Peer review needs peer pressure

Marketwatch has G-20 reaction from the president of the World Bank, who says the Pittsburgh declaration was a nice start, but it has a long way to go:

WASHINGTON (MarketWatch) -- The Group of 20 nations' proposal to tackle global imbalances through a peer-review process will require a sea change in international relations to succeed, said Robert Zoellick, the president of the World Bank, on Monday.

In his remarks, Zoellick called the peer-review framework a "good start."

"But the peer review will require a new level of international cooperation and coordination, including a new willingness to take the findings of global monitoring seriously," Zoellick said in remarks to Johns Hopkins University's graduate school for international studies.

The new peer-review process is aimed at trends that have turned the global economy upside down in some respects.

The primary global imbalance is that countries such as China, Japan and Germany have geared their economies to send exports to the United States.

However, after years of overspending on imported goods, the U.S. savings rate fell to record low levels.

Economists say the challenge for policy makers is to move the U.S. savings rate higher though fiscal measures while the exporting countries develop a domestic market for their goods.

In Pittsburgh, President Barack Obama proposed the new peer-review framework that the other 19 countries adopted. See related story.

Under the peer-review plan, the G20 countries will have to put forward policies to reduce global imbalances. They will gather under the IMF umbrella to discuss progress, with the IMF serving as referee.

Zoellick said that this review process will have to have teeth.

"Peer review will need to be peer pressure," Zoellick said.