G20 trade ministers gather at the opening ceremony of their meeting in Shanghai on July 9 (XINHUA)
As the world shifts from the shadow of the global financial crisis, G20 economies are now reaching toward the goal of creating long-term governance mechanisms. While fiscal and financial policies topped the agenda in times of crisis, trade and investment facilitation measures are gaining traction amid a slowdown in global trade and investment growth.
"As an organization that covers economies that take up 85 percent of the world's economy, 80 percent of world trade and outbound investment and 70 percent of inbound investment, the G20 should improve trade and finance to help contribute to global growth," said Wang Shouwen, China's Vice Minister of Commerce.
From July 9 to 10, the first G20 Trade Ministers Meeting convened in Shanghai, during which the ministers agreed to improve global trade and investment governance. The G20 Trade Ministers Meeting Statement, the first of its kind in G20 history, was also released after the meeting.
During the two-day meeting, trade ministers endorsed the Terms of Reference of the G20 Trade and Investment Working Group, the G20 Strategy for Global Trade Growth and the G20 Guiding Principles for Global Investment Policymaking. The ministers also reached an important consensus on strengthening the multilateral trading system and helping developing countries and small and medium-sized enterprises participate in and take full advantage of global value chains.
According to Gao Hucheng, China's Minister of Commerce, the meeting endorsed the Terms of Reference of the G20 Trade and Investment Working Group, establishing its cooperation scope and agenda, which deem that it should regularly report work progress to trade ministers and coordinators. In this way, the G20 can play a better role in global economic governance and provide a stable mechanism for boosting the growth of global trade and investment.
"We cracked some real issues, because China took the initiative of setting up the trade and investment working group and put in lots of work which has been very productive," Rita Teaotia, Commerce Secretary of India, said in an interview with the Xinhua News Agency.
Liang Guoyong, an economic affairs official at the United Nations Conference on Trade and Development, noted that the implementation of China's proposal on such major issues reflects China's efforts to improve the global economic governance structure and to promote the country's prominence on the global stage. Besides that, the results of the meeting have paved the way for the success of the G20 Summit that will be held in Hangzhou this September.
"G20 economies are both the major contributors and partners of global trade and investment. The consensus reached at the trade ministers meeting is vital to improve global trade and investment governance," said Zhang Jianping, a research fellow from the Academy of Macroeconomic Research under the National Development and Reform Commission.
Containers are loaded onto a vessel at Qinzhou Port, Guangxi Zhuang Autonomous Region, on May 19 (XINHUA)
In fact, global trade growth has slowed significantly since 2008, from an average of over 7 percent between 1990 and 2008, to less than 3 percent between 2009 and 2015. Last year marked the fourth consecutive year in which global trade growth stood below 3 percent, according to statistics from the World Trade Organization (WTO).
The WTO unveiled a new trade-related index called the World Trade Outlook Indicator the day before the meeting convened, aiming to provide real time information on trends in global trade. The current reading suggested that trade growth will remain weak into the third quarter of 2016.
"Of course, the recent deceleration of trade growth is to some extent a result of the global economic slowdown. Protectionism is also a major culprit behind it," said Wang.
According to a report published by the WTO on June 21, trade protectionism is resurfacing, and in some G20 countries, the problem has become quite serious. Bai Ming, a research fellow from the Chinese Academy of International Trade and Economic Cooperation, noted that since the eruption of the global financial crisis in 2008, some developed countries have been more inclined to protect local enterprises by instigating trade conflicts, rather than settling them.
Before the crisis broke out, Bai claimed that nations tended to expand their share in the international market by pursuing trade liberalization. In fact, regardless of the policies that these countries use—be they trade protectionism or liberalization—these are just tools used to maximize national interests in favor of an international division of labor.
Given that, G20 economies have recommitted to their existing pledge for a halt and rollback of protectionist measures, as well as this policy's extension until the end of 2018, according to the G20 Trade Ministers Meeting Statement.
Specifically speaking, countries should not release new protectionist measures, and should promise to gradually eliminate existing protectionist actions, said Bai.
What's worth mentioning is that the meeting endorsed the G20 Strategy for Global Trade Growth, in which participating economies will lead by example by lowering trade costs, harnessing trade and investment policy coherence, boosting trade in services, enhancing trade finance, and promoting e-commerce development.
Despite that, whether or not it can generate good results depends on flexible and efficient implementation, said Liang.
Beyond all that, the G20 economies promised that all the member countries will approve the Agreement on Trade Facilitation by the end of this year and try to reduce global trade costs by up to 15 percent.
Ning Gaoning, President of Sinochem Group, estimated that global export value would increase more than $750 billion if the Agreement on Trade Facilitation is fully implemented.
The role of investment in driving global economic growth has been dwindling since the outbreak of the global financial crisis. Although global investment soared 38 percent in 2015 due to a surge in cross-border mergers and acquisitions, reversing the declining trend in the previous four years, growth still fell short of the highest level, which was recorded before the financial crisis occurred. What's worse, global investment growth is expected to level off at 10 to 15 percent this year, according to Gao.
Meanwhile, by the end of 2015, a total of 3,304 international investment agreements had been signed worldwide, including 2,946 bilateral ones and 358 other agreements that include investment content, according to statistics from the United Nations Conference on Trade and Development. These agreements, differing from each other in terms of the level of protection and degree of market opening, restrain further global investment growth.
To provide momentum for global investment, the G20 Guiding Principles for Global Investment Policymaking urged the G20 economies to fight against cross-border investment protectionism and create open, non-discriminatory, transparent and predictable conditions for investment. The guiding principles also call for the strengthening of investment protection, the ensuring of transparent policymaking, the promoting of investment to realize sustainable development and the observation of corporate responsibilities.
G20 economies laid out their common points in investment-related policies, agreed on investment system reform and formulated the non-binding Guiding Principles for Global Investment Policymaking, which sent a positive signal for promoting investment facilitation, reducing unnecessary artificial barriers and fueling economic growth, said Xu Hongcai, Director of the Economic Research Department at the China Center for International Economic Exchanges.
In the realm of international investment, no multilateral framework has been set up that can play a leading role like what the WTO has done for global trade. Since countries are at different stages of economic development and have different scales of investment, there have been great divergences regarding the requirements for such an international investment system, said Han Bing, an associate researcher from the Institute of World Economics and Politics under the Chinese Academy of Social Sciences.
Since a global uniform multilateral investment agreement is not likely to come into being in the short term, the G20 Guiding Principles for Global Investment Policymaking can temporarily fill in the blank, said Han.
Gao suggested that the new principles have established a general framework for global investment rules and provided an important direction for the formulation of domestic investment policies and the negotiation of foreign investment agreements.
It also represents a historic step toward bridging the differentiation of inter-state investment policies and intensifying multilateral investment policy coordination, and will serve as institutional guidance to foster global investment growth in the long term, said Gao.
Copyedited by Bryan Michael Galvan
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