The G20 lives on, but mistrust between the West and China hampers progress

World leaders pay their respects at the Mahatma Gandhi memorial at Raj Ghat on 10 September, 2023. (Photo by PIB/AFP via Getty Images)
World leaders pay their respects at the Mahatma Gandhi memorial at Raj Ghat on 10 September, 2023. (Photo by PIB/AFP via Getty Images)

The agreement on a leaders’ declaration at New Delhi’s G20 summit was critical. It keeps the group alive as a vehicle for the US, its allies and the major emerging economies – particularly China – to work together on addressing escalating economic and social challenges.

But the G20 still failed to take the kind of urgent, ambitious action required, in large part due to a continuing lack of trust between the US and China.

Agreeing a declaration was necessary

G20 declarations are often long and heavily caveated, leading many commentators to question their purpose and value.

But they do serve an important role in recording what has been agreed, enabling signatories to be held to account, and signalling new policy directions to groups like private sector firms and civil society.

If no declaration had emerged from New Delhi, it would have been a major blow to the G20’s credibility as an institution and to the prestige of India as host.

The declaration itself is therefore good news: neither the G7 nor the BRICS group can substitute for the G20 as the premier global forum for international economic cooperation.

G7 nations took the right decision in compromising on language referencing the war in Ukraine – probably concluding that China would otherwise be willing to see no declaration agreed, and may have prepared for this by sending Premier Li rather than President Xi.

While the statement did not mention Russia by name, it pointedly noted that ‘all states must refrain from the threat or use of force to seek territorial acquisition against the territorial integrity and sovereignty or political independence of any state’. It also called for ‘the cessation of military destruction or other attacks on relevant infrastructure.’ Both these statements are clearly directed at Russia.

Russia’s attack on Ukraine is critically important in the G20 context because it undermines the very principles on which the G20 is based, including respect for international law and national sovereignty.

But the compromise enabled agreement on other pressing issues after none of the preceding ministerial meetings had resulted in formal agreement.

Some positive outcomes

The summit text reflected the Indian presidency’s theme that the world needs to pursue growth, but in a manner which safeguards the climate, noting that ‘we resolve to pursue environmentally sustainable and inclusive economic growth and development in an integrated, holistic and balanced manner.’ It also calls for a renewed effort to achieve the UN’s Sustainable Development Goals.

Most significantly it called for ‘bigger, better, more effective development banks’.

This built on the momentum created by President Macron’s Summit for a New Global Financing Pact in June and raises the bar for decisions at the World Bank-IMF meetings next month.

To support this effort, President Biden has asked the US Congress to agree to capital contributions which would enable the World Bank to increase its lending to low- and middle-income countries by $25 billion.

The declaration includes strong support for the WTO and ‘a fully and well-functioning dispute settlement system accessible to all members by 2024’.

It also features support for the Pandemic Fund and reaching new agreements on pandemic preparedness and response; for tripling renewable energy capacity globally by 2030; and for work on the macroeconomic risks posed by climate change.

Failing to meet the scale of the challenge

But compared with the scale of the challenges the world now faces – particularly on climate change and the related threat of food insecurity, but also on debt distress and future threats to global health – the outcome was disappointing.

For example, the declaration calls for ‘accelerating efforts towards phasedown of unabated coal’, rather than ‘phasing out’. It makes no mention of action to reduce use of other fossil fuels, except repeating an important, but long-standing, call to tackle fossil fuel subsidies.

This needs to be set against Secretary-General António Guterres’ description of the latest evidence on climate change as a ‘ code red for humanity’.

Meanwhile emerging markets (excluding China) and other developing economies will require about $1 trillion in climate finance per year, but data suggests that they are currently receiving only 27 per cent of the necessary flows.

So, while the G20 has survived, there remains a pressing issue of how to step up its delivery in concrete terms. This will be a key question for the next presidency, Brazil, and for those that follow, South Africa and the US.

At the heart of the challenge is how to build a greater level of trust between all members of the group.

The need for greater trust

Understanding between advanced and developing countries may be helped by the agreement for the African Union formally to join the G20, by the progress made on expanding the multilateral development banks, and by the expectation that the commitment on $100 billion per year in climate finance from developed to developing countries will finally be met in 2023.

More intractable is the issue of trust between the West and China.

Western views are shaped by the experience of China’s participation in international agreements, such as those underpinning the WTO, where it is widely seen to have followed the letter rather than spirit.

China meanwhile sees the US assertion that it does not wish to block China’s development, and wants to cooperate on some issues while competing on others as ‘insincere’.

This is not helped by the nature of the debate in the US Congress, where for example the Biden administration has felt the need to present the call for additional World Bank financing as a way to counter China’s Belt and Road Initiative.

Nor is it helped by the possibility that a newly elected President Trump in 2024, or another MAGA Republican, will withdraw from international agreements made by the Biden administration.

But the US and Soviet Union were able to trust each other enough to reach agreement on limiting the nuclear arms race.

And there is enormous potential for mutual – as well as global – benefit from agreements on issues such as climate finance, debt and health in the G20.

Achieving sufficient trust will require new kinds of thinking, for example, about the way in which proposals are designed, so that there is a greater focus on sustainability and verification of agreements.

It will also require both sides to take more calculated risks. Without that willingness there is little hope that the G20 can address the complex, urgent global threats facing the world.

Creon Butler, Director, Global Economy and Finance Programme.

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