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Pacific Currents

Pacific Currents is a discussion forum on Asia-Pacific economic issues. We welcome submissions from all stakeholders including academics, researchers, thought-leaders, civil society, business leaders; and other policy experts. Submissions should cover issues related to economic policy and integration in the region. Articles should be written for a general audience and not technical but should have a foundation in objective policy analysis. Articles should also conform with PECC nomenclature - if you are not familiar, the editor will provide you with appropriate guidelines. Acceptance of articles is entirely at the discretion of the Editor. Articles should be in an op-ed format of around 1000 words but longer submissions are also occasionally accepted. Submissions are done in the name of the author and represent their individual opinions and not those of the institutions that they work for. To submit an article, please send in Word format to:

G20 comes to the fore again

Jorge Heine
Research Professor, Pardee School of Global Studies, Boston University
Non-resident senior research fellow at the Center for China and Globalization in Beijing

The current COVID-19 is the worst global pandemic to hit the world in a century, only surpassed by the 1918 influenza virus that killed 50 million people. As of this writing, the virus has been found in 175 economies and regions, with 471,000 cases and 21,000 deaths worldwide. The World Health Organization (WHO) reports that the epidemic is still accelerating. And it will not abate any time soon. While some specialists speak of a time horizon of three to four months, others predict waves of cases that may last for two years.

Vaccines may take anywhere from a year to 18 months to develop and be ready to go to market. Even relatively remote and isolated places like Puerto Williams in Chile, the world's southern most human settlement, and Nantucket Island, off the coast of Massachusetts, have reported cases of coronavirus. You can run, but you can't hide.

The No.1 priority is to contain and to mitigate the disease. Italy, and now Spain, are examples of the devastating consequences of a cavalier governmental attitude, and of how quickly the virus spreads. The mistaken notion that it does not affect the young has been especially pernicious.

As calamitous as the health picture is, the impact on the economy could be worse. In the US alone, it is estimated that 37 million jobs are at risk, about a third of them in the restaurant business. The airline industry around the world is looking at bankruptcy.  The 2020 "corona-cession" will be a lot worse than the downturn provoked by the financial crisis in 2008-09, which leads me to the need for concerted international action to fight this crisis.

The G20 is much more representative of the new realities of the 21st century, as it includes the emerging economies like China, India, Brazil, South Africa, Indonesia and Turkey, among others. It played a critical role in deflecting the worst effects of the 2008-09 financial crisis. The notion that, in this day and age, a small group of North Atlantic economies can still call the shots in matters of global economic governance is passé at a time when the economic axis has been shifting to the Asia-Pacific.

The good news is that a virtual meeting of the G20 finance ministers, headed by the current chair, Saudi Arabia, was held on March 23, and that one of the G20 health ministers is scheduled for April 20. The virtual summit called by Saudi Arabia for March 26 opens a window of opportunity to move forward.

The paradox of the current pandemic is that, by definition, it is a global challenge, but it's being fought with a minimal degree of international coordination, not even within the EU itself. The almost automatic response has been to shut borders, as if that, by itself, would solve the problem. There is an argument to be made to close borders at certain moments, and to travelers from certain economies. But the haphazard measures, and the tens of thousands of people that have been left stranded abroad, without being able to return home, reflect the improvised and chaotic nature of the world's response to the pandemic.

The whole point of meeting global challenges is to develop global solutions. The development of early detection mechanisms of potential pandemics is a critical task, and one in which the WHO could play a much more critical than it has until now. Pandemics, like other natural disasters, are impossible to predict. But we do know they will happen and the consequences they will entail. Simulations have been extraordinarily accurate in predicting their course and the impact of policy choices, conflicts and bottlenecks. It should be possible to develop protocols, mechanisms and timelines to be applied to avoid the worst of what we have seen in these tragic weeks. This would allow to further refine the "10 Core Principles" for pandemic response developed by the presidents of China and the US in 2005, and later subscribed to by 88 economies.

Gallagher, Ocampo and Volz have pointed out that with the capital flight from emerging markets and many debt obligations coming due soon in developing economies, the IMF should emit $500 billion in Special Drawing Rights (SDRs), much as it did with $250 billion in SDRs in 2009 to deal with the financial crisis. The global challenge is both on the health and on the economic front.

In many economies around the world, the debate has now turned to the trade-off between continuing to prevent the spread of the virus and the damage caused by the economic shutdown social distancing entails. Governing is about making choices, and there is a fine line here, but health specialists are right in their warning that a premature return to normalcy would put many more lives at risk. So far, early, radical and sustained interventions in disrupting the spread of the virus have shown to be the most effective.

The US and China should take the lead in working together to overcome what is a major threat to all of humanity. However, there is no substitute for concerted multilateral action. For this, we happen to have an instrument that seems made-to-order for this extreme emergency. The G20 should once again come to the fore and do the needful.

A version of this article originally appeared in the Global Times here: on 26 March and is published here with the kind permission of the author

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