Despite the many calls for a “new Atlanticism” or a “new transatlantic bargain,” the U.S.-European relationship is still imprisoned by old habits and ways of doing business. Yet, it is an inescapable reality that almost all the new challenges lie outside the traditional NATO relationship, and many of them are in areas where U.S. and European views have long diverged.
It would be too much to ask that there be a U.S.-European meeting of the minds on every global issue, but on many of these issues U.S.-European strategic convergence seems both possible and necessary. These include management of the global financial and trading system, addressing energy security and climate change, and re-fashioning existing international institutions to address all these problems.
Perhaps it has taken the global economic crisis to compel Americans and Europeans to revitalise their cooperation and exercise co-leadership. It was noteworthy that the International Monetary Fund found itself totally sidelined, making it the first time since its creation at the 1944 Bretton Woods conference that it has played no role in a major financial crisis. It was for this reason that the Europeans, led by UK Prime Minister Gordon Brown, called for a summit meeting of the G20 world economic powers to consider a “Bretton Woods II” world financial architecture, bypassing not only the IMF but the G7 as well.
This initiative and the three G20 summits which have since taken place – Washington in November 2008; London in April of last year; and Pittsburgh in October – have been a promising start. With European and U.S. leadership, several measures were undertaken to strengthen financial oversight and monitoring via the IMF and a Financial Stability Board that replaces the old Financial Stability Forum. The G20 leaders also agreed to recapitalise the IMF and multilateral development banks via an impressive $1.1 trillion package of measures to assist the poorest countries. The G20 was formally designated at Pittsburg as the premier forum for international economic cooperation, but although it is far more inclusive and representative than the G7, the G20 is itself far from ideal because Europe is so greatly over-represented,with France, Germany, Italy, the UK and the EU all having seats at the G20 table.
The essential next step is to bring the new economic powers more fully into the global system and to have their growing power and influence reflected in the IMF, World Bank and other institutions. The emerging market economies account for 30% of global GDP, 45% of total exports, and 75% of foreign exchange reserves, yet the traditional Western powers of the OECD continue to hold 63.8% of the total voting shares in the IMF, with the G7 alone constituting 43.7% of the total. Symbolically, a good place to start would be for the United States and Europe and to give up their conventional claims to the top World Bank and IMF jobs and open those leadership positions to candidates from other countries. Procedurally, emerging economic giants like China and India should be accorded substantially greater voting power. One possible formula would be for the U.S. to relinquish its position as the sole country with veto power in return for the EU’s agreement to reduce its combined voting share from 30% down to the same level as the U.S. The size of the IMF’s executive board should be reduced from 24 to 20 by consolidating European representation. Although the United States and its European partners have pledged to reform IMF governance, so far they have been loath to relinquish their privileged positions.
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Robert Hutchings is a diplomat in Residence at Princeton University's Woodrow Wilson School of Public and International Affairs. He becomes Dean of the Lyndon B. Johnson School of Public Affairs at the University of Texas in March 2010.
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