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In a Tougher World, G20 Needs to be More Strategic

Ye Yu
June 14, 2011
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The G20 has been widely hailed as “historic progress” when global governance is entering a period of restructuring. As long as the process of power shifting does not reverse, the urgent demands for the G20 will continue to exist. However, meeting those demands is increasingly difficult. Misgivings and criticism of the G20 emerged after the Toronto Summit of 2010. There is concern that it could be another talk shop like APEC. Whether it will be able to successfully transform from a crisis management approach to a long-term steering committee involves great challenges and uncertainties.

The G20 needs to balance a number of conflicts. The first is a balance between the immediate needs of countering inflation, unemployment and weak momentum, and the medium to long-term tasks of a balanced, strong and sustainable world economy. The second is a balance between combating urgent crisis and the comprehensive reorientation of the world economy. The third, and most important, is a balance between and among divergent interests during the great transformation. The two-speed recovery has resulted in conflicting macroeconomic policies, e.g., the tightening of monetary policies in emerging economies to fight inflation is strongly countered by the continuous quantitative ease in advanced economies. More fundamentally, the traditional dichotomy of developed and developing countries is not applicable any more. While national interests are increasingly globalized and intertwined, they are also getting more diversified, rendering global cooperation harder and harder.

Therefore, the world is getting tougher to govern. The G20 members need to think and act more strategically and ambitiously to narrow the gaps and find and realize the “contract surplus.” Major powers should not only take advantage of their structural leadership but also exhibit more intellectual and entrepreneurial leadership in this process.

Emerging economies especially,should be more proactive in the G20’s agenda-setting and play a more constructive role within it to bridge the developed and developing worlds. BRICS is a positive start but still short of substantial coordination. Asymmetric interests and different positions are limiting its ability to present a united position and collective influence on global governance. For example, Russia does not see much relevance or gain in the G20 agenda and is refocusing its attention on regional affairs. Emerging economies are often defensive rather than offensive. For example, on the issue of choosing a new IMF managing director, BRICS issued a common statement expressing concern about European efforts to hold onto the position, but did not effectively nominate its own candidate. More strategic and efficient coordination among members is needed.

It is true that international institutions like the G20 can only play a marginal role in facilitating global cooperation; but this role is pivotal instead of negligible. It provides a platform for members to exchange information, promote understanding, foster consensus and monitor compliance. Therefore, more institution building is needed to improve its relevance and sustainability. Three points are worth mentioning:

First and foremost, the G20 as a leaders’ summit should be more active beyond economic governance. A more profound G20 scope in the future could foster strategic consensus across issues, leaving the details for the bureaucrats. As the Chinese scholar Liu Youfa said, it should fulfill the roles of crisis management, economic growth and global governance, analogously to the UN’s goals of “peace, development and cooperation”. The G20 members are somewhat like elephants in the global zoo of nations, so whether their relations are harmonious or not will set the tone of peace or conflict for the whole world.

Then the G20 needs to move forward from annual presidency to system building and strengthen designing and planning. Small members tend to favor a more institutionalized structure while major powers would prefer more flexibility to enjoy the manipulation of their power. It is not desirable to transform the G20 to a formal organization like the Bretton Woods System; but a more credible G20 needs more principles, rules and mandates for its agenda-setting, proceedings and implementation and so on. If a standing Secretariat is not easy to have, a revolving Troika composed of previous, present and future host states based on the majority principle could be institutionalized. The G20 needs to strike a balance between tangible benefits and intangible norms.

Last but not least, the representation and legitimacy issue needs to be taken seriously and dealt with properly. The demand for representation has been increasing in recent years due to the rise of global governance. Although the G20 is already a more inclusive architecture compared to the G8 in terms of GDP, it still leaves 85% of state actors outside the door and therefore faces more and more criticism. The advent of the G20 actually stimulated more demands for participation. Scholars from the developing world argue that the expansion of the G20's coverage into other issues that are in the domain of the UN could deepen the legitimacy deficit of the G20. Therefore, the G20 cannot avoid the representation issue in order to be effective and sustainable. Regional organizations, non-members, especially those from Africa, and civil society should be more involved in this mechanism. The Seoul Summit offered an invitation to up to five non-members to the G20 meeting and consultation with a range of international organizations, regional bodies, academics, and civil society, among others, but without workable rules. The G20 needs to make a rather formal mandate about this issue.

Ye Yu is research fellow in the Department of World Economy, Shanghai Institute for International Studies.

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