G20 for global economic governance
- By Zhang Lijuan
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E-mail China.org.cn, August 22, 2016
In today's global governance, the G20 has a critical role to play. As a high-level forum, the G20 is expected to provide desperately needed public goods for the current world economy. G20 nations conduct 80 percent of global trade and generate about 85 percent of the global economic output. Consequently, if G20 economies can work together to frame a beneficial structure serving both domestic and global economies, future global economic growth prospects would be much brighter than otherwise.
In the G20, China now has a key role to play. The upcoming G20 Hangzhou Summit provides a great opportunity for China to manage consensus building among large economies and to apply commercial diplomacy to the resolution of uncertainties arising from the highly interconnected global economy. There is also an expectation that China can play a leading role in creating a better institution for global economic governance.
China assumes the G20 presidency at a challenging time. Financial market volatility, endogenous trade protection, and entanglement of geo-economic strategies have added tremendous risks and uncertainties to the future global economy. Furthermore, every G20 nation is a stakeholder. Without structural reforms for global governance, economic prosperity will most certainly be at risk.
As China looks forward to the upcoming G20 summit, the challenges are particularly obvious. China is still a new player on the global stage and quite new to be a rule maker in global economic governance. For the past thirty years, China's popularity has been mainly due to its growth miracle. Trade development, in particular, has contributed largely to China's economic growth.
However, the global trade scenario has changed dramatically in the last decade.When China joined the World Trade Organization (WTO) in 2001, China was obliged by WTO rules and regulations designed mainly by leading developed economies in the late 1940s. Nevertheless, China has been a beneficiary of the WTO multilateral trading system.
The world trade arena is very different today compared to just a few years ago. Trade in services is far more important, digital trade is booming by creating tremendous cross-border data flows, and global supply chains have linked many more nations to just one product. To promote trade, the world needs a more efficient global governance system.
On the one hand, countries recognize that open trade is good for economic growth. On the other hand, domestic politics and geopolitical strategies often serve as stumbling blocks for further market development. The reality is that any domestic trade or economic issue in one nation could easily become a global economic issue. This is true not only for the advanced economies such as the U.S. and the EU, but also for emerging economies such as China and India.When economic slowdowns occurred in China, we saw the immediate meltdowns on Wall Street; when the U.S. financial crisis happened in 2008, we witnessed many closings of Chinese manufacturing factories. The world needs a global safety net to reduce unpredictable economic turbulence and adversarial market disruptions which may be caused by individual economies.
We must recognize that whether or not "going global" is a decision that many nations have been wrestling with. Globalization is indeed a political debate on almost every nation's political agenda. Politicians like to argue that globalization leads to unemployment, harmful imbalances, inequality, and insecurity. The fact is, globalization itself cannot be wrong, but the rules for governing globalization need to be changed or upgraded. As the Nobel Laureate Joseph Stiglitz argues, "the problem was not globalization, but how the process was being managed."
If we review the reforms the IMF and the WTO have been called upon to institute, the conclusion we would reach is clear; the reshaping of global economic governance is woefully overdue. And yes, the G20 may not be able to do as much as we wish. However, at leastleaders from the G20 economies can launch a framework and coordinate with one another to begin the restructuring process.
21st century global governance requires not only new rules, regulations, and restructuring of governing institutions, but also trust-building among G20 nations. The G20 has its limits, but with China's G20 presidency this year, let us hope the Hangzhou Summit, aiming "Toward an Innovative, Invigorated, Interconnected and Inclusive World Economy", can mark a new beginning for the rebuilding of global governance.
Zhang Lijuan is a professor with Shandong University, China. She is also a columnist with China.org.cn. For more information please visit:
http://www.keyanhelp.cn/opinion/zhanglijuan.htm
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