The major global economies came together to put aside differences and coordinate policies to avoid the worst economic downturn since the great depression in the 1930s. That was in 2008 in the middle of the global financial crisis, half a lifetime ago. Yet the G20 and global economic cooperation were significantly absent during the much bigger health and economic crisis from the coronavirus pandemic.
Japan’s Prime Minister Yoshihide Suga, Italy’s Prime Minister Mario Draghi, Canada’s Prime Minister Justin Trudeau, US President Joe Biden, German Chancellor Angela Merkel, Britain’s Prime Minister Boris Johnson, France’s President Emmanuel Macron and Britain’s Queen Elizabeth attend a reception on the sidelines of the G7 summit, at the Eden Project in Cornwall, Britain, 11 June 2021 (Photo: Jack Hill/Pool via Reuters).
With global cooperation and coordination the health crisis and economic downturn would have been much less severe. There was technical cooperation among health experts, starting with the rapid genomic sequencing of what became known as COVID-19, but countries restricted exports of personal protective equipment, food and medicines. The World Health Organization was hamstrung by geopolitics instead of backed in with the support it needed. The COVID-19 Vaccine Global Access (COVAX) program has done little to improve equitable distribution of vaccines.
Economic cooperation has been piecemeal and economic support largely provided bilaterally or regionally based on narrow self-interest or for geopolitical reasons. Countries that could afford fiscal stimulus failed to realise that without global macroeconomic coordination, the rest of the world couldn’t afford to put a floor on the economic downturn and support lockdowns.
Global cooperation has been one casualty of strategic competition between China and the United States.
The priorities for the global community are getting the world vaccinated and re-shaping global governance to ensure recovery is sustained.
Leaders of the Group of 7 advanced economies came together in the United Kingdom this weekend to push for comprehensive reform of the WTO, stronger action on climate change mitigation and improved vaccine distribution. The global trade rules are outdated and cover a smaller proportion of global commerce each year. Rules are needed for trade in services, investment and the digital economy, and disciplines are needed on subsidies to fisheries, agriculture and industry. The existing rules are currently not enforceable since the United States vetoed the appointment of new judges to the dispute settlement system.
The G7 finance ministers earlier agreed to move ahead with green finance that can help reshape financial markets to facilitate decarbonisation and the transition to cleaner energy. Under President Biden, the world’s largest economy is no longer in the way of global economic cooperation. We may look back at the summit in Cornwall as a turning point.
The G7 will not, however, fix the global governance deficit by themselves. These are by definition the established powers and even with Australia, India and South Korea as invited observers, the grouping is around half of the global economy. India has more in common with the emerging economies and the rest of the world than the group gathered in Cornwall, and prime minister Modi is unable to attend anyway because of the virus situation at home. The key will be for G7 members to lead by example, provide global public goods and shape outcomes in the G20 and multilaterally. British hosts of the G7 have coordinated closely with Italian hosts of the G20.
Less noticed but potentially more consequential is coordination happening on the other side of the world in New Zealand where APEC trade ministers met virtually last week.
The APEC grouping accounts for 61 per cent of the global economy and includes advanced and emerging economies. Its diversity in membership, including both established and rising powers, and its consensus building approach are a strength with strong leadership of its host and membership.
The practical and strategic joint statement by APEC trade ministers lays the groundwork for an interim leaders’ meeting in July before the summit later in the year. They proposed specific trade measures to respond to COVID-19 with agreement to reduce barriers to trade — of which there are many — in vaccines and their inputs along the supply chain, and work on protocols to resume cross border travel. They also called for comprehensive WTO reform, including protecting the existing system and updating the rules. The emphasis differs from the G7 approach and is inclusive of developing country interests.
One of those developing countries — Indonesia, not China — could be key to reform of global trade rules. Indonesia will host the G20 in 2022 at a time when global recovery from COVID will remain uncertain. As a democratic, dynamic developing country that is majority Muslim, Indonesia has a moral authority in global governance that it is yet to fully exercise. It is roughly half of the strategically important and economically large ten member Association of South East Asian Nations in economic size and population and chairs the Group of 33 developing countries in the WTO.
Indonesia put an initiative forward for WTO reform during Osaka’s G20 summit in 2019 but it was overshadowed by China-US rivalry and the hosts trying to keep then US President Trump from blowing up the summit. It will have another chance next year.