Expert Speak Raisina Debates
Published on Nov 02, 2021
Can G20 rise up to the occasion and meet the global expectations by coming to a universal agreement on crucial issues like trade and climate?
Fault lines at the G20 The Group of Twenty (G20) has emerged as a leading global forum for international economic cooperation and rulemaking, comprising key advanced and emerging economies. It brings together the world’s major economies, accounting for 80 percent of the world’s GDP, 75 percent of global trade, and 60 percent of the population. It was one of the first multilateral forums to give both advanced and emerging economies an equal footing on the same platform. However, in recent years, the G20 has been subjected to increasing criticism for its lack of legitimacy and inadequacy in addressing global challenges. In the aftermath of the pandemic, existing fault lines have deepened and the gaps in expected recovery pathways have further widened. Moreover, evidence of friction and divergence in priority areas are visible in certain key issues of the G20 agenda.

Trade divergence

Over the last few years, the G20 agenda has focused on supporting the necessary reform of the WTO. The G20 leaders have recognised the urgent need to restore the dispute settlement system to “contribute to predictability and security in the multilateral trading system”. In reality, the G20 faces several constraints that can delay the fulfilment of its trade agenda and recovery convergence from the pandemic. Since December 2019, WTO’s Appellate Body (AB) has been unable to replace the retired members for the required quorum—which has rendered the Body inactive. The US, under the Trump administration, had accused the WTO of “judicial overreach” and blocked the appointment of judges to the Appellate Body. The United States has expressed its discontent over the Appellate Body’s interpretation of WTO rules on anti-dumping, subsidies, and countervailing duties—stating that the AB had significantly affected the US and other market economies’ ability to confront the trade distortions, used mainly by China.
The G20 has been subjected to increasing criticism for its lack of legitimacy and inadequacy in addressing global challenges.
While the US blockage of appointment of WTO Appellate Body members has led the multilateral rules-based trading system into crisis, the Biden administration has not yet taken any action towards lifting the impasse at theAB. The G20 as a grouping has not been able to expedite the restoration of dispute resolution despite highlighting its urgency in several of its high-level meetings. Moreover, the G20 Rome Leader’s Declaration has not made any direct mention of this agenda. The underlying reason could be due to G20 countries’ varying proposals on how to proceed with the resolution. For instance, the EU proposed expansion of the AB and redefining the AB membership, whereas, Canada highlighted the need to update trade rules to ensure WTO’s relevance for modern trade issues. Additionally, while a Multi-Party Interim Appeal (MPIA) has been proposed by a group of countries, such a solution is short-lived as only 22 of the WTO’s 164 members or 6 of the 20 G20 members have so far joined this appeal. Further, the G20 leaders also highlighted the crucial role of the multilateral trading system in ensuring equitable access to medical supplies, vaccines, and pharmaceuticals. However, there is a wide gap in terms of global production and distribution of COVID-19 vaccines, medicines, and diagnostics between advanced and emerging and low-income economies— 60 percent of the advanced economies’ population are fully vaccinated; however, a whopping 96 percent of the low-income countries remain unvaccinated (as of October 2021).
The G20 as a grouping has not been able to expedite the restoration of dispute resolution despite highlighting its urgency in several of its high-level meetings.
At the Italian G20 Trade and Investment Meeting in 2021, India called for removing the trade barriers such as vaccine differentiations, COVID passports, and other mobility restrictions, which can disrupt the flow of critical services. G20 members such as Indonesia, South Africa, and India further reiterated that one of the ways to demonstrate this is by accepting the TRIPS waiver proposal. Despite the Biden administration’s announcement of supporting the waiver, a few G20 members such as the EU, Germany, and UK continue to oppose any consensus on this proposal. According to the EU, Intellectual Property (IP) is not a barrier to increasing capacity to produce vaccines. The Commission argues that IP would not speed up manufacturing. Similarly, Germany claimed that “IP is a source of innovation and must remain so in the future”. According to Germany and the EU, the factors limiting the production of vaccines is not IP but high-quality standards, infrastructure, skills, and production capacities—something which the developing nations lack and cannot be overcome in a short period of time.

Economic recovery

Though the G20 countries agreed to raise International Monetary Fund (IMF) reserves with a new SDR allocation of US $650 billion, critics have argued that given the scale of financing challenge in emerging economies, it is not enough. About 250 civil society organisations claimed that the SDR allocation of about US $3 trillion was required; however about US $650 billion was the most that could be granted without the support of the United States Congress. As the SDRs are allocated proportional to countries’ quotas at the IMF, the distribution is skewed towards bigger countries—according to the European Network on Debt and Development, advanced economies will receive around 67 percent of the allocation, while the LICs will receive about only one percent. Furthermore, in 2020, the extraordinary G20 Finance Ministers and Central Bank Governor’s Meeting recognised that debt treatments beyond Debt Service Suspension Initiative (DSSI) may be required on a case-by-case basis in the post-COVID-19 crisis. To date, 46 of the 75 eligible countries have applied for the scheme. However, the initiative has several roadblocks. According to Clement Landers, Senior Fellow at Centre for Global Development, the private creditors which constitute about 20 percent of the DSSI debt service, have refused to participate voluntarily. Secondly, many countries which requested the DSSI treatment have been downgraded by the crediting agencies. Lastly, China, which is the largest creditor to DSSI countries, has exempted its government-owned lenders by classifying them as private sector entities. G20’s failure is reflected by its inability to make the private creditors (banks, hedge funds, and oil traders) a part of the debt suspension scheme. IMF and World Bank data reveals that the 46 lower-income countries still paid US $36.4 billion in debt payments. Moreover, the World Bank warned that there has been a 12 percent rise in the debt burden of the world’s low-income countries.
G20’s failure is reflected by its inability to make the private creditors (banks, hedge funds, and oil traders) a part of the debt suspension scheme.

Climate-change divergence 

The G20 members have failed to break the impasse on climate goals—many countries disapproved of the idea of committing to keeping global warming below 1.5 degrees Celsius and phasing out coal. US, EU, Japan, and Canada want the G20 to cap temperature rise at less than 1.5 degrees and phase out coal by 2025. However, countries such as China, Russia, India, Saudi Arabia, and Turkey continued to defend the use of fossil fuels. The members also failed to agree on a date by which they would phase out inefficient fossil fuel subsidies. According to emerging economies such as India, climate action must be guided by the country’s national circumstances and stage of economic development, not at the cost of the country’s equity and development. Moreover, while the Rome declaration commits to mobilise climate finance of US $100 billion annually from public and private sources through to 2025, it fails to make any mention of retroactive payment of the financial commitment of 2020 to the developing countries. Given the fragile economic environment and global challenges posed by the pandemic, it is imperative for the G20 to seek common ground on global trade governance, international financial architecture and sustainable development—which is representative of the Global South. While the recent G20 Leaders’ Declaration has highlighted certain key issues, the onus to fulfil the agenda and beyond lies with the upcoming G20 presidencies.
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Contributor

Shruti Jain

Shruti Jain

Shruti Jain was Coordinator for the Think20 India Secretariat and Associate Fellow Geoeconomics Programme at ORF. She holds a Masters degree in Public Policy and ...

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