Since the Bretton Woods system was agreed to more than 70 years ago, nations have been coming together in pursuit of global public goods. These efforts have given us the international trading system and the global financial safety net. This is multilateralism in action, and it has been a pillar of our shared success.
The free flow of trade, investment and ideas has helped to lift more people out of poverty than ever. Prosperous and growing middle classes are broadening opportunities for the exchange of goods, services and innovation across the world. The multilateral system provides the economic and political security to allow both big and small countries to fulfil their tremendous potential.
As beneficiaries of this system, we have a responsibility to safeguard the institutions that have led to our shared economic success. We need to work together to forge consensus on pressing global challenges. At this moment, rising trade tensions are a serious concern. While we acknowledge there are legitimate issues that must be addressed, the risks of collateral damage are growing.
Uncertainty over the outlook is contributing to a slowdown in trade and manufacturing activity. We have seen a return of financial market volatility, currency instability and decreased capital flows to emerging economies. Dampened global trade conditions are affecting investor confidence, business investment and productivity. Growth has slowed and risks remain tilted to the downside. The World Bank and the International Monetary Fund continue to revise down economic growth forecasts.
Collectively, we need to take steps to reverse this course. We need to champion the rules-based multilateral system. While respecting each country’s domestic priorities, we should be clear that protecting free and open markets will ensure stronger growth and greater prosperity for all. We must not resort to unilateralism and protectionism. Pursuing confrontation over dialogue will only exacerbate risks, erode confidence and weaken the prospect of global economic recovery. Compromise is key to achieving win-win outcomes, as well as trust that others are sticking to the agreed rules.
Multilateralism relies on core principles of non-discrimination, predictability and transparency. We abide by these principles because we know they work.
In 2008, economic leaders from around the world – especially among G20 economies – came together to safeguard the global economy. Leaders took decisive and co-ordinated actions widely acknowledged as having boosted consumer and business confidence and supported the first stages of recovery. The G20 went on to put in place reforms needed to promote financial stability through more co-ordinated and stronger regulation and oversight.
More recently, G20 leaders responded to growing concerns about corporate tax avoidance. In November 2015, they agreed on a strategy to ensure multinational profits are taxed in the country where economic activity occurs. This consensus demonstrated a commitment to fairness, transparency and accountability on a complex cross-border challenge.
In the present global environment, it is this leadership and cooperation we need. The G20 is an important forum for global leaders to agree on solutions to our shared problems. Small enough to be efficient yet large enough to be representative of global voices, the G20 creates an opportunity for compromise and progress. But there are legitimate concerns that the multilateral system is struggling to manage the complexity of today’s global economy. We must come together to find concrete solutions. Some obvious ways forward involve taking an honest look at our trading system, reforming multilateral institutions and developing a multilateral agreement on digital taxation.
These are separate issues but must be dealt with in the same way: through multilateral dialogue and consensus building. By doing so, we will reduce the incentive for unilateral actions and increase respect for international norms and laws.
As upcoming G20 presidents, Saudi Arabia, Italy and India will have the opportunity and the important responsibility of setting the G20’s strategic direction across the next three years.
The G20 must continue to support an open trading system and a global financial safety net that can withstand times of crisis. There is also value in sharing our experiences addressing national challenges such as the future of work, women’s economic empowerment and competition policy.
Harking back to its origins in the global financial crisis, the G20 needs to continue to build mutual understanding and co-operation so it can uphold and support multilateral problem-solving in the event of another economic crisis.
To rebuild lost confidence, our multilateral system needs newfound strength to withstand the complexity of our present circumstances. This is not something one or two countries can do alone. All of us must play a role in restoring the system that has contributed so much to our shared growth and prosperity in the past 70 years.
Our collective determination and wisdom can return the global economy to a more positive path. As senior ministers, we will use all our energies to encourage co-operation on the global challenges we face together.
Josh Frydenberg is Treasurer and deputy leader of the Liberal Party. Heng Swee Keat is Deputy Prime Minister and Finance Minister of Singapore. Sri Mulyani Indrawati is Finance Minister of Indonesia. Bill Morneau is Finance Minister of Canada.