China and the G20 summit

By Ricardo Meléndez-Ortiz

This aerial photo taken on Sept 16, 2015 shows the Hangzhou Olympic Sports Center in Hangzhou, capital of East China's Zhejiang province. China will host the 2016 Group of Twenty (G20) summit in the eastern city of Hangzhou, a tourism city best known for its West Lake scenic spot, on Sept 4-5. [Photo/Xinhua]

China has highlighted "robust trade and investment" as a key theme in a document announcing the priorities for this year's G20 summit. China's 13th Five Year Plan aims to double its 2010 GDP per capita by 2020, signaling a continued opening up of the economy, alongside important domestic structural reforms. Chinese leadership of the G20 is acting on these priorities by championing the establishment of a groundbreaking trade and investment working group (TIWG).

Since 2013, the International Centre for Trade and Sustainable Development (ICTSD) has co-convened the E15 Initiative with the World Economic Forum (WEF), generating policy options for strengthening the global trade and investment system to meet the demands, realities, and challenges of the 21st century. The following selective proposals could inform preparations towards the September G20 Hangzhou Summit.

1. Enable the WTO to better serve and lead the global trade and investment regime

The World Trade Organization (WTO) concluded its Tenth Ministerial Conference (MC10) in Nairobi, Kenya last December with, among other things, agreement to disagree on how, or indeed whether, to continue its Doha Round of multilateral trade negotiations. In practical terms this has left the international community without a multilateral trade agenda.

Significant changes in the last two decades have also sometimes seen the WTO out-competed in relevance by other venues. The proliferation of regional trade agreements (RTAs), tectonic shifts in world markets, and the rapidly expanding use of new technologies offer just a few examples of trends impacting the global trading system.

If properly deliberated, this challenging environment could provide opportunities for G20 leaders and the trade policy community to re-think the future of the multilateral trade system. The G20 should continue to support the WTO through helping the institution re-gain its centrality by repositioning itself in the broader and complex global trade and investment system of the 21st century.

First, G20 members can agree to enhance the monitoring and facilitation functions of the WTO, in particular in the areas of data collection and analysis, transparency, and dialogues.

Second, G20 members could act at the WTO to pursue more innovative approaches, by promoting certain model elements for regional or plurilateral agreements, with a view to integrating these into the multilateral trade system in ten to twenty years.

Third, the G20 could encourage the formation of a working group to concretely address fossil-fuel subsidies at the WTO, through an expansion of existing disciplines that are uniquely placed to support international rules-based cooperation on subsidies. The G20 has committed to phasing out fossil-fuel subsidies.

2. Boost global trade growth

International trade and investment contribute to productivity increases by facilitating the optimal allocation and use of capital, labour, as well as technology. Current global trade growth, however, is sluggish. This year's G20 process could consider two initiatives to help re-harness trade and investment for global growth.

First, the G20 members could support negotiating a plurilateral Digital Trade Agreement, in order to maximise the contributions of Internet-based trade to economic development and employment, as well as boosting the integration of small-and-medium sized enterprises (SMEs) into global markets.

Second, the G20 can promote and develop a comprehensive framework for services trade facilitation so as to thoroughly explore the potential contributions of services to trade growth and quality job creation.

3. Promote inclusive, interconnected and sustainable global value chains.

With intermediate goods making up roughly 60 percent of total global imports, international production networks are a significant driver of trade and growth. This year's G20 could consider actions to help better integrate SMEs into global value chains (GVCs) and expand the development opportunities offered by global commerce.

First, set up a "Global Value Chain Partnership," as a public-private platform to enable the efficient functioning of supply chains and sustainable participation.

Second, provide clarity on and bolster the rules-based system in which GVCs must operate. This could include supporting an RTA Exchange as a public information platform on such deals. Efforts could also be made to simplify over 3000 international investment agreements, potentially through creating a new international model agreement, to serve as a template for best practice.

4. Enhance global investment policy cooperation and coordination

Like international trade cross-border investment is an important engine for economic growth and development. Recent instability in financial markets, tumbling commodity prices, slow growth in emerging economies alongside continued stagnation in major markets, among other issues, can act as a drag on investment.

This year's G20 could consider formulating a global investment policy cooperation compact. This could be non-binding, refer to an updated model investment agreement, include investment in the Aid for Trade initiative, and initiate a feasibility study for a G20 plurilateral investment promotion agreement. G20 members could also examine ways to improve investment dispute prevention and settlement.

5. Leadership for trade and sustainable development

In the area of promoting robust international trade and investment, the G20 could make several breakthroughs at the Hangzhou Summit, in addition to maintaining the Trade and Investment Working Group.

Supporting the multilateral trade system should remain a priority for the G20 agenda. However, the G20 should no longer view the WTO as an isolated institution, but instead develop its leadership role within the broader ecosystem of the global trade and investment architecture.

The author is Chief Executive of the International Centre for Trade and Sustainable Development (ICTSD).

Source:Global Value Chain and China Trade in Value Added Database, Ministry of Commerce