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Calming US-China Tensions

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My colleague, Michael Swaine, now a Senior Research Fellow at the Quincy Institute for Responsible Statecraft, has produced two very insightful pieces on US-China relations. The longer piece can be found as a Quincy Brief and well worth reading. But if that is not possible, then a shorter examination is set out by Michael at  WPR. The ‘heart’ of both pieces is that stability arising from the Biden-Xi Summit at the margin of the APEC meeting in  San Francisco late in 2023 is far less than meets the eye. As Michael narrates in the WPR piece:

All this means that, far from developing the incentives and the means to avert a crisis or conflict, efforts on both sides to reassure each other on their vital interests are ringing increasingly hollow, with the result that both continue to view each other as engaging in evasive or, worse yet, hypocritical and duplicitous behavior.

And with respect to Taiwan, set out in the Quincy Brief, Michael paints a rather bleak picture:

The reality, however, is that the features and trends pushing both countries toward a confrontation over Taiwan persist, fueling a dangerous, interactive dynamic that could quickly overcome any diplomatic thaw between the world’s foremost powers.

Why have the two leading powers come to such a serious pass in the face of what appeared to be a solid effort to stabilize the relationship at the margins of APEC? Here Michael is clear:

Achieving this requires each nation to match its formal statements clearly and reliably with its actual behavior—in other words, to avoid hypocrisy—with regard to what each side regards as its vital interests, and to do so consistently over time. This in turn requires both sides reaching a mutual understanding of what their vital interests are, the meaningful assurances regarding them that each desires, and what would constitute violations of those assurances and, hence, threats to the concerned party’s vital interests. …

Unfortunately, despite some initial efforts, neither Washington nor Beijing has thus far met these requirements. Perhaps the most prominent example of this failure involves what began as the “Four Noes and One No Intention,” but which Beijing now calls the “Five Noes.” These reportedly affirm that the United States: does not seek a new Cold War with China; does not aim to change China’s political system; is not revitalizing its alliances to counter China; does not support Taiwan’s independence; and does not seek a conflict with China. [WPR]

From Michael’s perspective the United States has failed to reassure China that indeed it is committed to the “Five Noes”. Then, added to this is the failure to provide the reassurances necessary over Taiwan. As Michael describes the Taiwan situation:

  • The increasingly high (and arguably growing) stakes the Taiwan issue presents for both Beijing and Washington;
  • Deepening levels of domestic threat inflation on each side;
  • The growing tendency on both sides to worst case the motives and intentions of others (fed by a persistent lack of trust) while failing to recognize the interactive nature of the rivalry;
  • A resulting steady erosion of confidence in the original, stabilizing bilateral understanding regarding Taiwan reached between Beijing and Washington during the 1970s normalization process, and a related stress on deterrence over assurance;
  • The absence of effective bilateral crisis prevention and management Mechanisms”. [Brief]

While the two articles focus on somewhat different aspects of the US-China relationship, the big conclusion I draw from these two very insightful pieces by Michael is that both leading powers are providing insufficient assurances to the other of the desire of each to maintain the status quo and peaceful relations.

The rising gyre of action and response between the two is underlined by Michael:

In China, U.S. assertions that the One China Policy has not changed, or that its relations with Taiwan remain unofficial, thus fall on deaf ears. And the apparent hypocrisy of U.S. behavior is then used to justify more provocative Chinese actions, which lead many Americans to conclude that Beijing is jettisoning its commitment to peaceful unification.

This worsening situation is made even more dangerous by the absence of substantive crisis prevention and management mechanisms and procedures between the two nations. It is true that Washington and Beijing have recently agreed to resume a nascent military–to–military crisis communication working group that remained suspended since 2019 and appear to be working to revive a few other more established agreements designed to avoid incidents in the air and at sea. [Brief]

For Michael the heavy reliance on military deterrence, as opposed to material bilateral reassurance is at the heart of the shaky relations between the two. What is needed is clear, according to him:

There are, however, concrete steps that the U.S. government, Congress, and civil society can take to reduce the mounting tension around the Taiwan issue and remove it as a major factor driving the growing rivalry between Washington and Beijing. Most importantly, both sides must reverse the tendency to regard the island as a surrogate for the overall U.S.–China strategic competition.

This requires, as a first step, efforts to reduce the overall intensity of the bilateral rivalry, by eliminating the heretofore divisive, often politically–induced, zero–sum rhetoric that has dominated much of the dialogue in Washington and Beijing, and ending, to the extent possible, the mismatch between the words spoken and actions taken on both sides.” “… Such overblown rhetoric and hypocrisy deepen distrust and signal that there is no potential common ground on critical issues such as Taiwan’s future. They reinforce worst–case assumptions about motives and therefore increase the likelihood that manageable crises will become severe conflicts.[Brief]

Michael then sets out a rather lengthy list of reassuring statements that the US might express to undermine any trajectory toward confrontation and conflict. As he says:

These statements would represent a clear shift from the current drift toward confrontation and abandonment of the “One China” normalization understandings with China over Taiwan. They would not constitute a new U.S. policy so much as an attempt to restore policy understandings that have maintained peace and stability in the Taiwan Strait for decades.”[Brief]

In an ideal world such efforts backed by equally reassuring statements and actions from China could well represent an optimal path for US-China relations in the immediate circumstances. Unfortunately, in a Presidential election year and with the heavy cloud of a possible Trump re-election and his growing wild rhetoric of an 8-month campaign, it seems to me Michael’s solutions in these circumstances may well unfortunately be overreach. What therefore can be done in this difficult period.

It would be nice if a Leaders Summit was planned relatively soon but unfortunately the Brazil G20 Summit is scheduled to  take place after the US election. Thus a bilateral meeting at the margins of a summit is not going to be possible. Bad timing I’m afraid. In the face of a poor calendar the best that might be hoped for are confidence building gatherings of senior officials. Here too the G20 can be useful. There are a large number of ministerial sessions that provide the setting for side meetings by US-China senior officials. These bilateral side gatherings provide opportunities where expressions of reassurance could be had and public statements made that underline the US-China effort to maintain stability and express specific collaborative policy initiatives. It might provide just the kind of opportunities that Michael believes might help stabilize US-China relations.

Image Credit: France24

This Post first appeared at my Substack, Alan’s Newsletter https://globalsummitryproject.substack.com/p/calming-us-china-tensions?r=bj&utm_campaign=post&utm_medium=web&triedRedirect=true

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Threatening a ‘Single International Community’

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Who would think that the threat to the global order could emanate from global summitry leadership. But that appears to be a real possibility. Let me explain.

For some time now at CWD and the Global Summitry project (GSP) we have identified that sustaining global order requires the maintenance, even strengthening of a ‘single international community’. Stability cannot be sustained without such a community. Fragmentation hinders collaboration. But that single international community is being challenged today. The current wars in Europe and in the Middle East undermine a single international community.  Rising geopolitical tensions between the leading powers, China and the United States, especially, erode it. Fragmentation then undermines stability of the order and diminishes, or eliminates,  opportunities for advancing global governance.  As described in the WPR Daily Review:

These tensions were underlined recently by statements from the President of Brazil, Luiz Inácio Lula da Silva, better known as Lula, now the host for this year’s G20. In an opinion piece he published in the Washington Post in January Lula described the impact of geopolitics and nationalism on global governance efforts:

The world is experiencing a contradictory moment today. Global challenges require commitment and cooperation among nations. We have never been so connected. At the same time, we are finding it increasingly difficult to dialogue, respect differences and carry out joint actions. Societies are taken over by individualism and nations are distancing themselves from each other, making it difficult to promote peace and face complex problems: the climate crisis; food and energy insecurity; geopolitical tensions and wars; the growth of hate speech and xenophobia.

Such a statement seems to suggest that Lula really gets it. Only a single international community can maintain a stable global order. But that may not be true. In fact Lula’s recent statements may be undermining such a goal. Why such statements are unclear. Some have suggested that he is determined to promote a different global order no longer dominated by the US and the West more broadly. Others focus on his imperatives in current domestic politics. Whatever. Nevertheless his recent comments over the War in Gaza may make it difficult to promote collective efforts in this critical Informal – the G20. One need only reference Lula’s view of Israel’s action in Gaza expressed by him in remarks at the African Union Summit Conference in Addis Ababa and reported in the NYTimes:

What is happening in the Gaza Strip with the Palestinian people has no parallel in other historical moments,” Lula told reporters during the 37th African Union Summit in Addis Ababa, Ethiopia. But, he then added, “it did exist when Hitler decided to kill the Jews.

And now as a result of these remarks his global summitry leadership efforts – and here I am focusing on his G20 efforts as the President – are being called into question. Rather than trying to knit the order together he apparently seems willing to fracture it.

Such a rupture of the international community is possible notwithstanding a promising start as G20 host. Indeed at the time of the transfer of hosting to Brazil, Lula set out important developmental priorities in a speech at the closing of the India G20 Summit. There he declared:

We are living in a world where wealth is concentrated. In which millions of people still go hungry. In which governance institutions still reflect the reality of the middle of the last century.

We will only be able to tackle all these problems if we address inequality.

Income inequality; inequality in access to healthcare, education and food; gender, race and representation inequality is behind all these anomalies.

If we want to make a difference, we must place the reduction of inequalities at the center of the international agenda.

Thus, Brazil’s G20 presidency will have three priorities:

(i) social inclusion and the fight against hunger;

(ii) energy transition and sustainable development in its three aspects (social, economic and environmental); and

(iii) reform of global governance institutions

All these priorities are contained in Brazil’s G20 presidency motto: “Building a fair world and a sustainable planet”

In advancing these priorities Lula announced  that Brazil would establish two G20 Task Forces (TF) for the Brazil hosting year. These TFs will unite the Finance and Sherpa tracks in a concerted effort to advance global governance policy. The two are: the Global Alliance against Hunger and Poverty, and  the Global Mobilization against Climate Change.

And in addition in the Concept Note Brazil also committed to the  following:

Seeking to close this gap, Brazil plans to launch a G20 Initiative on Bioeconomy with the objective of deepening the international debate on the subject and of identifying potential avenues for cooperation in the area. The Initiative would be structured into three axes: (i) research, development, and innovation for bioeconomy; (ii) sustainable use of biodiversity for bioeconomy; and (iii) bioeconomy as an enabler for sustainable development. As a final result,  the Initiative would be expected to produce a set of “High Level Principles on Bioeconomy.

All these priorities and institutional efforts require concerted collective action. Yet today all these promises seem to be in question over Lula’s statements on the current geopolitical crises, notwithstanding Lula’s injunction in his speech at the closing of the India G20 Summit that:

Thirdly, we cannot allow geopolitical issues to hijack G20 bodies’ discussion agendas. A divided G20 does not interest us. We can only tackle present day challenges through joint action.

Lula needs to heed his own words or he will find that his G20 leadership is undermined by his own words. Such words put at risk his determined collective priorities in the G20. They divide the international community putting at risk ‘a single international community’.

Image Credit : Brazil

This Post was first published at my Substack Alan’s Newsletter

https://open.substack.com/pub/globalsummitryproject/p/threatening-a-single-international?r=bj&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

Transition and Renewed Focus

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Well it can’t be bad news all the time; at least I hope not. Given the turbulence and death with two ongoing wars – Russia -Ukraine and Hamas and Israel, the renewal, or transition, of several summits is a positive global order sign. At least I hope so.

On the global summitry scene, this week we will witness the transition of G20 hosting from India to Brazil, presumably on December 1st. Thus, President Luiz Inacio Lula da Silva will lead Brazil as the 2024 host of the G20. And what can we expect from Brazilian leadership? According to statements from President Lula: 

“Brazil will focus on reducing hunger and poverty, slowing climate change and global governance reform when it heads the G20 group of the world’s largest economies starting next month, President Luiz Inacio Lula da Silva said on Thursday.”

Brazil is planning to hold the annual leaders’ summit in November 2024. And as Lula has declared: 

“I hope we can address the issues that we need to stop running away from and try to resolve,” Lula at a meeting with cabinet ministers to lay out Brazil’s priorities for the G20.”

Though Lula had, I suspect, hoped to take a triumphant turn as host of the G20, his leadership has been dampened, I suspect, with the election of the other Latin American regional power,  Javier Milei. As described in the Guardian: 

Javier Milei, [is] a volatile far-right libertarian who has vowed to “exterminate” inflation and take a chainsaw to the state, has been elected president of Argentina, catapulting South America’s second largest economy into an unpredictable and potentially turbulent future.

This is no companion for Lula in the G20 and the region. The volatility in recent national elections rolls on.  In this regard note the Netherlands and the strong showing of the anti-Islamic Geert Wilders. After 25 years in parliament, his Freedom party (PVV) is set to win 37 seats, well ahead of the nearest rival, a left-wing alliance. 

So there is volatility in a variety of national scenes that matches the uncertainty in the international scene. It is a troubling warning signal for advancing collective global governance. 

Still forward effort can be had for the moment internationally. Notably we can point to the gathering of foreign ministers of South Korea, Japan and China. This is the first Triple Summit gathering of foreign ministers since 2019. Faced with the pandemic but more pointedly the tensions between Koea and Japan no Triple Summit gathering has occurred. As chronicled in the SCMP:  “… the host, South Korea’s Park Jin, said after the meeting that the three ministers reaffirmed their agreement to hold the summit as soon as mutually convenient, according to Seoul-based Yonhap News Agency. 

“We will continue efforts to make sure that the holding of a summit will materialise in the near future,” Park was quoted as saying.” 

The key to this emerging initiative is the current improvement in relations between Korea and Japan. This easing of tensions has reopened the prospect of trilateral gatherings and the matching Indo-Pacific gatherings that includes the United States with this Trilateral effort. It is not an answer to the tensions generated by the US-China rivalry but it builds a better Indo-Pacific base. 

And in the category of renewed focus, and it is, is the major climate gathering  – starting this Thursday, COP28. As described by the think tank,  IISD

“The 2023 UN Climate Change Conference will convene from 30 November to 12 December 2023 in Dubai, United Arab Emirates (UAE). It will comprise the 28th meeting of the Conference of the Parties (COP 28);

In a letter dated 13 January 2023, the UNFCCC Secretariat announced that Sultan Ahmed Al Jaber, Minister of Industry and Advanced Technology and UAE Special Envoy for Climate Change, has been appointed to serve as COP 28 President-Designate.”

Many were disappointed by this COP28 leadership choice. However, it was a regional choice question with the Asia-Pacific Group determining the President (The regional groups include: The African Group, the Asia-Pacific Group, the Eastern Europe Group, the Latin American and Caribbean Group (GRULAC) and the Western European and Others Group (WEOG)) but it is what it is and COP 28 does appear to signal some progress. As Lisa Friedman of the NYTimes points out, progress may well be had at COP28 because of the following:

“The first is what’s called the global stocktake. This is the first formal assessment of whether nations are on track to meet a goal they set in Paris in 2015 to limit the rise in average global temperatures to 1.5 degrees Celsius (2.7 degrees Fahrenheit) above preindustrial levels. 

…Second, there is an expectation that nations will finalize the so-called “loss and damage” fund they agreed to create last year. The major questions to be resolved include who will pay into the fund and who will have access to the money. 

Finally, there is the political agreement that could emerge from the summit. It is likely that nations could agree on a deal to replace polluting fossil fuels with clean energy such as wind and solar power. The question is whether nations agree to phase out fossil fuels and, if so, what caveats are attached.”

The gathering is huge. Diplomats from nearly 200 countries, and many heads of state and government, will gather to try to draft a plan to accelerate the global transition away from fossil fuels. 

We shall see, but the possibilities are there especially given that China and the US confirmed following agreement between John Kerry and Xie Zhenhua that the US and China are committed to:

“Both countries support the G20 Leaders Declaration to pursue efforts to triple renewable energy capacity globally by 2030 and intend to sufficiently accelerate renewable energy deployment in their respective economies through 2030 from 2020 levels so as to accelerate the substitution for coal, oil and gas generation, and thereby anticipate post-peaking meaningful absolute power sector emission reduction, in this critical decade of the 2020s.” 

Even in these troubled times, it appears that progress is possible. We will follow it. 

This Post was originally a Substack Post at Alan’s Newsletter

https://open.substack.com/pub/globalsummitryproject/p/transition-and-renewed-focus?r=bj&utm_campaign=post&utm_medium=web

Image Credit: GreenBiz

Troubles with Global Summitry

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We are definitely in the midst of Global Summitry gatherings. With the BRICS Summit just recently ended, we are deep into the G20 weekend gathering in New Delhi. So much commentary has accompanied these summitry gatherings. But I caution casual observers and readers: there are way too many assessments and conclusions drawn by all those folks that unfortunately barely pay attention to Global Summitry through much of the year. You can see this in the various ‘hair on fire’ commentaries in the assessments and consequences of the actions of key players in both the BRICS and now especially with the G20. Too many declarations of the G20 demise; firm conclusions that China and Russia would block any consensus statement that sought to condemn Russia’s aggression against Ukraine; the fragmentation of global summitry with the rise of the BRICS plus and the demise of the G20 with leaders from Russia and China choosing to absent themselves from summit.

Now don’t get me wrong, the geopolitical pressures, particularly rising US-China competition and opposition and condemnation of Russia for its unprovoked aggression on Ukraine are impactful. The geopolitics has seemingly hindered the G20 in advancing global governance policies. Yet the global governance agenda and goals remain. Look at the G20 agenda as described by Damien Cave in the NYT:

The agenda in New Delhi includes climate change, economic development and debt burdens in low-income countries, as well as inflation spurred by Russia’s war in Ukraine. If members can reach consensus on any or all of these subjects, they will produce an official joint declaration at the end.

In the ‘hair on  fire’ camp here is a piece by Alec Russell in the FT

The countdown to the talks was dominated by news that Xi was not going to attend. This was widely seen as a major blow to the G20, and an acceleration of the shift to a world in which a China-led bloc is facing off against a US-led one, with many countries hovering in the middle.

But the collective global governance effort has not been stymied. Indian efforts to reach consensus have proven successful. The G20, thanks to India, has released the Declaration a day early. Our good fortune. As described by the Indian Sherpa the Declaration was:

… a complete statement with 100% unanimity” that highlights India’s “great ability to bring all developing countries, all the emerging markets, China, Russia, everybody together at the same table and bring consensus.

He went on:

Urging adherence to the United Nations Charter, the New Delhi statement says: “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. The use or threat of use of nuclear weapons is inadmissible.

So there we are, a consensus statement has been issued. As often is the case, the document was not short, some 29 pages of declaration plus pages of annex.  Nevertheless it ended on a ‘high note’:

81. We reiterate our commitment to the G20 as the premier forum for global economic cooperation and its continued operation in the spirit of multilateralism, on the basis of consensus, with all members participating on an equal footing in all its events including Summits. We look forward to meeting again in Brazil in 2024 and in South Africa in 2025, as well as in the United States in 2026 at the beginning of the next cycle. We welcome Saudi Arabia’s ambition to advance its turn for hosting the G20 Presidency in the next cycle. We also look forward to the Paris Olympic and Paralympic Games in 2024 as a symbol of peace, dialogue amongst nations and inclusivity, with participation of all.

But a reading of the Declaration raises again the question: what success has in fact been achieved? As Caves points out:

But how much progress has the G20 made toward its ambitions? And what can be expected from this year’s meeting in India on Saturday and Sunday? … Then what? Often, not much, when it comes to real-world results. Most of the grouping’s joint statements since it formed in 1999 have been dominated by resolutions as solid as gas fumes, with no clear consequences when nations underperform.

‘Solid as gas fumes’. Well, in many respects the Declaration is no more than a statement of collective progress – what have we collectively identified as worthy of committing to and implementing. And, I did note, in an earlier Substack Post, Not Simply the Pace of Summitry that Leaders and their official are working toward commitment but:

So, let me at least raise in this Post, what I believe is the ‘continuum of action and commitment’ available to leaders in these various Leaders’ Summits. This continuum identifies the extent to which global governance policies have been secured. We move from the aspirational, often set out in the leaders’ declarations or communiques all the way to implementation by a country. What is evident from the continuum is that these folks are governmental leaders. And, as a result no matter what the communique announces, individual leaders’ may, or may not, actually implement a collective wish set out in a declaration.  This is well beyond just the aspirational.

The continuum, as I see it, is:  Consultation/ Cooperation/ Coordination/ Collaboration – the 4Cs of global governance progress, as I see it. Distinguishing between these concepts can be quite difficult. And of course, beyond this is, collectively achieving the actions, proposals and policies that are set out in the communiques, or announced at the Leaders’ gatherings.

And that is paydirt. Collectively achieving the actions set out in all these Summit Declarations – implementing policy in other words – is global governance success. Such implementation lies generally at the national political level, although there are instances where international organizations do in fact implement.

Bottom line: it requires a lot more than a statement in a Leaders’ Declaration to achieve global governance progress. But a number of us are watching including my colleagues at the CWD process.

This Post was originally uploaded to my Substack – Alan’s Newsletter. Feel free to subscribe.

Image Credit: Al Jazeera

 

 

Puzzling over BRICS Enlargement

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As Global Summits go, and besides the leader-led summits, G7 and the G20, there is nothing with greater presence, and possible impact in international relations, than the BRICS. As noted by Ndzendze, Bhaso, Siphamandia Zondo (2023) in their recent article in The Conversation on the state of the BRICS: 

What began in 2001 as an acronym for four of the fastest growing states, BRIC (Brazil, Russia, India and China), is projected to account for 45% of global GDP in purchasing power parity terms by 2030. It has evolved into a political formation as well.

It is the political impact that is most interesting and, I would say, somewhat puzzling. For the BRICS club – Brazil, Russia, India, China and South Africa – all are members of the G20.  Like the G20, and for that matter the earlier created G7, the BRICS represent a ‘leaders club’ that is a leader-led global summit that has an annual meeting of those leaders – the centerpiece of the year-long hosting by one member or another. In some respects the BRICS are unique in what the group is not. That is, unlike the G7, the BRICS members have no  evident ideological dimension – neither democratic nor autocratic. Instead it appears to see itself as focused on opposition to US hegemony in the current global order and they appear to demand a greater development focus and attention to the Global South. Again, as pointed out by Bhaso and Zondo: 

Crucial to this was these countries’ decision to form their own club in 2009, instead of joining an expanded G7 as envisioned by former Goldman Sachs CEO Jim O’Neill, who coined the term “Bric”. Internal cohesion on key issues has emerged and continues to be refined, despite challenges. … Ever since, the grouping has taken on a more pointedly political tone, particularly on the need to reform global institutions, in addition to its original economic raison d’etre. 

Now, it is not that there haven’t been efforts to enlarge these informal leader-led institutions  – to draw in the systemically important Global South players – China, India, Brazil – and other regional powers, Turkey and Indonesia for instance.  Obviously, the G20 is the evident case. Still, it would seem that the BRICS members resisted absorption in the G20, indeed, just at the G7 members – Canada, France, Germany, Italy, Japan, UK and the U.S., and also the EU, failed to wind up the G7 and ‘live’ in an enlarged G20 after the Global Financial Crisis (GFC) in 2008. Though there has been constant academic and expert discussion over absorption, enlargement and continuing separation, there continues to be both a G20 and a G7 a G20 and a BRICS. Again my SOAS colleagues focussing on the BRICS suggest: 

Some may even bring destabilising dynamics for the current composition of the formation. This matters because it tells us that the envisioned change in the global order is likely to be much slower. Simply put, while some states are opposed to western hegemony, they do not yet agree among themselves on what the new alternative should be.

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China-West Dialogue (CWD) Members Discuss the Global Debt Management Environment

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The CWD focused recent attention on the global management of debt and the growing threat of a sovereign debt crisis. After a number of virtual gatherings and much focused discussion, the CWD completed a Debt Management Proposal that CWD passed to folks in India as India scheduled the first G20 Finance Ministers and Central Bankers Ministerial at Bangalore, or its official name, Bengaluru.

The  CWD Debt Proposal Summary is currently posted at the Global Solutions Initiative. but we do anticipate that the full Proposal will be up at the Global Summitry Project shortly. Meanwhile, I also wanted give you a flavor for the intense discussions that went on among CWD principals working on the Proposal. First, I wanted to link you to the Debt Management analysis prepared by Deborah Brautigam at SAIS that was published as: “The Developing World’s Coming Debt Crisis: America and China Need to Cooperate on Relief” in Foreign Affairs published on February 20th.

And then I wanted to give you a flavor of the deep discussion that went on for several weeks. This is a short back and forth that took place with Deborah Brautigam, Johannes Linn and Richard Carey on February 21st. I have smoothed the discussion and elaborated on the many acronyms in the back and forth:

“Johannes Linn

If I had one wish, Deborah, after reading your excellent article in Foreign Affairs, it would have been that you had explained more fully the nature of the Heavily Indebted Poor Countries (HPIC) process. In my view it was not “debt cancellation” by the IFIs, but the paydown of IFI debt with resources from bilateral donors and some International Bank for Reconstruction and Development (IBRD) net income (which could otherwise have been contributed to International Development Association (IDA)). If I understood the [current] Chinese proposal for the establishment of a World Bank trust fund in parallel with an existing IMF trust fund to pay off IMF debt (as you mention), then that would in effect be parallel to the HPIC approach, and one wonders why the World Bank didn’t accept that. It  could be that World Bank did not want to risk having bilateral donors reduce their new IDA contributions in reaction, which would have meant less new IDA money for the poorest countries.

It appears that the issue with multilateral debt relief is the following: there is no free lunch — if the Multilateral Development Banks (MDBs) take a hit on their balance sheet and give up their long-established “preferred creditor status”, they risk a downgrading and higher risk exposure and thus more restricted prudent use of capital market funding. IDA will have fewer resources for new lending. In effect, other developing countries will pay the price for multilateral debt cancellation. If they go for a HPIC-like solution then bilateral donors will have to pay, burdening either donor countries’ tax payers (which, one could argue, is not unreasonable); this might risk that their contributions to IDA and other concessional multilateral windows will drop and thus concessional new money from MDBs for the poor countries will decline (in which case other developing countries would again pay the price).

By the way, a straightforward comparison of debt outstanding across creditor classes, while relatively easy to compile, tells only a partial story. One really should look at the net present value of debt service obligations across creditor classes, since that reflects the real cost of debt to countries, allowing for very different terms under which different classes of debt are contracted. Under this approach private debt will weigh much more heavily and MDB debt less so. It would be interesting to see what happens to Paris Club debt versus Chinese debt.

Deborah Brautigam

My own view is that the World Bank should have explored the establishment of a Catastrophe Containment and Relief Trust (CCRT) – an IMF trust – equivalent more seriously. There was a view expressed that China wanted it to be funded in proportion to voting shares, which was deemed infeasible, but the IMF trust is, I believe, funded by voluntary contributions. This would have been a start.

As I recall during HIPC, since the debt relief was counted as “aid”, countries did reduce their non-relief funding. I remember that Japan warned that this would be the consequence.

Richard Carey

The decision to adopt and implement the “enhanced HIPC” was taken at the Cologne G8 Summit in 1999, after agreement at the previous Summit in Birmingham in 1998 that the following year the Summit would definitively deal with debt.

In that intervening year, the details were hammered out in the contentious process as previously described. Funding of multilateral debt reduction came from the OECD’s Development Assistance Committee (DAC) concessional aid essentially (the IMF used some of its own resources for the Multilateral Debt Relief Initiative (MDRI), with a call for bilateral contributions to cover additional needs, and the MDRI was extended to all countries with less than $380 per capita, whether they had been in the HIPC program or not).

The key mover was Clare Short, then new Labour Government Secretary of State with a new Department of International Development (DFID) and a new White Paper which endorsed the 1996 DAC International Development Goals (IDGs). She flew to Washington to help Brian Atwood, then the Head of USAID, face down Treasury and State who held that the 1996 DAC Goals had not been endorsed. The position was that this initiative did represent US agreement for what eventually became the IDGs. The story of how the HIPC became linked to the goal for poverty reduction is told in Chapter 10 of the recent history of the DAC.

In 1998 the Jubilee 2000 Campaign for Debt Reduction was having a major impact on  public opinion. Short saw an opportunity to make debt relief conditional on poor countries drawing up poverty reduction strategies. To establish that link, Short had to fly to Washington to face down USAID Administrator Brian Atwood and objections from Treasury and State that the US had never agreed to the OECD’s DAC International Development Goals. With her position that Prime Minister Blair would publicly criticize President Clinton if he failed to support the IDGs (eventually to become the Millennium Development Goals (MDGs), the 1998 G8 Communique endorsed them in resounding terms. That is how the enhanced HIPC came to be based on Poverty Reduction Strategy Papers. (Note that CWD Common Framework proposal involves countries adopting medium term strategies based on the “new development narratives”…).

A subplot in this story was that the Comprehensive Development Framework (CDF), was lost to the Poverty Reduction Strategy Papers (PRSPs), although the 1999 Cologne G8 Communique had briefly welcomed the CDF. As Chapter 10 in the DAC History relates, a joint note circulated on April 5, 2000, by James Wolfensohn and Stanley Fischer sought to square the circle of the urgency of the PRSPs to deliver fast on debt relief and the more time-consuming task of bringing multiple stakeholders into a country-led long-term development platform:

For some time the formulation of “PRSPs incorporating the principles of the CDF” became a standard phrase. But eventually the battle for the CDF was lost and this formula faded away. And without the CDF, the HIPC PRSPs essentially left out agendas such as infrastructure, urbanisation  and rural development. The MDGs were essentially human development/wellbeing- based proxies  – these left-out agendas only came back with the Sustainable Development Goals (SDGs) in 2015.

In the present case of the CF, medium term country strategies based on the “new development narratives” can in principle be built on the basis of nationally owned SDGs and Nationally Determined Contributions (NDCs)  to the Paris Climate Change Agreement. But let us see what is emerging in Finance Ministers and Central Bankers meeting in India this week and beyond. And, with bond financing now a major part of the picture, impact investing by the private sector and asset managers on the basis of projects and programs that are green, social, sustainable and sustainability linked  (GSSS) seems to be in vogue.  Also, as mentioned, the article by the Lazard Sovereign Debt Unit has useful ideas  -e.g., on how bondholders can be brought into early agreements with special bonds that provide a payoff for “haircuts” if and when the economy is in much better shape.

Johannes Linn

By the way, one question we all seem to studiously avoid in this discussion about debt relief is how to prevent a new debt crisis a few years down the road, after we solve this one. In the mid 1990s I was involved in establishing the broad design of HPIC – moving from basic concept to decision in principle –  with President James Wolfensohn at the World Bank, so it is particularly frustrating to see the debt issues being replayed all over again, except that it may be an even more intractable problem now than it was then.”

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Image Credit: IMF

The Twin Threats to Global Governance and Global Summitry

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It is a challenging G20 Summit. For any host. No less so for Indonesia, the first Global South leader in a follow on series of Global South hosts.

This year in November the G20 Summit is scheduled for Bali to then be followed in 2023 by India. India will then be followed in 2024 by Brazil and presumably, though not yet announced South Africa in 2025. So, what’s the problem? Well, in principle nothing. But these Global South hosts are only slowly becoming accustomed to leadership roles where advancing the global governance agenda is called for in the leadership role.

The second dilemma is the dramatic impact of renewed geopolitics. The growing tensions and rivalry between China and the US now dominate relations between these two leading powers. These bilateral tensions have been amped significantly higher by the Russian aggression against Ukraine.  War in Europe, as we haven’t seen in decades now sharpens differences between China and the United States. These difficult bilateral relations have now been further strained by Taiwan tensions following US House Speaker Pelosi’s visit to the island state. These strains are reflected in the undermining of collaborative global governance relations between the two, and more broadly the apparent hobbling of multilateral relations.

So, two threats to advancing critical global governance policy at the global summitry level. These threats are particularly enhanced where domestic politics dominates and global leadership emerges rather more as an afterthought.  And it would seem that is exactly what our Host faces. First, the dominance of domestic politics. This feature of Indonesian leadership politics is precisely what is identified by Shafiah Mushibat in his recent post at EAF titled: “Indonesia steps innocently onto the international stage”:

In Indonesian politics, the domestic audience and interests still trump the global audience and global common interests. This is not unusual, and it’s reasonable, considering that foreign policy involves actions and activities by governments that aim to defend and promote national interests. But Indonesia is quickly discovering that marrying its international roles, responsibilities and expectations that go with them to national interests that please domestic audiences is not altogether easy.

Mushibat concludes that the Indonesian President has chosen to emphasize the domestic politics of Indonesia’s leadership of the G20. He writes:

Approaching the G20 presidency, the Indonesian government initiated many activities to promote its role domestically. This included raising awareness of the G20’s ‘benefits’, such as the direct economic benefits of hosting the summit. In a November 2021 speech, Widodo pressed the country to make the most of its strategic position in the G20 presidency and ‘prioritise national interests’. Explaining how the G20 presidency will benefit the country has been a main part of the government’s effort to ensure domestic support for all the efforts.

And as to the second and growing threat – the destructive impact of geopolitical tensions – they are real:

Indonesia has been lauded as representing the voices of developing nations and emerging economies outside of the G20, but its presidency faces major challenges — mainly because of the geopolitical implications from the Russia–Ukraine war. While the G20 has performed important functions for member states and the world at large, it struggles with balancing the pursuit of its members’ national interests with a genuine commitment to the global common good. As the world grapples with economic and health recovery from COVID-19 and the impact of the Russia–Ukraine war on food and energy supplies, the global common good and how to achieve it is the vital interest.

The corrosive impact of Russia’s war in Ukraine on global cooperation cannot be underestimated. It has ramped up Biden Administration efforts to build alliances and partnerships. Included in that circle of partnership efforts is the G7 where the United States has emphasized the ‘like mindedness’ and democratic character of the G7. With all the emphasis on the G7 there seems to be little room for a Biden collaborative focus on the G20. Working the G20 with China in particular with all its Ministerials, Working Parties and Task Forces is a key but apparently a key not willing to be turned by the Biden Administration.  The G20, of course, includes Russia and much of the US G20 public discussion has urged the exclusion of Russia from the Summit. Rather than a focus on advancing collaborative efforts the public statements have been on Russia’s exclusion and questioning China, at least in public, on its positioning with respect to Russia.

Meanwhile Widodo has tried to smooth the difficult Russian presence by inviting the Zelenskyy, the President of Ukraine to attend at Bali as well. But the critical focus has to be on the Biden Administration to ‘grab’ the G20 ring, avoid the Russian distraction, and focus on critical multilateral global governance initiatives.

Image Credit: East Asia Forum

Constructing an Inclusive Order: Avoiding Fragmentation and Worse – Disorder

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Two summits completed and another off in the distance, but impacted by these just completed summits. A crowded summit schedule has begun.

The statements were voiced and the Leaders’ Communique issued by the G7 at Schloss Elmau to be followed by more speeches and statements and the issuing of the “Strategic Concept”  a once ever ten year statement by NATO at Madrid.

What have we learned from this G7 and the NATO gatherings? Let me first focus on the G7 Summit. Well, first it is relevant that we take into account the position expressed by one of the longstanding observers of the summit process, Sheffield’s Hugo Dobson. As he concluded, along with his colleague Greg Stiles in Global Policy , reflecting their review of the German G7 and in particular the Leaders’ Communique:

In summary, and despite what we have tried to do here, beware reading too much either positively or negatively into a single summit document. Rather, this communiqué should be placed in the context of a network of summits – most immediately the NATO Summit in Madrid later this week and looking further ahead to the Indonesian-hosted G20 Summit later this year.

And it is a summary and caution well worth heeding. Nevertheless, the tone is worth further comment. The G7 took the time and the Communique to underscore their self characterization as a democratic forum. In their Communique opening the G7 declared:

 As open democracies adhering to the rule of law, we are driven by shared values and bound by our commitment to the rules-based multilateral order and to universal human rights. As outlined in our Statement on support for Ukraine, standing in unity to support the government and people of Ukraine in their fight for a peaceful, prosperous and democratic future, we will continue to impose severe and immediate economic costs on President Putin’s regime for its unjustifiable war of aggression against Ukraine, while stepping up our efforts to counter its adverse and harmful regional and global impacts, including with a view to helping secure global energy and food security as well as stabilising the economic recovery. 

 

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The Missing Mechanisms – Examining the Current Summitry Cycle: Rome G20 and Glasgow COP26

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So many summits recently: from the Rome G20 Summit, to the Glasgow COP26 Summit, to APEC, and finally the East Asia Summit. It is the crescendo of the annual summitry cycle. And, this year, 2021, was particularly noteworthy. In this summit cycle we had in person leaders gatherings at the Rome G20 Summit, immediately followed by the 5-year COP ‘check-in’ with many G20 leaders flying off directly to the Glasgow Summit following the Rome G20 Summit. It is not a surprise given the importance of these summits that colleagues have been attracted to assessing the advances, or the limitations of these gatherings and then more generally to examine the overall effectiveness they present of multilateral leadership.  One of the key assessments, not surprisingly, is to determine whether these summits, and therefore the multilateralism underpinning them can meet the rising global governance challenges facing the international system. Prime Minister Draghi who chaired the recently concluded G20 Rome Summit had this to say about multilateralism, and inferentially the G20:

“Multilateralism is the best answer to the problems we face today. In many ways it is the only possible answer,”  he said in his opening comments on Saturday. 

 

From the pandemic, to climate change, to fair and equitable taxation, going it all alone is simply not an option. We must do all we can to overcome our differences”.

Yet the judgements from the experts have generally been measured, even rather downbeat, over the current G20 and COP26 and other summitry efforts. Broadly there is recognition of some material advances in the global governance agenda, especially concerning climate change efforts but the fundamental – and many would argue the urgent and necessary collective actions – seem to elude global summitry policy making. And, most agree that more global order needs are just out of reach. Here, my colleague Yves Tiberghien in East Asia Forum (EAF)  had this to say about the G20 and the critical multilateral efforts:

The G20 is currently unable to function as the incubator for the reform of global governance institutions that the world needs to manage global markets and pressing systemic risks. It is proving unable to manage the great frictions between established and emerging powers.

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‘G2’ and the Expectations Game

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While designed to build consensus among a broad group of countries, a significant aspect of the G20 has been a consolidated discussion between the leaders of China and the United States. US President, Barack Obama and China’s President, Hu Jintao have used these informal talks for relationship building.  These informal discussions have until now complemented the G20 leaders’ process. But if these US-China leaders’ talks take hold, it may also prove to be a principal rival to the G20 dialogue.

A new game of expectation-raising has begun to swirl over what has been dubbed the “G2” in anticipation of renewed strategic dialogue and the home-and-home state visits announced for 2009, with President Hu visiting Washington in late-summer and President Obama visiting Beijing in late-fall. While the US-China bilaterals will not lack for issues, indeed there are already a series of bilaterals between China-US officials, it remains to be seen how in-depth the two leaders will want to harmonize global economic strategies. Will these encounters survive expectations? Will the G2 serve as distraction to the G20 process?

China’s global status can hardly be ignored. While the economic fires rage on in New York, London and Tokyo, Beijing has demonstrated a cool confidence and continued growth. In the lead-up to the London Summit, People’s Bank of China Governor, Zhou Xiaochuan made very public declarations on the perils of over-reliance on a single currency for global reserves, advocating instead for a standardized, SDR-type currency valuation less prone to volatility. In London, Paola Subacchi of Chatham House commented that, “China graduated from regional to global power. It showed political and financial muscles and the appetite to be involved in the global dialogue – with also an interest in developing a closer relationship with Washington.”

A leading voice in support of an informal G2 “leadership conclave” has been C. Fred Bergsten of the Peterson Institute. As early as 2006, he advocated bilateral diplomacy to support China’s and America’s “joint responsibility” to ensure global financial stability. Recent events have revived proposals for such a format.  These advocates have stressed the need for the two countries to resolve currency disputes and jointly enforce IFI reforms.

In his analysis, CIGI Senior Fellow Gregory Chin suggests that failure or frustration in a divergent G20 process may feed a “Great Power withdrawal into the bilateral track to deal with matters of highest strategic importance. This could mean confining the multilateral track to implementing the decisions made by the Big 2.” This should not immediately be considered a negative outcome. While the G20 scores high on legitimacy, its efficiency and compliance have waned. Resolution of the multitude of issues on the US-China bilateral agenda alone (from trade to currency valuation to intellectual property) could ease gridlock in many international negotiations. However, expectations for a lean and authoritative G2 assume that the two leader countries can abstain from squabbles over human rights, the proverbial ‘third rail’ of US-China relations.

While certainly there are larger strategic factors at play, the success of a G2 would heavily depend on ability of the leaders themselves to get along and work constructively. Can the ever technocratic Hu find common ground with the always affable Obama? The new American President shows an understanding of the importance of the bilateral relationship. Following their first meeting, President Obama noted that, “I continue to believe that the relationship between China and the United States is not only important for the citizens of both our countries but will help to set the stage for how the world deals with a whole host of challenges in the years to come.”

Indications from inside China, however, seem to downplay any expectations of a G2. In the days before the London Summit, leading scholar Huang Ping of the Chinese Academy of Social Sciences (CASS) asserted that “the so-called G2 is both unrealistic and problematic to fit in with the traditional Chinese value of a harmonious world.” By pushing other regional and global developing economies out of key international decision-making, China could risk alienating its like-minded allies in the global South. Continued success of the G20 fits in much better with this approach, and Dr. Huang suggests that China should promote this larger steering group.

Whether formalized or not, a G2 appears to be inevitable, if in nothing but name only. As the two leaders meet, the US-China forum will be cast in this light with enormous scrutiny. ‘G2’ will become the favored term of pundits, perhaps to its detriment.

A major stumbling block for the G2 may end up being the two nations’ cultural differences in their fiscal behaviors. Arguably, the US propensity to spend and the Chinese need to save drove the world into crisis and offered recovery, respectively. However, this balance has proven unsustainable and the macro-economic structure must be fixed. Recovery relies on the two governments providing their citizens with the correct incentives towards long-term restorative fiscal behavior. Yet, to appear successful, a G2 will need instantaneous results.

In his column, “What the G2 Must Discuss Now that the G20 is Over” (7 April 2009), the Financial Times’ Martin Wolf suggests that while China’s desire to engage the US may be self-motivated – to stabilize its US currency reserve, deflect exchange rate reform, and rebalance spending-saving – it is a “necessary condition for serious discussion of global reforms.” If arranged properly, a collaborative G2 would have the potential to remove policy obstacles and pave the way for general agreement across the board. However, if used as another opportunity to name and shame each other, it could heighten tensions in an already delicate relationship.

The most likely outcome is a mediocre G2, one that cannot live-up to the overblown expectations. Here, enters again the G20, this time with a strong dose of modesty and a previously excluded group of leaders more committed than ever to be a part of the process. If however the G20 can forgo this chain of events by harnessing leadership from within and boosting national compliance and effectiveness, plurilateral consensus may trump dyadic centralism.