Define an Effective Approach to Global Economic Governance*

November 17, 2018

The scale of change we are encountering in the world today has not been seen in a century. Change creates opportunities, but more often than not, it is accompanied by risks and challenges. Humanity has once again reached a crossroads. Which direction should we choose? Cooperation or confrontation? Opening up or closing our doors? Win-win progress or a zero-sum game? The interests of all countries and indeed, the future of humanity hinge on the choices we make.

A review of modern world history clearly shows that different choices will lead the world onto different paths.

In the Asia-Pacific, the establishment of the Asia-Pacific Economic Cooperation (APEC) is a real success story. Its birth and growth echo the historic trend of opening and integration, our region's fervent desire for development, and our people's need to meet challenges through cooperation. Opening and cooperation in the Asia-Pacific has boosted its prosperity and injected vitality into the vast ocean of the global economy. Today's Asia-Pacific has the world's most dynamic and promising economies, and is widely recognized as a key engine driving global growth.

However, not all that has happened in the past has been a success story. Humanity has learned lessons the hard way. In the last century, for instance, World War II plunged the world into the abyss of calamity. Not far from where we are meeting now are the sites of the fierce Battle of the Coral Sea in 1942 and the Battle of Guadalcanal between 1942 and 1943. Today, this part of the ocean has long been restored to peace and calm, but never should we forget the lessons of history.

An ancient Chinese philosopher observed that "one needs to clean the mirror before taking a look at oneself, and should learn the lessons of the past before making the decisions of today"¹. In reviewing history, we should draw on its lessons to prevent the recurrence of past tragedies. Facing surging historic trends, we need to ask ourselves: How can we steer the right course for global economic development? How can the international community find an effective way of conducting global governance? I believe it is imperative that we focus on the following:

First, we should focus on opening up to create more space for development. Economic globalization is a sure way for human society to achieve development, and the multilateral trading system has created opportunities for us all. In today's world, countries' interests are so closely intertwined, and the global supply chain, industrial chain and value chain are so closely connected that we are all links in the global chain of cooperation; increasingly, we are becoming one and the same community with shared interests and of shared future.

This is the working of the laws of economics, a fact no one can change. We need to gain a keen appreciation of this underlying trend and view the changing world for what it is, and on that basis, respond to new developments and meet new challenges in a responsible and rule-based way. Any attempt to erect barriers and cut the close economic ties among countries works against the laws of economics and the trend of history, and runs counter to the shared desire of people around the world. This is a short-sighted approach, and it is doomed to failure.

Every era faces the problems of its day. Problems themselves are not to be feared; what truly matters is for us to take the right approach to resolving them. Resorting to old practices such as protectionism and unilateralism will achieve nothing. On the contrary, they will only add uncertainties to the global economy. Only opening up and cooperation can bring more opportunities and create more space for development. This is a clear historical fact. Those who choose to close their doors will only cut themselves off from the rest of the world and lose their direction.

APEC is a pioneer in building an open global economy. As the Bogor Goals are set for 2020, we should set our sights on post-2020 cooperation and endeavor to build a Free Trade Area of the Asia-Pacific (FTAAP). We should say no to protectionism and unilateralism, uphold the WTO-centered multilateral trading system, make economic globalization more open, inclusive, balanced and beneficial to all, expand converging interests, and share opportunities through opening up and cooperation.

Second, we need to focus on development to deliver more gains to our peoples. More than anything else, we should place our peoples' wellbeing at the top of our agenda. Every country is entitled to an equal right to development; and no one has the right or the power to stop people of developing countries from pursuing a better life. We should strengthen development cooperation and help developing countries eliminate poverty so that people in all countries will live a better life. This is what fairness is essentially about; it is also a moral responsibility of the international community.

We need to incorporate the 2030 Agenda for Sustainable Development into our national development strategies, promote coordinated advances in the social, economic and environmental fields, pursue inclusive development appropriate to our respective national conditions, and build equal and balanced global development partnerships. Developed countries should honor their commitments on official development assistance and increase support to developing countries.

We need to give priority to development in international economic policy coordination and have a clear focus on development when adopting policies and rules on trade and investment, protection of intellectual property rights (IPR), the digital economy, and other areas. By doing so, we will be able to create more opportunities and space for all countries as well as robust drivers and a stable environment for global growth. The principle of "special and differential treatment", which is a cornerstone of the WTO, is not to be challenged. Otherwise the very foundation of the multilateral trading system will be undermined.

Third, we need to focus on inclusiveness and promote harmony and mutual learning between nations. We live on the same planet. It is home to more than 200 countries and regions, 2,500-plus ethnic groups, and over 7 billion people. No attempt to erase their differences will work. Such differences are not a hindrance to exchanges, still less a cause for confrontation. Harmony in diversity and mutual learning between civilizations, social systems and paths can provide strong impetus for human progress. We should reject hubris and prejudice, treat each other with respect, stay open and inclusive, and embrace the diversity of our world. We should seek common ground while setting aside differences, draw upon each other's strengths, and pursue coexistence in harmony and win-win cooperation.

When it comes to choosing a development path for a country, no one is in a better position to make the decision than the people of that country. Just as one does not expect a single prescription to cure all diseases, one should not expect a particular model of development to fit all countries. Blindly copying the models of others will only be counterproductive, as will be any attempt to impose one's own model on others.

Fourth, we need to focus on innovation to tap new sources of growth. Breakthroughs are constantly being made in frontier areas such as information technology, life sciences, smart manufacturing, and green energy; new materials, new products and new business forms are replacing existing ones at a faster pace. Big data, 3D printing and artificial intelligence, which we read about only in science fiction in the past, are now part of our daily life. The future is already with us.

In a boat race, those who row the hardest will win. If we do not move proactively to adapt to the surging tide of new scientific revolution and industrial transformation, we risk missing valuable opportunities or even falling behind. We must lose no time in exploring new growth drivers and development paths, and removing all institutional obstacles holding back innovation. We should boost innovation and market vitality, and expand international exchanges and cooperation in innovation so as to better meet our own and our common challenges.

The sweeping new scientific revolution and industrial transformation will have a profound impact on the mode of production, way of life, and values of human society. The need to strike a balance between equity and efficiency, capital and labor, technology and employment, has become a common challenge for the international community. If not handled properly, this issue will further widen the wealth gap between the North and the South. We should gain a keen understanding of the complex dimensions of this issue and make the right decisions. This will enable us to steer the new scientific revolution and industrial transformation in the right direction.

Technological innovations should meet people's needs. Every country is entitled to benefit from such innovations, whether made through their own efforts or through international cooperation. Technological innovations should not be locked up or become profit-making tools for just a few. The IPR regime is designed to protect and encourage innovation, not to create or widen the technological divide. We should develop a policy framework that is responsive to the new scientific revolution and industrial transformation, and foster an enabling environment for international cooperation that will deliver the fruits of innovation to more countries and peoples.

Fifth, we need to focus on a rule-based approach to improving global governance. With the painful lessons of two world wars in mind, countries established the global governance framework under-pinned by the United Nations and composed of the IMF, the World Bank, the WTO and other institutions. This framework, while not an ideal one, represents an important step in human history. Indeed, it has been pivotal to global peace and development in the past decades. We must strengthen rule-based global governance if we are to achieve stability and development. Rules should be formulated by the international community, not in a might-is-right manner. Once the rules are made, they should not be followed or bent as one sees fit, and they should not be applied with double standards for selfish agendas.

If the system of global economic governance is to be equitable and efficient, it must keep up with the times. Our approach to the reform of the global governance system should be one of consultation, cooperation, and benefit for all. This reform should be based on the principles of equality, openness, transparency, and inclusiveness. Developing countries should have more say and greater representation in this process. Disagreements should be resolved through consultation. Attempts to form exclusive blocs or impose one's will on others should be rejected. History has shown that confrontation, whether in the form of a cold war, a hot war, or a trade war, will produce no winners. We believe that there exist no issues that countries cannot resolve through consultation as long as they handle these issues in a spirit of equality, mutual understanding and accommodation.

* Part of the speech at the APEC CEO Summit.

Notes

¹ Chen Shou: Records of the Three Kingdoms (San Guo Zhi). Chen Shou (233-297) was an official and historian of the Western Jin Dynasty.

(Not to be republished for any commercial or other purposes.)