G20 must deliver on global trade promises
Last week the Africa Progress Panel met French President Nicolas Sarkozy to discuss the importance of the development agenda for his G20 presidency. France must show leadership in this and ensure, in particular, that the group meets the promises on macroeconomics and global trade it made at last year’s Seoul summit.
In 2009 the G20, elevated to heads-of-government level, came of age. The breadth of its membership facilitated a far more inclusive approach than the G8.
There is no one-size-fits-all approach to macroeconomic policy.
The closed-economy model of textbook macroeconomics is no longer relevant, but at times during 2010 these basic truths seemed in danger of being forgotten.
Many G20 members face difficult challenges. The future of the eurozone remains in doubt. There are also serious bilateral divisions, notably tension over the renminbi/dollar exchange rate. It is vital for the global economy that these must be resolved.
The Seoul communiqué includes key commitments to avoid excessive currency volatility and to enhance the effectiveness of the mutual assessment programme, overseen by the International Monetary Fund (IMF), by agreeing to benchmark indicators of global imbalances. These must be delivered this year.
The communiqué also emphasises the commitment to helping low-income countries. African economies generally survived the 2009 recession reasonably well—the stronger-than-expected recovery in demand for commodities helped. Macroeconomic policies were on a much sounder footing, with more resources available for countercyclical policies without recourse to assistance from the IMF.
But this does not mean African economies can be left to stand alone. Issues such as poverty, disease and hunger remain daunting. Macroeconomic policies that support growth and employment creation (a jobs-based recovery was stressed in the communiqué) must be implemented.
On the trade front the G20 needs to help conclude the Doha round of trade negotiations. Free trade is in the interests of all economies, but warding off protectionist vested interests is a recurring challenge. Africa will continue to need aid and finance to accelerate its development and help it adapt to and mitigate the impact of climate change. But its long-term success will rest on expanded trade opportunities.
Africa’s exports need to be broadened from natural resources to value-added products and to trade in services other than tourism. But even this will not be sufficient in the underlying business environment, which remains sadly deficient in many African countries. We must boost productivity and encourage entrepreneurship. Here, too, the G20 has a key role to play.
Linah Mohohlo is the governor of the Bank of Botswana and a member of the Africa Progress Panel.