Shifting Coalitions and Potential Blocs For Asian & Pacific Leadership in the G20
September 13-15th, 2012
At the Shanghai Institutes for International Studies
Alan S Alexandroff, Director Global Summitry Project, Munk School of Global Affairs, University of Toronto
David Shorr, Program Officer, The Stanley Foundation
Lim Wonhyuk, Director, Division of Global Economy Research, Korea Development Institute
Chen Dongxiao, Vice President, Shanghai Institutes for International Studies
With Jeong-ae Choi, Rapporteur
This was the third annual workshop in Shanghai hosted by the Shanghai Institutes for International Studies (SIIS) in collaboration with The Stanley Foundation (TSF) and the Global Summitry Project at the Munk School of Global Affairs, University of Toronto (Munk School). This year, the original partners were joined by the Korea Development Institute (KDI). For the first time, the Shanghai Conference included officials and/or experts from all the G20 Asia and Pacific countries-this year also with representation
from Cambodia and Singapore and an official from the Trilateral Summit Secretariat.
The partner organizations are interested in identifying the key ingredients for more efficient, effective, and ‘forward-looking’ global governance. Now with the benefit of four years and seven summits since the first meeting of G20 leaders in 2008, we can start making preliminary assessments of the G20 Summits’ record in spurring international cooperation. The G20 includes most of the key players that must be involved to make headway on the major 21stcentury global governance challenges. After four years,
theG20 summit process appears to be making progress: from declaratory statements to incremental implementation; from general principles to specific actions. But the question remains whether this progress is sufficient.
This year’sShanghai Conference consisted of panels that examined:
- the critical bilateral relationship between US and China;
- the trilateral summits of Japan-Republic of Korea (ROK) – China;
- the Trans-Pacific Partnership(TPP) – a trade and investment agreement that is currently being negotiated by a number of Asia and Pacific countries;
- the traditional G7 powers;
- the BRICS; and
- assessments from Mexican representatives and experts on the Los Cabos Summit and from Russian experts on the prospects for the St. Petersburg G20 Summit set for September 2013.
The US-China Relationship
- The US-China relationship is pivotal for both regional and global affairs. Wide-swinging fluctuations between fruitful collaboration and engagement followed by periods of rivalry and tension have posed difficulty for officials and other experts trying to diagnose the state of relations. Since 2010this volatility has been accentuated by a presumed new “assertiveness” by China with apparent repercussions not only within the Asia-Pacific but extending beyond to multilateral institutions such as the G20.
the conferenceparticipants expressed confidence that the US and China ultimately can successfully manage their economic relations, but only by dint of diligent and steady work. Participants were concerned over the political-security dimension of the relationship-particularly given the trouble in even maintaining a continuous and substantial military-to-military security dialogue. Still the progress on economic cooperation is encouraging, with a notable acceptance of greater shared leadership by the Chinese
compared with just a few years ago. China does, however, feel upset by increasing protectionist measures against Chinese investment in US market and also some remaining discomfort in the G20 where it finds itself being criticized. China can still be quite defensive when it comes to criticism of its economic policies.The converse is a possible US expectation that it will get its way in this multilateral setting.
- Therefore challenges remain for US-China relations at the G20.For instance, how do the two intertwined economic powers promote growth and reduce the current external imbalances between themselves? Then, how do these two largest economies promote global economic, monetary and financial reform in the G20 in the immediate post-crisis era? Participants pointed out that domestic interests continue to push each power to take actions that are viewed negatively by the other. Some segments in China paint the so-called
“G2” as nothing more than a trap for China. In the rest of the world, there are nations worried that this implicit G2 leadership will benefit China and the United States to the detriment of others. Participants saw key issues for the relationship: parameters for a new trade round and clarifying the terms of ‘fair competition’ between the US and China-in particular the role of state-owned enterprises in the global economy.
The Trilateral Summit Japan-ROK-China and the Trans-Pacific Partnership (TPP)
- For the Asia-Pacific region, the participants discussed the significance of the China-Japan-ROKrelationship and regional multilateralism. The region’s recent multilateral cooperation has evolved to give various institutions their own specialization: ASEAN+3 focus on financial issues, APEC on trade liberalization, TPP as a new vehicle for US and a broad trade and investment agenda in the region. The East Asia Summit (EAS), created in 2005, seems to represent, not without some contention, a political
security forum for the Asia-Pacific. To an extent, the dense web of regional governance forumshas fed bureaucratic fragmentation. Within Japan’s government, for instance, competition among ministries has led to responsibilities for different regional organizations that are not always rational. There is also significant unevenness in terms of the support offered by secretariats for the various regional organizations.Some pparticipants suggested that the support functions for regional institutions such as ASEAN+3
should be strengthened.
- China is noticeably concerned over how the TPP will affect its economic and security environments. To help allay these fears, participants argued for the US to keep China well informed at every step of the TPP process. Such pro-active transparency, it was argued, will be crucial to dampen Chinese suspicions. What kind of system do the participants favor? Can the US and China, for instance, work together on Asian cooperation? China insists that if the US is only determined to keep US-centered military
the bilateral relationship will be much more difficult. What are the implications for East Asian integration? East Asian integration has been driven by market forces primarily, not by top down negotiations. Issues like food and resource security remain unaddressed however. The TPP negotiations keep states talking to one another and may lead to an agreement but not likely in the near future.Finally what of the impact of these regional organizations on global issues? For instance the China-Japan-ROK trilateral
summit has discussed development cooperation.
The Traditional G7 Powers
- The traditional powers have been meeting at this diplomatic “high table” since 1975. The crisis of 2008 served as a clarifying moment in terms of G7’s shortcomings to deal the financial emergency at hand. Large emerging market countries including China, India and Brazil needed to be included. Other significant economic powers such as Korea and Australia were also important players. So what of the role of the G7 since the G20 intensified its consultations to serve as a preeminent global economic policy
forum? The G7 certainly has not faded away; to an extent it has preserved its role by reemphasizing political and security issues such as the Arab Spring. Given the prominent European representation in the group, the G7 has actively discussed the Eurozone sovereign and banking crises. In relation to the G-20, we understand the G7/8 does not caucus among themselves prior to or during G20 summits. By some experts’estimates, a G8 and G20 pattern oftwo informal but separate annual summits likely will hold for
some time, with the G7/8 increasingly focused on political and security affairs.
The Impact of the BRICS
- Much has been made of the emergence of the BRICS—with some painting it as the “not G7 summit” and an antipode to the traditional advanced economies.While the GDP of G7 as a share of the global total is shrinking, the BRICS share of world GDP is rising and expected to continue doing so. That said, the countries in this group play differing roles in the global economy; China and India in the BRICS are suppliers of goods and services, while Brazil, Russia, South Africa supply raw materials.
- Do the BRICS influence the G20 process? Significantly, the BRICS’ influence within the G20 has given them a role in the Eurozone discussions, and their pledge of funds to the IMF for the sovereign debt crisis was a highlight of the Los Cabos summit. As a multilateral body, the BRICS has emerged as a prominent platform for the concerns of the large emerging market powers, though not necessarily for the broader developing world. While it is too early to consider it a tightly knit bloc, of the various alignments
examined at the conference, the BRICS has the greatest potential to emerge as a geopolitical force to be reckoned with.
- Meanwhile, BRICS countries face complex structural problems of their own. Growing income inequality in the large emerging marketsmay eventually lead to social instability. Many of their major industries are situated at the low-end of the global industrial value chain. Moving up the value chain will be critical to sustainingsignificant economic growth. The large emerging market countries also face challenges in strengthening their social safety nets. As first steps toward closer alignment, the BRICS
start by making sure the interests of emerging countries are properly represented in various international organizations. A significant step would also be for the BRICS to spur the reform of the international monetary system through their own financial links and transactions. To burnish their credentials in global leadership and stakeholdership, the BRICS should recommit to oppose trade and investment protectionism.
Global Economic Governance Institutions and Perspectives from the G20
- In the aftermath of the 2008 financial meltdown, the G20 summit process has worked with formal international organizations like IMF, World Bank, Financial Stability Board to bolster the global economy and financial system against future crises. The G20 has been an important forum to promote the reform of the international financial institutions and to prevent rising protectionism. Yet the G20 has also been plagued by critiques that paint it as having failed to deliver major global economic governance
or a substantial boost in multilateral cooperation.Participants took issue with the critique by emphasizing the need for more realistic expectations.While the G20 must help address global challenges to justify all the effort devoted to it, progress is bound to be incremental and should be judged accordingly.
- In terms of the G20’s comparative advantage, participants highlighted its flexibility, informality and of course the intense involvement of heads of state or government. Strictly speaking, the group is merely a loose set of consultations—without any defined authority or decision rules. But it is well positioned to spur progress on issues by providing high-level impetus, often in support of traditional international organizations. While the G20 has started extending this role beyond its core responsibilities
for global growth and financial stability, it must work to strike the right balance between core and peripheral topics. The next phase of its evolution should thus focus on developing new means of discipline to manage the substantive items on its agenda.
- In 2012 Los Cabos summit, Mexico as the host set the agenda. The topics included a mix of the “traditional” (growth and employment, financial regulatory reform) recent additions (food security, sustainable development)and newcomers (green growth and climate change financing). Participants expected these priorities to be continued by Russia in 2013—although no official agenda has been published—and observers also predict a heightened focus on to other energy issues, including infrastructure, stability
supply, demand and transit.
- In assessing the2012 Los Cabos summit, participants gave a qualified endorsement, concerned over the prolonged Eurozone crisis and a perceived leadership gap. They acknowledged the laudable job done by the Mexican government host but saw a need to spread responsibility so it is less concentrated in the hands of future summit hosts.