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Chen Dongxiao
Senior Research Fellow
Institute for International Strategic Studies
Related Articles Commentary Paper SIIS Report
Mar 20 2013
Asia and Global Economic Governance in the Framework of G20
By Chen Dongxiao
Today, I am going to touch on three issues. The first issue is how to look at the current global economic governance situation; the second issue is how to look at Asia’s role in the global economic governance, especially in the dimension of G20; the third issue is how China can push Asia to play a greater role in global economic governance.

I. The Current Global Economic Governance 

There are three trends emerged in the current global economic governance. First, the world economy is shifting from “the phase of fast growth” till the international financial crisis into “a phase of deep adjustment”; sluggish growth will become a new routine of the world economy long into the future; market competition is a rarest resource; varieties of trade protectionism and investment protectionism are caught up into a trend of “strategic approach”, “long-term approach” and “systematic approach”. According to WTO data, the major economies have put in motion over 800 protectionist actions since 2008. Protectionist measures grew by 25% between September 2010 and the first half of 2012 alone.  

Second, regional and sub-regional cooperation, bilateral, mini-multilateral, and multilateral negotiation processes are substituting for global multilateral negotiations as the mainstream global economic cooperation. According to WTO data, various regional trade arrangements that took effect globally have increased by 74 to a total of 356 pieces up to date since 2008 financial crisis. When the trade arrangements in the relatively closed regions boom, the global multilateral trade negotiations will suffer will be tougher to go ahead.

Third, supply-demand contradiction in global economic governance remains acute. On one hand, agendas of global economic governance abound ranging from monitor in financial system, trade liberalization, monetary system reform to strategic resource security such as energy and food, climate change, anti-corruption, decent employment, sustainable development, etc. The global economic governance network centering on G20 is playing the three functions: crisis management, advancing development and enduring governance. On the other hand, the ruling and implementation of the G20 agendas are a long way to go to meet expectation. Given the backgrounds that the financial crisis continues, economic growth of the countries across the world remain sluggish, and “agenda internalization” on the part of the elites of the countries, it becomes a key issue in the global economic governance that how G20 can play the leading role in strengthening the macro-economic coordination of the major economies, and pushing for the world economy growing in the “robust, sustainable and balanced” framework.

II. Perspective on Asia’s Role in the Current Global Economic Governance

In my view, there are two outstanding points regarding the role of Asia at present. First, the standing of the Asian economy in the global economy will keep on growing, though little can be said of Asia in terms of collective leadership in global economic governance or in G20. according to the forecasts of IMF and other authorities, Asia accounts for 30% of global GDP at present and will hopefully reach 37% by 2030 and 50% by 2050.

However, Asian countries fail to share a leadership collectively in G20. The 6 Asian members of G20 (China, Japan, India, ROK, Indonesia and Australia) account for 34% of GDP of G20 in 2011 and estimated for 40% in 2015. They account for 66.1% (a total of $5.36 trillion) of the total foreign exchange reserve of G20. Their total trade volume, $8.38 trillion, accounts for 36.9% of the total trade volume of G20. In addition, the above 6 Asian countries account for 13.6% of the total investment of G20 and 24.7% of the total FDI of G20 and 70% of the total population of G20. Nevertheless, Asian countries are limited in terms of agenda-setting and absolute influence over G20 in the framework of G20. Thanks to the extremely complicated geoeconomic and geopolitical reasons, the Asian G20 members are in want of a powerful mechanism to take effective and concerted policy coordination in respect of setting agenda of the global economic governance.

Second, the interdependence and integration level within Asia are rising. Over 50% of the total trade of Asia is done among Asian partners, which is higher than the internal trade of other regions. The trade ties within Asian countries will become even closer with the passage of time. Obviously, Asian countries share a relatively loose economic cooperation mechanism, let alone the mutual competition among them. This indicates that Asian countries are free of agreement on the prospect of Asian regional economic integration, which hinders them from exercising “collective coordination power” in G20 and other global economic governance mechanisms alike.

III. How to Push Asia to play a Greater Role in the Global Economic Governance?
 
I believe Asia has the prowess and potential to raise its collective role in the global economic governance including setting and implementing the G20 agendas. It conforms to Asia’s rising share in the global economic map and Asia’s deepening internal economic cooperation. However, Asia has to overcome a couple of difficulties and obstacles before it can play a collective influence in G20.

1, Asia has to strengthen its ability to interconnect and integrate the global agendas and Asian agendas. In this regard, Asia must build up coordination ability of Asian countries, especially the Asian G20 members. Only by so doing can Asia come up with collective voice in the agenda-setting of the global economic governance. At the same time, the Asian G20 members should strengthen communication with non-Asian G20 economies before global agendas will be carried out in the region. For examples, Asia will continue to play the role of an engine of the world economic growth under the framework of “robust, balanced and sustainable” growth. Again, the Asian G20 members must pay more attention to the systematic and structural issues of the global economic governance and put forward responding solutions. As a creditor to the major industrialized countries of the world, Asia must strengthen the construction of financial cooperation mechanism, especially paying attention to the management of financial risks such as enormous liquidities and further integrate the management into the framework of G20, which will help Asian countries to acquire larger say in the reform of financial system as well as economic governance in other areas. Moreover, Asian G20 members shall be active in promoting the experience and path of Asia in transition and take concertedly actions against the trade protectionism that hindering economic growth.

2, Asian countries, especially the Asian G20 members shall join hands to push for the improvement of G20 mechanism, e.g., pushing for the formalizing of troika mechanism as a role of Asia in agenda setting, sustaining G20 agendas, and preventing hosting country from inappropriately highlighting the agenda of its own country in G20 agendas. Again, Asia should continue to explore the way to establish a responsibility system of global economic governance centered on G20, consolidating the status of G20 as a leading global governance mechanism.

3, Major Asian economies, including the Asian G20 members, should try hard to resolve geopolitical and economic frictions and build up strategic mutual confidence. This is not a priority subject to be discussed today though, it is vitally important indeed in enhancing Asia’s coordination ability in setting global and regional economic governance agendas.

(This article is the speech of the author on the international seminar “Australia -China Dialogue on G20 and Regional Initiatives” on Jan. 31, 2013)

 


Source of documents：siis.org.cn


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