BERKELEY, Calif. — On Jan. 1, South Korea takes over the Group of 20 chairmanship from the United Kingdom. Korea is not the first emerging market to chair the G20, but it is the first to do so since the global financial crisis. And it is the first to do so since the G20 emerged as the steering committee for the world economy.

G20 chairs can have considerable influence. They coordinate the group’s work, they organize its meetings. Like most committee chairs, they have significant agenda-setting power.

During Britain’s G20 chairmanship, Gordon Brown had a clear agenda. He saw the G20 as a vehicle for building consensus on coordinated monetary and fiscal stimulus measures and financial regulation. He also viewed it as a forum to address problems created for the poorest countries by the global financial crisis. And he used the chairmanship to elicit commitments to resist protectionism.

In retrospect, Brown’s agenda-setting problem was easy. Given the nature and gravity of the crisis, it was brutally obvious what the priorities for the G20 should be.

The priorities for President Lee Myung Bak will be less obvious. Some will say he should get the G20 countries to coordinate an orderly exit from their expansionary monetary and fiscal policies. But growth in the advanced economies will almost certainly remain weak in 2010. With the United States, Europe and Japan still suffering postcrisis hangovers, this issue can be safely left to the country that chairs the G20 in 2011.

Others will say that a priority should be agreement on slowing climate change. But this is best addressed at a conference — as in Copenhagen — of all world leaders, not in the cozy confines of the G20. Small countries, such as Mauritius, are likely to be the ones most dramatically affected by global warming. Yet they are excluded from the G20, which is designed to comprise the 20 largest economies.

Instead, President Lee should give priority to four issues, starting with financial reform — a problem that Brown targeted but did not solve. Progress here has been inadequate, despite much talk. In particular, there has been little action on issues like creating a cross-border resolution authority to deal with the failure of a large financial group, something that can only be done at the international level.

The window of opportunity for financial reform is now closing, and business as usual will only result in more crises and bailouts. South Korea must therefore do everything it can to reinvigorate the debate.

The second priority should be more progress on global rebalancing. Asian countries need to do even more to stimulate spending, and they need to move together. China is incapable of solving this problem on its own, because its economy is still only one-third the size of America’s. But if Asian countries move together, China will be more willing to let its exchange rate against the dollar become unstuck. The second factor contributing to the crisis could then be addressed once and for all.

Third, the G20 must address its own legitimacy deficit. After all, no one anointed these 20 countries as the designated representatives of the world. Who speaks for the other 173 internationally recognized countries? Why should there be so many European G20 members — other than for the fact that they were incumbent members of earlier “G’s” — and not more African members?

Here, South Korea can propose an obvious solution. Align G20 membership according to the composition of the International Monetary Fund’s Executive Board. Twenty-four countries sit there. Big ones have their own seats, while smaller ones represent groups of countries, known as “constituencies.” In many cases, the constituencies rotate the chair among their members. Everyone is represented.

Finally, the G20 needs an emerging- markets caucus. The U.S. and the Europeans are in constant contact, doing their best to agree on positions and table common proposals. Emerging markets, failing to do the same, have punched below their weight. They have allowed the advanced countries to drive the G20 process.

This is the most delicate issue of all for South Korea. As chair, it needs to act as an “honest broker.” It can’t be seen as giving emerging markets special encouragement. Given its location, South Korea would be torn between encouraging an emerging-market caucus and encouraging an Asian caucus — for Asia, too, needs to organize itself better in order to represent its interests in the G20.

Thus, the initiative here might best come from another G20 country — maybe Brazil, South Africa or even Russia. But South Korea could usefully drop a hint.

Barry Eichengreen is professor of economics and political science at the University of California, Berkeley. © 2009 Project Syndicate (www.project-syndicate.org)

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