China Daily 2022-11-03
Make fit for purpose
Wu Guoding
Since the beginning of 2022, the unabated COVID-19 pandemic, escalating Russia-Ukraine conflict, rampant inflation, and the US Federal Reserve's tightening monetary policy have all damaged the prospects of global economic growth. In its latest World Economic Outlook, the International Monetary Fund predicted global growth will slow from 6 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023.
Amid the growing uncertainties and downward pressure on the global economy, countries, especially the developed ones, should enhance policy coordination and adopt rational economic policies, such as expanding capacity investment, curbing inflation, and stepping up assistance to low-income and highly-indebted countries.
The G20, which is a primary platform for global economic governance, should shoulder its due responsibility for coordinating international macroeconomic policies. In recent years, the G20's strength and efficiency in policy coordination have weakened. For example, the group has failed to resolve the trade frictions triggered by the United States, or to synergize the member countries' efforts in overcoming the shocks brought by the COVID-19 pandemic. The Russia-Ukraine conflict, which has added a political factor to the economic issues, has made it more difficult to coordinate global economic policies. Therefore, it is imperative to improve the capacity of the G20 to coordinate the global economy.
In recent years, more issues have been put on the agenda of the G20, covering trade, finance, the environment, energy and public health, among other major issues of global concern. The growing range of issues has made it harder for group members to reach consensus, thus impairing efficiency in policy coordination.
The remedy is for the G20 to focus on core issues and to play its original role as a platform for global economic governance and policy coordination, instead of attempting to solve all the problems of the world. While concentrating on international economic governance, the G20 should leave issues not concerning its essential functions to other international organizations to solve. The group also needs to set priorities, allowing less pressing problems to be solved at subsequent meetings.
Meanwhile, some urgent and burning issues of global concern should be incorporated into the agenda of the G20. One example is the debt problems of many low-income countries. G20 members should boost assistance to these countries through the G20 Debt Service Suspension Initiative and the G20 Common Framework to help them avoid a new round of sovereign debt crisis.
No issues ought to be politicized. Since the outbreak of the Russia-Ukraine conflict, some countries have been boycotting Russia's participation in the G20 summit. Politicizing economic issues will only deepen the rift among G20 members and add to the difficulties in coordinating macroeconomic policies.
In the process of policy coordination, G20 members should keep the overall picture in mind and find the common ground of all parties to seek consensus on coordination. The consensus should reflect both the individual interests of members and the shared interests of all parties, and should advance the individual interests through the expansion of common interests.
When formulating their own economic policies, G20 members should take into consideration both their own economic goals and the spillover effects of their policies. A country's economic policy must not be pursued at the expense of the interests of other nations. Also, when coordinating policies, bigger room should be given to policymakers of individual members, enabling them to cushion against shocks from the policies of other countries. In addition, agreements should be more precise and enforceable. Without clear goals and steps, no agreements can ever be effectively implemented.
A strong monitoring system should be established to help urge member countries to implement agreements, and thus increase the efficiency in economic coordination.
After the 2009 summit in Pittsburgh, the G20 established a mechanism for coordination and evaluation, according to which member states assess the policies of other countries and their implementation under the guidance of the IMF and other international organizations, and judge whether they are conducive to the realization of economic goals. But as the mechanism is non-binding in nature, its supervisory role has constraints. Therefore, the monitoring system should be improved.
The G20 could set up a panel to assess and supervise the fulfillment and implementation of agreements, and regularly publish assessment reports and accordingly offer suggestions for improvement. The G20 could also entrust authoritative external organizations to evaluate the implementation of member states. A punishment mechanism can be introduced for members that fail to deliver promises, such as depriving them of some membership rights in the group.
The G20 should also strengthen cooperation with other global organizations and governance institutions. As the G20 meetings are participated in by not only group members, but also international organizations such as the United Nations, World Trade Organization, IMF and World Bank, the G20 should enhance cooperation with them. It should focus on formulating plans at the strategic level, and leave the work of finding solutions to specific problems and the implementation to relevant international organizations. The G20 should also fortify cooperation with other governance coordination platforms, such as G7 and 10+3 (ASEAN plus China, Japan and the Republic of Korea).
Moreover, the G20 should invite non-member countries with significant influence when discussing certain issues. For instance, when it comes to energy issues, major oil-producing countries could participate.
Via cooperation on multiple levels, the G20 could effectively pool the resources in global economic policy coordination, and build a multi-layer and comprehensive economic policy coordination system with the G20 at the core.
Indeed, G20 member states have varied interests and the group's institutional building and governance capacity still have deficiencies, which have caused the difficulties in coordination. Facing the complex international economic situation, the G20 must boost its efficiency in coordination to better tackle various challenges for global economy.
The author is an associate researcher with the Institute of World Economics and Politics at the Chinese Academy of Social Sciences. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.