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Tilting the economic balance
By Patrick Messerlin |
April 1, 2010, Thursday
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Print Edition
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IN the aftermath of the G20 Pittsburgh Summit last year, European and American officials invited policy makers from the emerging giants to become more involved in designing a new global economic framework - implicitly suggesting that this has not been the case so far.
Yet the evidence does not support this view. Brazil, China, India, South Korea and Mexico had been playing a decisive role in two major areas - the global trade regime and the management of the worldwide economic crisis; the jury is still out on a third - climate change.
Few people appear to realize the fundamental contribution of emerging economies to the success of the current global trade regime. During the last three decades, the amazing success of China's trade liberalization has done much more to convince other developing countries of the gains from trade than all the OECD countries' exhortations.
Similarly, among World Trade Organization members, China has made the deepest commitment to liberalization of services, India has raised the issue of wider services liberalization, and Brazil has been decisive in cracking American and European agricultural protection.
On crisis management in the wake of the financial meltdown in 2008, the emerging economies have been as diligent and active as the United States and the European Union. The deterioration of the overall fiscal balances of South Korea, China and India has been just as severe as in the larger EU member states.
The core emerging economies have abstained from increasing tariffs, and their stimulus packages grant much more limited subsidies to the banking and automobile sectors than do comparable packages in OECD countries.
As for climate change, the positions of the emerging economies were until mid-2009 negative or defensive. But India did much to change the mood when it became pro-active in the climate-change debate in the run-up to last December's Copenhagen summit. Just before the meeting, China announced a substantial cut in the increase, although not the level, of its emissions.
It is fashionable nowadays to look to stricter international rules as "the solution" to most global problems, but such a strategy is not well-suited to an ongoing shift in international economic relations. The emerging economies are likely to be increasingly disinclined to accept constraints that they see as American or European tutelage.
OECD countries will have to lead by example. They should keep their markets open, and open those that are closed - in agriculture (crucial to the sustained growth of emerging economies such as Argentina, Brazil and Indonesia) or in services (crucial for countries such as India or South Korea).
Above all, these areas hold the key to generating more domestically-based growth in all emerging economies.
(The author is Professor of Economics at the Institut d'Etudes Politiques in Paris. Copyright: Project Syndicate. The views are his own. Shanghai Daily condensed the article.)
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