The G20 and the Future Global Policy Research Agenda
Barry Carin and Ye Yu
CIGI and SIIS
This note imagines what could conceivably be on the list next year in the Turkish Summit Communique, trying to envisage options China would like to have explored before it takes over the presidency. A more speculative conjecture is to forecast areas of future work China may wish to invite at the end of its presidency and what working groups the 2016 G20 Summit may establish. For invitations for future work, who could be invited to do what? What specifically could they be asked to do?
1. Enhancing the intellectual role of the G20
One of the less visible dimensions of the G20 Leaders summit process is the G20’s direction of the global policy research agenda. In the G20 Summit communiques, the Leaders request or extend invitations for reports to be provided for the next Summit. Tasks are assigned to groups of G20 ministers, to officials, to international organizations or even to other G20 Leaders. In Brisbane, labour and employment ministers were asked to set up an employment working group and to report in 2015 on labor market issues including youth unemployment and appropriate social protection systems. Energy ministers were directed to meet and report in 2015 on options to advance the work on G20 Principles on Energy Collaboration. The International Monetary Fund was asked to build on its existing work and stand ready with options for next steps on quota and governance reform. The WTO, the OECD and UNCTAD were asked to continue to monitor G20 protectionist trade and investment restricting measures. In the French G20 Presidency, Prime Minister Cameron was asked to prepare a report on initiatives to improve global governance.
2. The G20 could play a more strategic role in the long term.
The world is in transition and systematic challenges of re-negotiation prevail in almost every key issue area. The G20 needs to be patient but not inactive about the long-term prospects. The G20 should encourage intellectual participation of G20 members, especially emerging economies, promote redefinition of common interests, and foster potential “big deals”. Criterion for a G20 global policy research agenda
Several criteria forG20 attention pertain:
3. G20’s policy research agenda for 2015-2016
The news that China is to host the G20 in 2016 has led to a sharp rise of people’s expectations on the G20. It is unrealistic to expect much breakthrough for the current G20 agenda under China’s presidency, but we do hope to see more momentum and milestones for the “premier forum for international economic cooperation” in the next couple of years. Interactions between the G20 agenda and China are moving into a more harmonious style. This favorable trend will enable China to contribute more actively. In its early stage the G20 was dominated by discussions on rebalancing of world economy and China was unhappy with its efforts to set quantitative targets for members’ external trade balances. This issue has faded today and the focus has become how to foster growth.
Indications of Chinese priorities could be found in last year’s APEC meeting’ Leaders Declaration and the China-US Strategic and Economic Dialogue fact sheet. Some of their initiatives will be cited as reference points in the following.
a) Infrastructure investment and sustainable development
Several documents (here and here) have been issued in promoting and regulating the use of public private partnerships (PPP) in infrastructure investment by the Ministry of Finance of China since September 2014. At its 22nd Leaders’ Meeting, APEC launched new Pilot PPP Center in Indonesia and called on its members to establish more similar centers with a view to developing a regional network of PPP centers to share good practices. The G20 could invite China to report on the progress and study the feasibility of expanding the practice to G20 members and linking the network to the Global Infrastructure Hub in Sydney.
Considering the ongoing renovation of lending standards of the World Bank and the emergence of several South-South multilateral development banks (MDBs) in infrastructure financing, the G20 could ask the World Bank to work together with the network of MDBs on Principles for their coordination.
The G20 could also specifically invite participating non-members, to report their comments and concerns on the G20’s infrastructure agenda. Similar invitations could be extended on other development agenda issues.
The world trading system is not in total collapse. A lot small steps are going on in regions and sectors. TPP, RCEP and China-US BIT negotiations might be able to conclude by 2015 as announced. China is expected to access to the Government Procurement Agreement in this or next year. China and the US have reached agreement on the expansion of Information Technology Agreement. The G20 should go beyond resisting trade protectionism, build on the momentum and ask Trade Ministers to do a strategic study of the roadmap of the future global trade and investment system. The 22nd APEC leaders’ meeting delegated a collective strategic study on the roadmap to FTAAP, which could be scaled up to the global level.
Given the continued turbulence in oil markets, and the Chinese-American agreement on climate change, global energy governance is sure to be a focal point.With respect to preparing the ground by commissioning studies, options include:
• Formulate a G20 investment plan for global infrastructure to assist in fossil fuel divestment, pursuing Australian plans “to unlock up to $57 trillion infrastructure investment by 2030,” estimated by Mckinsey required to just keep pace with projected global GDP growth.
• Ask Energy and Finance Ministers to propose potential regulations and subsidies to promote financing of alternative energy systems. The remit could include exploring a “Low Carbon Bretton Woods” to create a low-carbon financial mechanism to certify and price emission reductions.
• Request the OECD, International Energy Agency (IEA) and World Bank to together develop options for the expansion and ultimate integration of carbon markets.
• Ask the IEA to amend its rules to allow non-OECD members to join the strategic oil reserve agreement, enriching its emergency response system to include all G20 countries to respond to oil supply disruptions. The IEA should consider eliminating its outdated voting system; future decisions should all be by consensus. The IEA should have a substantial physical presence in Asia.
• Building on APEC’s Environmental Goods Agreement, the WTO should initiate a Sustainable Energy Trade Agreement to facilitate trade in environmental goods and renewable energy technologies.
• Based on the peer review terms of reference reached between China and US in July 2014, ask all G20 members to commit to the peer review of policies on fossil fuel subsidies.
• Various APEC initiatives that could be scaled up to include all G20 members include the High-level Roundtable on Green Development and the APEC Cooperation Network on Green Supply Chain. Its first pilot center established in Tianjin, China could become the headquarters of a G20 network of similar centers. Similarly, the APEC Sustainable Energy Center in Tianjin, and the APEC Higher Education Research Center at Beijing Normal University could be scaled up to be the international headquarters of a G20 network. Other APEC priorities could lead to requests for further study, including food security, and the next evolution of the APEC Network of Anti-Corruption and Law Enforcement Agencies.
d) Global financial safety net (GFSN)
Ask the IMF and OECD to study the accumulated impacts of diverging monetary policy trends of major economies on emerging and developing countries.
Ask the IMF to report on possible “Plan B”s for its quota and governance reform.
Ask the IMF to further its work on “G20 Principles for Cooperation between the IMF and Regional Financing Arrangements”. Take stock of its experience and lessons in participating in the rescue of Euro Area members for improvement of the global financial safety net, including providing technical assistance for regional financing arrangements, such as Chiang Mai Initiative Multilateralization (CMIM) and BRICS Contingent Reserve Arrangement (CRA), on strengthening precautionary instruments. Integrate the proliferating bilateral swaps into the G20 attention on GFSN.
Focusing on preparing for future G20 Leaders’ discussions may lead to more active Chinese engagement in the G20 Troika, in turn leading to greater G20 effectiveness and increased credibility. This approach finesses China’s tradition of a “quiet foreign policy” and its reluctance to assume responsibilities of global leadership.
Barry Carin is a CIGI Senior Fellow.
Ye Yu is Associate Professor and Assistant Director of the Institute for World Economy Studies at the Shanghai Institutes for International Studies (SIIS).