2019. vol. 14. No. 2

This article examines how the Group of Twenty (G20) became a hub of decentralizing authority in global economic governance since the 2008–09 global financial crisis. It analyzes how this forum responded to the crisis by decentralizing authority away from the Group of Seven/Eight (G7/8) and integrating more diverse actors and networks in global governance. The G20 also became an important hub for diffusing new policy norms and practices. These global crisis effects are linked to international authority shifts since the Cold War. The analytical approach combines, especially, social constructivist tools from the field of International Relations and insights from the sociology of professions literature. This involves analysis of strategic, political, and cognitive dimensions of authority, and a focus on the influence of global governance networks in G20 policy processes and practices. The research includes participant observation, semi-structured interviews and personal discussions with members of such G20 governance networks. The article indicates how the G20’s role as a driver and conduit for shifts in global authority was augmented by the global financial crisis.

The Group of Twenty (G20) was created at the ministerial level in response to the global financial crisis that erupted from Asia in 1997, and then at the leaders’ level after the greater crisis from the United States in 2008. These crises called into question the core principles and practices of the dominant liberal order and its core international institutions, based on economic, social and political openness, developed since 1944. The G20 combined all established and emerging countries with high capability and connectivity to operate as equals to fulfill its dual distinctive foundational mission of promoting financial stability and making globalization work for all. Since its first summit in 2008 its performance spiked at Hamburg, Germany in 2017 and remained solid at Buenos Aires in 2018. These latter summits coped well with the new populist, protectionist U.S. president and a UK prime minister withdrawing her country from the European Union. G20-supported initiatives for rules-based open trade, climate change control and security were advanced. No other global summit emerged to govern an increasingly globalized world. With the forces that propelled this rising performance growing, future G20 summits promise to perform well along this proven path. The next summit, in Osaka, Japan on 28–29 July 2019 will be hosted by a country that has never sparked a financial crisis, remains dedicated to the core liberal order and is becoming more economically and even demographically open in response to the growing vulnerabilities it and its G20 partners face. After a test in 2020 when the G20 summit will be hosted in Saudi Arabia — a still closed polity with a single staple, state-controlled economy — G20 stewardship returns to democratic, economically open Italy in 2021 and India in 2022.

The 2012 transatlantic corporate tax scandals surrounding Amazon, Google and Starbucks exposed the scope and gravity of offshoring by digital multinationals, producing major dilemmas for the global governance of international fiscal law and policy. The Organisation for Economic Co-operation and Development (OECD) (2015) estimates corporate profit shifting erodes up to $240 billion dollars from the global tax base every year. Extant literature has established links between corporate tax avoidance and accelerating domestic socio-economic inequality, the declining redistributive capacity of states, the malign impact on growth of gross domestic product (GDP), and the rise of anti-globalism in the form of populist discontent, providing unambiguous evidence that global tax competition causes social and economic harms. Responding to public outcry, world leaders at the Los Cabos summit in 2012 tasked the OECD with tackling national tax base erosion, and the Inclusive Framework for the Base Erosion and Profit Shifting (BEPS) initiative currently boasts 123 participating states, including 93% of global GDP. Although taxation is at the heart of the social contract, this new global tax governance is both under-theorized and poorly understood in the mainstream political science literature. This study draws on the extra-disciplinary approach of law and economics to argue that while global tax cooperation under Group of 20 (G20)-OECD auspices may be considered a successex ante based on the record of first-order compliance, theex post enforcement dimension of BEPS is both under-theorized and under-scrutinized empirically. This study contributes a novel meta-theory of the new global tax governance that accounts for the variables of time, institutional sphere of action and policy feedback loops embedded in the global fiscal policymaking process to stimulate further inquiry. It concludes with recommendations for global fiscal policy, further research on BEPS and G20 digital governance.

In recent years, multilateralism has faced significant challenges. The rise of populist sentiment in western countries, trade wars and now slowing economic growth have undermined trust in multilateral institutions including those of a plurilateral summit form. The Group of Twenty (G20) often faces criticism for its ineffective problem-solving and members’ poor compliance with their summit commitments. Yet evidence from the G20 Research Group shows that G20 members do comply solidly with the commitments they make at one summit before the next one takes place. Some summits and subjects have secured higher compliance than others. Understanding what causes compliance and how it can be improved is essential for improving G20 effectiveness, credibility and even its future. This study offers an exploratory quantitative analysis of performance at G20 summits. It relies on established conceptual frameworks and presents a descriptive inferential argument. Compliance coincides with, and thus might be improved by, making more summit commitments, holding ministerial meetings and using specific catalysts in the commitments, given the prevailing reciprocity in compliance among members rather than a single dominant actor such as the U.S. or China setting the pace.

In 2009, the first summit of the leaders of what would become known as the BRICS countries (Brazil, Russia, India, China and later, South Africa) was held in the Russian city of Yekaterinburg. Since then, “BRICS” has gradually evolved from an academic concept to a cooperation mechanism that has played an ever-greater role in the international political arena. In the past 10 years, the agendas of BRICS summits have been enriched and its action plans have been pragmatic and effective. This article analyzes the agendas of the 10 summits to date and explores the factors that shaped them. Finally, the article analyzes trends for future agendas and explores the complex difficulties and challenges faced by the BRICS countries in the international environment. It concludes with suggestions about how to resolve these difficulties and challenges through future cooperation.

Why have the New Development Bank (NDB),established by the BRICS grouping of Brazil, Russia, India, China and South Africa, and the Asian Infrastructure Investment Bank (AIIB), both created by emerging economies, taken different operational institutions? The NDB has adopted a borrowing country-oriented operational modality, while the AIIB’s operational modality is still donor country-oriented. This article examines the structural factors leading to the creation of these new banks and different institutional proposals during the establishment negotiation processes to explain the operational differences. In the establishment of NDB, the competition between India and China for leadership made the principle of equality a basic feature of the bank. All the founding members are the borrowing countries. The NDB is a borrowing country-oriented new multilateral development bank (MDB) with equal shareholding and the use of country systems as two prominent institutional innovations. In the case of AIIB, after being joined by non-regional European powers, China pushed it toward an internationalized and high standards approach, in the face of political pressure toward multilateralism, especially from the European founding members, and market pressure from the international credit rating agencies in America. As a result the AIIB was similar to existing MDBs in terms of operational modality. This research shows the different institutional approaches to participation in global economic governance for emerging economies.

During the last decade the BRICS group of developing countries (Brazil, Russia, India, China and South Africa) became a noticeable phenomenon in international relations. Discussion continues among politicians and experts about the group’s perspective, its sustainability and its potential both for further institutionalization and to become a more integrated community. Many experts are pessimistic about the prospect that BRICS will gain more influence, taking account of slowing economic growth, economic asymmetry, different political goals and the distinct strategic cultures of the group’s members.

Under such circumstances elaboration of a BRICS communication strategy becomes an issue of vital importance. The first step might be the design of a strategic BRICS narrative which could act as an interpretative platform framing the perception of key issues, establish the connection between the past and a vision of future, and designate the group’s identity. Such a narrative could serve as the basis for strategic positioning, which is the key component of a communication strategy. It enables the formation of a basic discourse and key messages which can be transmitted through diversified channels of communication.

This article outlines the strategic narrative of BRICS, drawing from the model of strategic narrative and the concept of national biography. The narrative of the international system, the identity narrative and issue narratives are considered as key components of its strategic narrative. Similarly, parameters of national biography are exposed: myths about the birth of community, significant experiences in the past, images of the future, the spatial facet and relationships with other countries and communities. This analysis identifies those components of the strategic narrative that are sufficiently developed and describes ways to further elaborate others.

A constructivist approach is used, according to which a “strategic narrative” is considered to be social construct elaborated to achieve particular strategic goals, in combination with a holistic analysis which views the different tracks of BRICS activities as intertwined. Content analysis of documents from BRICS summits (primarily of the summits in Xiamen, China in 2017 and Johannesburg, South Africa) and public speeches by the leaders of BRICS countries is undertaken.

Intensified trade protectionism led by the Trump administration in the U.S.negated the Trans-Pacific Partnership (TPP) AgreementuntilJapanese Prime Minister Abe restored it in 2018 without U.S. participation. At present, the trade wars between China and the U.S. and between the European Union (EU) and the U.S. are still ongoing processes and no one can predict exactly what the results will be for the global economy. Eventually, trade protectionism may be regarded as the Achilles heel of global economic cooperation. Despite the protectionist atmosphere, there is a pro free trade movement in the global economy. The EU and Japan started negotiations for a free trade agreement (FTA) in 2012 and finalized their agreement in December 2017 after 18 rounds of negotiation. The two parties agreed in principle on the main elements of the EU-Japan FTA. After a legal verification and translation process, the European Commission submitted the agreement for the approval of the European Parliament and EU members. As a highly developed economy and a major global trader and investor, Japan is one of the most important partners for the EU. The EU-Japan FTA will lead to extensive economic cooperation accounting for approximately 30% of global gross domestic product (GDP) in 2017. Moreover, the EU-Japan FTA removes many barriers and establishes global trade rules in line with the high standards of free trade and shared values. In addition, it sends a powerful signal that two major economies reject the protectionism that has arisen since the global financial crisis in 2008 in general and the Trump administration in 2017 in particular. This article focuses on the EU-Japan FTA and examines whether it will boost economic growth and provide benefits for both parties. It also investigates and analyzes which industrial sectors will profit the most in the two economies. Finally, it estimates the impact of the EU-Japan FTA on the global trade environment.

This article examines the economic sanctions imposed by the UN Security Council (UNSC) on the Democratic People’s Republic of Korea (DPRK or North Korea) in 2006–2017 in response to Pyongyang’s nuclear tests and missile launches. The UNSC adopted a number of resolutions containing obligations for all UN member states. Some of them have a direct impact both on North Korea’s economic contacts with the outside world and on the country’s economic development. The restrictive measures imposed against the DPRK in 2016–2017 were particularly biting.

The purpose of this study is to explore economic sanctions imposed on the DPRK by the UNSC and examine their possible consequences for the North Korean economy.

The study is based on a systems approach. It examines the DPRK’s economy as a system, and the UNSC sanctions as an external factor that influences its development. Methods of comparative analysis are applied to explore the dynamics of the tightening sanctions regime. Statistical and analytical methods are also used to evaluate the current state of the North Korean economy, identify the key factors of its development and the potential impact of multilateral sanctions.

In the 1960s, the DPRK classified most of its economic statistics and sometimes released only certain indicators, such as the gross domestic product (GDP) for certain years. Therefore, to analyze the long-term dynamics of North Korean economic development it is necessary to use evaluations from secondary sources, including international organizations and government agencies of the Republic of Korea (ROK). It is estimated that the last decade was marked by the growth of North Korea’s GDP despite the restrictions imposed by the UN Security Council. Pyongyang’s efforts to expand foreign economic relations, as well as the growth of a market sector in the country’s socialist economy contributed to that upward trend.

The present study identifies important consequences that multilateral sanctions might have for the North Korean economy. By the end of 2017, North Korea was effectively cut off from the global banking system and substantially restricted in its foreign trade, investment, transport and scientific ties. In addition to a significant drop in exports, all external transactions for North Korean companies have become more expensive. The DPRK will have to search for new ways of interacting with the world economy, including the use of cryptocurrencies. Previously export-oriented producers in North Korea will be forced to focus on the domestic market. With increased local competition and limited access to resources, big companies connected with the state will probably oust smaller “private” forms of business from the market. An important unintended result of international sanctions is the negative humanitarian impact on the civilian population of the DPRK.

The institutional aspect of post-crisis banking regulation reform (Basel III) remains unsettled, and as such undermines regulators’ efforts to shape a seamless platform for international financial intermediation. The lack of global acceptance of the Basel III standards amid the internationalization of banking activities is one of the main reasons for regulatory asymmetries which are difficult to handle at the national level. In this context, the efforts of governments and financial regulators are a central core of their policy in protecting banking sectors from systemic risks. It becomes imperative to bring together national mechanisms of banking regulation and to develop a regional system of regulatory institutions, as is evidenced by the single supervisory mechanism in the eurozone countries.

Strengthening stress-resilience of the national banking sectors in the Eurasian Economic Union (EAEU) and the expansion of banking activities to the Eurasian economy will require a conceptual framework of the EAEU banking regulation system. However, different regulatory regimes in EAEU states along with the lack of supranational regulatory institutions may slow the progress of the Eurasian mechanism of banking regulation. This means that operationalization of the EAEU regulatory mechanism will depend on whether the mini-Basel III format as a methodological hub of regionalization and supranationalization will act as an enabler of a resolution to the regulatory trilemma of the feasibility, relevance and opportunities of supranationalization.

The institutional aspect of mini-Basel III is intrinsically linked to the integrity and consistency of the supranational authority for regulation of EAEU financial markets being an authority documented in the treaty on the EAEU; however, the costs of regulatory alignment may exceed the advantages of a single-institution regulatory architecture owing to the existent and tacit risks from the heterogeneity of the national regulatory models. Stemming from the complex financial sector environment that falls short of valid and reliable institutional fundamentals, this article proposes alternative scenarios for the EAEU regulatory mechanism that could be sought for optimization of regulatory logistics and algorithms of regulatory alignment. Based on systematization of the benefits and weaknesses of each of the scenarios as well as on a comparative analysis as to whether the proposed scenarios would ensure a continuum of financial intermediation and financial stability, this article concludes that currently there are no priority approaches to the design of a supranational institutional system in the EAEU. At the same time, the identical structure of national banking sectors together with the least expensive scenario approach could underpin the process of regulatory supranationalization; however, to secure the integrity of the EAEU supranational authority, it should be complemented with an authority that would be responsible for the coordination of EAEU-wide regulatory alignment.

China’s digital economy has expanded rapidly in recent years. While average digitalization of the economy remains lower than in advanced economies, digitalization is already high in certain regions and sectors, in particular e-commerce and fintech, and costal regions. Such transformation has boosted productivity growth, with varying impact on employment across sectors. Going forward, digitalization will continue to reshape the Chinese economy by improving efficiency, softening though not reversing, the downward trend of potential growth as the economy matures. The government should play a vital role in maximizing the benefits of digitalization while minimizing related risks, such as potential labor disruption, privacy infringement, emerging oligopolies, and financial risks.

This article substantiates the necessity of reform of the major institution of global economic governance, the World Trade Organization (WTO). A number of crucial problems facing the existing multilateral trading system (MTS) are explored: the problem of the development and efficiency of the WTO in the new environment; the weakening of the leadership role of the U.S.; regionalism; the crisis of the decision-making system in the WTO; and the recent rise of trade protectionism. These challenges point to the necessity of WTO reform, the latter two being particularly pressingsince they eventually moved the issue from the realm of scientific discussion into the realm of practical initiatives. This article analyzes the first steps taken by members of the WTO in 2018 toward the organization’s reform, focusing on the EU’s concept paper on WTO modernization, which was the first such initiative. Emphasis is given to the pivotal role of the positions of the U.S. and China since it is hardly possible to successfully continue the process of WTO reform without them. The controversial position of the U.S., formed largely under the influence of the current isolationist and protectionist trade policy of the Trump administration, is analyzed in depth. The article concludes that the process of WTO reform is bound to be extremely complicated and may take years.

The review covers 2018 OECD report “Trade Facilitation and the Global Economy”. It is shown that most countries indeed facilitated their trade in 2015-2017 and developed countries led this progress. Border agencies co-ordination and Single windows launching are the most challenging trade facilitation measures among all countries as both require skilled employees and high levels of trust among border agencies and partner countries. Trade facilitation does not require significant investments, but leads to welfare gains. In the short-run trade facilitation drives growth of production, while efficient resource allocation and growth of wages are achievable over the longer term. Lower income countries are benefitting the most from trade facilitation.