What to expect in world economic order after COP27 and G20 summit

U.S. President Joe Biden, French President Emmanuel Macron and German Chancellor Olaf Scholz greet each other during the first working session of the G20 leaders' summit in Nusa Dua, Indonesia on  November 15, 2022. [AP Photo]

November has been quite busy with the agenda of global economic and political cooperation and sports. Before the World Cup football tournament kicked off in Qatar on Sunday, one of the world’s most complex and delicate negotiations happened at Sharm el-Sheik, in Egypt.

On the second week of COP27, the world’s 20 big boys ‘economic speak’ congregated for two days in Bali, Indonesia.

The agenda for the two-day summit on 15 and 16 November dwelled mainly on food and energy security, climate action and biodiversity, sustainable post-Covid-19 recovery and digital transformation. Together, the G20 members control an estimated 85 per cent of the global Gross Domestic Product. The group sees itself as the singular forum that fosters global macroeconomic cooperation and financial stability.

With many high-octane events happening in quick succession, it is easy to miss out on the primary issues and their implications. The multidimensional issues surrounding the COP27 and G20 summit provide useful insights into what the next phase of world economic order may look like. There are interesting similarities in their outcomes that may be of interest for country-level policy choices.

There are two questions that may be of interest for the sub-Saharan Africa region. While most countries in Eastern Africa are combating one of the worst famine and drought in recent history, this does not seem to have received any special mention at the G20 summit. Why?

Secondly, there was a lot of jostling between the developed and developing nation caucuses reported at COP27 around 100 billion-dollar adaptation fund and scale down on fossil fuels. What clues can policymakers at the individual country level or collectively as a region pick from these events? 

Major distractions

Outside the Covid-instigated global economic slowdown, there are two major different but related events that are shaping the new world economic and political order. These are the Russian –Ukraine conflict and increasing diplomatic tensions between the US and China.

It would appear the positions taken by these two nations in relation to the Ukrainian war have had a significant influence on the positions different countries took at COP27 and the G20 summit. At one point, the pre-summit meeting between President Joe Biden and China’s Xi Jinping almost stole the show in Bali. It was the first time the two men met face-to-face since Biden became president.

Experts believe the relationship between the two countries had deteriorated to its worst levels since 1978 when they normalised diplomatic ties after Chairman Mao Zedong’s disastrous Maoism era.

In the days preceding the summit, there were heightened tensions as to whether the Russian Leader, Vladimir Putin would be allowed to attend the meeting in person.

Russia is a member of the group with all the rights and privileges of membership. The technical inter-ministerial committee of the G20 had struggled to find a common position on most of the issues on the table prior to the physical meeting of the heads of state. Outside recent trade-related issues, the Chinese leader has been at loggerheads with the US leader over the political views taken by the Biden administration on China-Taiwan relations. The Chinese–Taiwan relations have similarities to the complexities that have taken Russia into war with Ukraine.

Tensions probably got to their lowest when Nancy Pelosi, the outgoing Speaker of Congress made an official visit to Taiwan in August. The Chinese government in Beijing has maintained that it has jurisdictional control over Taiwan and still maintains a one-China policy over the island.

However, it is declarations adopted by the leaders at the end of the conference that provides insights into what is at stake for the world economic order in the coming days.

 Inward-looking policies 

Based on the 52 declarations adopted by the G20 leaders in Bali posted on the White House official page, it is without a doubt the developed world is increasingly adopting a far more inward-looking policy on global problems.

For instance, the leaders in Bali opted to go by their previous positions already taken on other forums like the UN Security Council as it relates to the continued Russian aggression in Ukraine. This explains how divisive the subject is among the big economies.

More fundamentally, the emerging problem of increasing food insecurity and disruptions in global food supply chains took centre stage in Bali. It is widely believed that Ukraine has been a key bread basket for most of Europe. The related agricultural and agro-processing technologies took a prominent role among the leaders coupled with a commitment to invest more in green energy sources.

The war in Ukraine has had a particularly painful negative impact on European countries that heavily rely on gas supplies from the two nations at war.

The consequent effects have been transmitted into other regions including sub-Saharan Africa which has often survived other global financial shocks like the 2007/08 meltdown. This conflict has put many nations at a crossroads, especially on the question of economic sanctions against Russia.

Faced with food supply and energy crises at home, inflation and the emergence of new economic powerhouses like China and India, most Western nations are possibly reconsidering their positions on many global challenges.

This should however not be construed to mean they are uncommitted in their engagements. It is only a natural human response to self-preservation to survive hard times.

New world order

In many ways, the challenges rich nations are facing within their domestic economies played out towards the final outcomes of COP27. Three key issues point out to this reality. In the dying minutes of negotiations, the developing nation’s caucus appeared to win with an agreement by the negotiators to establish a Loss and Damage Fund.

Billed as a major milestone after almost three decades of protracted negotiations, the fund seeks to provide financial assistance to rescue and rebuild physical and social infrastructure attributable to global warming.

The general feeling is that developing nations have suffered the most due to climate change despite being low emitters of greenhouse gases. On the second issue of the adaptation fund, it has remained a moving target.

It is projected that only about 83 billion dollars have been mobilised since 2010 when the commitment was made. This perhaps provides insights into the difficult task ahead for the agreed Loss and Damage Fund. It would be interesting to see who will pay and the criteria to select beneficiary countries.

The failure to get new commitments to cut down on fossil fuels billed as the worst sources of greenhouse gases speaks to the ongoing energy crisis. But for Kenya and the rest of sub-Saharan countries, while it is true we are low emitters, is it because we have better responded to climate action?

Or is it simply because we are insignificant players in the global economic system? How we answer these questions should inform our policy actions in to the future.