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Policy Paper
This policy note was published as part of the T20 U.S. 2026 Workstreams, under the workstream “Fostering Trade and People-Centered Economic Growth,” which brings together policy experts to develop recommendations for G20 policymakers.
The Group of Twenty (G20) accounts for most of the world’s output, yet its decisions shape the prospects of 174 United Nations Member States without G20 membership, among them the great majority of least developed countries and small states. Many of these non-G20 economies are close trading neighbors of a large G20 member and depend on that neighbor for export demand, investment, remittances, and development finance. These links are increasingly exposed to fragmentation of the global economy. New trade restrictions nearly tripled between 2019 and 2022, and remained elevated in 2025. Under a two-bloc trade fragmentation scenario, low-income countries could lose more than 4 percent of output over the long run. Such risks compound debt vulnerabilities and food insecurity.
External support is also contracting. Preliminary data show that official development assistance from Development Assistance Committee members and associates fell by 23.1 percent in real terms in 2025, the steepest annual fall on record, returning to its 2015 level. Developing countries also face an annual financing gap for the Sustainable Development Goals of around 4 trillion dollars.
Regionalism offers G20 economies a durable channel to keep supporting their non-G20 neighbors even as multilateral cooperation weakens. Asia illustrates this approach, having built dense regional production networks, a large regional financial safety net, and shared institutions that allow larger economies to anchor smaller ones. In Africa, connector economies can link fragmented markets to wider production networks. Morocco exemplifies this potential through its logistics infrastructure, industrial capabilities, and access to European and United States markets, provided that firms in smaller African economies can participate in the resulting value chains.
The G20 should finance regional public goods through regional platforms and reformed multilateral development banks, and expand the use of low-cost remittance services; design open and inclusive regional trade arrangements that allow smaller neighbors to join regional value chains; and strengthen regional financial safety nets and improve their coordination with the International Monetary Fund (IMF). Each recommendation builds on existing G20 workstreams and on an agenda centered on growth.
