What scope for more regionalism in G20?

The entry of the African Union (AU) into G20 proclaimed in 2023 is to be tested this year in terms of the contribution that this regional bloc can deliver to the decision-making at the global level. With South Africa taking chairmanship in the G20 in 2025, there may be a window of opportunity in the 2024-2025 period for the African Union and other regional blocs in the world economy to play a more prominent role in the initiatives launched by the G20 grouping. One of the possible tracks that could be pursued by the African Union in this respect is the formation of a platform of regional integration arrangements that would support the initiatives launched by G20 economies. Such a platform could take the form of a G20 engagement group (a regional 20 (R20)) and include not only the regional integration arrangements, but also their regional development institutions such as regional development banks and regional financing arrangements.

It could be argued that the case for regional integration arrangements to play a greater role in global fora such as the G20 has arguably strengthened appreciably in the past 5-6 years. One of the reasons is that a growing number of economies in the world are starting to conduct their trade policy on the basis of their respective trade blocs (Brazil via MERCOSUR), while a growing share of trade liberalization (especially in the Global South) has been originating from the emergence of such blocs as the Regional Comprehensive Economic Partnership (RCEP) or the African Continental Free Trade Area (AfCFTA). Further contribution to trade liberalization coming from the regional integration blocs may be coming on the back of free trade accords between several regional blocs (the EU-MERCOSUR FTA is still in the negotiation stage) as well as between individual economies and regional trade blocs – one of the recent cases in point is the economic accord between India and the European Free Trade Association (EFTA).   

Another area of the growing importance of regional integration blocs at the global level is the digital economy. In particular, digital economic agreements (DEAs) that were initially launched between individual economies such as Singapore and Australia (SADEA) are more recently being scaled up to the level of regional integration blocs. One of the leaders in this process is ASEAN (with the key role played by Singapore) – in September 2023 ASEAN members launched negotiations on the first region-wide DEA that are to be completed by 2025. At the same time ASEAN members such as Singapore are actively pursuing negotiations of further digital accords with regional blocs – one of the cases in point being the Singapore-EFTA DEA that has already gone through 6 rounds of talks[1]. Singapore has also concluded negotiations on a European Union (EU) – Singapore Digital Partnership (EUSDP) in February 2023.

Regional integration blocs can also play a crucial role in advancing environmental norms and standards in the world economy. According to OECD, the number of regional trading arrangements (RTAs) with environmental provisions has increased from 114 in 1990 to 671 in 2021, with the share of RTAs containing environmental provisions rising from 65% in 1990 to 80% in 2000 and to 87% in 2021[2]. At the same time the number of such provisions per RTA increased from 8 in the 1990s to around 19 in 2000s and to more than 44 in the 2010s (50 in 2020). The OECD further notes that “anecdotal evidence suggests that some RTAs with environmental provisions have led to positive environmental outcomes by strengthening environmental laws and regulations, introducing new institutional arrangements, promoting co-operation on improving environmental law and enforcement, and improving environmental awareness”[3]. Environmental provisions are also becoming prominent in the free trade agreements negotiated between regional integration arrangement as is the case with the ongoing talks on the EU-MERCOSUR FTA.

Finally, greater cooperation among the regional integration arrangements within a G20 platform could also significantly improve the effectiveness of coordinated stimuli undertaken by G20 economies. In particular, the scale of the stimuli can be amplified by involving regional development banks (RDBs) as well as the regional financing arrangements (RFAs) together with the resources disbursed by individual G20 members. While the most recent G20 coordinated stimulus undertaken in 2020 was superior to that of the 2008-2009 period in making use of the resources of the multilateral development banks, there arguably remains significant scope to further raise the level of utilization of resources available in the Global Financial Safety Net (GFSN).

A platform for regional integration arrangements could also raise the degree to which the stimulus can reach a greater number of regions and economies across the globe via the more targeted measures and additional stimuli undertaken in the respective regional integration platforms. The coordinated stimulus can hence become more targeted, effective, inclusive and sizeable with the involvement of regional blocs and their developing institutions into such global stabilization undertakings. In assessing the potential response to global downturns and crises, the Financial Stability Board (FSB) should incorporate scenarios that involve the use of resources exercised by regional integration arrangements.

In effect a G20 platform for regional integration arrangements and their regional development institutions can play a key role in scaling up the G20 stimuli and economic development initiatives in such areas as sustainability, trade liberalization and digital alliances. In the case of trade liberalization such a platform may cooperate with the World Trade Organization (WTO) in coordinating and multilateralizing the lowering of trade barriers across the regional integration arrangements – this would serve to overcome the high degree of fragmentation and gridlocks in trade liberalization experienced by the WTO at the level of national economies. As regards environmental policy, a regional G20 platform may be better geared to address environmental challenges compared to country-to-country coordination platforms given the intensity of cross-country spillover effects in the environmental sphere and the limitations in attempting to resolve environmental challenges (that are regional/global in scope) exclusively within national boundaries.   

Perhaps most importantly, a G20 engagement group for regional integration arrangements would overcome one of the most glaring shortcomings of the current version of the G20 platform, namely its lack of legitimacy in representing the largest economies of the globe as the embodiment of the entire global community. The inclusion of the African Union as a full-fledged member of the G20 does address this “deficit of legitimacy”, but only to a degree. In line with the spirit of Ubuntu (“I am because we are”), the creation of a platform for regional integration blocs and their development institutions would notably increase the inclusivity of G20 and the scale of its outreach to the global community.

[1] https://www.efta.int/Free-Trade/news/EFTA-and-Singapore-hold-sixth-round-Digital-Economy-Agreement-negotiations-538786

[2] https://www.oecd.org/env/environment-and-regional-trade-agreements.htm

[3] https://www.oecd.org/env/environment-and-regional-trade-agreements.htm

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