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Bumpy road still lies ahead (Jiang Shixue)

Bumpy road still lies ahead (Jiang Shixue)

Author:Jiang Shixue From:http://www.chinadaily.com.cn Update:2017-08-21 13:43:57

G20 has a long way to go before it can play its due role in promoting sustainable world economic growth and peace

The sixth meeting of the G20 heads of government, to be convened on Nov 3 in Cannes, France, is now the focus of attention for the international community.

As the host, France has set several priorities for the summit, which include the global economic situation, the framework needed for strong, sustainable and balanced global growth, reform of the international monetary system, strengthening international financial regulation, combating commodity price volatility, improving global governance and development issues.

These issues are of great significance against the backdrop of the world's feeble economic recovery. But if world leaders attending the summit can continue to carry forward the all-in-the-same-boat cooperative spirit shown by European leaders in their recent agreement on tackling the European debt crisis and seek common ground, the summit will be a success.

Needless to say, what the international community is hoping for is not just a joint statement at the end of the summit, but down-to-earth collective actions. However, many observers have low expectations of this summit.

This is mainly because without an established mechanism, the G20 has to limit its function to discussions between the leaders, resulting in non-binding documents in terms of implementation and accountability. Although the heads of the International Monetary Fund (IMF) and the World Bank have been invited to the meeting, the two agencies do not have to execute the proposals and requirements put forward by the G20.

The legitimacy of the G20 is also doubted by many, as the overwhelming majority of countries are excluded from the group.

Also although previous joint statements issued by the G20 leaders have pledged to oppose trade protectionism, it has in fact intensified, with developing countries the main targets.

Some developed countries also make things deliberately difficult for emerging countries by making issues of exchange rates or trade surplus.

Meanwhile, reform of the international monetary system has become just empty words as little substantive progress has been made or looks forthcoming.

In order for the G20 to play a leading role in the international arena, it should realize institutionalization as soon as possible. Cooperation between countries generally requires non-institutionalized and institutionalized forms. Non-institutionalization refers to cooperation among member states without a formal organization, with no definite purpose and charter, through summit meetings that are held on a regular or irregular basis and joint statements or communiqus that are issued after the meetings.

The strength of such cooperation is that member states are subject to little or limited institutional constraints, and the costs are low. But the problem is the summits are merely "talking shops". Thus, the G20 should set up a fixed secretariat, and make its legal documents binding for member states.

The successful operation of an international organization requires three elements: effectiveness, efficiency and legitimacy. So the G20 should try to strengthen its legitimacy by increasing its representation.

The current G20 members account for 90 percent of the world's total GDP, but not everybody agrees with its representation. No wonder some analysts suggest the other countries should set up a G172. Of course, an increase in G20 membership may damage its efficiency, but an increase in representation is still necessary.

The G20 must also firmly oppose trade protectionism, especially at a time when the global recovery is still weak. Unfortunately, while constantly claiming to oppose trade protectionism, for some developed countries this is merely lip service. Developing countries are undoubtedly a victim of trade protectionism. Thus, the G20 should use its influence to ensure the Doha Development Round achieves its objectives.

While the G20 is facing a number of vexing issues, the most critical is how to understand the root causes of the global economic imbalances and the means to deal with them.

Some developed countries, in defiance of the dollar's monopoly status and structural problems in the US economy, have pointed the finger at the exchange rates and trade surpluses of some emerging countries. Such a wrong diagnosis will inevitably result in the wrong "prescription". Therefore, to some extent, the G20 has become a platform not for consultation and cooperation, but an arena in which some countries choose to find fault with the others.

Reform of the international monetary system also needs to pick up speed. The G20 members have reached a consensus on the necessity and importance of promoting reform of the international monetary system. However, due to dollar's strong monopoly status, reform of the international monetary system has remained all talk and no action.

It would be well if the G20, on the basis of respecting related IMF criteria, adjust the currency "basket" of its Special Drawing Rights (SDR).

A journey of a thousand miles begins with one step. The tasks entrusted to G20 are heavy and the road ahead is long, but it will get nowhere unless it takes the first steps.

http://www.chinadaily.com.cn/opinion/2011-11/02/content_14020103.htm

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