The 14th G20 Summit is round the corner and media is abuzz with speculations of how the ongoing US-China trade war might impact discussions at the upcoming summit.
In the last summit in Buenos Aires, a 90-day temporary truce was achieved during the Xi-Trump-dinner discussion at the G20. The negotiations, however, reached nowhere after Beijing failed to agree upon the core reform demands proposed by Washington. Doubts have also been raised about China’s new Foreign Investment Laws (FILs) and its commitment to WTO standards since China has frequently tweaked the WTO rules to favour its State-Owned Enterprises (SOEs).
Earlier this month President Trump, while expressing his optimism about meeting with President Xi at the Osaka summit and to break the impasse over tariffs between the two countries, unambiguously stated his readiness to do otherwise if the agreement fails.
In a new threat to Beijing, the Trump administration has vouched to levy additional tariffs on Chinese products worth 300 US billion dollars, raising the duty from 40 to 60 percent. However, Beijing’s recent confirmation to meet and discuss the tariff issue with Washington in Japan has abated some of these tensions, at least temporarily.
The key question: What Next? therefore stares the G20 leaders in the face. More significant is the low level of expectations that prevail among the members who fear a worsening of trade tensions between the two economic giants.
The G20 which traces its origins to the late 1990s, was created with the objective of stabilising world economy by upholding the principles of a liberal international order. The idea was to create a forum which would share fairly consensual views on major issues of global governance, play the role of “responsible stakeholders” in the times of a meltdown/crisis and strengthen the working of the WTO. It rose to prominence after successful coordination of the global economic affairs after the 2008-2009 financial crisis.
A few instances from WTO Ministerial clearly show the active role played by G20 in arriving at an agreement on key trade related issues. For example, in the run-up to the Hong Kong Ministerial in 2003, the joint draft on trade-distorting subsidies prepared by the US and the European community met with serious criticism from the G20, which demanded the complete elimination of a particular kind of domestic support programmes (blue box subsidies) and a strict capping on the others.
Notwithstanding such transformation, the group today faces backlash over a range of issues, ranging from Brexit, to the US-China trade war, debt problems of member nations, and America’s increasing disengagement with the WTO. Even before the world economy could fully recover from the effects of the global financial crisis, new challenges popped up for the group, which threaten to render it obsolete and meaningless.