The first speaker, Dr. Charles Morrison, Co- Chair, PECC / Chair, USAPC, began his speech with a quote from former White House Chief of Staff Rahm Emanuel, said sometime after the 2008 financial crisis: "Let no crisis go to waste." He explained that crises give countries the opportunity to try many things they otherwise would not be able to do in normal times.
The Chiang Mai Initiative and ASEAN+3 only emerged thanks to the Asian financial crisis of 1997. Although there are problems in the Asia-Pacific with regard to regional cooperation, the G-20 has made significant progress on developing an architecture for discussion on the world economy. Basil III is a sign of progress. In addition, progress can be seen in looking at organizations like the WTO or UN. Originally, the General Agreement on Tariffs and Trade (GATT) had 23 members-today the WTO has 130. A major difference today is that, unlike in the Cold War era, no one country has emerged as dominant in global cooperation fora.
During the first phase of the response to the financial crisis, the public in each country was generous about allowing leadership to go in a defined direction. Thus, reforms were implemented with relative ease. Lately, public attitudes have shifted and reform has become more difficult.
Asia should provide leadership in international meetings. The G-20 is almost too large to achieve very much unless a leader emerges in the group. APEC economies should act as this leadership. In addition, Asian members of the IMF and World Bank should work to play a more central role in these institutions in the future.
APEC is an interesting organization since it is one of the few international cooperation initiatives not born out of a crisis; it was created out of the opportunities offered by the end of the Cold War. Although the organization has had difficulty in producing concrete deliverables, it has helped to deepen ties within the global economy and now has a promising and united vision in the FTAAP.
The United States has announced that President Obama will attend the next ASEAN+8 meeting, but it is hard to say if a US President will attend any of the meetings afterwards. APEC economies should work to connect together the ASEAN+8 meetings and APEC meetings. This could have a positive effect on regional cooperation.
Mr. Jusuf Wanandi, Co-Chair, PECC / Chair, INCPEC, opened his speech by reminding the meeting that the G-20 had been formed to reform the global economy following the 2008 financial crisis. It did this by preventing trade and investment protectionism and working to reform the financial sector as well as international financial institutions. The G-20 has established midterm goals to address issues such as energy efficiency, food security, WTO Doha Round negotiations, climate change, and development issues. However, it may take time for the G-20 to develop to a point
where it can address these issues effectively. The G-20 still has work to do in addressing the large amount of high and unsustainable debt held by many countries, as well as exchange rate imbalances.
The lessons from the four G-20 summits so far are that the organization has played a significant role in addressing the economic crisis, and that global governance organizations can be effective if there is strong will for them. The G-20 from now on should try to position itself to be the governing body of the world economy.
East Asia faces many challenges. Bigger economies have a responsibility to commit more to solutions for these challenges. The G-20 should work to be accepted as legitimate by the regional cooperation initiatives of East Asia if it is to be successful in the future. PECC should prepare itself to continue to give important ideas to APEC and the G-20 over a long period.
Prof. Yung-Chul Park, Distinguished Professor, Department of International Studies at Korea University, explained to the meeting that he would attempt to enlist support for the successful completion of the G-20 summit with his speech.
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| The sixth session on The Future of Global and Regional Cooperation - Looking toward the G-20 and APEC: (l-r) Amb. Yoshiji Nogami, Chair, JANCPEC; Dr. Charles Morrison, Co-Chair, PECC / Chair, USAPC; Mr. Jusuf Wanandi, Co-Chair, PECC / Chair, INCPEC; Prof. Yung-Chul Park, Distinguished Professor, Department of International Studies at Korea University; and Dr. Manfred Wilhelmy, Chair, CHILPEC |
The G-20 may have a short history, but it has made a considerable contribution to the world. The organization has set the agenda for global regulatory reform. Although many countries have commented that Basel III is not quite adequate, it represents a major step toward effective financial reform.
A global safety net for the supply of liquidity will be an important issue for the G-20. When countries come under speculative attacks as the Republic of Korea did in the fourth quarter of 2008, it is such safety nets that can make the difference in whether or not a crisis is averted. Having failed to establish such a system, the IMF and G7 have little right to demand countries open their accounts fully. This is a critical point, and it is what makes the G-20 is legitimate and important.
The Seoul meeting will take up development issues in lower income economies. These economies are expected to be future sources of global growth. China is a good example. In the past few years, economies such as China and India have supplied an enormous amount of relatively inexpensive products to world markets, helping to sustain the global economy. In the coming years, many other economies are expected to play similar roles.
The biggest challenge the G-20 now must deal with is legitimacy issues. Many are questioning what right the organization has to manage the global economy. To many, the G-20 is too small. To others, it is too large. The issue of whether the G-20 is too small or large has a lot to do with what is being discussed.
For the 180 countries not included in the G-20, credibility and legitimacy are serious issues. It did not help that at the first G-20 meeting leaders pledged to not raise imports and then returned home to do just that. The leaders of the G-20 need to confront the organization's credibility issues. The G-20 has so far not made much progress on trade issues, but it is reaching out to global trade institutions for help. Other pressing global issues such as energy conservation and climate change have been too controversial to be taken up at group meetings so far. The G-20 may further lose credibility if it tries to tackle these issues. These issues should be dealt with by APEC.
China, Japan, and the Republic of Korea should come up with some sort of package to lessen their surpluses and address the problem of global imbalances. If they do so, we will be able to prevent a currency war.
Dr. Manfred Wilhelmy, Chair, CHILPEC, explained to the meeting that he hoped to give the perspective of a non-G20 country. For such countries, it is hard to understand why some nations get invited to the G-20 and others do not. For example, Dr. Wilhelmy questioned why the Netherlands or Spain had been invited to meetings.
Latin American countries have a huge potential for growth. Further interaction between the G-20 and APEC about the issues facing Latin America could be hugely beneficial to all sides. World perceptions of Latin America are changing. About 8.5% of global GDP, around the same amount as is produced by China, is created in Latin America. The region has managed to withstand the shock of the financial crisis and move swiftly back toward growth. The current account of most economies is balanced, and regional debt is now half of what it was in the 1980s. Trade is being actively diversified and each economy is showing greater macroeconomic discipline. There is a strong case to be made for other regions to engage more vigorously with Latin America.
Latin America is now developing in pace with other emerging economies, but there is yet a long list of tasks to be undertaken. Brazilians are beginning to look outward, Colombia and Peru face significant challenges with regard to opening up trade, Mexico continues to grow, and Chile seems to be returning to growth after suffering a horrible earthquake.
Close to half of the exports of Latin America go to APEC economies. The relationship between APEC and Latin America will continue to be important.
APEC and the G-20 should work to complement each other. The G-20 has had success on financial reform, but APEC is more equipped to deal with trade and a host of other issues. The G-20 process should be made more open and interactive. This could lead to significant benefits for every region of the world.
Discussion
Dr. Morrison started the discussion on the topic of legitimacy. He postulated that the G-8 never dealt with legitimacy issues because it was clear that it was a caucus of rich nations. The G-20 claimed to represent the world and so it faced difficulties. He suggested that, moving forward, these issues would be sorted out and that the organization would begin to deal with a broader range of issues.
Prof. Park commented that especially because of the failures of the Doha Round, the G-20 was vital for promoting positive change in the world economy. He stated that new initiatives were needed. He also exclaimed that Europe seemed to be overrepresented at the G-20, and solving this issue was one way to make progress on the topic of legitimacy. On the subject of the expansion of the issues dealt with by the G-20, Prof. Park argued that the world needed the G-20 to focus only on financial reform for the time being.
Dr. Wilhelmy interjected that it did seem questionable that huge areas of land could be represented by only the largest country in them, as was the case with the regions of South Asia and Africa.
A meeting participant said that a problem for G-20 was that of deliverables, and asked Prof. Park what the group would accomplish in Seoul or in France in 2011. Prof. Park answered that in 2011 the scope of the group would probably be expanded. As for deliverables, Prof. Park argued that the group had already achieved a great deal in a short period of time. He raised Basel III as an example of the achievements of the G-20, and explained that further regulatory reform was going to be difficult given that there was no global financial regulatory body. Nevertheless, Prof.
A meeting participant reminded the session that the G-20 had been created due to a lack of coordination among global financial institutions, but that it was not a decision-making body; it only recommended action. He argued that actual decisionmaking organizations such as the IMF were still necessary, and would perhaps be more effective at dealing with some of the issues being raised in the meeting. Dr. Wilhelmy responded that he agreed the G-20 was not quite ready to deal with some of the issues being discussed, but that institutions like the IMF had problems to deal with as well. He suggested that it was time the IMF be led by someone from a nation outside of the European Union. Dr. Morrison argued that, being a leader's event, the G-20 did have considerable power to implement decisions and that, although issues of deliverables and effective action were problems, he believed the organization would prosper in the future. Prof. Park commented that the G-20 was valuable as a discussion forum which did not implement decisions on members. He further commented that he could not think of any other appropriate place to discuss a currency war and that for this and other reasons the group would continue to be important in the future.