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An important question has attracted the attention of world markets and economists over the last few days. They are wondering as to whether new doors have been opened after G 20 Summit, 2018.
Nineteen leaders of the world's biggest economies and a representative of the European Union met in Buenos Aries, Argentina during the Group of 20 Summit on November 30-December 01. The countries that attended the Summit included: Argentina, Australia. Brazil, Canada, China, Germany, France, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom and United States. It also included the presence and participation of IMF chief Christine Lagarde.
All eyes were on a range of issues, including a high-stakes meeting between US President Donald Trump and his Chinese counterpart Xi Jinping and the potential signing of the US-Mexico-Canada Agreement (USMCA). The presence of Saudi Crown Prince Mohammed bin Salman drew attention of a section of the leadership. There was also the strategic dimension over the recent measures taken by Russia with regard to Ukraine. All these factors added drama and attracted world media attention.
The world's two largest economies - the US and China - have been locked in an escalating trade battle for the last two years. This emanated from the US President complaining about China's trading practices even before he took office in 2016. That year he remarked that China had been engaged in the "rape" of the US economy. Since then he has been aggressively targeting Beijing as part of his broader America First agenda. In 2017, the US launched an investigation into Chinese trade policies and has since then steadily imposed tariffs on Chinese products.
So far, the US has imposed three rounds of tariffs on Chinese goods, totalling more than $250 billion and they cover a wide range of consumer and industrial items including handbags, rice and railway equipment. The duties range from 10 per cent to 25 per cent. Mr Trump has also threatened to hit another $267 billion worth of goods - meaning, all Chinese imports could be subject to tariffs. The US has, besides, put tariffs on worldwide imports of goods like steel and washing machines, which further affects products from China.
Beijing has also struck back. It has accused the US of starting "the largest trade war in economic history" and imposed tariffs on $110 billion worth of American goods. In this context China's list of products subject to levies - range from 5.0 per cent to 25 per cent - includes chemicals, coal and medical equipment. Chinese moves have been strategic, targeting products made in Republican districts of the US and also goods - soya beans - that can be purchased elsewhere.
Some analysts have pointed out that tariffs, in theory, make US-made products cheaper than imported ones, and encourage consumers to buy American. However that has always not been the case. Both the US and international firms have said that they are being harmed. The International Monetary Fund (IMF) has warned that a full-blown trade war would have an impact on the global economy and weaken it.
US President Donald Trump and his Chinese counterpart Xi Jinping have agreed to halt new trade tariffs for 90 days to allow for talks, the US says. The two men met in Buenos Aires after the G20 summit for their first talks since the trade war erupted this year.
Global policy makers and investors were hoping that President Donald Trump and his Chinese counterpart Xi Jinping would reach a ceasefire in their turbulent trade war that has sparked global market turmoil. But one is inclined to agree with Donna Borak of CNN that " the outwardly positive agreement between the leaders of the world's two economic superpowers to halt further escalation in tariffs and continue negotiating to reduce trade imbalances -- hailed by Trump as 'an incredible deal' -- was seen by many US-China experts as another punt by the two countries in a year-long trade negotiation that leaves unresolved deep issues between the two countries".
US Commerce Secretary Wilbur Ross was however notably absent from the US delegation in Argentina, which included Trump's hardline China trade adviser Peter Navarro and top trade negotiator Robert Lighthizer, as well as more moderate figures like Treasury Secretary Steven Mnuchin and National Economic Council director Larry Kudlow.
The agreement between Trump and Xi on the sidelines of the G20 summit in Argentina set up yet another deadline by the Trump administration to broker a deal with China to address top US concerns like forced technology transfer, intellectual property and cyber-theft within 90 days, as Donna Borak observed.
It has however been observed that the critical difference was the omission in China's statement of any agreed upon timetable for negotiations. Also absent was specific mention as to whether China would be inclined to open up critical markets like -- agriculture, energy and industrial US products. This has led Myron Brilliant, Executive Vice President and Head of International Affairs for the US Chamber of Commerce, to note that "The hard work begins now." The statements issued by the two sides, while each positive, illuminated how far apart Washington and Beijing remain despite each country's leader boasting about their strong personal relationship, Donna Borak noted.
Craig Allen, President of the US-China Business Council has noted that "It was a postponement" and "certainly not any resolution of any issue. But it's better than the situation we had before. Now we wait and see." "Going down the line, you can see what was left ambiguous," said Allen, who viewed the absence of a joint statement as yet another signal of an unclear understanding from both sides.
China's statement also did not mention Xi's willingness to consider approving a $44 billion deal for Qualcomm Inc. to purchase NXP Semiconductors NV, if the deal was put before him again - a gesture the White House lauded as an achievement over dinner talks. In July, Qualcomm scrapped the proposed deal for its rival chip maker after waiting nearly two years for approval from Chinese regulators as tensions escalated between the two counties.
The one area of shared agreement between the two countries was on fentanyl, a substance that has been tied to an epidemic of overdose deaths in the United States, which been a top priority issue for the Trump administration. It needs to be noted here that after years of negotiations dating back to President Barack Obama, China has finally agreed to designate the synthetic opioid fentanyl as a controlled substance - meaning sellers would be subject to the maximum penalty under the law. Officials in Washington believe China is the primary source of fentanyl found within US borders, following a 2017 US Congressional report citing law enforcement and drug investigators. The US President had declared the opioid crisis a public health emergency last year and whatever the final arrangement on trade, a commitment from the Chinese to crack down on fentanyl would be a viewed as a victory by the US Republican base.
Two powerful trade lobbies in Washington -- the US Chamber of Commerce and the Business Roundtable -- which represent companies like Walmart Inc., Target Corp., and Procter & Gamble Company have welcomed the decision by the US Administration to set aside applying further tariffs as the "right course of action." In this context, one also needs to observe that more than 100 S&P companies had also pre-emptively drawn the attention of the White House that further tariffs by the USA could affect the US economy. Some companies like Walmart, the country's biggest retailer, had also warned that prices on everyday goods like shampoo, detergents and paper goods like napkins would get more expensive for US consumers.
However, analysts have cast doubts as to what might be achievable over the next three months, suggesting it would be unlikely for both sides to make a substantial breakthrough in negotiations ahead of the next deadline. Scott Kennedy, Deputy Director of the Freeman Chair in China Studies at the Center for Strategic and International Studies, has said that to achieve successful negotiations, there would need to be "clear consensus" of the goals by the Trump administration and "a more genuine interagency process." Such a shift would have to come after months of clear division within the President's cabinet between trade hawks like Navarro, and free traders like Mnuchin.
It will also require China to set down a fresh starting point for negotiations in the weeks ahead as Beijing celebrates the 40th anniversary of reform. It is being speculated that this important anniversary could offer Xi an opportunity to lay out a clear vision for a new wave of liberalisation on his own terms based on the country's own needs and political schedule.
It needs to be remembered at this point that the trade war between the world's two largest economies has been a major risk factor for investors this year. Analysts have pointed out that it has threatened economic forecasts for countries across the Asia Pacific region. Consequently, the world has watched carefully the dinner date between President Trump and President Xi and looked for connotations in their inter-action. The personal chemistry between them appeared to have briefly become the source of discovery of common denominators within the matrix of diametrically opposing viewpoints.
Both China Daily and Chinese international broadcaster CGTN have in the meantime reported that Trump and Xi have agreed not to impose new tariffs after January 01. This is being seen as a form of reprieve for President Xi who has been grappling with a slowing economy at home. Analysts have observed that Xi was under pressure to come home with some sort of a deal that would not only exert less pain on Chinese manufacturers but also the language of which would be vague, and non binding with regard to how much Beijing has to open up, or how much it will have to buy from the US.
Others in North America and the EU have indicated that this postulate was applicable for both as the economic and trade superpowers needed to appear as strong within their domestic arena.
Muhammad Zamir, a former Ambassador, is an analyst specialised in foreign affairs, right to information and good governance.