Recognising the risk of economic slowdown and weakening trade posed by protectionism, the G20 has decided to extend until the end of 2016 its standstill commitment to further progress in removing barriers and impediments to global trade and investment.
In a 27-page declaration adopted at the end of the two-day Summit on Friday night, the group of 20 industrialised and major emerging economies also reaffirmed its commitment to roll back new protectionist measures.
“With these commitments, we stress the importance of further curbing protectionism through the WTO,” the G20 Leaders’ Declaration said.
The G20 called on all WTO members to show the necessary flexibilities to bridge existing gaps and deliver positive and balanced results at ninth WTO ministerial conference in Bali in December on trade facilitation and some elements of agriculture and development issues.
“This would be a stepping stone to further multilateral trade liberalisation and progress in Doha Development Agenda negotiations, providing new confidence in successful post-Bali negotiations,” the declaration said.
The declaration committed itself to cooperate to ensure that policies implemented to support domestic growth also support global growth and financial stability and to manage their spillovers other countries.
The Summit also shared Prime Minister Manmohan Singh’s views on the need for orderly exit from the monetary stimulus undertaken in the context of 2008 economic crisis.
“In the five years since we first met, coordinated action by the G20 has been critical to tackling the financial crisis and putting the world economy on a path to recovery.
“But our work is not yet complete and we agreed that it remains critical for G—20 countries to focus all our joint efforts on engineering a durable exit from the longest and most protracted crisis in modern history,” the declaration said.
It noted that the most urgent need is to increase the momentum of the global recovery, generate higher growth and better jobs while strengthening the foundations for long term growth and avoiding policies that could cause the recovery to falter or promote growth at other countries’ expense.
Talking about the problems arising out of the exit from stimulus package, the G20 leaders said monetary policy will continue to be directed towards domestic price stability and supporting the economic recovery according to the respective mandates of central banks.
“We recognise the support that has been provided to the global economy in recent years from accommodative monetary policies, including unconventional monetary policies. We remain mindful of the risks and unintended negative side-effects of extended periods of monetary easing,” it said.
The Summit recognised that strengthened and sustained growth will be accompanied by an eventual transition toward the normalisation of monetary policies. The Central banks are committed that future changes to monetary policy settings will continue to be carefully calibrated and clearly communicated.
The declaration said, “We reiterate that excess volatility of financial flows and disorderly movements in exchange rates can have adverse implications for economic and financial stability as observed recently in some emerging markets.
“Generally, stronger policy frameworks in these countries allow them to better deal with these challenges. Sound macro economic policies, structural reforms and strong prudential framework will help address an increase in volatility. We will continue to monitor financial market conditions carefully.”
The Summit also reiterated the countries’ commitment to move more rapidly toward more market determined rate systems and exchange rate flexibility to reflect underlying fundamentals and avoid persistent exchange rate misalignments.
“We will refrain from competitive devaluation and will not target our exchange rates for competitive purposes. We will resist all forms of protectionism and keep our markets open,” the declaration said.
The leaders identified eight main challenges to the global economy.
They are: weak growth and persistently high unemployment, particularly among youth, and the need for more inclusive growth in many economies;
-- Financial market fragmentation in Europe and the decisive implementation of banking union;
-- Slower growth in some emerging market economies, reflecting in some cases the effect of volatile capital flows, tighter financial conditions and commodity price volatility, as well as domestic structural challenges;
-- Insufficient levels of private investment in many countries, in part due to continuing market uncertainties, as well as internal rigidities;
-- High public debt and its sustainability in some countries that need to be addressed while properly supporting the recovery in the near-term, especially in countries with the highest actual and projected debt to GDP levels;
-- Volatility of capital flows as growth strengthens and there are expectations of eventual monetary policy recalibration in advanced economies;
-- An incomplete rebalancing of global demand; and
-- Continued uncertainties about fiscal policy deliberations.
The declaration said that to address these challenges and to place the global economy on a stronger, more sustainable and balance growth path, the leaders have built their previous actions with new measures as set out in the St Petersburg Action Plan.
“The Action Plan is designed to boost economic activity and job creation, support the recovery, and address near-term risks to the outlook, while strengthening the foundations for strong, sustainable and balanced growth through ambitious and well-targeted reforms. We will act together and implement all our commitments in a timely manner and rigorously monitor this process,” it said.
Agreeing on the Action Plan, the leaders said cross-border tax evasion and avoidance undermine public finances and trust in the fairness of the tax system.
“Today, we endorsed plans to address these problems and committed to take steps to change our rules to tackle tax avoidance, harmful practices, and aggressive tax planning,” they said.
The declaration also reiterated its commitment to fully implement the outcomes of Cancun, Durban and Doha and said the G20 will work with Poland as the incoming presidency towards achieving a successful outcome at COP 19.
“We are committed to support the full implementation of the agreed outcomes under the United Nations Framework Convention on Climate Change (UNFCCC) and its ongoing negotiations,” it said.
It identified corruption as a “severe impediment to sustainable economic growth and poverty reduction“.
“As a group of the world’s largest economies, the G20 has the potential to create unstoppable momentum towards a global culture of intolerance towards corruption. We will redouble our efforts to achieve this goal, in particular by enhancing transparency and closing implementation and enforcement gaps,” the declaration said.
“We reiterate our determination to combat domestic and foreign bribery, as well as solicitation, and endorse the non-binding Guiding Principles on Enforcement of the Foreign Bribery Offence and the Guiding Principles to Combat Solicitation,” it added.