Global economic integration will need to be complemented by:

• rebuilding the foundations of a global financial system;
• agreeing on how to share the burden of adjusting to a sustainable level of GHGs in the atmosphere in an equitable way; and
• the need to cope with potential scarcities of some natural resources.

The growth of China, Indi a and perhaps other economic giants has huge implications for resolving these issues, and will require vast structural adjustment which cannot be expected to take place in less than a global economy. Accordingly, the G20 should be interested in preventing a potential fragmentation of the WTO-based international trading system into competing trading blocs.

It will be useful to draw on the recent experience of the WTO, together with regional and bilateral efforts to promote integration. The G20 is a group of very diverse economies with no mechanism for enforcing negotiated agreements. Therefore, it may be useful to consider the example set by the Asia Pacific Economic Cooperation (APEC) process of voluntary co-operation among Asia Pacific governments.

It may prove possible for some, or all, of the G20 economies to implement cooperative arrangements to reduce costs and risks of international economic transactions among them, or among some of them. These could set examples which can lead to wider arrangements among all interested economies.

Due to the rapidly changing nature of international commerce, cooperation to promote mutually beneficial economic integration will need to look well beyond support for a general concept of ‘free trade’. Low border barriers to trade and investment need to be complemented by an international environment of:

transparency, best practice, and consistency of regulations, including:

competition policy;
regulations on government procurement;
mutual recognition of standards and qualifications;
efficient communications, including e-commerce; and
best practice logistics.

Progress on most of these vital dimensions of economic integration should not require negotiations. There is already a shared interest in cooperative arrangements to reduce many of the costs and risks of international commerce.

This paper sets out an approach which draws on experience of both voluntary and negotiated multilateral and regional economic co-operation. With care, it should be possible for the G20 to promote both of these in parallel.

The G20 can continue to encourage the WTO, and possibly other negotiating forums, to deal with matters where negotiations are seen to be needed, while encouraging interested governments to cooperate voluntarily on practical issues where there is already a perception of shared potential benefits.

Experience has also shown the importance of marshalling the resources needed to create the capacity for economies, particularly developing economies, to participate in cooperative arrangements, for example to enhance the efficiency and security of supply chains. If G20 leaders decide to seize these opportunities for mutual benefit, they may also need to help mobilise the necessary financial resources from the international capital market, even as part of their overall effort to reform the international financial system.