Recently, the world leaders from the most powerful economies of the world were in Japan for the G-20 summit. The leaders from the bloc called for a stable trade environment and reforms in the world trade organization. They also mentioned that the bloc has a lead role to play in the global efforts to curb corruption by denying safe haven to people who are seeking for corruption and work more closely with each other on asset recovery cooperation. The group agreed to foster economic growth through striving for a free, non-discriminatory, stable environment for trade and investment. However, the summit left magnified and potentially unbridgeable divides among member countries on the matters ranging from Trade to Climate change. In order to understand the implications of those question, it is mandatory to understand the history of the G-20 summit.
What is G-20 summit?
After the Asian financial crisis of 1997-98, finance ministers from powerful G-7 countries agreed that participation of major developing economies is also necessary to improve the international financial system. The G-20 bloc was expanded out of G-7 countries with an objective to increase cooperation in the world order which now included both developed and emerging economies, however, it has faced acute criticism over the years for lacking a solid charter, a clear mandate, an enforcement power and hosting expensive but inconclusive summits. On this Saturday, Japan concluded this year’s G-20 summit in Osaka where main themes included Trade and Investment, Innovation, Environment and Energy, Employment among others. Questions are now raised on the role of G-20 given go-it-alone approach adopted by the US president and widening differences among the member countries in the matters ranging from Trade to Climate change.
These are a few key takeaways from the recently concluded summit:
US-China trade war
The US and China’s president met on the sidelines of the G20 summit and agreed to a cease in a year-long trade war, averting a potential escalation as feared by the financial markets, bringing trade ties on the right track. The US president confirmed that the US would not impose any new tariffs on China’s exports and China acknowledged this by agreeing to resume purchases of American farm products. Trump also mentioned his willingness for a landmark trade deal with China. However, the most surprising was Trump backtracking on a ban on American companies selling equipment to China’s telecom giant Huawei. He explained that his intention was to help American companies that had complained about the ban. It must be known that earlier, the commerce department of the US put the Chinese major on a blacklist, eventually prohibiting American companies from selling equipment to Huawei.
The world order was clearly divided on this issue. On one side, Mr. Trump gave signals that the US will definitely be withdrawing from the Paris climate Accord, whereas the French president threatened to not sign any joint agreement unless Climate change issue is dealt with sincerity. The final statement signed by the world leaders reflected their commitment to the pact signed last year at Buenos Aires and its commitment. However, the statement included the US decision to withdraw from the Paris accord citing disadvantages to American workers and taxpayers. Mr. Abe only acknowledged the difference of opinion on this topic and could not emphasize on execution for the benefits of generations to come. Essentially, the prime minister of the host country, who described the summit as a success, failed to achieve an important priority, which is to forge a stronger and unanimous commitment to the Paris climate accord under pressure from the US resistance.
After the meeting between Trump and Xi Jinping, two sides would start the trade negotiations which were strained weeks ago after the US accused Beijing of backtracking on their earlier pledges. This may calm down the financial markets a bit for now, but deep differences are clearly visible, indicating that trade war is not over yet. Also, the peace between both the countries was worked out independent of G-20 summit, overshadowing the summit’s final declaration and indicating that there is no substitute for the US leadership. Amid the bilateral dispute between the US and China, major indicators such as ‘Pure growth’ are suggesting that trade is going to shrink further which is not a good sign for the world. With the summit’s final declaration repeating the language what was used last year, outcomes have only underlined the ineffectiveness of the bloc.
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