Advertisement

East Asian Community Review

, Volume 2, Issue 1–2, pp 21–38 | Cite as

The G20 Growth Challenge in the Framework of the EU–East Asia Economic Relations

  • Bernadette Andreosso-O’CallaghanEmail author
Original Article
  • 425 Downloads

Abstract

With the broad aim of strong, sustainable, balanced and inclusive growth, the G20 has been contributing to the framing of global economic performance. This paper critically analyzes and assesses the progress in terms of achieving a number of economic objectives centered on the post-2008 global crisis challenge of economic growth revitalization; the analysis is based on the latest Communiqués since Hangzhou in 2016 so as to highlight the areas of convergence (conversely divergence) between the different official texts. Results show that although many policy measures have been acted upon, growth and macroeconomic recovery is still unconvincing, due to a number of long-term challenges (Brexit, protectionism) that could reposition the main G20 actors and reframe the EU–East Asia economic relations. A last section therefore discusses the impact that these long-term economic challenges could have in terms of reframing the G20 actors by looking at several long-term scenarios.

Keywords

G20 G20 economic assessment Economic growth Global financial crisis 

1 Introduction

The group of 20 world leading economies (G20) was formed as an informal process in 1999 with the aim of responding to a new economic challenge which was the accompanying of the economic shift toward the emerging markets and away from the well-established Bretton Woods-based western countries. This group has since been contributing to frame global economic governance—or the interrelationships between the major economies in the world—, with the aim of macroeconomic, sociopolitical and environmental stability and prosperity. This orderly shift has been taking place under the aegis of the USA and of other leading western economies. Of specific importance to this shift has been the challenge of the 2008 global financial crisis (GFC), and of specific relevance to the topic of long-term crisis management is the latest three G20 state leaders summits (Hangzhou in September 2016, Hamburg in July 2017 and Buenos Aires in 2018), which took place after and during years of unimpressive global economic growth. According to recent OECD projections (OECD 2019), economic growth at the global level will decline from 3.6 percent in 2018 to 3.3 percent in 2019 followed by a negligible recovery at 3.4 percent in 2020. It looks therefore as if world economic growth was still not as strong as desired in spite of the many policies and actions advocated at the various G20 state leaders summits since 2008, policies and actions that have been shaped on the basis of a number of objectives. With the outbreak of the US-born GFC, all G20 state leaders have been concerned about the necessary governance changes stemming from the crisis and from the need to revitalize economic growth in a sustainable manner.1 The vision enshrined in the Hangzhou September 2016 Communiqué acknowledges that growth is “weaker than desirable”; at Hamburg, the need for a “strong, sustainable, balanced and inclusive growth” was formulated (p.1 of the Hamburg Communiqué), whereas in Buenos Aires, the Communiqué entitled “Building consensus for fair and sustainable development” evoked global growth picking up, albeit with some key risks such as financial vulnerability and escalating trade disputes, as epitomized by the US–China trade tensions at the time.

The 2015 Antalya declaration had given rise to an action plan for “sustainable development” endorsed in 2016 in Hangzhou and the first step of which was put into practice in Hamburg during the following year. Although the over-arching broad theme of the G20 Summits is “strong, balanced, inclusive and sustainable growth,” the core policy aims and objectives of the different G20 Summits change. The general lack of quantified objectives renders nevertheless any thorough evaluation exercise futile. This does not prevent, however, the analysis of the progress in terms of achievements. Perhaps, the most well-known achievement in the area of economic and financial policy is the BEPS proposals (base erosion and profit shifting) in terms of corporate taxation. This achievement takes the form of automatic exchange of financial accounting information and the implementation of tax transparency data. The most well-known impact of this achievement is possibly represented by the stark opposition between the EU Commission and the Government of Ireland in the 2018 Apple case (von Wuntsch 2019). But in general, progress has been extremely slow; for instance, the steps toward the reforms of international financial institutions (for example, the implementation of an IMF quota reform which would give China, Russia and Brazil more voting powers) have been extremely lengthy.

Consequently, and bearing in mind the broad objective of strong, sustainable, balanced and inclusive growth, this paper aims at critically analyzing and assessing the progress in terms of achieving a number of economic objectives centered on the current economic challenge of growth revitalization. Two main questions arise at this juncture. One is to explore the extent to which the concrete actions spelled out in the 2018 Buenos Aires G20 Declaration address a number of objectives that are different from those of the Hamburg 2017 and Hangzhou 2016 Declarations. The other is to analyze the economic areas where most of the progress is visible as well as the obstacles—or challenges—that prevent further progress. In that vein, the paper will also tentatively explore whether there is a tendency toward a “reframing” or repositioning of the main G20 actors, particularly with reference to the EU–East Asia economic relations. The tentative assessment will focus first on a number of macroeconomic results, and it is structured in three parts. First, by focusing on the Hangzhou, Hamburg and Buenos Aires Communiqués, Sect. 2 will highlight the areas of convergence and divergence in the objectives and themes written in these three official texts. This section summarizes the main points, and it sets the discussion for the ensuing macroeconomic appraisal. Second, the use of statistical indicators will provide a comparative analysis between the main objectives of the different Communiqués (Sect. 3) and it will tentatively discuss the progress toward the achievement of the selected objectives. A fourth section will discuss and analyze a number of longer-term and future preoccupations such as a weakening the European Union. The section will explore the ensuing rebalancing of governance in East Asia and within the G20 with, on the one hand, Beijing’s increasing assertiveness in the sphere of world economic policy in the background of rising protectionism and rising limits to growth in China; this assertiveness has been drawn in large part from the opportunities represented by the GFC; on the other hand, the discussion will then explore Japan’s evolving aspirations both in the Asian region and worldwide given that the country is hosting the 2019 G20 Summit. This section will end with a brief overview of a potential closer integration in East Asia and its repercussions in terms of the EU–East Asia and G20 economic relations. Some conclusive avenues will close the paper.

2 From Hangzhou, Hamburg to Buenos Aires: Continuity and Change

What characterizes the three Communiqués is that they provide a continuity in terms of the main objectives and themes addressed, as well as some changes in line with evolving global trends and national priorities.

2.1 Continuity or Small Variations on Common and Recurrent Themes

Judging by the opening paragraphs of three Communiqués, the G20 continues to acknowledge the fact that economic growth in the G20 countries has not yet fully been resuming and reaching its potential; the group highlights therefore the need for a type of economic growth which is “strong, balanced and inclusive” (page 1 in the Hamburg Communiqué). Interestingly, the need for an inclusive type of growth appears for the first time in the Hamburg document as an important opening objective and all three Communiqués highlight and reiterate the joint objective of a commitment to international economic and financial cooperation. The strengthening of global and financial governance and the stabilization of the global financial architecture with a fairer and modern tax system as well as the fight against corruption are also recurrent common themes in post GFC G20 Communiqués.

In order to attain these objectives, a number of policies and actions are presented. For example, the economic and financial objective gives rise to a policy of “building resilience” in Hamburg, to the need for a more effective and efficient global economic and financial governance in Hangzhou, and according to the Buenos Aires Communiqué, to a strengthening of global financial safety nets with a strong quota-based IMF.2 In the Hangzhou document, these policy actions rest on a number of key principles which are: (1) vision (2) integration (3) openness and (4) inclusiveness. Vision implies simply increasing the growth agenda of the G20. Economic integration is meant to refer to the synergy between fiscal and industrial policies as well as to a better coherence between the labor, economic and social spheres. Openness entails the strengthening of the world trading system dimension with a more open world economic system (this includes the energy dimension), whereas inclusiveness suggests that economic growth should “serve the needs of everyone.” Although the policy aims in the Hamburg document have different headings (such as “building resilience”), the two Communiqués emphasize the same broad growth objective and they share several other objectives. Both are in support of a multilateral trading system, although in the Hamburg text, the necessity to further advance the Doha multilateral agenda is not mentioned in contrast with the Hangzhou document. In the Hamburg case, the global challenge represented by Brexit is eventually fully acknowledged, whereas the Hangzhou document sees long-term innovation as a main driver to growth, in line with the newly born Chinese Government’s “Made in China” 2025 strategy. Other shared concerns visible in both Communiqués are the issues of sustainability and excess capacity in some industries, namely steel, where a combination of sluggish demand and growth as well as subsidies—on the supply side—is pointed out as explanatory variables for the disruption in the industry. The careful wording of the causal relationship between subsidies and market distortions in the Chinese document did not prevent, however, the setting-up of a Global Forum on Steel Excess Capacity, facilitated by the OECD, with the task of developing a number of policies aimed at reducing excess capacity in this industry. With regard to sustainability, the Hangzhou and Hamburg documents refer, with various degrees of detail and several variations, to the environmental impact of growth; the particular issue of food security, which falls normally under the heading of sustainability, is not a central issue in the Hamburg document as it is not specifically highlighted, in sharp contrast with the 2018 Buenos Aires document. In the broad heading of “improving sustainable livelihoods” (Hamburg Communiqué), falls again the idea of creating “better jobs” that become, in 2017, connected with the broader policies of digitalization and training. Interestingly, work issues together with food policy issues are raised as top priorities in the Buenos Aires 2018 document. The Buenos Aires Declaration announces at the outset that the vision should be a “people-centered” vision. Under the heading of “Future of Work,” the document highlights the need to promote “decent work” (although this is not defined), re-skilling in the framework of new technologies and better labor conditions. Under the “Sustainable Food Future” heading, the recommendations highlight prominently the issues of food security, quality of food, as well as healthy and productive soils. This emphasis on food systems is hardly surprising given Argentina’s world share of agricultural food exports which reached nearly 3 percent in 2016,3 and given the specific macroeconomic conditions in which the 2018 Buenos Aires G20 Summit took place. In 2018, the country was dealing with yet more severe macroeconomic conditions caused in part by a drought affecting the country’s farm belt; the inability to recover from the 2001 crisis was putting additional pressures on the national currency implying that the Argentinian Peso was one of the worst performing currencies in 2018. This affected dramatically the country’s inflation rate which reached 47.6 percent in 2018. The deterioration of the financial macroeconomic conditions of the country prompted the Government to seek yet another US$ 57 billion loan from the IMF, assorted with a number of additional public spending cuts (OECD 2019). In such an uncertain macroeconomic climate, food security issues tend to take prominence again.

2.2 Main Changes and Dissonance

According to some analysts (Jann 2017) (B20 Germany 2017), reaching a consensus in Hamburg at a time of a serious backlash against globalization proves the relative diplomatic success of the German Presidency which was able to adapt to some unpredictable political events such as the US decision to withdraw from the Paris agreement. Consequently, a changing world policy environment has led the German Presidency to display a large degree of flexibility and also a new vision with some new policy areas. Two new main differentiating policy areas contained in the Hamburg document are the following: the recognition of efforts toward women empowerment and the advocacy of a partnership with Africa; the latter goes beyond the mere integration of African countries in global economic development as stipulated in the earlier document, and this new policy stance has led to the launch of the G20 Africa Partnership. Relatedly, the Hamburg document leaves some space to the problem of people’s displacement and to the root causes of this displacement. These innovative changes in the Hamburg Communiqué reveal the direct preoccupation of the German presidency confronted with the migrant crisis (as well as with the exit of a major economy from the EU). Conversely, there are areas where the Hamburg Communiqué falls short of what was envisaged in the Hangzhou declaration. Although the Hamburg document is more ambitious than the Chinese-based document in terms of addressing excess capacity (in the steel industry in particular), of human rights and of sustainable globalization, it is nevertheless a step backward with regard to two areas, namely the G20 Trade and Investment Working Group Environmental Goods Agreement and in terms of the guiding principles for global investment policy making (B20 Germany 2017). Consequently, an assessment of the concrete results emanating from evolving policy actions will have to focus on a small selection of core economic objectives enshrined in the last three Communiqués. As hinted at above, the Buenos Aires document seems to aim at rebalancing the three dimensions of the sustainable development agenda (economic, social and environmental) toward people, by giving more weight to the societal aspects of economic growth so that, ultimately, peace be sustained.

Given that the action plan only rarely provides quantified objectives to be attained, a thorough economic evaluation exercise is beyond the scope of this paper. The next section suggests therefore a tentative economic assessment of the broad economic objective of growth revitalization as an ongoing economic challenge by using some macroeconomic indicators.

3 A Tentative Assessment of the G20 Main Objectives—Tackling the Post GFC Challenge of Slow Growth

3.1 A Note on the Methodology

A number of assessment reports have been published jointly by the IMF, OECD and World Bank Group as well as by other organizations so as to highlight the progress in terms of policy choices, actions and results. One of the latest such documents is the 2018 International Trade Union Confederation and Trade Union Advisory Committee joint document (ITUC/TUAC 2018). This critical review sees the Action Plan adopted in Buenos Aires very much skewed toward an economic competitiveness agenda, without much consideration for earlier commitments in terms of income inequality and labor income share. This is despite the “people-centered” vision as claimed at the outset. An assessment report of the pervious G20 meeting in Hamburg in 2017 is the “Hamburg Accountability Assessment” published by the G20 Framework Working Group in July 2017. As in all assessment exercises, the qualitative and quantitative methodology used in the various assessment documents rests on a number of clearly stated measurable objectives which can be divided into different areas or groups. These objectives must ideally be assessed in the medium to long term, which suggests that new objectives can be discarded, at least in the framework of the current paper. The starting point of the exercise is to focus on the broad objective of achieving a ‘strong, sustainable, balanced and inclusive growth’—the latter epithet having been given more prominence in Hamburg and in Buenos Aires as discussed above.

Strong growth implies monitoring the trend of several macroeconomic indicators such as: (1) an increase in combined output and in combined GDP; for example, at the 2014 Brisbane G20 summit, the G20 countries had envisaged and planned an increase in their combined GDP by more than 2 percent by 2018; (2) easing fiscal policy; this can be gauged with the help of indicators such as the government debt to GDP ratio; (3) long-term interest rates (real and nominal); (4) unemployment rates; (5) wage growth; (6) trade indicators; and (7) productivity growth. These are all easily quantifiable indicators, and the remaining analysis will rest upon a selection of these indicators.

Sustainable growth in this context implies monitoring progress in terms of product market reforms (including trade related measures), labor market reforms, tax reforms, R&D expenditure as well as expenditure on public infrastructure.

Balanced growth is appraised at two levels: First, this objective implies looking at external balances (current account imbalances), and second at internal balances such as public debt. Finally, inclusive growth implies assessing the way income and wealth inequality has evolved since the crisis, even though this sub-objective has only recently been included as an over-arching objective in the Hamburg G20 Communiqué, and although no concrete action has been proffered. Understandably, because of the myriad of policy commitments falling under this broad growth heading (some 1700 in total), because of the difficulty to measure some of them and because of the limited space here, the remainder of our analysis will focus on a number of selected macroeconomic indicators.

3.2 A Macroeconomic Analysis

First of all, a synoptic table shows the slightly declining share of the G20 in the world population, world GDP, world trade in goods and services, exports of goods and services and current account for a number of selected years since 2006 (Table 1).
Table 1

World share of the G20—selected indicators (2006, 2011 and 2016)

 

2006

2011

2016

World population

65.96

64.78

63.53

World GDP (in PPP, current international $)

80.33

79.99

79.74

World trade in goods and services (BoP, current US$)

78.18

76.26

76.42

World exports of goods and services (BoP, current US$)

76.75

75.18

76.26

Source: World Bank data (available at: databank.worldbank.org/data/reports; accessed on 5th March 2018)

In particular, the table shows a small recovery of the G20 countries with regard to their share in world trade over the period 2011–2016. Concomitantly, although G20 growth has been picking up, it still remains slightly below pre-crisis levels in 2016 (G20, Framework Working Group 2017), particularly in the advanced economies of the group. Fiscal policies have on the main helped to correct most of the macroeconomic imbalances, and many G20 economies have subsequently been able to ease their fiscal constraints; long-term interest rates are on the rise—albeit this has been still at a low pace—whereas unemployment rates have tended to fall except in emerging G20 countries (G20 Framework Working Group 2017). An area where progress has been well below expectations is in terms of labor productivity growth. As Table 2 suggests, average annual labor productivity growth has declined since the GFC, with some recovery visible in some countries (USA) in 2017. Declining labor productivity growth has not spared the emerging economies of the G20. Relatedly, wage growth has been rather modest in the advanced economies of the G20, whereas it has declined in some of the emerging G20 economies.
Table 2

Average annual labor productivity growth of G20 advanced, G20 emerging and G20 (2012–2017, in %)

Countries

2012

2013

2014

2015

2016

2017

2012–2017 average

Advanced

Australia

2.41

1.64

0.59

2.46

− 0.56

1.28

1.303

Canada

− 0.11

1.2

2.52

− 0.18

0.6

1.75

0.963

France

0.33

1.35

0.96

0.81

0.03

1.31

0.798

Germany

0.62

0.78

1.02

0.58

1.42

0.89

0.885

Italy

− 0.32

0.91

0.18

0.22

− 0.4

0.5

0.182

Japan

0.94

2.06

0.08

1.5

0.28

0.95

0.968

Korea

1.3

1.98

2.23

0.86

2.67

4.21

2.208

UK

− 0.58

0.26

0.17

1.69

− 0.56

0.83

0.302

USA

0.26

0.38

0.44

0.75

0.26

1.01

0.517

Spain

2

1.4

0.32

0.49

0.48

1.09

0.963

Total average

0.685

1.196

0.851

0.918

0.422

1.382

0.909

Emerging

Mexico

0.37

− 0.48

2.5

0.57

0.68

0.49

0.688

Russia

2.5

2.11

0.28

− 3.54

− 0.12

1.59

0.470

South Africa

1.07

− 0.01

0.09

7.63

3.99

− 1.11

1.943

Turkey

2.1

6.76

0.03

3.22

0.99

3.73

2.805

Indonesia

4.941

5.561

1.504

4.702

1.846

2.801

3.559

India

4.833

4.375

5.52

6

5.267

4.844

5.140

China

7.458

7.373

6.926

6.647

6.491

6.849

6.957

Argentina

− 1.952

1.55

− 2.618

1.045

− 1.739

1.641

− 0.346

Brazil

1.326

1.4

− 0.897

− 3.53

− 1.019

1.916

− 0.134

Saudi Arabia

0.798

− 0.544

0.482

0.327

0.266

Total average

2.344

2.810

1.382

2.307

1.821

2.528

2.135

G20

Total average

1.515

2.003

1.116

1.613

1.085

1.925

1.522

Source: OECD data (https://data.oecd.org/lprdty/labour-productivity-and-utilization.htm) and CEIC database

The OCED database provides figures for the countries Australia, Canada, Germany, Spain, France, UK, Italy, Japan, Korea, Mexico, Russia, Turkey, USA and South Africa, while the CEIC database provides figures for China, India, Indonesia, Brazil, Argentina and Saudi Arabia

This first part of a qualitative assessment shows that the G20 economies still suffer from an untapped output growth potential and that the growth recovery is fragile. In the words of the G20 Framework Working Group (2017: 3), “growth is not yet sustainable.” This is due to the fact that the different structural reforms have not yet delivered the promised outcomes, and part of this is due to renewed political uncertainty in both the USA and the EU (see Sect. 4). With regard to the third component of the main G20 objective (i.e., balanced growth), statistical evidence shows that the problem of current account imbalances has tended to abate (Table 3) but that the adjustment has been asymmetric. Internal imbalances have been addressed with deleveraging in the corporate sector of some G20 emerging economies, and with declining public debt/GDP ratios (Table 4). Finally, a major flaw of post-crisis fiscal adjustment policies has been their detrimental impact on income and wealth inequality (sub-objective 4). The downward trending share of wages in the national income of G20 countries since the 1970s—including China (Pauls 2015), has been somewhat mitigated by a stable trend of income inequality after the GFC, owing to the existence of correcting social transfers. Of specific concern here are the issues of youth unemployment, gender gaps in labor markets as well as part-time work and self-employment, all labor market characteristics that have tended to become more prominent since the crisis. No concrete and specific policy actions have been put forward in the area of income distribution in the Hamburg and Buenos Aires Communiqués, where socioeconomic issues would have tended to be reduced to the need of creating “better jobs” (through training and digitalization in the Hamburg case).
Table 3

Current account imbalances in % of GDP of G20 countries from 2010 to 2023 (categorized by surplus and deficit)

 

Forecast

 

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2023

G20-surplus

Germany

5.6

6.1

7

6.7

7.5

8.9

8.5

8

8.2

8.2

7.8

Italy

   

1

1.9

1.5

2.7

2.9

2.6

2.2

0.9

Spain

   

1.5

1.1

1.1

1.9

1.7

1.6

1.7

1.8

Japan

3.9

2.1

1

0.9

0.8

3.1

3.8

4

3.8

3.7

4

Korea

2.6

1.6

4.2

6.2

6

7.7

7

5.1

5.5

5.8

5.6

China

3.9

1.8

2.5

1.5

2.2

2.7

1.8

1.4

1.2

1.2

0.6

Indonesia

0.7

0.2

         

Russia

4.1

4.7

3.2

1.5

2.8

5

2

2.6

4.5

3.8

3.4

Saudi Arabia

12.7

23.6

22.4

18.1

9.8

  

2.7

5.4

3.6

 

G20-deficit

USA

− 2.9

− 2.9

− 2.6

− 2.1

− 2.1

− 2.4

− 2.4

− 2.4

− 3

− 3.4

− 3

France

− 0.8

− 1

− 1.2

− 0.9

− 1.3

− 0.4

− 0.9

− 1.4

− 1.3

− 0.9

− 0.2

UK

− 3.8

− 2.4

− 4.2

− 5.5

− 5.3

− 5.2

− 5.8

− 4.1

− 3.7

− 3.4

− 2.9

Italy

− 3.4

− 3

− 0.3

        

Spain

− 3.9

− 3.2

− 0.2

        

Canada

− 3.6

− 2.8

− 3.6

− 3.2

− 2.4

− 3.6

− 3.2

− 3

− 3.2

− 2.5

− 1.7

Australia

− 3.7

− 3.1

− 4.3

− 3.4

− 3.1

− 4.7

− 3.1

− 2.3

− 1.9

− 2.3

− 2.3

India

− 2.8

− 4.3

− 4.8

− 1.7

− 1.3

− 1.1

− 0.7

− 2

− 2.3

− 2.1

− 2.6

Indonesia

  

− 2.7

− 3.2

− 3.1

− 2

− 1.8

− 1.7

− 1.9

− 1.9

− 2

Turkey

− 5.8

− 8.9

− 5.5

− 6.7

− 4.7

− 3.7

− 3.8

− 5.5

− 5.4

− 4.8

− 3.3

Argentina

− 0.4

− 1

− 0.4

− 2.1

− 1.6

− 2.7

− 2.7

− 4.8

− 5.1

− 5.5

− 5.9

Mexico

− 0.5

− 1

− 1.5

− 2.4

− 1.8

− 2.5

− 2.1

− 1.6

− 1.9

− 2.2

− 2

South Africa

− 1.5

− 2.2

− 5.1

− 5.9

− 5.3

− 4.4

− 3.3

− 2.3

− 2.9

− 3.1

− 3.4

Brazil

− 3.4

− 2.9

− 3

− 3

− 4.2

− 3.3

− 1.3

− 0.5

− 1.6

− 1.8

− 1.9

Saudi Arabia

     

− 8.7

− 3.7

   

− 2.2

Source: IMF April 2018 World Economic Outlook (WEO)

Note that the oil exporting countries are Russia and Saudi Arabia

Table 4

Change in gross general government debt levels from 2008 to 2023 in G20 countries (Advanced vs. G20 Emerging countries; % of GDP; forecasts for 2019–2023)

Countries

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Advanced

Australia

11.7

16.7

20.5

24.1

27.7

30.6

34.1

37.8

40.6

41.6

41.7

41

38.7

36.1

34.2

32.2

Canada

67.8

79.3

81.1

81.5

84.8

85.8

85

90.5

91.1

89.7

86.6

83.8

81.2

78.7

76.4

74.3

France

68

82.9

85.1

87.8

90.7

93.5

95

95.8

96.6

97

96.3

96.2

95.1

93.6

91.6

89

Germany

65.1

72.6

80.9

78.6

79.8

77.4

74.7

71

68.2

64.1

59.8

55.7

52.2

48.7

45.5

42.4

Italy

102.4

112.5

115.4

116.5

123.4

129

131.8

131.5

132

131.5

129.7

127.5

124.9

122.1

119.3

116.6

Japan

191.3

201

207.9

222.1

229

232.5

236.1

231.3

235.6

236.4

236

234.2

232.3

231.4

230.7

229.6

Korea

28.2

31.4

30.8

31.5

32.2

35.4

37.3

39.5

40

39.8

38.9

38.3

37.9

37.6

37.3

37

UK

50.2

64.1

75.6

81.3

84.5

85.6

87.4

88.2

88.2

87

86.3

85.9

85.2

84.5

83.6

82.5

USA

73.6

87

95.7

100

103.5

105.4

105.1

105.3

107.2

107.8

108

109.4

111.3

113.1

115.2

116.9

Spain

39.4

52.7

60.1

69.5

85.7

95.5

100.4

99.4

99

98.4

96.7

95.1

93.9

92.8

91.8

90.9

Advanced G20

69.77

80.02

85.31

89.29

94.13

97.07

98.69

99.03

99.85

99.33

98

96.71

95.27

93.86

92.56

91.14

Change

3.89

10.25

5.29

3.98

4.84

2.94

1.62

0.34

0.82

− 0.52

− 1.33

− 1.29

− 1.44

− 1.41

− 1.3

− 1.42

Emerging

Argentina

43.9

53.8

42

37.5

38.9

41.7

43.6

55.1

53.3

52.6

54.1

52.7

52.2

52

52.5

53.5

Brazil

61.9

65

63.1

61.2

62.2

60.2

62.3

72.6

78.4

84

87.3

90.2

92.7

94.6

95.7

96.3

China

27

34.3

33.7

33.6

34.3

37

39.9

41.1

44.3

47.8

51.2

54.4

57.6

60.5

63.1

65.5

India

74.5

72.5

67.5

69.6

69.1

68.5

67.8

69.6

68.9

70.2

68.9

67.3

65.8

64.3

62.9

61.4

Indonesia

30.3

26.5

24.5

23.1

23

24.8

24.7

27.5

28.3

28.9

29.6

30.3

30.7

31.1

31.5

31.7

Mexico

42.8

43.7

42

42.9

42.7

45.9

48.9

52.9

56.8

54.2

53.5

53.4

53.4

53.3

53.3

53.3

Russia

7.4

9.9

10.6

10.8

11.5

12.7

15.6

15.9

15.7

17.4

18.7

19.5

19.9

20

20.1

20.4

Saudi Arabia

12.1

14

8.4

5.4

3

2.1

1.6

5.8

13.1

17.3

20

23.8

26

27.1

27.6

29.4

South Africa

26.5

30.1

34.7

38.2

41

44.1

47

49.3

51.6

52.7

54.9

55.7

56.4

57

57.6

58.1

Turkey

38.2

43.9

40.1

36.5

32.7

31.4

28.8

27.6

28.3

28.5

27.8

27.9

27.9

28

28.1

28.1

Emerging G20

36.46

39.37

36.66

35.88

35.84

36.84

38.02

41.74

43.87

45.36

46.6

47.52

48.26

48.79

49.24

49.77

Change

− 1.4

2.91

− 2.71

− 0.78

− 0.04

1

1.18

3.72

2.13

1.49

1.24

0.92

0.74

0.53

0.45

0.53

Source: IMF April 2016 Fiscal Monitor, April 2017 Fiscal Monitor and April 2018 Fiscal Monitor

The change equals to, for example, data of 2008 minus data of 2007 (69.77 − 65.88 = 3.89), and the rest of the years are done in the same manner. Fiscal Monitor (April 2016) is used for the data of 2007, and Fiscal Monitor (April 2018) is used for updating the data from Fiscal Monitor April 2017

A non-exhaustive qualitative assessment based on a selected number of macroeconomic indicators and falling under the broad (and quasi consistently repeated) objective of “strong, sustainable, balanced and inclusive” growth as reiterated in the different G20 Communiqués after the crisis shows that the G20 growth has resumed but that it is still rather fragile. An important lesson that can be drawn from this analysis is that concerted and common actions, for example, in the form of a G20, are a necessary condition for growth recovery. The different assessments undertaken by the OECD, IMF and World Bank Group highlight the relative success of the G20 in achieving its commitments.4 Most of the policy measures delineated in Brisbane (2014), Antalya (2015), Hangzhou (2016) and Hamburg (2017) have been assessed as being either fully implemented (this is the case for 26 percent of all commitments in Hangzhou) or in progress (62 percent in the Hangzhou case). Very few are either abandoned or show limited progress; the latter corresponds, for example, to about 10 percent only of all key commitments undertaken in Antalya in 2015. Needless to say, much of the progress for countries such as Italy, Spain, France and also the UK in terms of “strong, sustainable and balanced growth” is due to the EU policy framework and a more thorough analysis would need to take this into account so as to fully assess the impact of G20 policy making on growth revival in these countries.

4 Current and Future Challenges, Repositioning of the G20 Main Actors and Impact for the EU–East Asia Economic Relations

Policies in favor of global crisis management and growth revival are more efficiently devised and implemented at the multilateral level, and yet with most of the direct damaging effects of the GFC being under control, the momentum for action at the G20 level seems to have slowed down. After all, the concerted efforts implemented in order to tackle the short-term effects of the GFC, particularly under the auspices of the G20, might only be an exception in the long-term trend of regionalism (or regional integration) as observed since the 1990s (Boyer 2005). According to some critical analyses (ITUC/TUAC 2018), the economic-policy coordination exercise of the G20 has dissipated and the institution increasingly focuses on long-term structural reforms with competitiveness as the main driving objective. Also, the dynamics within the G20 have been changing with the retrenched attitudes from the part of key G20 players. Brexit and the reintroduction of relatively high tariffs in the steel, alumina and other industries in March 2018 by the US administration tend to suggest that the evidence of new protectionist trends which was visible shortly after the crisis erupted in 2008/09 was well founded.5 Whatever the final precise impact of Brexit on the UK, Irish and EU-26 economies—an impact which, at the time of writing, is still subject to various speculative scenarios and econometric calculations—what Brexit certainly implies in terms of global economic governance is a further weakening of the European Union, both politically and economically. This état-de-fait undermines the role of the EU in the G20 itself. In addition, the reintroduction of substantially high tariffs6—up to 25 percent—by the US administration, first on Chinese imports but also potentially on other countries’ imports (such as eventually on EU/German motorcars and parts) is deemed to weaken other G20 economies. Again, given the specialization of Germany in the industries targeted by the Trump Administration’s protectionist policy, the new US retrenchment situation is bound to hit the German economy and, in turn, the EU economy further and as a whole. Growth prospects in the euro area are being revised downward particularly for Germany, Italy and France, the three biggest economies in a post-Brexit EU (OECD 2019).

The economic marginalization of the EU in general and of some European or/and “Western” countries in particular had proceeded in parallel with the inexorable economic rise of Asia and of other emerging economies in the world. What Brexit and the Trump tariffs imply nevertheless is that this marginalization could accelerate in the near future. Consequently and thanks to modern economic globalization, a major rebalancing or change in terms of Chinese (and Asian, emerging countries’) increasing assertiveness has become more visible. This takes the form of new institutions in emerging countries and new policies having a worldwide impact. An example on the Chinese side in particular, starting with the go global strategy, is the policy of RMB internationalization, the” Belt and Road Initiative” (Solmecke 2016), and the “Made in China 2025” initiative. For these three cases, the global financial crisis seems to have had a catalytic role. This change is also institutional, with the creation of new regional financial institutions, such as the Asian Infrastructure Investment Bank (AIIB). It is unclear whether these developments might lead either to: (1) the diminishing role of the Chinese economy in Asia; to (2) a rebalancing of economic and political forces in the East Asian region and worldwide with Japan (and South Korea in its footsteps) taking on a new role in the Asian region thereby undermining the prospect of China becoming eventually the new world Hegemon; or (3) a more integrated East Asian region. The remainder of the analysis will briefly look at these three possible scenarios in terms of the EU–East Asian relations and global governance.

4.1 Scenario 1—The diminishing role of the Chinese economy in Asia

Shortly after the outburst of the 2008 GFC, China managed to weather the global recession noticeably better than the EU, where “muddling through” policies de facto aggravated the euro area crisis. China was able to show that the country was able at the time to be relatively resilient, a resilience that materialized, for example, through its fiscal and monetary stimulus program implemented in the Autumn of 2008. Nevertheless, lower growth rates launched China on a new growth trajectory of what became known as the “new normal” (trajectory). In addition, economic growth was not proceeding without a number of limits, internally and also with respect to other countries in the world (Fabre 2013; Walter 2014). From a domestic perspective, these limits are income and wealth inequality, severe environmental problems, important regional disparities combined with ethnic issues, and major weaknesses in the under-developed financial system. China’s rapid economic growth since the economic reforms has created serious problems to its environment such as water scarcity, desertification, decreasing land for agricultural use as well as considerable pollution problems generating serious health issues. The country contributes massively to carbon dioxide emissions that are considered as an explanatory factor of global climate change; hiding behind its status as a developing nation (in the WTO framework), China is expected to assume more responsibility and accountability in the fight against pollution. With respect to the sphere of global governance, economic growth in China has been raising a number of concerns worldwide as the country has been involved in reaching out to the outside world so as to secure energy, natural resources and core inputs necessary to keep supporting its manufacturing exports. Ambitious energy and agricultural policies have enabled, for example, the acquisition of land abroad for agricultural purposes; “land-grabbing” has thus become a core instrument of China’s food security and agricultural policy (Zolin and Grabbion 2013); the intense exploitation and extraction of natural resources from poorer countries (namely African countries) has not gone without increasing resentment from the part of these poor host countries, jeopardizing the privileged relationship that the EU had in the past with the African continent. As discussed by Fabre (2013), the Autumn 2008 economic stimulus program has accelerated the rate of investment in the property and manufacturing sectors, leading to overcapacity in manufacturing and to increasing speculation in the property sector. There are therefore important limits to contemporary Chinese economic growth, and these limits might ultimately lead to question China’s ability to become the regional hegemon (Andreosso-O’Callaghan and Morales 2019). These limits are even more important today given the global trend of protectionism fueled by the new US administration. The trade tensions with the USA come at a time when China has still not been able to move successfully away from its export-led growth model; as a result, these trade tensions weigh increasingly on Chinese industrial production and exports. It might be that the growing skepticism vis-à-vis China and from the part of both individual EU countries and of the EU in toto (Meunier 2014) will contribute to isolate China technologically and economically in the near and more distant future. According to OECD forecasts (OECD 2019), Chinese GDP growth will slow down gradually (to 6 percent in 2020).

4.2 Scenario 2—Japan Taking on Again a Leadership Role

Ultimately, the Asian winners of rising protectionism could be the market economies that have fruitfully connected with the EU and with other western economies through deep trade deals, namely Japan and also South Korea. It is therefore legitimate to conjecture whether Japan—the G20 host country for 2019—might take on a new role, both in the Asian region and worldwide, and particularly within the G20 framework.

Although internationalization is an integral part of the third arrow of today’s Abenomics, the country has generally been an active supporter of the multilateral WTO framework particularly after the oil shocks of the 1970s. The signing of several free trade agreements—starting with Singapore in 2000—has placed Japan in the median position in terms of openness (measured by the trade/GDP ratio) out of 75 trading countries. For example, the signature by Japan and by ten other countries of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, known as TPP11) in March 2018, without the USA, shows the commitment of Japan to engage in certain forms of regionalism. Of specific note is the EU and Japan’s Economic Partnership Agreement (EJEPA) that entered into force on February 1, 2019, and referred to as the largest trade area in the world. EJEPA belongs to the category of “deep agreements,” since it covers areas such as procurement markets, technical barriers to trade (TBTs), intellectual property rights, rules of origin, etc. By removing almost all custom duties (equivalent of up to €1bn annually), the agreement would yield higher output gains for Japan than for the EU in relative terms (by 2035);7 Japan would incur output losses in agricultural products and in clothing–textile but these would be compensated for by substantial output gains in motor vehicles, machinery–equipment and chemicals (EC 2018), the Japanese strong manufacturing areas. With Japanese GDP growth forecast to be around ¾ percent in 2019 and 2020 (OECD 2019), and with important labor shortages, the trade variable—combined with technological change—is seen (again) as a new engine of growth in Japan. In a sense, the Trump tariffs imposed on Chinese imports come at the most auspicious time for Japan. The limits to growth in China combined with renewed growth prospects in a technology-oriented Japanese economy supported by the USA might reposition Japan as a driving economy in the Asian region and within the G20 ambit; the country might be able to use the 2019 G20 meeting to successfully signal this new ambitious role. Ultimately, Japan, the USA and the EU do share common long-lasting interests, not only in terms of economic growth but also in terms of peace and security, implying a stronger “Western” alliance forming in the ambit of the G20 Framework (with other similar countries therein). That may further weaken China’s position and its economic relations with the EU countries. Economically, this alliance could be the core of future economic growth as the current growth revival in the USA alone tends to demonstrate.

4.3 Scenario 3—Toward a More Integrated East Asian Region?

Nevertheless, a logical development arising from the new limits to growth faced by China and by the new opportunities on offer to Japan might translate into a rapprochement between these two countries, and ultimately into a more integrated East Asian region. After all, China and Japan form the core binomial of (economic) integration in East Asia,8 and the modern relationship between the two countries has been one of conflict and cooperation (Dent 2017). Now that China sees the necessity to become more economically independent from the USA, China shows a more positive attitude vis-à-vis Japan which it reconsiders as a key economic partner. The conditions are thus optimal for more progress on the Regional Comprehensive Economic Partnership (RCEP, which embraces also ASEAN countries as well as India, Australia and New Zealand), and also on the tri-lateral East Asian Economic Community (with South Korea). Although the momentum for monetary union has dissipated in East Asia, the increasing business/economic interdependence between China, Japan and South Korea compels these three countries to work more closely together. Globally, this implies that increased regional integration in East Asia might ultimately be able to offset the negative effects arising from economic disintegration in the EU (with Brexit). This scenario would imply that Japan would see the US and European economic relations as crucial but that it would optimize its willingness to embark upon a new partnership with China and with other countries in the region.

5 Conclusions

An examination of the objectives contained in the last three G20 Communiqués shows, on the main, a continuum in the area of priorities, summarized by the need for a “strong, sustainable, balanced and inclusive” growth coupled with some variations. At the Buenos Aires 2018 Summit, issues such as food security, financial safety nets and a people’s centered vision were proffered by a crisis-stricken country, whereas in Hamburg in 2017, trade was reiterated as a main driver of growth, and innovation was prominent in Hangzhou in 2016. The examination of some broad macroeconomic indicators reveals the incidence of untapped output growth potential and of a fragile recovery on the G20 countries.

The main economic challenges ahead can be noted as follows: First, there is a need for more concrete progress on the issue of fairer globalization, so as to address the problems of within-country inequality. This is a pressing issue to tackle given the risk of social and economic disunity, as Brexit and some other adverse sociopolitical events in the EU would lead to infer. Second, the Trump tariffs tend to reframe the dynamics between G20 member countries. The new global growth patterns seem to consolidate the USA in its role as the uncontested world hegemon, and they seem to question the ability of China—which is still very much dependent on foreign technology and knowledge—to emerge as a leader in the Asian region and further afield. A winner of this G20 reframing process could be Japan; the country is now part of the biggest trade area in the world (with the EU) which will yield relatively higher gains to Japan in the long term, and its long-standing friendship with the USA could be given a boost. The reframing of economic relations within the ambit of the G20 might thus ultimately lead to a strong core of Western countries led by the USA and encompassing inter alia Japan, the UK and EU countries. The future position of China is intriguing: It now sees the need to engage in a constructive dialogue with Japan and with other countries in the region, while minimizing its economic and technological isolation with a number of increasingly skeptical Western countries. It remains to be seen whether Japan will “use” the 2019 G20 opportunity to reaffirm itself as a key economic (and political) actor in Asia. A broad challenge for Japan will be to revitalize the economic-policy coordination exercise of the G20 which has tended to dissipate, given that most of the short-term damaging effects of the GFC are now under control.

Footnotes

  1. 1.

    By “sustainable growth,” one implies looking at three inter-connected dimensions, namely economic, social and environmental.

  2. 2.

    This is of particular relevance to a country such as Argentina that has been subject to several crises since 1998 and that has consequently been relying on several IMF bails outs; the country’s GDP is expected to contract in both 2018 and 2019 following tight fiscal and monetary policies implemented as a result of financial market disruptions (OECD, 2019).

  3. 3.

    FAO Statistical Trade Indices. Food is defined by the FAO as including cereals, crops and livestock, and these figures exclude fish. Note that the peso depreciation together with stronger agricultural production are two factors that are expected to stimulate economic growth in Argentina in the near future.

  4. 4.

    See the IMF and OECD (2018) document.

  5. 5.

    For an early account of protectionist trends after the crisis, the interested reader can refer to Andreosso-O’Callaghan and Uprasen (2009).

  6. 6.

    The tariff rates have reached 25 percent (on $50 billion worth of imports from China); there are also tariffs of 10 percent on $200 billion worth of imports from China.

  7. 7.

    This means that the additional GDP growth arising from the agreement by 2035 would be higher for Japan than for the EU. All simulations in the EU study are based on CGE modeling.

  8. 8.

    Since much of “regionalism” or regional integration in East Asia has been business-driven—notably through the impulse of Japanese multinational enterprises—the emphasis in this subsection is on economic regional integration.

References

  1. Andreosso-O’Callaghan, B., and Uprasen U. 2009. Measuring the impact of protectionism on China: A CGE approach. In American Association for Chinese Studies 51st anniversary annual conference, Rollins College Orlando, 16–18 October.Google Scholar
  2. Andreosso-O’Callaghan, B., and L. Morales. 2019. Emerging Asian economies: Are they really a challenge to the current Status Quo? Journal of Applied Business and Economics 21(1): 1–11.Google Scholar
  3. Boyer, Robert. 2005. European Monetary Union and its implication for Asia. In Regional integration—Europe and Asia Compared, ed. W. Moon and B. Andreosso-O’Callaghan, 97–134. Aldershot: Ashgate.Google Scholar
  4. B20 Germany. 2017. Preliminary G20 summit evaluation. Berlin, July.Google Scholar
  5. Dent, Christopher M. 2017. East Asian integration—Towards an East Asian Economic Community. ADBI Working Paper 665, Tokyo, Asian Development Bank Institute.Google Scholar
  6. EC. 2018. The economic impact of the EU-Japan Economic Partnership Agreement (EPA). European Commission Directorate for Trade, Brussels, June.Google Scholar
  7. Fabre Guilhem. 2013. The lion’s share: What’s BEHIND China’s economic slowdown. Fondation Maison des Sciences de l’Homme, No. 53. Paris, October.Google Scholar
  8. G20 Framework Working Group (2017) Hamburg accountability assessment. Hamburg, July.Google Scholar
  9. IMF and OECD. 2018 Quantifying the implementation and impact of G20 members’ growth strategies. Washington.Google Scholar
  10. ITUC/TUAC. 2018. Assessment of the G20 summit in Buenos Aires, November/December.Google Scholar
  11. Jann, Lay. 2017. The G20 under the German Presidency: A diplomatic success…, GIGA Focus Global, No. 6, December. Hamburg: German Institute of Global and Area Studies.Google Scholar
  12. Meunier, Sophie. 2014. Divide and Conquer? China and the cacophony of foreign investment rules in the EU. Journal of European Public Policy 21(7): 996–1016.CrossRefGoogle Scholar
  13. OECD. 2019. Interim economic outlook—Better policies for better lives. Paris, March.Google Scholar
  14. Pauls, Robert. 2015. Capitalist development, contradictions and crises in China, 1993–2011. A case study within a theoretical framework for the comparative study of capitalism. PhD thesis, RUHR-UNIVERSITÄT BOCHUM Fakultät für Ostasienwissenschaften.Google Scholar
  15. Solmecke, U. 2016. Multinational enterprises and the “One Belt, One Road” initiative in a post-crisis global environment. The Copenhagen Journal of Asian Studies 34(2): 9–27.CrossRefGoogle Scholar
  16. Von Wuntsch, M. 2019. Wohin treibt die kapitalistische Gesellschaft? Eine Lebensform in der Krise. Berlin: UvK Verlag.Google Scholar
  17. Walter, A. 2014. Should we be sceptical about prospects for an “Asian Century”? The Australian Economic Review 47(3): 370–377.CrossRefGoogle Scholar
  18. Zolin, Maria Bruna, and Grabbion, Marco. 2013. Food and energy (In)security: Evidence from agricultural investments in selected emerging economies. Department of Economics Working Papers Series, No. 25/WP/2013. Venice: Ca’Foscari.Google Scholar

Copyright information

© Asiatic Research Institute 2019

Authors and Affiliations

  1. 1.Department of Economics and ManagementRuhr University BochumBochumGermany

Personalised recommendations