The St Petersburg G20 Summit on September 5 and 6 will be shaped by three factors in descending order of impact “ the immediate context, the priorities set by the host, and follow up to previous summit decisions.

While the issue of Syria will likely take up a lot of time in bilateral meetings and corridor discussions, it is extremely unlikely to be a topic of discussion at the summit table. The G20 is not yet ready for political issues. Leaders will try not to let it detract from trying to achieve a productive summit and will focus on the economic business at hand.

While some decisions still depend on discussions in St. Petersburg among officials and leaders, signs point to a modestly productive and workmanlike economic Summit.

Most of the outcomes will be satisfactory to Prime Minister Harper and his government. Many of the decisions will be consistent with his priorities over the years in the G20, including promoting economic growth, fiscal consolidation, better financial regulation, and promotion of international trade.

Economic Context

On the eve of St. Petersburg, there are no economic or financial emergencies that need attention. The global economy is still struggling (the IMF has recently pared back its 2013 growth estimates), but with the slow improvements evident in the US, with Japan on the mend, and with indications that the EU may be finally coming out of its slump, leaders will want to "stay the course" and send positive signals to markets.

As regards advanced countries, we should expect a repeat of the G8 Summit formula in June (and largely adopted at the G20 Finance Ministers meeting in July) in which a fine balance was struck between stressing the need for medium term fiscal consolidation plans (as set out in the Toronto communique in 2010 - and still more or less on track) and allowing for case by case variations in some countries struggling to rekindle growth, such as in southern Europe. President Obama will argue for this kind of flexibility. Prime Minister Harper and Chancellor Merkel will be among the strongest voices pushing for firm plans and target dates for bringing deficits under control.

The international business community look for leaders to support the launching of negotiations on trade facilitation when World Trade Organization ministers meet later in the year. With the Doha multilateral round on hold, these talks could at least yield some benefits for global trade. The private sector would also like to see a renewal of the Toronto G20 “standstill” commitment against taking new protectionist trade measures, although the record has been mixed in its implementation. However, getting agreements on trade issues has always been difficult in the G20 given the range of interests in the group, so a positive outcome at the Summit on these matters is not assured.

The only new concern for St. Petersburg will be the slowing of growth in China, and the doldrums now evident in India, Brazil, and in other emerging economies. But it is still be too early to push any panic buttons.

In the meantime, the juxtaposition of this development with the apparent if uneven economic revival in the developed world is causing fault lines to re-emerge within the G20 on such issues as capital flows (this time away from emerging markets) and currency weaknesses in places such India, Indonesia and Turkey. These fault lines will be evident in the discussions in Russia on the global economy, especially around the effects in the emerging countries of the end of quantitative easing and return to higher interest rates in the USA and elsewhere.

There is some irony in the fact that the next set of global weaknesses may arise not in developed countries but in the emerging economies, which have kept the global economy afloat since 2008. Sooner or later the G20 will need to discuss the impact of this structural slowdown on the longer-term outlook for the global economy and what it means for G20 policies and collaboration in meeting the group “s agreement at the Pittsburgh Summit in September 2009 to achieve “strong, sustainable and balanced” global growth.

Perhaps that discussion is something for the 2014 G20 Summit in Australia, a country very much feeling the effects of China “s moderating growth rate. In the meantime, while progress is being made among the G20 in meeting the 2009 objective, the easing of the crisis has meant less motivation to tackle the tough issues, such as labour market reform in advanced countries, or more market-driven exchange rate systems in emerging ones.

Russian Priorities for St. Petersburg

To the surprise of some observers, Russian President Putin did not come up with a list of ambitious new “signature” initiatives for the Russian chairmanship. The G20 work agenda is already heavily laden. Instead, Russia has emphasized continuity and stewardship through a set of priorities that picks up or builds on past themes.

On macroeconomic issues, for example, the Russians have focused on the timely subject of jobs and employment, and how governments can best tackle structural unemployment and promote employment of vulnerable groups such as youth. From within the G20 “s lengthy “development agenda”, they are looking for ways to enhance long term financing arrangements for badly needed infrastructure projects in developing countries.

The Russians have also predictably taken some ownership of the G20 “s Energy Sustainability theme, building on previous work and using an existing Working Group. The objectives however have been relatively modest, focusing on transparency and functioning of international commodity and energy markets, for example, and some attention to green energy and energy efficiency policies in the G20.

In these and other areas the Russian President is looking for some “wins” to put in the window as his G20 achievements.

One such “win”, probably unanticipated at the beginning of the year, will be a decision in St. Petersburg to adopt the OECD “Action Plan on Base Erosion and Profit Shifting” as the roadmap for G20 approaches to future international taxation agreements. The Plan offers a way for governments to cooperate in setting new standards and processes so as to prevent “double non-taxation” by multi-national companies looking to reduce their tax load.

Following Up on Previous Commitments

Some good outcomes for the Russians and their guests will probably lie in the progress that officials have registered over the past year in advancing the G20 work plan and implementing previous decisions. Accountability for meeting past commitments (promoted by Canada ahead of the Toronto Summit) is slowly becoming an accepted principle underlying G20 credibility.

Surprisingly for some, the Russian chair has vigorously backed the G20 “s Anti- Corruption initiative, which dates from the Toronto Summit, and is said to be nearing some solid outcomes for delivery in St. Petersburg. The irony of Russia driving this item is hard to miss: the positive view is that many in the Russian Government believe that a strong outcome will help them deal with the problem at home.

Two other important “legacy” items will also get attention in St. Petersburg.

On the very positive side, leaders should be expected to welcome progress and call for further work on the financial regulatory agenda. Driven by finance ministers and officials, this agenda has been central to the G20 “s summit agenda from very beginning. It is technically complex, but enormously important. This year it is has focused on more effective domestic regulation of “too big to fail” financial institutions (with an emphasis on ensuring they have adequate reserves for emergencies), of insurance companies and “shadow banking” entities. Leaders can be expected to urge deadlines be met for domestic implementation of new regulatory standards. Authorities may also be instructed to develop better cross-border legal and other frameworks to link domestic regimes and handle emergencies when the “to big to fail” multinationals get into trouble.

Finally, Leaders must urge their finance ministries to meet the end of year deadlines for the reform of the governance of the IMF as agreed in Seoul three years ago. This reform would give more voice to emerging economies commensurate with their share of the global economy. Some problems have arisen in the US and Europe where resistance naturally exists to giving up power.

Conclusion

While the Syria issue will probably steal the media spotlight (much to Russian dismay), the St. Petersburg Summit should achieve some good outcomes: solid progress on the financial regulation agenda, the adoption of the OECD Action Plan on international taxation cooperation, and a good Anti-Corruption package. This will be accompanied by further directions from leaders about continued attention to reviving the global economy “perhaps with some words of caution about the softening in emerging markets and the need for structural changes to underpin future growth everywhere.

The outcomes on other issues mentioned above - of which international trade is the most important to Canada - will depend on the negotiations among officials and at the table in the hours up to and during the summit.