Globalisation is under siege. Multilateralism is under threat due to rising protectionism and unilateralism, mainly in the US. It is a world in flux- full of uncertainty, unpredictability and turbulence. Nation states are thriving to survive and stay relevant in the world that is falling apart.
Multilateral institutions such as the Group of 20 or G20 are at a crossroads. They are vulnerable to be fragmented if they could not forge a common position based on common principle to safeguard against trade protectionism, nationalism and unilateralism. In other words, the members of the multilateral institutions must dare to challenge and pressure the US in order to protect and promote an open, inclusive and rules-based multilateral system.
For the G20 to stay relevant, it needs to expand its scope of cooperation-not only focus on economic policy issues such as economic growth and financial stability but also social and environmental issues. For instance, the agenda on inequality and climate change should be discussed and addressed at this important platform as well.
The Joint Communique issued last weekend by the G20 Finance Ministers and Central Bank Governors predicted that the global growth in 2019 and 2020 will be moderate due to the continuation of accommodative financial conditions and stimulus measures.
“The growth remains low and risks remain tilted to the downside”, stated the Communique. The escalating trade war and geopolitical tensions, especially between the US and China are poised to affect global growth.
Some of the measures to mitigate and safeguard against downside risks include the promotion of strong, sustainable and inclusive growth, and advancing bilateral and multilateral dialogues to restore and enhance confidence and trust.
The G20 members also proposed that the fiscal policy should be flexible and growth-friendly and monetary policy should ensure that inflation remains on track toward, or stabilizes around targets.
They stressed that international trade and investment are important engines of growth, productivity, innovation, job creation and development. Therefore, it is necessary to maintain open multilateral trade and investment regime. The message is viewed as a countermeasure against the US’s practices of unilateralism and protectionism.
It must be noted that the US has lost certain trust and credibility of its allies due to its retreat from globalisation and the multilateral system. The withdrawal of the US from the Trans-Pacific Partnership (TPP) and the threat to withdraw its membership from the World Trade Organisation (WTO) are some of the cases in point proving that the US is becoming more inward looking and protectionist.
Demographic changes, including population aging, is another emerging issue. Demographic changes require policy actions that span fiscal, monetary, financial, and structural policies. The G20 proposes six policy measures as following.
First, enhancing productivity and growth, including by investing in skills, and encouraging labour market participation in particular of women and older people and promoting elderly-friendly industries.
Second, enhancing the efficiency and effectiveness of public spending as well as a well-functioning and fiscally sustainable social safety net with due consideration to intra- and inter-generational equity.
Third, designing the tax system in an equitable and growth-friendly manner, so as to better respond to the challenges posed by aging.
Fourth, better understanding the implications of aging for monetary policy.
Fifth, assisting financial institutions to make any needed adjustments to their business models and services.
Sixth, managing the cross-border implications of demographic changes, such as capital and migratory flows.
Concerning the infrastructure development, the G20 gives emphasis on quality infrastructure. The stresses the importance of maximizing the positive impact of infrastructure to achieve sustainable growth and development.
The G20 members have developed disaster risk financing and insurance schemes as a means to promote financial resilience against natural disasters. In addition, they are supporting the developing countries to move towards Universal Health Coverage (UHC).
The group has taken some measures to address the tax challenges arising from digitalisation of the economy, while promoting an open and resilient financial system to support sustainable growth.
With regards to technological innovations, including those underlying crypto-assets, there are concern over the associated risks, including those related to consumer and investor protection, anti-money laundering (AML) and countering the financing of terrorism (CFT).