Four ways G20 leaders can calm nervous markets, citizens

 khaleejtimes.com  03/29/2020 19:11:43  3  James Cockayne (Centrepiece)

The virtual summit of the Group of 20 (G20) last week was a defining moment for international cooperation. The Covid-19 disease crisis is truly international - a global pandemic and a contagion in a globalised economy. No country will be able to exit this crisis alone.

That much is clear already from China's experience. Hugestrideshave apparently been made in curtailing transmission on the mainland, but China still faces risks of transmission fromtravellers arriving from overseas. And even as China's factories slowly revive, the deep and lasting shock to demand in the West will make it difficult for China to return to growth levels before the coronavirus struck.

Governments have so far understandably focused on immediate crisis management at home. Two new realities are now setting in.

First, that the underlying conditions that require imposition of social distancing, lockdowns, and commercial restrictions are not going away soon. Opening up while the virus is still out there simply risks renewed exposure.

This is clear fromHong Kong's experience.

Second, that the removal of those conditions requires coordinated global action. The virus will not be truly contained anywhere until it is effectively controlled everywhere.

Yet, no centralised crisis response mechanism has emerged to coordinate national efforts. Instead, travel restrictions have beenimposed unilaterally, and a dangerously competitive dynamic is emerging as countries scramble for scarce resources, such asventilatorsand promisingpharmaceutical treatments.

Enter the G20. Created to deal with the 2008 global financial crisis, and bringing together countries that account for around 90 per cent of global GDP, the G20 forum is in a unique position to quickly establish a framework for coordinated crisis response.

Here are four things leaders should prioritise:

1. A Covid-19 global crisis coordination mechanism

This crisis is unprecedented in its scale and speed. The exponential nature of both viral and economic transmission challenges our ability to see around corners, and has repeatedly forced leaders to get well out ahead of their publics - a lonely and uncomfortable place for democratic politicians especially.

Yet zero sum competition for the scarce resources governments need - masks, ventilators, hospital beds, even healthcare workers - increases the risk to all. It means that resources aren't where they need to be, and instead may be where they do not need to be. As states realise they need to cooperate to exit this crisis, they will look for help from abroad. The G20 can lay the foundations for a science-based, strategic coordination mechanism to allocate resources on the basis of a truly collective needs assessment.

This mechanism would need to supplement the technical mandate of the World Health Organization's (WHO)Emergency Committee, established by the International Health Regulations, with a political one. States would commit to coordinate production and allocation of key resources such as masks, ventilators, and medicines. In time, there may be a need to coordinate access to healthcare workers, especially as the virus takes hold in developing countries, whichlack the resourcesof the countries worst hit so far.

2. A temporary regime for moving response-critical people and goods

The global system of travel is effectively suspended. Individual actors are pitching in: Maersk, the Danish shipping giant, is providing its ships and cargo spaceto move medical goods. But new restrictions on movement for response-critical people and goods are a huge hindrance.

The G20 should consider creating an international analog of the "green lanes" system developed in the European Union, to ease the passage of critical freight and medical supplies. At the same time, leaders should offer an out to the24+ countriesthat have adopted medical equipment export controls since the start of the crisis, by creating an international coordination mechanism to speed production and distribution of this equipment, based on medical needs.
Simultaneously, the 156 countries that have tariffs in place on disinfectants and sanitisation products should be encouraged to drop them immediately. It would cost only $2 billion to substitute those revenues, for example, through a World Bank grant.

It's in everyone's interest to ensure developing countries have the best chance of managing this crisis, or the coronavirus will become entrenched there and create a permanent break on economic recovery, plus risking an emerging markets financial crisis. Value-chains are now heavily globalised - no country will recover properly from this crisis until global value chains are back up and moving.

3. The first true global fiscal stimulus

The global nature of the economic shock we are facing, with simultaneous collapses in both supply and demand, means we need the first truly global fiscal stimulus in history.

That stimulus should be channeled not only to big businesses and lead firms, but to the workers and small to mid-size enterprises worldwide that underpin the global economy. It's not enough to protect the major suppliers: we need to protect their suppliers, and the global consumer demand-the household income-that will slowly draw the global economy back to life.

The need here is not just to coordinate fiscal expansions but to fund them, especially for developing countries. This will require creative thinking about how to mobilise large injections of concessional finance - not only from multilateral development banks, but also from private lenders such as pension funds, who will be in a hunt for even low-growth investment opportunities. Development finance institutions may need to work together to create new mechanisms for collective credit easing for emerging market private sectors. And there may be a need to access Special Drawing Rights (SDRs) at the International Monetary Fund, suspend bilateral debt repayments, and coordinate central bank currency swaps.

All of this should take place within an overall coordination mechanism prioritising capital allocation to response-critical sectors and value-chains such as medical supply manufacturing.

4. A commitment to do whatever it takes to protect people

Finally, but perhaps most importantly, the key task of the G20 is to make clear that global leaders stand united in their commitment to dowhatever it takesto protect people.

The choice between profits and people is a false one. There can be no economy, let alone economic growth, without health and safety. A clear statement of commitment by G20 leaders to work together to protect people will calm nervous markets and citizens. And it will provide the foundation of trust, without which international cooperation and global markets may quickly falter, as a spiral of protectionism and bear market panic sets in.
The tragic irony of this crisis is that social distancing makes clear just how much we are all in this together. Now is the G20's moment to help us begin to find our path out of this crisis-together. -IPI Global Observatory

Dr. James Cockayne is Director of the United Nations University Centre for Policy Research (UNU-CPR). He tweets@James_Cockayne.


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