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G20 Summit 2019: A truce in trade war but ...

Muhammad Mahmood | Published: July 06, 2019 20:49:09


The G20 Summit has become an annual event since 1999 following the Asian Financial crisis but has taken a more pivotal importance since 2008 in the wake of the GFC (Global Financial Crisis), when the event turned into the Leaders' Summit where heads of governments from G20 (Group of Twenty)  countries meet to discuss global financial and economic matters. The participants are leaders from 19 countries and the European Union (EU). They collectively account for 80 per cent of global GDP (gross domestic product) and two-thirds of global population. The G20 summit was envisaged as the premier forum to broaden the scope of international economic and financial cooperation.

But in a more open global economic environment there are other issues that have got intertwined with global macroeconomic and trade issues.  The issues such as development, climate change, energy, health, counter-terrorism and migration and refugees also are now impacting on the global economy requiring close attention from the G20 Summit. The 2019 Summit has been marked by disagreement on trade, climate change, migration and refugees. But it was the US-China trade war that dominated the talk at the Summit in Osaka with a meeting taking place between President Trump and President Xi. In effect the G20 Summit turned into a 'G2' summit.

President Trump has single-handed created a confrontational economic environment rendering the Summit close to ineffectual to deal with global economic, financial and other issues. He has destabilised the global economy to a point now hardly any multilateral institutions can work effectively. His key foreign policy is based on aggressive confrontation. His aggressive foreign policy posturing is best exemplified by his trade war with China. He has virtually been moving towards imposing a siege against China while waging a trade war of attrition and by creating military confrontation in the South China Sea.

His reading of the current global political and economic landscape appears to have led him to ignore negative consequences of his trade war at home but go for his longer-term objective to make China blink first which is unlikely to happen . Yet, Trump firmly believes the US will come out successfully in his trade war with China even if the US plunges into a recession before the election as many economists are predicting. But he also knows that will lead to global recession which will cause serious economic problems for China as well. Trump may not be able to distinguish between "Western liberalism'' and "West Coast liberals'', but he is not a fool and he knows what he wants and can devise ways to get that  and that is getting re-elected in 2020. That means to keep his anti-China rhetoric high to keep his base on his side.

Trump is quite cleverly playing on the economic anxieties of ordinary working American, of which 50 per cent are just one-month salary payment away from bankruptcy. Poverty in the US has emerged as the major growth industry, as census data clearly show that half or more households are impoverished or almost close to that. In effect, the US is increasingly turning into a third world country for a very large number people in the country.

China fits the bill for playing on those anxieties pointing out US firms' offshoring their manufacturing activities to China and trade deficits with China. But US firms have been offshoring to many, many other countries as many Chinese, Japanese and European firms are offshoring to the US. But behind Trump's populist rhetoric, it is all about his attempt to marginalise, weaken, isolate and contain China so as to remain unchallenged global economic and military hegemon. As China's Global Times opined, Trump's "America first doctrine is dragging global governance into a quagmire''. According to the IMF (International Monetary Fund), the escalating trade war between the US and China will shave off 0.5 percentage point of global growth this year.

The US has a very long history of making unacceptable demands while undertaking negotiations with other countries in return for empty promises. Its trade negotiation strategy with China has not been any different. On the last day of the Summit, both President Trump and President Xi have been successful in securing a temporary truce in trade war but existing tariffs and irreconcilable US demands still remain in place. The US has eased tech exports to the Chinese tech giant Huawei. Both countries also agreed to put trade negotiations back on track after the collapse of trade talks in May this year. IMF Chief Christine Legarde, in the wake of the announcement of trade war truce, warned that trade uncertainties caused by existing high levels of tariffs threaten global growth.

Bilateral trade disputes between the US and China have little to do with the trade balance being favourable to China. Trump's attempt to help shore up US trade balance using the tariffs has in fact resulted in the opposite. While imports from China have declined, so also exports from the US to China. Now exports from other countries to the US have soared, further pushing the US trade balance into the deeper negative zone. 

Trump's dispute with China is actually regarding China's growing economic, financial, political and military clout. These differences will remain irreconcilable so long as the US lives in its dream world that it will eternally remain the sole super-power in the world following the collapse of the Soviet Union.

The final photo shoot at the G20 Osaka Summit tells it all. Turkish President Recep Tayyip Erdogan, who reportedly switched places with President Xi Jinping at the very last moment so as the Chinese President would not have to pose next to President Trump.  It was a clear portrait of deep discord. Trade was not the only issue that contributed to the discord but there were other issues such as climate change, multilateral institutions, Iran, migration and refugee. Russian President Vladimir Putin has created a ruckus claiming that liberalism (as understood in the West) was obsolete. That remark prompted a rebuke from EU President Donald Tusk who said "What I find really obsolete are:  authoritarianism, personality cults, the rule of oligarchs. Even if sometimes they may seem effective''.  When Trump was asked to comment on Mr Putin's comment on liberalism, he completely got lost in distinguishing between Western liberalism and liberal political leaders in the state of California (West coast liberals) in his country. That further added to the drama and fun at the Summit. Then his daughter Ivanka further added to the drama by barging into an informal discussion between French President Emmanuel Macron, Canadian Prime Minister Justin Trudeau, UK Prime Minister Theresa May and IMF Chief Christine Legarde - but was ignored by them all.  To give the drama a final touch, the French Government posted  the video of the encounter onto its Instagram channel for public consumption. Since then the video has gone viral. The Summit was definitely not without its moments of fun and amusement.

However,  as an end note, it would be fair to say that  the G20 Summit and its ability to achieve any of its declared objectives let alone any dispute resolution, the track record is not very encouraging.  This annual event that is called G20 Summit, at the best of times remains a forum of little traction and achievements. Since its inception nothing worthwhile, let alone of lasting nature, has ever been achieved. The G20 annual events are primarily geared for public relations exercises, nothing else.

Muhammad Mahmood is an independent economic and political analyst.

muhammad.mahmood47@gmail.com

 

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