Our Agenda for the G-20

Countries should work to stabilize debt levels, enact new financial regulation, and reduce their dependence on fossil fuels.

This week, President Obama will travel to Toronto for the G-20 Summit. Engagement with the G-20 has been a key component of the administration's strategy to defuse the global financial crisis and ensure economic recovery. Stronger growth with solid job creation here in the U.S. depends on an expanding global economy, and this year's G-20 provides an important opportunity to focus on the policies required to reinforce growth.

In London last spring, the G-20 embraced an unprecedented and coordinated strategy to end this crisis. In Pittsburgh last fall, we established a new framework for global growth, and we designated the G-20 as the premier forum for international economic cooperation. In Toronto, we will take steps to ensure that the current recovery is self-sustaining.

Thanks to strong, decisive and coordinated action, President Obama and the other G-20 leaders have achieved significant progress since the London meeting. The global economy, which was then contracting at an unprecedented rate, is now expanding, and world trade has increased by more than 20% over the last 15 months.

U.S. Treasury Secretary Timothy Geithner, Spain's Finance Minister Elena Salgado, Bank of Korea Governor Kim Choong-soo, South Korea's Finance Minister Yoon Jeung-hyun and France's Economy Minister Christine Lagarde at the G20 Finance Ministers and Central Bank Governors meeting.

This turnaround has been especially dramatic in the United States. At the time of the London summit, the U.S. economy was shrinking at an annual rate of 6%. Now it is growing at a rate in excess of 3%-the largest swing in U.S. growth in 50 years.

At the start of last year, the U.S. was losing more than 700,000 jobs a month, and today the private sector is generating new jobs. Recovery was only possible because we took action to repair our financial system, driving down borrowing costs for homeowners, consumers and businesses, and put in place the Recovery Act, which increased demand by cutting taxes for families, helping unemployed workers, and investing in public infrastructure.

We still face enormous challenges. To maintain the momentum of the U.S. recovery, we need strong, balanced and sustainable global growth. Global growth will help double U.S. exports over the next five years, supporting several million American jobs, a key goal of the president's export initiative. The G-20 is critical to ensuring that global growth, and three priorities must be at the center of our agenda in Toronto.

First, the G-20 must continue to work together to secure the global recovery it did so much to bring about. We must ensure that global demand is both strong and balanced. While the U.S. was the major source of demand for the world economic growth before the crisis, global demand must rest on many pillars going forward. That is why the G-20 must support Europe's reform program and the financing that Europe and the IMF will provide to countries facing acute fiscal challenges. There is a broad consensus about the importance of fiscal sustainability, but the precise timing and sequencing of that consolidation should vary across countries and be calibrated to maintain the momentum of private sector recovery.

Countries must put in place credible plans to stabilize debt-to-GDP levels and set a pace of consolidation that reinforces the momentum of growth. We must demonstrate a commitment to reducing long-term deficits, but not at the price of short-term growth. Without growth now, deficits will rise further and undermine future growth.

Emerging economies can help strengthen the global recovery by strengthening domestic sources of growth and by allowing more flexibility in their exchange rates. We welcome China's recent decision to do so and look forward to its vigorous implementation.

Second, we need to accelerate efforts to establish a global framework for financial regulation. Here at home, we are on the verge of completing the most sweeping financial reform in more than 70 years. This reform will curb excessive risk-taking, reduce leverage, reform compensation, protect consumers, bring transparency and more competition to derivatives markets, address the problem of firms that are too big to fail, and make sure taxpayers do not bear the costs when firms do fail.

The world should welcome Europe's announcement to bring greater disclosure to its banking system, which provides further momentum for the G-20 work to bring all global institutions and markets within a more transparent regulatory system. Critically, we need to reach agreement internationally on reducing leverage and raising capital requirements, improving both the quantity and quality of capital. While new measures must be phased in over time so as not to interfere with the flow of credit, establishing those rules now can be an important source of certainty and confidence.

Third, we need to make progress on other global challenges that are essential to the future security and prosperity of the world. Alongside our efforts to lay a new foundation for economic growth, we must follow through on our common commitment to raise living standards across developing countries and to make smarter investments in areas like agricultural development and food security.

In addition, we must address the urgent challenge of our energy needs, as the current disaster in the Gulf makes clear. In Pittsburgh, the G-20 countries agreed to phase out inefficient fossil fuel subsidies over time. The U.S. has laid out how it intends to achieve this goal, and we urge other G-20 countries to demonstrate their commitment to this critical objective by detailing how and when they plan to eliminate policies that encourage the overconsumption of fossil fuels.

In this new era, when emerging markets account for two-thirds of global growth, concerted action by the G-20 is the only effective way to confront the challenges that lie ahead. As world leaders arrive in Toronto, we must renew the sense of common purpose and collective urgency that has served the world so well over the past year and a half.

Mr. Geithner is the secretary of the Treasury. Mr. Summers is director of the National Economic Council.