B20 summit: where cashed-up lobbyists meet to write trade rules?

News Corp Chairman Rupert Murdoch joined Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs, and Business Council of Australia President Catherine Livingstone at the B20 summit this week. Jason Reed/AAP/Reuters

The Business 20 (B20) summit typically attracts the global corporate glitterati, as the usual suspects assemble in alpine retreats like Davos; cinema-infused beach towns like Cannes; or sunny Mexican resorts, such as Los Cabos.

Except this year. The G20 will meet in Brisbane. Yes, Brisbane.

It’s no surprise, then, that the B20 opted for cosmopolitan Sydney this week to define the themes that will feed into the Brisbane G20’s agenda at the leaders’ meeting in November.

At the Sydney B20, business leaders will this weekend be joined by the G20 trade ministers. Prime Minister Tony Abbott, Treasurer Joe Hockey and Trade Minister Andrew Robb are among the 400 global leaders at the B20 summit. Corporate chiefs Rupert Murdoch (News Corp) and Andrew McKenzie (BHP) are also attending.

The raft of pressure groups lobbying international organisations has grown exponentially, particularly as the G20 has taken over where the G7/G8 left off. What was previously an elite grouping of the major powers from Europe and North America, plus Japan, has morphed into a behemoth with representatives from every continent. Including Australia.

With all the G8s, G22s and G3s, you could be forgiven for letting the B20 fly under your radar.

But make no mistake: international corporate lobbies are cashed-up, well-organised and influential. They write the rules of international trade and investment; governments merely implement them.

How does the B20 work?

Like the World Economic Forum, the B20 comprises leaders and CEOs from the world’s major corporations, as well as major industry group representatives, such as the European Round Table of Industrialists (ERT) and the International Chamber of Commerce (ICC), a CEO advisory group to the G20. However, the B20 also includes representatives from international organisations, such as the WTO and OECD.

The ERT is the most powerful business actor in the European Union and in the US-EU Transatlantic Business Council (which initiated the current Transatlantic Trade and Investment Partnership (TTIP) negotiations).

The B20’s relevance stems from its direct influence: its agenda feeds directly into the discussions between the G20 member countries. A representative from the B20 (usually senior or retired business leaders) act as a “sherpa”, who formally represents the B20 to international business groups. Australia’s sherpa this year is former Business Council of Australia director and UBS adviser Robert Millner.

Similarly, each G20 government appoints its own sherpa, who are generally career foreign affairs or trade officials, who are officially authorised to conduct pre-summit consultations with other foreign ministries. In joint meetings, sherpas prepare the summitry groundwork, often green-rooming in small cliques, in which they agree on agendas and draw a red line around issues that other sherpas transgress at their peril.

Australian Prime Minister Tony Abbott has told the B20 summit the private sector should lead the way on economic growth. Lisa Maree Williams/AAP/Getty Images

What are the B20’s objectives?

The B20’s task forces envelop trade, investment in human capital and infrastructure. Unremarkably, it promotes a reformist, deregulatory, free-trade agenda. Many of these proposals are uncontroversial and make good sense from the perspective of freer competition and efficiency. For example, the B20 has urged governments to address non-tariff barriers to trade, a bug-bear that has been at the centre of global trade reform since the Tokyo Round of GATT in the 1970s. However, the B20 has also identified over 1,500 new non-tariff measures that have been introduced since the global financial crisis struck.

More controversial is the B20’s proposal to scale back the pace of regulatory reform in the banking and finance sector. ANZ’s Mike Smith, who heads the B20’s taskforce on financing growth, argues reforms need a “pause” to avoid a deleterious impact on global growth.

This is nothing new. Banks and legislatures have proven extremely reluctant to pass undiluted versions of legislation such as Dodd-Frank and the Volcker Rule, while the Basel III regulations on minimum capital requirements have experienced mounting resistance from the very governments who drew up the new rules.

The B20 states that its objective is “to ensure that global regulation does not inhibit growth and the creation of jobs”.

The IMF sees it differently. In May, IMF managing director, Christine Lagarde attacked the banking sector in particular for its resistance to reform, arguing global finance still values “profit over long-term prudence”.

Labour mobility is also a key aspect of the B20’s reform push. Under the rubric of “human capital”, the B20 taskforce is examining issues such as youth unemployment and labour arbitrage.

Although labour arbitrage usually sees jobs off-shored to lower-wage economies, Steve Sargent, the chairman of the B20 Human Capital Taskforce, argues that skills will drive wages in both developed and developing countries, rather than resulting in a global “race for the bottom” to find the cheapest wage labour.

Infrastructure investment and countering corruption have also been the focus of B20 taskforces. Again, corporate investors’ concerns centre upon excessive regulation of infrastructure projects, which the B20 claims is blocking trillions in potential infrastructure investment globally.

Prognosis: negative?

The B20 itself should be less than optimistic that its recommendations will be adopted widely by G20 governments. As The Economist reported in 2012, the McKinsey Global Institute and the International Chamber of Commerce keep a running “dashboard” of promises made versus promises kept by G20 members.

Unsurprisingly, politicians promise much, but deliver little. Only a fifth of the G20 governments stuck by their commitments on trade between 2010 and 2011. They performed poorly in issue areas such as reducing carbon emissions and countering corruption.

If G20 governments persist with this dismal strike rate, one prime minister, one treasurer, sundry trade ministers and 400 business leaders in the Harbour City are, frankly, wasting their time. And money.