G20 Summit: Trade Talk, Little Action
The reviews are in on the recent G20 summit, held in the Chinese city of Hangzhow. How did it do? If it were a movie with these kinds of reviews, it would not be picking out a dress for the Oscars.
Veteran observers were probably less surprised, having seen this narrative before.
Every year high expectations accompany the buildup to the G20, in which leaders from the world’s 20 biggest economies meet for a two-day summit.
This year, with the Brexit vote in Britain, the stalling of international free trade agreements in the U.S., and other disputes over trade and tax policy, there was no shortage of agenda items to discuss. A vigorous defense of free trade and globalization were anticipated, particularly by representatives from the host nation; much of China’s successful economic transition has hinged on trade.
And discussions took place. “Extremely productive” is how President Barack Obama described bilateral talks with China’s president Xi Jingping. And a consensus was reached to reject trade protectionism of the kind supported by Republican presidential candidate Donald Trump.
Responding to concerns over Brexit, new British Prime Minister Theresa May reassured attendees that the UK plans to be a global leader in free trade: “The message for the G20 is that Britain is open for business. As a bold, confident, outward-looking country we will be playing a key role on the world stage.”
A final communiqué, issued after the event, highlighted accelerated efforts to promote international trade and investment, as well as fiscal stimulus and innovation to boost economic growth. Support for refugees was expressed, as was disdain for protectionism and tax evasion.
Will anything change as a result? Probably not.
Of course it is always better when world leaders get together and discuss the issues of the day, but one two-day meeting is not enough to solve the paralysis of global economic integration through trade, investment and migration, or reverse falling world export volumes.
“We aim to revive growth engines of international trade and investment,” President Xi said in a closing statement. “We will support multilateral trade mechanisms and oppose protectionism to reverse declines in global trade.”
But beyond the photo op and the carefully crafted statements, there is little evidence of any follow-through. That may be why reviews of this year’s event were especially harsh:
“Ask yourself, what are leaders going to do differently the day after the Summit?” wrote Thomas Bernes, a Distinguished Fellow at the Centre of International Governance. “They have been told that, after five years, their G20 announced strategy is not delivering the necessary economic growth. If nothing is to be changed, then what are leaders doing?”
“For many, the event will also cement the G20’s reputation as a modern-day talk shop, and a forum unable to address the challenges posed by rising anti-globalization sentiment,” wrote Tristram Sainsbury, a Research Fellow and Project Director at the G20 Studies Centre at the Lowy Institute.
“The G20 is doing a lot of believing, recognizing, and taking things into account. As predicted, the outcomes are bureaucratic, with many consensuses, initiatives, agendas, indicators, frameworks and reports listed…But, collectively, G20 countries aren’t changing economic course quickly enough and there remains a disconnect between those who can spend (but won’t), and those who can’t. As a result, the low growth, high unemployment and mounting risk scenario will likely endure,” Sainsbury concluded.
Never Say Never
Good things have emerged from previous G20 events. These include the forum’s united response to the global financial crisis of the previous decade, and a strengthening of financial regulation through the Financial Stability Board. The Base Erosion and Profit Shifting project also helped to curb corporate tax avoidance.
But in all of these cases, there was consensus already in place that there was a problem that needed to be solved, and some urgency attached to doing so. This plays into the strengths of events like G20, which can present a united front in recognizing issues and promoting solutions.
If the trends toward protectionism continue by the time of the 2017 G20 in Germany, perhaps we’ll see a return to solutions-oriented sessions and less concern about opening ceremonies and pomp and circumstance.
Digital Supply Chain 2020: Here’s What Industry Players Should Know