G20’s bigger role
The author is the president of Lee & Ko Global Commerce Institute and former minister of trade.
The world faces uncertainties from various factors. Covid-19 danger remains. Both developed and underdeveloped economies are grappling with low growth, high unemployment and income disparities. While the global economy is rapidly turning digital, many governments are still opting for trade protectionism.
That’s not all. Companies are facing bigger challenges to meet commitments to address climate change. The conflict between the United States and China has gone beyond security issues to high tech. Uncertainties in international relations, security, global commerce and the supply chain only aggravate the woes.
Yet there is no sign of global governance to address the challenges. The World Trade Organization (WTO) has long lost its role of refereeing — and governing — global commerce order. The fault lies in the rigidity of its tedious decision-making process, where all 164 member nations must come to an agreement on a concerted move. An international action cannot take off if any one of the members oppose. The Doha Round, which commenced in 2001, failed because of such a structural problem. As a result, expectations for the 12th Ministerial Conference (MC12) of the WTO, scheduled from Tuesday to Friday in Geneva, Switzerland, are not that high.
Some experts underscore the need for the establishment of regional trade platforms — such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (Cptpp) and the Regional Comprehensive Economic Partnership (RCEP) — to make up for the structural drawbacks in the multilateral trade system. The WTO allows regional trade agreements as an exception, yet they can hardly lead to a reforming of the multilateral trade system. Other experts cite the need for the signing of plurilateral trade agreements by countries with similar positions, but under the current WTO order, that can hardly be accepted either.
We need to benchmark the past global financial crisis of 2008. After the Wall Street-triggered meltdown, U.S. President George W. Bush in November 2008 rounded up leaders of not just members of G7, but also 12 countries — including major economies of each continent and key emerging economies — as well as the European Union for the G20 Summit. The summit was held twice a year in 2009 and 2010. The G20 economies agreed on a synchronized macroeconomic policy and fought together to combat the greatest global economic challenge since the Great Depression. Their concerted effort proved effective thanks to the balanced composition of the G20 and their more than 80 percent share in the global economy.
The G20 Summit made great achievements, including an agreement to a standstill on trade protectionism during the global financial crisis. The first G20 Trade Ministers’ Meeting in Mexico in 2012 raised expectations for a G20 leadership in international trade order. But major members of the group such as Brazil, Russia, India, China and South Africa (BRICS) opposed the idea of the G20 system discussing global trade issues that should be dealt through the WTO. They contended that the G20 could not interfere in decisions of 164-membmer WTO since G20 represents only 20 economies. Nevertheless, the G20 Trade Ministers’ Meeting set up a working-level body on trade and investment in 2016 and worked to expedite WTO discussions on e-commerce and trade promotion. But the G20 Summit could not play a major part in pursuing reforms of the WTO.
The WTO order requires serious and cool-headed examination. Its stagnated role due to the requirement on a unanimous decision needs a fundamental review. Under the current system, discussions would go on forever without reaching any decision.
The G20 economies, which still make up more than 75 percent of global trade, must do their part so that the WTO system functions properly. Of course, the G20 Summit may not reach an agreement on WTO agendas.
Nevertheless, the G20 must act to draw an agreement on big issues — such as normalization of the appeals body and endorsement of plurilateral agreements — to bring new life to the WTO-led multilateral trade system.
Although a G20 agreement lacks binding force, it could have political influence on WTO members. The G20 Summit must play a bigger role to fight global trade challenges. The 2022 G20 Summit in Indonesia must become the tipping point. As a member of G20, South Korea also must raise a bigger voice so that the G20 can contribute to restoration of the multilateral trade order.