G20 Summit: Assessing the Impact on Asia-Pacific Countries
By Rajiv Biswas, Asia Pacific Chief Economist, IHS Markit
An important outcome from the G20 Summit is the decision announced by China and the US to ratify the Paris climate change agreement. The G20 communique highlighted this and made a commitment for G20 members to complete domestic procedures so as to join the Paris climate change agreement as soon as possible and to aim to implement the Paris Agreement by the end of 2016.
An important related outcome from the G20 Summit was the priority given to strengthening green financing to support environmentally sustainable growth, and the role of the Green Climate Fund in helping developing countries to adapt to climate change and mitigate its effects. As many Asian developing countries are estimated to be highly vulnerable to the impact of climate change and global warming, notably the Pacific Island states, this will improve their access to financing to assist them tackling climate change.
The G20 Summit launched a new initiative to create a Global Forum on steel excess capacity to be facilitated by the OECD. This new forum may help to improve communication and reduce misunderstandings among G20 members and other major steel producing countries, particularly in relation to progress by China in reducing excess capacity in its steel sector. China’s State Council announced in January 2016 that Chinese steel production would be cut by 100 million to 150 million tons over five years.
The Chinese government’s steel capacity reduction target for 2016 is 45 million tons, with an estimated 21 million tons of capacity reduction achieved by July. There has been considerable trade friction among global steel producers during 2015-2016, with many countries invoking WTO anti-dumping procedures in relation to steel exports by other countries, with many such anti-dumping actions being taken against Chinese steel exports, including by the US and the EU. This new initiative will be of high relevance for the Asia-Pacific G20 members, including for the steel industries of China, Japan, South Korea, India, Indonesia and Australia.
The G20 Summit also launched a new G20 Initiative on Supporting Industrialisation in Africa and Least Developed Countries, which will be a potentially important source of policy support for the Asian least developed countries, which includes Afghanistan, Bangladesh, Bhutan, Cambodia, Kiribati, Laos, Nepal, Myanmar, Timor Leste, Tuvalu and Vanuatu. G20 assistance to these countries to try to develop their industrial sectors is important in order to help generate employment growth and diversify their economies away from subsistence agriculture and other primary industries.
Bangladesh, Cambodia and Myanmar have already made significant progress in developing some segments of their industrial sector, notably in the low-cost garments industry, and the new G20 Initiative could be an important further boost to help Asianleast developed countries to accelerate their industrial development.
The G20 also made a commitment to ratify the WTO Trade Facilitation Agreement (TFA) by the end of 2016, which could help to speed up its ratification process among other WTO members. The WTO TFA wasmade at the WTO Ministerial Conference in Bali in December 2013, but has not yet been ratified by enough WTO members to be implemented. Two-thirds of WTO members must ratify the agreement before it can enter into force.
The TFA, when implemented, is expected to deliver significant reductions in trade costs, with the potential reductions to the costs of world trade estimated to be in the range of 12% to 18%. Due to the importance of trade in the overall GDP structure in many Asian developing countries, the implementation of the WTO TFA is expected to deliver significant economic benefits to many Asian countries. Overall, two-thirds of the gains from the TFA implementation are expected to accrue to developing countries worldwide.
The G20 also welcomed the decision by the IMF to include the Chinese yuan into its Special Drawing Right currency basket, reflecting the growing international importance of the yuan as an international currency.
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Source: The Insiderstories