World Bank Group President Robert B. Zoellick has suggested formation of a core group comprising seven emerging powers, including India, joining the Group of Seven to deal with the global economic crisis.
"The G-7 is not working. We need a better group for a different time," he said in a speech to the Peterson Institute for International Economics in Washington on Monday.
"For financial and economic cooperation, we should consider a new Steering Group including Brazil, China, India, Mexico, Russia, Saudi Arabia, South Africa, and the current G-7."
Speaking ahead of the Annual Meetings of the World Bank Group, Zoellick said the new Steering Group should be more than just replacing the G7 with a fixed-number G14, as this would be using old world methods to remake the new.
The Steering Group should evolve to fit changing circumstances, including new emerging powers, while serving as a network for frequent interaction. "We need a Facebook for multilateral economic diplomacy," Zoellick said.
Warning about the effects of the financial crisis, he said: "The events of September could be a tipping point for many developing countries. A drop in exports, as well as capital inflow, will trigger a falloff in investments."
"Deceleration of growth and deteriorating financing conditions, combined with monetary tightening, will trigger business failures and possibly banking emergencies. Some countries will slip toward balance of payments crises."
As is always the case, the most poor are the most defenceless," added the former US diplomat, trade negotiator and financial executive.
Referring to the upcoming US election, Zoellick said the new president will have to move beyond "the firefight of financial stabilisation" to address the "economic aftermath".
Whoever wins the White House should work with others in modernising the multilateral system as there needs to be a greater shared responsibility for the health and effective functioning of today's global economy.
Turning to multilateral trade talks, Zoellick said the Doha round "has hit the rocks" and countries should therefore consider trade facilitation as another way of cutting the costs of trade. "There are opportunities to cut costs of trade far in excess of those imposed by tariffs and other trade barriers," he said.
Zoellick said economic multilateralism needed to be redefined beyond its traditional focus on finance and trade. Energy, climate change, and stabilising fragile and post-conflict states were economic issues and not just part of the global dialogue on security and the environment.
The New Multilateralism must give an equal value to development as to international finance otherwise the world would remain an unstable place. But the aid system was not working well enough and it needed to move much more quickly and effectively to help those who were most vulnerable when crisis hits.
The World Bank Group also needs reform, said Zoellick announcing the creation of a High Level Commission under the leadership of former Mexican President Ernesto Zedillo to consider modernizing the governance of the World Bank Group.
Describing world energy markets as "a mess", Zoellick called for a "global bargain" between energy producers and consumers. Both sides could share plans for expanding supplies, improving efficiency and lessening demand; assisting with energy for the poor; and considering how these policies related to carbon production and climate change policies.
"There could be a common interest in managing a price range that reconciles interests while transitioning toward lower carbon growth strategies, a broader portfolio of supplies, and greater international security," Zoellick said.
Zoellick said the World Bank Group is developing an Energy for the Poor initiative with a number of donors to help the poorest countries meet energy needs in efficient and sustainable ways.