China, US to strengthen cooperation under the G20 framework
- By He Yafei
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E-mail China Today, September 22, 2016
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Chinese State Councilor Yang Jiechi talks with visiting U.S. National Security Advisor Susan Rice in July, 2016. |
Having assumed the G20 rotating presidency, China is to host the summit conference in Hangzhou this month. Hangzhou and China have thus become a world focal point. The outcome of the Summit is expected to reinvigorate the global economic governance system so riddled with holes and fragmentation tendencies, and to drive the beleaguered world economy back on to the tracks of powerful momentum and sustainable growth.
Unfavorable Int'l Environment
The overall political and economic environment throughout the world is extremely complex and hardly optimistic.
The world economy is still facing strong cyclical downward pressure. It usually takes five to seven years to recover from a global economic crisis, but eight years have passed since 2008, and the world economy remains at the bottom of the L-shaped growth curve. Meanwhile, the U.S. has entered a cycle of liquidity contraction and a stronger dollar. The Eurozone and Japan have gone their separate ways from the U.S. in terms of their monetary policies. Prices of crude oil and other bulk commodities remain low and uncertain, and emerging economies and developing countries are facing mounting financial risks and difficulties. The International Monetary Fund (IMF) and the World Bank have lowered expectations for 2016 economic growth several times. The most recent World Bank global GDP forecast was less than 2.4 percent. All these factors have made economic structural adjustments even more difficult.
With regard to the international political environment, changes have accelerated, and intensifying geopolitical conflicts are weighing on the uncertainties of international relations and the disordered and fragmenting global governance. Those tendencies are reflected in the following aspects:
First, the "anti-globalization" ideology, best embodied in populism and populist parties, has swept many countries, especially in the West. It is making alternations to the political environment and social order in these countries, and is also likely to profoundly change the face of the world and the international order in the coming decades.
The EU has responded feebly to the success of the Brexit referendum and confronted the risk of a "domino effect." At the same time, anti-EU sentiments in France, Spain, Greece, and Italy, all of whom have received migrants from the Middle East, is also rising. In the U.S., Donald Trump has won the GOP nomination as well as wide support from the people. The rising populist force in these countries reflects strong dissatisfaction and even indignation among ordinary people, including the middle class, toward the failed state governance of the elite. The conflicts between the two groups have spilled over into the public domain. Domestic political struggles, including elections, have grown more intensive, and no one can tell who the winner is likely to be.
Second, the United States tried to push forward the Trans-Pacific Economic Partnership Agreement (TPP) and the Transatlantic Trade and Investment Partnership Agreement (TTIP). This signaled an even sharper and more complicated struggle with regard to world governance leadership and the redistribution of globalization benefits. The U.S. and other Western countries, in the light of containing China and other emerging economies, hope to change the "game rules" to obstruct emerging countries and raise the bar for their development. This, in turn, will safeguard its leading position.
Frankly, Western countries don't want to make the idea of "East-West co-governance" a reality. In this sense, a disordered and fragmented global governance system is beneficial to the U.S.'s strategic intentions, making it more difficult to tackle the main challenges facing the current system.
Third, traditional geopolitical contradictions among major powers are deepening and extending, constituting deep-rooted hurdles to strategic cooperation in addressing issues like economic growth and global governance.
The solidarity that major countries showed during the 2008 financial crisis has long been lost. Today, due to geopolitical interference, reaching an even basic consensus is more grueling than ever before. The Ukraine crisis is continuously fermenting between the U.S. and Russia. The U.S.-deployed antimissile system in Eastern Europe and East Asia attracts protests from Russia and China; and the U.S.'s direct interference in the South China Sea issue has increased regional tensions and affected its relations with China... All the above issues have undermined rather than built the foundation for major countries' cooperation.
All these negative, complex factors make it harder to stimulate the global economy and reform the governance system. From the perspectives of either China or the U.S. or bilateral relations, the G20 Summit in Hangzhou and a series of related meetings can be viewed as a great opportunity, as well as an unprecedented challenge.
Building Consensus
Looking at opportunities, China and the U.S. should, through bilateral channels and under the G20 framework, strengthen negotiations and coordination to reach a consensus on major global challenges. Only in this way can the two countries foster a steady, healthy bilateral relationship, gathering consensus from major countries and the G20 on promoting economic growth and transition. It may then play a leading role in improving and reforming the global governance system, thus driving the international order in a more just, fair, and reasonable direction.
The G20 Summit is important in offering an ideal platform for boosting the steady transition of a global governance system and even of the whole international order. To banish the fear of emerging economies drifting away to form a new club, the U.S. and other Western countries hope to trammel them through the current system, reforming it in a gradual way. Only if the emerging countries act according to the "rules" will the West be willing to delegate international institutional power. Emerging economies regard themselves as beneficiaries of the current system and rules. What they want is not to start from scratch but instead to become a "rule-maker" in the current system. The G20 is a platform that can meet the strategic demands of both parties.
As to the challenge aspect, if China and the U.S. fail to recognize the real situation or to strengthen cooperation, their bilateral relationship will be impaired, as will the world economic recovery and reform of the global governance system.
To become an effective platform for cooperation between developed and developing countries, and China and the U.S., the G20 should convert from a crisis-responsive mechanism to a long-term one on global governance. The biggest obstacle is the lack of decision-making efficiency and the ability to execute. This is due to the G20's positioning as an "informal forum" and also to the current disordered and fragmented global governance mechanism.
The group's "informal" nature results in low legal validity and execution, and more slogans than actions. The G20 has not established official linkages or been wedded to the IMF and other international institutions. Another reason for this lack of efficiency is that of rising internal divisions and contradictions. The G20 now has three small blocs – G7, BRICS, and MITKA (Mexico, Indonesia, Turkey, South Korea, and Australia). Developed countries like the U.S., Europe, and Japan still hope to leverage the G20 agenda through G7 influence.
All these have affected major countries' coordination and decision making. The solidarity of major countries is just the base of effective decision making and execution of the G20.
How to Cooperate within the G20
So, how can one strengthen the Sino-U.S. cooperation within the G20 framework?
First, both countries should take their responsibilities as major countries, implement the consensus reached by their state leaders, and exclude geopolitical interferences such as the South China Sea issue. They may then achieve substantive progress in building the new-type major country relationship featuring "non-confrontation, non-conflict, mutual respect, and win-win cooperation." Both should build consensus on global strategic stability and their bilateral relationship and define an achievable roadmap through negotiation and coordinative channels such as the China-U.S. Strategic and Economic Dialogue. This will lay the foundations for both to jointly solve major challenges on such platforms as the G20 and UN.
Second, against the backdrop of the world economic downturn, fluctuating international financial markets, and a continuously fermenting debt crisis in the Eurozone and some developing countries, China and the U.S. need to give priority to jointly promoting world economic growth.
In this era of globalization, world economic growth concerns the development of China and the U.S., and also the livelihood of all people in the world. It is hence vital to adopt structural reforms of the world economy. China and the U.S., increasingly relevant in the overall economy, should make concerted efforts to lead the world in overcoming setbacks and solving problems. In this regard, it is imperative to achieve a Bilateral Investment Treaty and negotiate TPP issues as soon as possible.
As the world's two biggest economies, the U.S. and China should reach a consensus and strengthen cooperation on the G20 platform. This is of great consequence for international cooperation in such institutions as the IMF, World Bank, and WTO. At the forthcoming G20 Summit, China and the U.S. should set an example by proactively promoting policy coordination in macro-economy and finance. This is a prerequisite for the world's economic recovery.
Furthermore, the two countries should come to an agreement on the direction and path of the world governance reform for its orderly implementation.
Global governance reform is too complex to be accomplished at one stroke. At the core is giving emerging economies and developing countries the corresponding rights of decision-making and say, so reflecting the changes of powers in the global economic system.
Take the international monetary system reform for example. The current dollar-centered system, an extension of the Bretton Woods system, safeguards the interests of the U.S. with a strong hint of "monetary nationalism." The system is a "weapon" of the U.S. for dominating the world and exploiting other countries – especially the developing ones. For now a multi-reserve currency system is probably a feasible reform direction. It can be a transitional phase for the super-sovereign reserve currency in the future.
But how can the reform be best carried out? A multi-reserve currency system means the functions of an international reserve currency should be shared by a number of currencies, whose shares and benefits are in line with their responsibilities. They constrain one another, so providing a steady, reliable international exchange rate and reserve assets for other countries.
Thus far, the U.S. dollar, euro, Japanese yen, and British pound are all international reserve currencies. Of them, the U.S. dollar dominates by an absolute majority – between 60 and 70 percent. Therefore, other currencies are not able to constrain the dollar effectively, nor to require the U.S. to take both domestic and international demands into consideration when formulating its domestic monetary policies. At the end of 2015, the IMF put the RMB into its SDR (special drawing right) currency basket. This, in a sense, is a "small" but key step toward diversification of the international reserve currencies. Along with the shift of power of states, especially the increasing strength of the Eurozone, China, Russia, India, and Brazil, I believe the system of multiple reserve currencies can be gradually built up. Some suggested first of all that the SDR be an international reserve currency in circulation. This could well be an option, and can be realized jointly by China and the U.S.
Last but not least, the G20 is a mechanism, along with others, on which China and the U.S. can work together and with other countries tackle common challenges such as a growing wealth gap, rampant thoughts of anti-globalization, and rising populism. The two countries should advocate the imperative of building a community of shared interests and common destiny by demonstrating real cooperative benefits.
China and the U.S. can explore new ideas, models, and paths of international political, economic, and cultural cooperation such as the Belt and Road Initiative. Guided by the UN's Sustainable Development Goals, both should set great store on development issues and boosting common development and prosperity in both developed and developing countries.
There is no doubt that history is advancing. Today, the role of China and the U.S. as major countries with close cooperation is more important than ever. In this sense, their cooperation under the G20 framework is crucial to and valuable as regards pumping up the world economy, revitalizing global governance, and realizing sustainable growth.
HE YAFEI is former deputy foreign minister and former deputy director of the Overseas Chinese Affairs Office of the State Council.
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