AnAsianRegionalCaucusforG-20 StephenGrenvilleandMarkThirlwell Tempo(Jakarta) 24March2010

TheG20hasbecomethe worldspremierforumforinternationaleconomiccooperation.This is animportantshiftintheinternationalarchitecture.Untilrecently,itstillseemedlikelythatsomead hoc enlargementof the G7framework wouldbetheunsatisfactoryresponse to the increasingly unrepresentativelegacyofpostWWIIinternationalarrangements. TheG20sarrivalattheapexoftheinternationaleconomicarchitecturegivesEastAsiaamuch greaterpresenceatthetoptableoftheworldeconomy:sixregionaleconomiesaremembersof 1 the G20 , in contrast to the G7, which only had room for Japan. But seizing this opportunity presentschallengesaswellasopportunities. Reshaping the internationalenvironment requiresidentifying, producing,refining andultimately sellingpolicyideas.Giventhatinmanyregionaleconomies,policymakingresourcesareinshort supply relative to the challenges thoseeconomies confront, thismeans that the region faces a potentially important resourceconstraint when it comes to maximising the opportunity now offeredbytheG20. Thecaseforacaucus OnewaytoloosenthisresourceconstraintwouldbebypromotingtheformationofanEastAsian 2 caucusgroup. Thefunctionof suchagroup wouldbe first,to identify G20typeissues which lendthemselvestotheformulationofaregionalposition,second,torefineanddistilaconsensus argument,andthird,presentthistotherestoftheG20assomethingwhichhasthebackingof thecaucusmembers.

Moreover,thefunctionandoperationoftheG20itselfis,toalargeextent,stillupforgrabs.The creation of an East Asian caucus would enhance the regions ability to help shape the future workingsofthenewgrouping. Whattopicsshouldthecaucusconsider? A lookat the issuescurrently underdiscussionat the G20 suggests that there isplentyto talk about. First, there are important issues of macroeconomic policy coordination. Current policy issues such as the withdrawal of fiscal and monetary stimulus and the removal of bank guarantees wouldbenefitfromadegreeofinternationalcoordination.Ontheperennialtopicofinternational imbalances,thecaucuscountriescouldwidenthecurrentdebatesothatitislessfocusedonthe bilateralimbalancebetweentheUnitedStatesandChina,andmorefocusedonpoliciesthatwill 3 maintainandexpandingglobalisation,includingincapitalflows.

Japan,China,India,Indonesia,SouthKoreaandAustralia. HadiSoesastrohasmadethecaseforleadersoftheAsianG20memberstodirecttheirfinanceministers to have regular strategy meetings to strengthen East Asias engagement in formulating G-20policies and actionstowardstherecoveryoftheglobaleconomyandinshapingglobaleconomicgovernance.SeeEast Asia, the G20 and global economic governance, East Asia Forum, 8 March 2009, available at http://www.eastasiaforum.org/2009/03/08/eastasiatheg20andglobaleconomicgovernance/. 3 For more on global imbalances and a possible role for the G20, see Stephen Grenville, External imbalancesandtheG20,PolicyBrief,LowyInstitute,Sydney,14September2009.
2

Second, international coordination of prudential regulation. Much of the current international debateisnotrelevanttomanyoftheAsiancountries,becauseitislargelyabouthowtoorganize theprudentialsupervisionofcomplexinternationalbanks.Now,withthedownsideofcomplexity clearlydemonstratedintheUnitedStates,theremightbeanewopportunitytodevelopa setof principlesmoreappropriateforEastAsiancountries. Third, the G20 represents an opportunity to update the anachronistic postWWII balance of powerintheinternationalfinancialinstitutions,particularlytheInternationalMonetaryFund.There are other related issues here. How to coordinate the regional crisisresponse architecture (primarilytheChiangMaiInitiative)withtheIMFsmoreglobalapproach.Howtodevelopthenew lowconditionalityresourcestheIMFsFlexibleLineofCreditsothatitcanbeusedwithoutthe stigmaattachedtoaconventionalIMFprogram.

Resisting protectionism and dealing with climate change are just two more of themany issues wheretheregionwillhaveinterestswhichdifferinsubstanceoremphasisfromthecurrentworld view. WhatsinaG20CaucusfortherestofEastAsia? WhataboutthecountriesoftheregionwhicharenotinG-20?Thiscaucuscouldbeembeddedin the East Asia Summit framework, thus connectingall EAS countries into the G-20discussions. WhenthesixEASmembersbringtheirargumentstoG-20,theywillbereflectingnotjustthesesix countriesbutthewiderregionalconstituency. Thereisalegitimateconcernthatanynewinternationalgroupingwilldiminishtheroleoftheold inthiscaseASEANandAPEC.ThereseemslittleoverlapherewithASEAN,whichwouldstillbe the premier forum for issues within the SE Asia region. This arrangement would, in fact, strengthen ASEAN by giving it a strong linkage to the overall international economic debate, absentatpresent.APEC mightpotentiallyhavemoretolose here,asits LeadersMeetinghas beenitsmaindrawcard,andtheG-20Leadersmeetingmightovertimedisplaceit.Butevolution offorumsseemsnotonlyinevitable,butdesirable,whenthenewarrangementrepresentsamore coherentapproachtointernationaleconomicissues. Conclusion It issometimesaidthat,whileEastAsiaiskeentohaveagreatervoiceinmanagingtheworld economy,theregiontendstobereluctanttotakeonamoreactiveleadershiproleortocomeup withpolicyproposals. MembershipofG-20isanopportunitytoshowthatthereisnogapbetween aspirationanddelivery.ThesixcountriesmaynotsinginunisonatG-20,buttheycouldcertainly singinharmony.

Alongerversionofthisarticlecanbefoundatwww.lowyinstitute.org/Publication.asp?pid=1153