G-20 and crumbling world order

India should engage more with OECD nations to have a greater say in the norm-setting process

The role of the G20 as the premier forum for international economic coordination continues to diminish in a world where the ills of economic stagnation, widespread unemployment, growing inequality, and political and social strains resulting from large influx of migrants from conflict zones, are all being laid at the door of globalisation. The riots on the streets of Hamburg in Germany, with serious incidents of violence and arson, were a telling counter-point to a gathering of world leaders, deliberating on the theme of “Shaping an Inter-connected World.” The demonstrators on the street wanted less not more interconnection. 

Globalisation has lost its sheen and the G20 leaders have been unable to make a convincing case why it remains the best opportunity there is to meet the trans-national challenges which define our world. The multi-nation summit made headlines not for the decisions taken to collaborate on various pressing issues of the day but for providing the platform for eagerly anticipated bilateral summits, including one between Russian President Vladimir Putin and US President Donald Trump, and another between Mr Trump and Chinese President Xi Jinping. A handshake between Mr Xi and Prime Minister Narendra Modi on the sidelines of the meeting among the BRICS leaders gave hope that the continuing stand-off between Indian and Chinese forces at Doklam may be defused. The Chinese spokesman insisted there had been no meeting at all but the two leaders just happened to be in the same room for the BRICS meeting. The Trump-Putin meeting was their first and lasted over two hours. It ignited hopes that under Mr Trump, US relations with Russia will move in a positive direction. The agreement on a ceasefire in Syria was an encouraging first step. While the Washington establishment continues to be implacably hostile to Russia and there may yet be damaging revelations of Russian meddling in US presidential elections to help Mr Trump win the presidency, it is clear that Mr Trump remains committed to a re-set of relations with Moscow and that could be good news for India. A Russia less beholden to China will shift geopolitics in our favour.

But in case that does not happen the Russia-China embrace will become tighter. Mr Xi was in Moscow in advance of the G20 summit and announced that Sino-Russian relations were going through their “best time in history”. Underscoring this was an announcement that China would begin receiving natural gas from Russia through the Power of Serbia pipeline by December 20, 2019. A second Power of Siberia pipeline was also agreed upon. The two sides have set up a joint $10-billion investment fund to develop projects under the One Belt One Road initiative in the Eurasian Economic Union. 

And Japan’s Shinzo Abe came to Hamburg with a Japan-EU free trade agreement under his belt, having concluded the deal in Brussels on the eve of the G20 summit. This only underscores how much outliers the US and the UK (after Brexit) have become in global economy and trade.

The Trump-Xi meeting was important because the US President believes that China is not doing enough to rein in North Korea. The American THAAD anti- missile defence system has already been deployed in South Korea and this was condemned by both Mr Xi and Mr Putin. Mr Trump held out the possibility of unilateral U.S action to eliminate the nuclear and missile threat from North Korea if China failed to restrain its ally. This was followed up with US bombers doing several runs across South Korea in practice for what they might have to do in the North. There is every possibility that Sino-US relations may rapidly deteriorate if tensions on the Korean peninsula escalate. Perhaps that may take the heat off Doklam; or maybe that is just wishful thinking.

In a summit dominated by such issues what was achieved on items on its agenda? The commitment of the leaders to “a strong, sustainable, balanced and inclusive growth” from other recent summits remains though obviously, achieving this has become much harder. The Hamburg Action Plan, for example, acknowledges that the Brisbane ambition, put forth at the summit held there in 2014, of raising global gross domestic product (GDP) growth by 2 per cent by 2018 is unlikely to be realised, even though both growth and job prospects have improved. There continue to be serious downside risks in the longer term from weak productivity growth, income inequality and aging populations.

The leaders re-committed themselves to refrain from engaging in competitive devaluations and from using their own exchange rates for competitive purposes. This has appeared at each G20 summit and is reassuring.

However, it is on the trade and climate areas that there is backsliding. For example, at successive G20 summits there has been a commitment not only to fight protectionism but specifically to observe “standstill and roll-back of protectionist measures till the end of 2018.” This commitment is missing from the Hamburg communiqué. Instead the fight against protectionism is qualified by recognising “the role of legitimate trade defence instruments in this regard.” So clearly Mr Trump was able to get his way on this important question.

Illustration by Binay Sinha

On climate change, the Hamburg Action Plan recognises that the US is exiting the Paris Agreement but that the rest remain committed to its implementation. This is the first time that dissenting positions have been separately recorded in the outcome document, another sign of the fragmentation of the global governance architecture. 

India may take comfort from the fact that its focus on counter-terrorism found full reflection in the outcome documents but there was not much else to cheer. 

In the assessment of progress achieved by various countries on domestic reform measures it was surprising that the goods and services tax (GST) was not acknowledged as a significant Indian achievement. There was only a proforma acknowledgement of the commitment to improve ease of doing business and the introduction of some derivative financial instruments as part of financial market reform.

Considerable amount of work of the G20 continues to take place in technical groups and these are mainly guided by the OECD secretariat. Thus the norms which are being developed and put in place in a number of areas are those favoured by OECD countries. It is not clear whether their impact on India’s interests have been properly evaluated. Also this begs the question whether the time has not come for India to engage more closely with the OECD, if not become a member. That would at least give us the opportunity to make inputs in the norm-setting process.
 

The writer is a former foreign secretary and is currently senior fellow, CPR and a member of its governing board.