G20's Trade and Investment Focus

Inclusive Global Value Chains, Digitalisation, Debt Resolution

Dr. S P Sharma

The Delhi Declaration, adopted on September 9, 2023, during India's G20 presidency, acknowledges the global economy's fragility and commits G20 nations to implement prudent monetary, fiscal, financial, and structural policies aimed at fostering growth, reducing inequalities, and preserving macroeconomic stability. Financial inclusion and digital infrastructure, formally supports the G20's policy recommendations for increasing financial inclusion and productivity gains through Digital Public Infrastructure (DPI). The Sustainable Development Commitment acknowledges setbacks in achieving the Sustainable Development Goals (SDGs) and pledges to marshal affordable, accessible financing from diverse sources to bolster sustainable finance for developing countries. Climate Resolve, a defining feature of the declaration is its robust commitment to environmental sustainability and the urgent mitigation of climate change. G20 member nations agree to bolster their efforts by fully and effectively implementing the Paris Agreement while respecting the principles of Common But Differentiated Responsibilities (CBDR). Multilateral Development Banks (MDBs) Reform, underscores the importance of reimagining the operating models of MBDs, improving responsiveness, and augmenting financing capabilities to maximise their developmental impact. Likewise, G20 nations have pledged to promote women's empowerment through equal participation in decisionmaking, equal access to education, social protection, financial inclusion, and the elimination of gender-based violence. The declaration also recognises the adverse consequences of armed conflicts and underscores the importance of adhering to UN resolutions.

Progressive and Promising Bilateral Engagements

Prime Minister Shri Narendra Modi hosted 15 bilateral meetings with leaders from various countries, covering a range of topics. On day 1 of the summit, a meeting was held with leaders including Bangladesh PM Ms. Sheikh Hasina, Mauritius PM Mr. Pravind Kumar Jugnauth and US president Mr. Joe Biden. The leaders reviewed the multi-faceted bilateral cooperation and lauded the positive progress. On day 2 of the summit, the Indian PM held a meeting with leaders of other guest countries; the President of Comoros, President of Nigeria and Prime Minister of Netherlands. The leaders held productive talks on various areas of wide ranging bilateral cooperation. In addition, Prime Minister Shri Narendra Modi held a working lunch meeting with French President Mr. Emmanuel Macron. Further, he engaged in discussions with Canada and held bilateral meetings with leaders from Turkiye, UAE, South Korea, EU/EC, Brazil, and Nigeria. The leaders discussed India-Middle East-Europe Economic Corridor and reviewed the progress in their bilateral Strategic Partnership. The Indian leader took note of the progress in diverse areas of bilateral cooperation as per the India-UK comprehensive Strategic Partnership as well as Roadmap 2030 in meeting with UK counterpart.

In conclusion, the G20 Summit has set a tone for global peace and prosperity where there is "One Earth", "One Family", "One Future." This collective approach aligns with the ancient Indian philosophy of 'Vasudhaiva Kutumbakam,' emphasising that the world is one family. The New Delhi Leaders' Declaration has made an unequivocal statement that all acts of terrorism, regardless of their motivation, are criminal and unjustifiable. This commitment to combating terrorism reflects the G20's dedication to upholding global security and stability. Going ahead, the strength of G20 has become G21 with inclusion of African Union. Now it will have more participation in world GDP, trade, peace and prosperity.

Finding Solutions to Global Trade and Investment Challenges

During India's G20 leadership, a Trade and Investment Working Group (TIWG) was formed, and four sessions were held prior to the G20 Trade and Investment Ministerial Meeting (TIMM).The discussions centred on reaching an agreement on global trade and investment challenges, as well as implementing action-oriented measures proposed by the Indian Presidency. During the meetings, priority areas were identified. These include Trade for Growth and Prosperity, Resilient Trade and Global Value Chains (GVCs), Integrating Micro, Small & Medium Enterprises (MSMEs) in World Trade and Logistics for Trade, and World Trade Organization (WTO) reforms. The leaders renewed their commitment to ensure a level-playing field and fair competition by discouraging protectionism and market distorting practices, to foster a favourable trade and investment environment for all.

The G20 (TIWG) has also embraced the priority on WTO reforms to build consensus among countries for standing together to support the ongoing reform process and work constructively to achieve meaningful outcomes at the upcoming Thirteenth Ministerial Conference (MC 13). The leaders agreed that trade and environment policies should be mutually supportive and consistent with global trade rules and multilateral environmental agreements. This assumes significance as the dispute settlement mechanism of the WTO has been derailed due to a non-functional appellate body since December 2019.

Global Biofuel Alliance for Clean Energy

At the G20 Summit, Prime Minister Shri Narendra Modi introduced the Global Biofuels Alliance (GBA), an initiative led by India. The GBA seeks to unite governments, international organisations, and industry stakeholders to promote biofuels as a crucial element in the global energy transition, fostering job creation and economic growth. This alliance offers comprehensive support, including capacity building, technical assistance, and a virtual marketplace for stakeholders. It prioritises international standards and sustainability principles to drive biofuel adoption and trade. For India, the GBA enhances its global standing, boosts technology and equipment exports, and expedites biofuel programs, benefiting farmers and overall development. GBA already boasts the participation of 19 countries and 12 international organizations, showcasing widespread international support.

The India-Middle East-Europe Corridor (IMEC)

The India-Middle East-Europe Corridor (IMEC) is a strategic initiative that extends beyond being a mere business corridor. IMEC strengthens India's geopolitical influence by connecting it with the Middle East and Europe, enabling a more active role in regional and global politics. Moreover, it contributes to India's energy security by facilitating the flow of vital resources. The corridor enhances supply chain resilience, ensuring access to essential goods even during global disruptions, bolstering economic and national security. IMEC aligns with India's green goals, reinforcing its global image as an environmentally responsible player. Infrastructure development through IMEC fosters inclusivity, reduces disparities, and opens doors for Indian companies to engage in projects abroad, enhancing India's influence and economic reach. By fostering economic cooperation and interdependence, IMEC also has the potential to contribute to regional stability and peace, reducing turbulence and insecurity in the Middle East. The anticipation that this project will fetch contracts worth billions to the railway companies like Indian Railway Construction International Limited (IRCON), Indian Railway Finance Corporation Ltd (IRFC) and Rail Vikas Nigam Ltd (RVNL), has provided momentum to the railway companies setting new records.

Enhancing Inclusive, Sustainable Global Value Chains and WTO's 'Aid for Trade' Initiative

Global Value Chains (GVCs) account for 70% of global trade, to the G20 TIWG discussed building a mapping methodology that may make GVCs resilient to future shocks. In the Delhi Declaration, G20 Generic Framework for Mapping Global Value Chains (GVC) was adopted to help members identify risks and build resilience. They also recognised the importance of WTO's 'Aid for Trade' initiative to enable developing countries, notably LDCs (Least Developed Countries), to effectively participate in global trade, including through enhanced local value creation.

High-Level Principles on Digitalisation of Trade Documents

Technology has had a significant impact on how cross-border trade is conducted. Paperless trading systems would further reduce transaction costs, make smaller shipments more cost efficient, and enable lower-cost internationalisation of operations, maintaining trade competitiveness in a fast digitalising world, and this subject has received significant attention at the G20. Under the G20 trade and investment ministerial meeting, an outcome document has been adopted 'High Level Principles on Digitalization of Trade Documents' to ensure effective transition to paperless trade. The document enunciated 10 broad principles that will provide guidance to the countries in implementing measures related to the cross border exchange of electronic trade related data and documents.

Enhancing Multilateral Development Banks for addressing Global Challenges

Reforming and strengthening Multilateral Development Banks (MDBs) remained a key part of India's agenda during its G20 presidency. MDBs were set up nearly 80 years ago in the immediate aftermath of World War II. The Report of the Independent Experts Group recommended a triple agenda to harness the potential of MDBs. The three elements of this agenda are: (i) adopting a triple mandate of eliminating extreme poverty, boosting shared prosperity, and contributing to global public goods (ii) tripling sustainable lending levels by 2030; and (iii) creating a third funding mechanism which would permit flexible and innovative arrangements for purposefully engaging with investors willing to support elements of the MDB agenda. The report identified 17 MDBs. These MDBs include the World Bank, International Monetary Fund, European Investment Bank, African Development Bank, Asian Development Bank, European Bank for Reconstruction, InterAmerican Development Bank, and Asian Infrastructure Investment Bank. These are seen to be in need of an overhaul, given the fast changing economic and financial dynamics of the world. MDBs have a key role to support the needed reforms and resources. They work with governments and the private sector to create the conditions for investment and transformation.

G20 Roadmap for Implementing MDBs Capital Adequacy Frameworks

G20 leaders have called on Multilateral Development Banks (MDBs) to leverage private capital through innovative financing models and new partnerships to have a greater development impact. They also endorsed a roadmap for implementing the recommendations of the G20 Independent Review of MDBs Capital Adequacy Frameworks (CAFs) and urged comprehensive efforts to evolve the vision, incentive structures, operational approaches, and financial capacities of MDBs. The framework could generate an additional $200 billion in lending headroom over the next decade for Sustainable Development Goals (SDGs) and climate finance.

Supporting Domestic Resource Mobilisation in Emerging Markets

The mobilisation and effective use of domestic resources are central to financing sustainable development. The G20 affirms its commitment to strengthening domestic resource mobilisation through international support to low-income and developing countries, improving domestic tax policies administration systems and better collection of revenues and statistics, and combating illicit financial flows. Leaders urged MDBs to maximise their development effect by leveraging private finance through novel financing strategies and new partnerships. They took note in the Summit for a New Global Financing Pact, as well as other international endeavours.

Financial Vulnerabilities and Cyber Risks in the Global Economy

Leaders at G20 stressed that cyberspace has emerged as a new source of funding for terrorism and global cooperation and framework are necessary for securing it.

Addressing Debt Vulnerabilities in Low and Middle-Income Countries

The G20 New Delhi Leaders' Declaration emphasised the need to address debt vulnerabilities in low and middle-income countries, urging swift resolutions to their debt situations, amid global financial tightening. The G20 has recognised the Global Sovereign Debt Roundtable's (GSDR) efforts to improve communication and understanding among key stakeholders for effective debt treatments. The G20 will co-chair the GSDR, and all stakeholders, including private creditors, are encouraged to work together to enhance debt transparency.

Enhancing Cross-Border Payments for Global Trade

The leaders committed to achieving global targets for faster, cheaper, more transparent and inclusive cross-border payments by 2027 in the G20 Roadmap for Enhancing Cross-border Payments. Further, discussions also took place on the potential macro-financial implications arising from the introduction and adoption of Central Bank Digital Currencies (CBDCs), notably on cross-border payments as well as on the international monetary and financial system.

Revised Principles of Corporate Governance and Sustainability

G20 Leaders endorsed the revised G20/OECD Principles of Corporate Governance at the G20 Summit on 9-10 September 2023. In the Summit Declaration, Leaders endorsed the revised principles "with the aim to strengthen policy and regulatory frameworks for corporate governance that support sustainability and access to finance from capital markets, which in turn can contribute to the resilience of the broader economy". The revised Principles include a new chapter on "Sustainability and Resilience" and reflect changes in corporate ownership, institutional investors, risks, and digitalisation. They aim to improve companies' access to finance and support national efforts.

(The author is Chief Economist | Deputy Secretary General, PHD Chamber of Commerce and Industry. Ms. Reema Jain and Ms. Nishika Chauhan, Research Associates extended support in preparing this article. You can send us your feedback on this article at feedback.employmentnews@gmail.com)

Views expressed are personal.