|Obama says more must be done to prevent another global financial crisis but has so far stepped back from imposing caps on bonuses awarded by the finance sector [EPA]
Protectionism, the removal of stimulus packages and capping bank bonuses will dominate next week's G20 meeting in Pittsburgh.
As workers apply the finishing touches to the David Lawrence Convention Centre in Pittsburgh, the site of the G20 meeting, the business of constructing a stronger global system of financial regulation is still a work in progress.
The summit host, US President Barack Obama, says more needs to be done to prevent another worldwide breakdown.
"Abuses in financial markets anywhere can have an impact everywhere," Obama said in a speech on Wall Street September 14.
"And just as gaps in domestic regulation lead to a race to the bottom, so too do gaps in regulation around the world."
Despite Obama's rhetoric, the US and Britain actually want less robust rules than do France and Germany. Those countries want a formal agreement to slash bankers' bonuses.
Excessive compensation, they argue, encourages reckless risk taking. The global banking industry is lobbying furiously against bonus caps.
Nicolas Sarkozy says he will walk out if the leaders fail to agree on a bonus crackdown.
Another fight may be brewing over trade.
"The good news is there haven't been huge protectionist moves like we saw in the 1930s," says Ian Vasquez of the Cato Institute in Washington.
"The bad news is virtually every country has in one way or another violated the spirit of free trade and imposed some sort of protectionist measures including, most recently, the United States."
|Sarkozy has threatened to walk out of the G20 meeting if bonus caps are not agreed [AFP]
Obama's decision to impose tariffs on imports of Chinese tyres pleased his labour union constituents but infuriated the Chinese, who retaliated by penalising American chicken and car parts imports.
Obama and Hu Jintao, the Chinese president, will meet in Pittsburgh.
At their London meeting in April, the G20 agreed to use government funds to stimulate economic growth.
Now, with France, Germany and Japan officially out of recession and US Federal Reserve Chairman Ben Bernanke saying America is "very likely" out as well, the G20 have to work out an orderly exit strategy for withdrawing government financial support.
"We had to have the stimulus to get the economy kick started again," Clyde Prestowitz, president of the Economic Strategy Institute, "but the stimulus is inflationary, so if you keep doing it you will wind up with a nightmare scenario. So therefore it's a high priority to stop doing it, but if you stop it too soon then you're back in the soup."
The G20 already approved more funding for the International Monetary Fund (IMF) and the World Bank to help poorer countries get through the recession.
Finance ministers agreed last month that the IMF, which is dominated by European countries, should make way for more representation and influence from emerging and developing countries, including the poorest.
"We have a global economy characterised by enormous imbalances with the US, Britain and a few other... countries running chronic trade and current account deficits"
Clyde Prestowitz, Economic Strategy Institute
But Prestowitz says the G20 is neglecting more fundamental issues that will, over time, require massive readjustments.
"We have a global economy characterised by enormous imbalances with the US, Britain and a few other mostly Anglo countries running chronic trade and current account deficits and Asia, Germany and the Middle East running chronic current account surpluses," Prestowitz says.
"That system is not stable; it was a big reason behind the economic crisis of the past year, its still there and has not been addressed."
Meanwhile Pittsburgh is gearing up for widespread disruption, with large sections cordoned off for security and thousands of anti-capitalist and environmental protesters converging on the city.