Asian nations well-placed to lead central to global recovery

As the world contemplates the savage impact of the COVID-19 pandemic on the global economy, there’s a need to deepen global cooperation to emerge from the slump caused by the lockdowns and other measures to contain the novel coronavirus. International economic cooperation will be key to managing the crisis and facilitating the recovery through trade, stabilizing markets, reopening of supply chains and international travel. Without it, the world is going to face a prolonged health crisis and lasting stagnation on a scale not seen since the Great Depression.

In this geopolitically fractured world, international cooperation is no easy call. The United States, the world’s biggest power, has lost its appetite for multilateral cooperation and is at odds strategically with China. Strategic competition between the US and China will ultimately limit both countries’ capacity for constructive contribution to global recovery.

In this context, a compact for multilateral cooperation between Asian nations can be the starting point.

Asian countries can lead exit from health crisis

Because of their potential and weight in the world economy, Asian economies are central to recovery from the COVID-19 crisis. Struck first by the virus, they are positioned to restart their economies sooner than European or American economies. Asia can thus lead the exit from the health crisis and drive the global economic recovery. During the past half a century or so, Asian countries have been among the best performing economies in the world. Despite differences in the levels of development, sizes of their economies and political systems, most Asian countries are key beneficiaries and strong supporters of an open global trade and investment regime.

Yet like the rest of the world, Asia has to simultaneously deal with two challenges: big international health challenges and economic policy challenges to exit from the crisis. This is a task faced by every economy in the region, and failure to navigate judiciously between these two will cause social disruption, and more deaths and economic hardship. The task of defining the way forward on both fronts at the same time is urgent.

Regional economies need to coordinate health measures

An Asian experts’ group convened by the Asian Bureau of Economic Research, of which I was a member, has released its report, “An Asian Strategy for Recovery and Reconstruction after COVID-19”, calling for ASEAN+6 nations (the Association of Southeast Asian Nations plus China, Japan, the Republic of Korea, India, Australia and New Zealand) to coordinate their financial, trade, public health and food security measures in order to avoid prolonged stagnation, and push the US and Europe to join them.

The foundation for gearing up regional policy action in Asia was laid at an ASEAN+3 summit on April 14 that included leaders from Southeast Asia, China, Japan and the ROK, with commitment to coordinate their health and economic policies. In particular, China has a critical contribution to make by working with its neighbours in ASEAN, and Japan, India and the ROK to meet the global challenge posed by the virus.

This Asia-centered policy initiative is a significant step in several respects. One, at a time when the world is a big mess, Asian countries, by joining hands and standing together, can provide critical support, even play leading roles, for stabilization of global public health and the world economy. Two, at a time when geopolitical risks are rapidly rising and trade protectionism is becoming increasingly popular, it is in Asian countries’ fundamental interest to work together to maintain an open and cooperative international economic order. And, three, the Asian cooperation framework will provide a platform for China to play a greater role in the international economic system, without having to face one-to-one confrontation.

Creating macroeconomic space and ensuring financial stability

There are six important objectives of this initiative in regional policy cooperation:

First, to get the central banks and finance ministries across the world to expand bilateral currency swap arrangements and agree on a new issuance of Special Drawing Rights of the International Monetary Fund to create a stronger regional financial safety net.

This would simultaneously create macroeconomic policy space and ensure financial stability to combat the public health and economic dimensions of the crisis in the region’s developing countries.

Second, to support the development, production and equitable distribution in Asia of diagnostic tests, vaccine (if developed) and treatment through collective commitment of funds to Access to World Health Organization’s COVID-19 Tools Accelerator and the expansion of the COVID-19 ASEAN Response Fund to include ASEAN+6 nations. China is already committed to this approach but needs to broaden its circle of partners.

Third, to keep regional medical and food markets open. It is essential to avoid restrictions on trade in medical equipment and supplies after critical domestic needs have been met. This requires the region’s commitment to reducing or eliminating tariffs and non-tariff measures on medical goods and services. Asian collective action on open supply lines will carry heft. Similarly, regional food security will depend on access to international markets and the removal of export restrictions that have been imposed. And current bilateral initiatives to keep food trade open can be consolidated into a regional agreement.

Fourth, to speed up the development of protocols for health certification for international travel, so as to expedite the resumption of international commerce, students’ travel, scientific exchanges, temporary labor movement and tourism. Getting experts together to work through the issues is the first step, while resuming global travel will release the brakes holding back global commerce.

Fifth, to embrace the digital transformation that COVID-19 has brought to health management. Asia can initiate a proactive agenda for collective governance of the digital infrastructure that includes regulatory coherence, privacy standards and data sharing. This is essential to new work practices, innovation in production, supply chain management and delivery of goods and services, including government services. China has accumulated some useful experiences in this area, and can engage with the region to work on this complex but more crucial aspect of the modern international economy.

And sixth, to conclude the Regional Comprehensive Economic Partnership agreement to build regional trade solidarity. Early conclusion of the RCEP with 15 members will send a signal to the rest of the globe to keep trade open, ensure food security and avail of open markets in East Asia. China and the RCEP group also need to keep open a path for India’s eventual membership and actively promote economic cooperation with South Asia.

Asia needs to lead WTO and IMF reforms

The COVID-19 crisis is now at the center of the maelstrom that is engulfing global economic and political affairs. Asia can implement this agenda through its ASEAN, ASEAN+3 and ASEAN+6 arrangements, engaging the East Asian Summit countries including the US, and the APEC and G20 forums, while stepping up to lead World Trade Organization and IMF reforms.

Coordination through regional and multilateral frameworks will increase the capacity of all Asian nations to constructively contribute to regional and global recovery beyond conflictive geopolitics. And immediately mobilizing political energy and will in Asia to deal with the international ramifications of the COVID-19 crisis will be central to dealing with the big global problems we face, securing regional political stability and facilitating the early economic recovery. This could lay a solid foundation for another critical step toward an “Asian Century”.

The author is a professor at and deputy dean of the National School of Development, Peking University, chair of the China Finance 40 Forum Academic Committee, and former member of the People’s Bank of China Monetary Policy Committee. The views don’t necessarily represent those of China Daily.