A US$1 trillion increase in the IMF’s crisis-fighting war chest, US$5 trillion in coordinated fiscal stimulus, US$250 billion to support trade finance, US$100 billion of additional lending by the multilateral development banks, the creation of new international institutions and reforms to existing ones, a commitment to reform global finance and a pledge not to impose any trade protectionist measures.
It’s an impressive list of G20 outcomes. It’s a shame that this is the list from the 2009 meeting of G20 leaders not the emergency G20 leaders’ meeting held last Friday to deal with the COVID-19 crisis.
Friday’s commitment from leaders to do ‘whatever it takes’ rings hollow when the G20’s announcements are compared to those of the past.
The meeting was big on rhetoric, but short on substance. G20 leaders promised to strengthen the global financial safety net, but gave no details on how or by how much they would do this. They promised a global initiative on pandemic preparedness but gave no details on how this initiative would work. They promised resources for the World Health Organization without quantifying how much they would give. They promised to cooperate on the global supply of medical equipment but gave no details on what that would involve, East Asia Forum editorial board reported.
The things leaders didn’t say were just as troubling.
The G20’s commitment from times past to refrain from trade protectionism was nowhere to be seen. The commitment to refrain from competitive currency devaluations was conspicuously absent. The commitment to the multilateral trading system was missing. This is deeply worrying as more than 50 governments, including the EU, have restricted exports of medical supplies, 33 of which acted after the beginning of March.
The most significant practical action announced by leaders, albeit buried in paragraph 10 of the communique, is the line which said ‘we are injecting over $5 trillion into the global economy’. This is the same amount leaders announced in 2009 despite the global economy being much larger: US$5 trillion represented an 8 per cent of GDP stimulus back in 2009, but represents only 6 per cent today. This is woefully inadequate, particularly given that the shock of the close-down caused by COVID-19 is, by all counts, already significantly larger, and that the US$5 trillion relates to existing stimulus and assistance rather than embodying any new commitment to do more.
Of greatest concern was the tone of the communique. It doesn’t read like a statement from the most powerful people in the world, particularly given its constant deference to finance ministers, health ministers and central bank governors to make decisions and come up with plans.
The G7 was unable to release a communique at all last week because President Trump insisted the virus be called the ‘Wuhan Virus’ rather than the coronavirus — not a helpful tone of cooperation. The opening line of the G20 communique that the pandemic ‘is a powerful reminder of our interconnectedness’ is hardly an endorsement of global integration. If G20 countries are to deal with this crisis and deal with it as quickly and effectively as possible, they had best start cooperating.
This week’s lead essay from Allan Gyngell warns that COVID-19 has done more to close borders, reverse globalisation, decouple supply chains and marginalise multilateral institutions than the most fervent efforts of the world’s populist nationalists. He looks ahead to what the world will look like post-COVID-19 and what role Australia needs to play within that world.
‘The world before coronavirus is not returning’, warns Gyngell. ‘An economic and social shock of this scale is not a freeze-frame moment. The balance of global power, the structure of the international and national economies, the role of multilateral agencies, patterns of social interaction and ways of work will all be different’.
Gyngell warns that the virus will see calls for greater self-sufficiency grow and a more poisonous relationship between the United States and China. At the same time, the balance between the two countries is shifting. ‘China is offering its resources and experience in handling the virus to build relationships with other countries’, Gyngell notes. ‘In contrast, the United States is absent from any international leadership’. He warns that ‘Australia’s ally, the United States, looks irrevocably weakened as a global leader, although a lot will hang on the results of the November presidential election. It is hard to think of a global crisis over the past 50 years to which Washington has offered the international community so little response’.
Gyngell warns that Australia is likely to find itself in a weaker overall position in the post-coronavirus world. ‘The pattern of China’s growth, the structure of its economy and Australia’s role in it will change’. The multilateral institutions most important to Australia will be weaker. The G20 has already proved itself entirely unable to mount an effective response.
‘Australia needs to find its own clear and consistent voice in Washington and Beijing as it attempts to avert the worst of its deteriorating relationship’, says Gyngell. He notes that Australia should engage effectively in direct high-level discussions with both Beijing and Washington, or risk being crippled in its recovery as well as quest for political security. Australia also needs to undertake a comprehensive audit of global institutions and rules-making processes where it has the greatest stake.
Not just Australia but the rest of the world is being held hostage to the US–China rivalry that is making the G20 and other instruments of collective action more problematic, just when it is more urgent and needed more than ever. The times are compelling middle powers to act.
The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.