TUAC - TRADE UNION ADVISORY COMMITTEE TO THE OECD

13/02/2015

“We will strive to ensure that growth is inclusive, including through policies that address income inequality.” – This was one of the main conclusions of the G20 Finance Ministers and Central Bank Governors Meeting’s communiqué ( Link to the Communiqué). Taking place in Istanbul on February 9-10, the meeting marked an acknowledgment of the economic risk posed by rising inequality, weak demand and sluggish growth.

Before the start of the official gathering, the Turkish G20 Presidency hosted an outreach group morning meeting between several Finance Ministers with the L20, B20 and T20. On the L20 side, Turk-Is President, Ergun Atalay outlined the international labour movement’s main concerns and policy suggestions (Link to the L20 Room Document to G20 Finance Ministers and Central Bank Governors). Mr Atalay also welcomed Turkey’s priorities for Inclusiveness, Implementation (of past G20 decisions) and Investment. “For the L20, “inclusiveness” cannot omit forms of social inclusiveness: obviously, I am referring to inclusiveness in the labour market and strong social protection needed to avoid social marginalisation,” he said.

TUAC General Secretary, John Evans said that the stakes were high as populations had lost trust in governments and institutions, and reiterated L20 calls for comprehensive measures to boost aggregate demand and reduce inequality. By putting inclusiveness high on this year’s agenda, the Turkish Presidency raises expectations that policy proposals on fighting income inequality and promoting the integration of vulnerable groups into labour markets will be developed in the upcoming months with concrete benchmark targets.

However, as pointed out by ITUC General Secretary Sharan Burrow at consultations with the IMF and World Bank in Washington taking place at the same time “many of the “structural reforms” that governments are pursuing are weakening wage bargaining and employment protection and driving increased inequality”.

A fresh approach is needed. Raising wages of those on low and middle incomes together with expanded public investment is necessary to kick-start growth. Therefore, policy coordination on the G20 level and beyond is essential. Preparations for the joint Labour and Finance Ministers meeting in September may give an opportunity for more concrete and coherent proposals.

On promoting infrastructure investments (#8), the G20 Finance Ministers and Central Bank Governors committed to “improve the quality of public investment processes” and of “PPP models to attract further involvement by the private sector” and to “early operationalization of the Global Infrastructure Hub”- a key deliverable of the previous Australian G20 presidency. Evans called upon closer cooperation with trade unions and civil society organisation on these issues to ensure that public interest is protected – including fair risk-sharing between public and private parties – and that job creation targets and responsible investment standards are effectively observed. He also suggested for the G20 Employment Working Group to focus on the employment creation aspect of the infrastructure track.

On financial reform, six years after its historic summit in London, the G20 is still struggling with “Finishing the Post-Crisis Agenda” (the title of the letter of the FSB chair to the G20 finance meeting). The G20 commitment to “ending too-big-to-fail” appears to be a never-ending story, as “critical steps remain to be taken” (#10). Work on the regulation of over-the-counter derivatives, shadow banking and extending the current TBTF framework to non-bank financial institutions are far from being completed. The G20 Finance Ministers and Central Bank Governors expressed, and rightly so, concern about recent cases of “market misconduct” in the banking sector.

On tax policies, the G20 Finance Ministers and Central Bank Governors endorsed three central deliverables of the G20/OECD Base Erosion and Profit Shifting (BEPS) Action, including the launch of negotiations for a new multilateral convention on BEPS, and committed to the prompt implementation of the recently adopted OECD standard on automatic exchange of information (#11). The adoption of a final version of the OECD country-by-country tax reporting – a central measure of the BEPS Action plan – is welcome. However, the filing of the reporting is restricted to tax authorities, leaving no option for any form of public disclosure. On SMEs, the L20 emphasized the critical role of social dialogue and unionisation in SMEs.  The consultation in Istanbul re-confirmed the importance of social dialogue – also within the G20 itself.

Overall, the outcome communiqué of the official meeting confirms that there is disagreement on strategies moving forward and in particular on the analysis of the macroeconomic situation, societies are faced with. On the positive, the text picks up the risk of "persistent demand weakness leading to persistent stagnation in some countries”. The L20 will further analyse the references on structural reforms, infrastructure investment, taxation and financial reform. The follow-up on national growth and employment plans remain work in progress at this point.