International economic coordination is as necessary as it is elusive. During the global financial crisis, the G-20 became the primary forum to agree on basic principles in areas such as the fiscal-policy response and the role of the International Monetary Fund.
By underscoring the need to avoid trade protectionism and other beggar-thy-neighbor policies, it also put some pressure on governments concerning what not to do. In these respects, the G-20 was clearly a step forward.
Lately, however, as the G-20 has tried to reconcile divergent national economic interests and recovery strategies, it has been far less successful relative to its initial meetings in Washington and London in 2009. Indeed, the G-20’s Seoul summit in early November exposed a deep divide.
Global imbalances and currency misalignments could well wreck the global recovery and push the world into the protectionist mire. Most nations would suffer, but nations caught in the middle would suffer the most. Today, the emerging economies of Latin America could become some of the first casualties in the economic crossfire between the United States and China.
Consider Colombia, Chile, and Peru. These economies face two serious problems. The first is the flood of short-term countries are not adequately represented, international economic coordination will return by default to the multilateral institutions where it made little progress in the years that led up to the crisis.
We propose changing the status quo by allowing these countries to take a rotating seat at the G-20 table. They can help steer the world toward coordinated recovery and save many emerging economies from becoming innocent casualties in other people’s wars.
Source: Project Syndicate
Published by Santiago Times
(By Mauricio Cárdenas is a former Minister of Economic Development and of Transport of Colombia. Luis Carranza is a former Minister of Finance of Peru. Andrés Velasco is a former Minister of Finance of Chile.)