New
Thinking and the New G20 Paper No. 1
Series: New Thinking and
the New G20
AUTHOR:
·
HYOUNG-KYU CHEY
The global financial crisis has transformed the
structure of global financial governance, however. It was the first truly
global financial crisis of the postwar era, and given the considerable increase
in the role of emerging economies in the world economy, their cooperation
became essential for the effective management of the crisis. The
leaders forum of the G20 was created in November 2008, as the premier forum for
global economic governance. The memberships of the key SSBs have also been
widened to include major emerging economies. The Financial Stability Board
(FSB), which was established as the successor to the FSF in 2009, and the BCBS
have extended their memberships to incorporate all G20 members. The CPMI has
opened its membership to Brazil, China, India, Korea, Mexico, Russia, Saudi
Arabia and South Africa. In addition, Brazil, China and India have joined the
IOSCO’s Technical Committee (Helleiner 2014, 138). The G20 has led initiatives
for the reform of international financial regulation to prevent future crises,
outlining a road map for this reform and assigning to the FSB and other SSBs
the responsibilities for producing new international financial standards. As a
result, major emerging economies have finally joined the “club organizations”
that formulate international financial standards. This remarkable change in
global financial governance raises the following important questions: Do
emerging economies actually play significant roles as rule makers? Does their
participation in the process of establishing international standards affect their
compliance with those standards? And does the inclusion of emerging economies
in the rule-making process ultimately deepen or weaken international
cooperation in this area? This paper attempts to address these issues. There
are two different major perspectives in the literature on this subject. One is
the weakening cooperation view,3 which presents a largely negative perspective
of the impact the increased representation of emerging economies in
international standards setting has on international cooperation. This view
holds that the inclusion of emerging economies in the rule-making process makes
it harder to reach international agreements, stressing that they have
regulatory preferences distinct from those of advanced economies. The other
perspective is the enduring status quo view,4 which argues that little has
changed despite the crisis. There are, in fact, discrepancies among those
sharing this latter perspective, in terms of their normative judgments of the
desirability of this outcome. They nonetheless share the assessment that global
financial (or economic) governance is still led primarily by advanced
economies, in particular the United States, due largely to its persistent
dominance and leadership. These two perspectives both have notable limitations,
however. The weakening cooperation view appears to presuppose the ability of
emerging economies to formulate their original regulatory frameworks, as well
as to actually incorporate their preferences into the international standards.
But these two issues should be subjects of empirical research rather than
assumption. The enduring status quo view, meanwhile, rarely provides systematic
direct analysis of emerging economies themselves, instead placing its
analytical focus mainly on the leading powers, in particular the United States.
As a result, the role of emerging economies in post-crisis global financial
governance tends to be either indirectly or implicitly examined, rather than
analyzed directly and explicitly. In addition, neither of the two perspectives
offers much systematic research on the impacts of emerging economies’ new SSB
memberships on their compliance with international standards — they mainly
examine only the rule-making processes. Most studies also tend to address the
consequences of the extension of SSB membership to include emerging economies
as part of their broader analysis of the overall nature of post-crisis global
financial or economic governance, rather than undertaking more devoted and
systematic research on the subject.
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