Role of the G20 in WTO governance

Thursday, 30 September 2010 12:57 -     - {{hitsCtrl.values.hits}}

The Public Forum organised by the World Trade Organisation in mid September dealt with many interesting topics and the ‘Role of the G20 in WTO Governance’ was one of the topical themes that generated an interesting debate.

It was organised by the World Trade Institute, American Society of International Law and the International Economic Law Interest Group. Speakers at the session conveyed their views on whether the G20 undermines the role of the WTO and whether it will interfere, compete or reinforce the role of the WTO governance.

G20 referred to here is the Group of Twenty Finance Ministers and Central Bank Governors that was established in 1999 to bring together systemically important, industrialised and developing economies to discuss key issues in the global economy. This distinction is necessary as there is another G20 that refers to a trade group established prior to the fifth WTO Ministerial Conference held in Cancun.

The G20 being a newer entity than the long-established WTO is different from the WTO in that it is has no charter, no organised institutional structure and no secretariat. G20 members account for roughly 80% of world trade, two thirds of the world’s population and 90 % of GDP.

As some speakers pointed out, it was created out of crisis. It was earlier created ‘as a response both to the financial crises of the late 1990s and to a growing recognition that key emerging-market countries were not adequately included in the core of global economic discussion and governance’ and recreated for the recent global financial crisis.

Some of the more important member countries of the G20 are G7 members and Brazil, Argentina, India, China and Russia, South Africa, Republic of Korea, Saudi Arabia, Mexico and Indonesia. Although some of the emerging developing countries are members, G20 doesn’t include Africa with the exception of South Africa and has no LDC representation unlike the WTO where the African continent and the LDC s are represented.

A major accomplishment of the G20 was that in the wake of the recent global crisis, G20 members pledged not to backslide to protectionism and there have been no new border barriers such as tariff increases although reports on the effective control of fiscal barriers such as subsidies are inconclusive. Some economists say, as a result, the protectionism dog did not bark.

For example, during the recent economic crisis, world trade was affected only about 2 % by protectionism measures whereas after the economic crisis in 1930s, 40% of world trade was affected due to the protectionist measures. While they report on global trade with cautious optimism and although no major obstacles have been observed, regulatory protectionism described as “sand in the gears” have been reported.

Speaker after speaker pointed out that the WTO’s organised structure allowed for stakeholders to engage the WTO when necessary whereas the G20 did not have such a facility due to a lack of organised structure. However, this did not preclude the important role of the G20 in providing leadership when necessary. The G20 has better ability to identify global issues, reinforce political will of leaders, promote collaboration among political leaders and promote dialogue beyond G8 to a larger group.

Unlike the WTO, G20’s dynamic ad hoc response to crisis as shown during the global financial crisis is better.WTO being the more organised structure, provides reports with statistical and analytical data to the G20 which provides the grouping with important information. While the G20 has evolved its leadership role in global finance, it has yet to evolve a firm role in global trade although it cannot be the premier forum for world trade as it is not fully representative of world trade.

What was clear from the session was that while the G20 may be yet in an evolving stage, it could become an executive coordinator while not interfering with the WTO’s role as global trade negotiator. On the other hand, the WTO could learn from the dynamic response of the G20 to global crisis. There is also scope for WTO to utilise the G20 for policy discussion among world leaders and not only negotiations. This in turn will give more scope to the WTO to show more initiative on trade policy and subjects such as climate change, food security, etc. The session conveyed effectively how an informal grouping which is centre stage in the world despite being informal could join forces with a formal organisation in the world in delivering a better deal for global trade.

(Manel de Silva holds an Honours Degree in Political Science from the University of Ceylon, Peradeniya and has engaged in professional training in Commercial Diplomacy at ITC and GATT. She has served as a trade diplomat in several Sri Lankan Missions overseas and was the first female Head of the Department of Commerce as Director General of Commerce.)