Australia’s Chairing of G20 Provides Opportunity to Reenergize Economic Reform
January 30, 2014
The Brisbane Group of 20 (G20) Leaders Summit in November will provide Australia an opportunity to inject new life into a grouping founded to broaden dialogue on international economic issues. Prime Minister Tony Abbott told the World Economic Forum in Davos on January 23 that Australia would press the organization in 2014 to focus on increasing world trade and taking steps to eliminate protectionism.
Some critics say the G20’s best days are behind it and that it has become little more than a talk shop, but continuing global economic challenges suggest that important tasks remain for the organization that played a critical role in tackling the 2008–2009 global financial crisis. Today the U.S. economy has strengthened, Japan looks like it may be on the mend, and the risks in Europe have eased. But a number of emerging economies, including China, India, and Indonesia, may be facing slowing growth and uncertainty.
Global economic growth remains weak and uneven. Job growth is less stellar than many leaders of developed countries had hoped. The global trade agenda is moving forward only slowly and protectionism is alive and well in many parts of the planet. Emerging economies such as Turkey and Brazil that rely heavily on short-term investment from foreigners to finance their current account deficits have faced considerable headwinds in recent weeks.
The G20 summit in Australia later this year could play a critical role in tackling these challenges. Mike Callaghan, who heads up the G20 Studies Centre at Australia’s Lowy Institute and earlier served as a senior official in the Australian Treasury, has called on his government to “define a focused agenda” to address ongoing critical international economic issues.
Callaghan argues that the priorities should include the following:
- Developing a strategy to restore stronger, sustainable, and more equitable global growth, including the creation of jobs.
- Injecting new life into the multilateral trading system. The Doha talks in the World Trade Organization are stuck and progress on the 12-nation Trans-Pacific Partnership (TPP) trade talks, which include Australia, Japan, and the United States, are struggling to get across the finish line by a date that keeps getting pushed back. President Barack Obama did little to give the negotiators fresh impetus when he urged Congress only to “work” on trade promotion authority in his January 28 State of the Union address. Partner countries would have been more assured if he had called on Congress to ratify the legislation.
- Tackling financing for climate change to create momentum for negotiations under the United Nations Framework Convention on Climate Change.
- Injecting a development agenda into the G20 by enhancing food security and increasing funding for the multilateral development banks.
For Canberra the stakes are high. The November G20 summit will be the most high-profile international economic meeting ever held in Australia. The meeting provides this middle-income power in the heart of the Asia Pacific a global stage to demonstrate that it can manage and cajole the world’s top leaders to pursue initiatives to jumpstart the global economy at a time when the financial system is no longer in crisis.
Australia is a propitious chair for the G20 this year. Over 40 percent of its gross domestic product is fueled by international trade. The country has long been a strong proponent of free trade and liberalization of trade in agricultural products. Australia has free trade agreements (FTAs) with eight partners, is negotiating bilateral FTAs with four critical Asian economies (China, India, Indonesia, and Japan), and is a key driver of the TPP.
To be sure, the G20 faces some credibility problems because it has often been unable to deliver on key commitments. Callaghan says this has been caused by the growing scope of the G20’s agenda, the increasing size of the grouping, and challenges participants have in reaching agreement among nations that have diverse interests and expectations.
To reverse this trend, Callaghan says Australia’s government will have to pick a few strategic areas and practical issues on which to zero in. It must avoid trying to do everything, as has often been the inclination of recent G20 chairs.
Callaghan argues that the ultimate role of the G20, which has no enforcement mechanisms, is to encourage good policies and strengthen international economic governance through peer pressure. In 2014 the grouping has to confront economic challenges at a time when many politicians face domestic political pressure to go slow on cobbling together new trade agreements and introduce new protectionist pressures to ease economic imbalances.
Australia’s chairing of the G20 provides the country with an important opportunity on the global stage. If Canberra focuses world leaders on a few tangible achievements, it will be able to play a critical role in reinvigorating the G20 and achieving more stable global economic growth.
(This Commentary originally appeared in the February 2014 issue of Pacific Partners Outlook.)
Matthew P. Goodman holds the Simon Chair in Political Economy and Murray Hiebert is senior fellow and deputy director of the Pacific Partners Initiative at the Center for Strategic and International Studies in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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