G20 and Global Governance: Can it Do Better?

Synopsis

The G20 convenes this weekend in Brisbane for yet another summit. In the aftermath of the recent global financial crisis, some wonder whether the G20 still has relevance. Can this exclusive group of world leaders be the hope of global governance?

Commentary

THE WORLD needs more global governance than it has at present. At the same time, sovereign countries are reluctant to cede power to a supra-national body. As a result, there are big differences of opinion about just what form this global governance should take.

When G20 Leaders first met in 2008, it seemed that this grouping might be the key institution for global governance of economic issues, taking over from the unrepresentative G7. Its early years were promising. In the aftermath of the global financial crisis, it helped coordinate global fiscal stimulus and pressured countries to resist the sort of protectionist measures that had caused the downward spiral of global trade during the 1930s depression. As the crisis diminished, however, so too did G20’s relevance.

Failure of Global Governance

Today, there are many examples of the failure of global governance, even if we confine the list to economic issues. Voting rights and quotas in the International Monetary Fund and the World Bank have not been properly adjusted to reflect the greatly increased importance of the emerging economies, especially China. The World Trade Organisation (WTO) has laboured on the Doha Round for more than a decade, with no result. The World Health Organisation (WHO) still lacks the mandate and resources to do its job effectively, with the Ebola outbreak reminding us that there is no clear process for dealing with health emergencies.

The UN Framework Convention on Climate Change (UNFCCC) seems no closer to global agreement, despite the high level of scientific consensus that the problem becomes more urgent the longer action is delayed. There is no replacement in sight for the Millennium Development Goals (MDG), whose timeline ends in 2015. The list goes on: effective international tax coordination; sovereign debt restructuring; and a response to the increasing flood of refugees.

Of course G20 cannot fix all these problems. It began with a narrow focus on macro-economic issues, and these are challenging enough, with the recovery from the 2008 crisis still painfully slow. As well, emerging economies complain about a ‘currency war’ stemming from the unconventional monetary policies in advanced economies.

With so little progress on these issues, it is not surprising that narrower – more ad-hoc – approaches are tried, cutting across the multilateral approach and adding further complexity. The Trans-Pacific Partnership (TPP), the ASEAN-based Regional Comprehensive Economic Partnership (RCEP) and the APEC-sponsored Free Trade Area of Asia and the Pacific (FTAAP) illustrate the over-lapping initiatives on regional trade.

Similar overlap is seen in the development banks: as well as the World Bank, there are regional developments banks (such as the Asian Development Bank, ADB), the BRICS New Development Bank, and China’s recent initiative of an Asian Infrastructure Investment Bank, AIIB). In the area of financial safety nets we have the European Stability Mechanism in Europe and the Chiang Mai Initiative Multilateralism in East Asia.