Multilateral approach needed to counter rising global pessimism

Note: The following article is taken from the Chinese-language "Commentaries on International Affairs".

The international community is increasingly concerned about the global economic outlook. Kristalina Georgieva, the new chief of the International Monetary Fund (IMF), recently warned that, overshadowed by factors like the ongoing trade wars, global growth "this year will fall to its lowest rate since the beginning of the decade." And the finance ministers of Australia, Singapore, Indonesia, and Canada have issued a joint statement stressing the importance of multilateral problem-solving in the face of global political and economic challenges. Taken together, these messages highlight how necessary and urgent it is to underline the consensus on multilateralism and defend the global free trade system.

Kristalina Georgieva, the managing director of the International Monetary Fund, gives her curtain-raiser speech in Washington on Tuesday, October 8, 2019, ahead of the organization's annual meetings on October 14-20. [Photo: IC]

This year marks the 75th anniversary of the Bretton Woods system, which helped put the United States in its dominant position in the world's currency, financial, and trade systems after World War II. Although it came to an end in the 1970s, the global economic systems that it helped to create continued to evolve. Western countries have gained long-term benefits from these systems of global competition and free trade thanks to their comparative advantages. But the foundations of the global economy are now on the verge of collapse because of the Trump administration's America First policy, which has provoked trade wars across the world and fueled a rising pessimism in international politics and economics.

This pessimistic sentiment comes at a time when world economic growth is facing grave pressure. Last month, the OECD cut its forecast for global growth this year from 3.2 percent to 2.9 percent, the lowest level since the 2008 financial crisis. It also reduced its global growth forecast for next year down to 3 percent from 3.4 percent.

To respond to these uncertainties, the international community, and major economic powers in particular, needs to shoulder a greater share of the responsibility of defending multilateralism and the rules of free trade. Ending the China-U.S. trade war is the most pressing task, but more broadly, major economies such as the G20 countries need to strengthen their policy coordination, maintain their support for rule-based multilateral systems, and remain open to trade and investment. China has repeated its commitment to further open and reform its markets, and later this year it will host the second China International Import Expo, which is expected to help boost global trade and investment.

Developed countries need to let emerging market countries have more rights to participate in global governance and multilateral rule making, because the rise of emerging market countries is an irreversible trend. The former IMF chief Christine Lagarde has said that the organization needs to go further with quota and governance reforms so that it better reflects the contributions made by its member countries. As the IMF and the World Bank prepare to hold their annual meetings, observers are expecting to see more positive signals from the two organizations on the need to build consensus and improve multilateral governance.

Aside from the reform of these two leading organizations, China and other countries involved in the Regional Comprehensive Economic Partnership (RCEP) are speeding up their negotiations on a deal. The European Union and China are steadily pushing forward their negotiations for an investment agreement. And the negotiations on a China–Japan-South Korea free trade agreement are also making progress. All of these measures help to increase stability in international institutions.

Just as the G20 mechanism was established in response to the 2008 global financial crisis, new methods to tackle risks and achieve mutually beneficial outcomes will be created to respond to new challenges, as long as the international community upholds the spirit of multilateralism and dialogue on an equal footing.