Happening just a week from now in Buenos Aires, this year’s Group of Twenty (G20) summit carries added significance as it holds potential to break ice between the US and China. According to reports, a ‘meeting plus dinner’ would take place between President Trump and President Xi, giving them more opportunity to settle issues in a casual setting, his would also be their first face- to- face meeting in a year. Ending the trade war is in everyone’s interest as US-China relations have a trickle-down effect on global markets and an adverse impact on global growth. Consequently, the G20 promises to be in the limelight in the coming days.
Just to add perspective; the G20 was raised to summit level in the aftermath of the global financial crisis in 2008. Impacting 85 percent of the world economy, it represents two -thirds of the world’s population and 75 percent of world trade. Successfully bringing together the world’s leading industrialized and emerging economies, the group constitutes of the US, UK, France, Italy, Mexico and Germany plus the European Commission representing the EU, Saudi Arabia, Indonesia, Turkey, Australia, South Africa, South Korea, Russia, Brazil, India, Argentina, China and Japan.
As far as the G20 summit is concerned, it stands to gain clout if its platform helps in reducing the trade war frictions troubling the world and re-establishes the trust missing in Sino-US ties nowadays
Attended by heads of state as well as top officials from key international organizations, it is useful for achieving a consensus for policy-making and stabilizing the global economy. This year three main topics are on the agenda; the future of work and the implications of innovation and automation, global infrastructure requirements, physical and digital, and the importance of food security and sustainable agricultural development.
Initially, promoting sustainable economic development to reduce poverty and development imbalances of the Asian and Latin American growing economies were the main concerns of the G20 and it focused on global economic growth, financial market regulation and international trade only. Now it includes diverse matters such as development, employment and labor policies, climate change and digital technology also under its ambit.
In the build up to this year’s event, back-channel talks have been going on since a while between the two largest economies. Chinese officials started providing a doable outline of potential concessions to the US since a few months. Engaging positively for the first time since the trade war started, even a bilateral trade agreement is possible if things go well. Since bilateral high-level dialogue was resumed just weeks before this meeting, hopefully sensitive matters would have been mulled over so that talks do not strike a dead end. If not, then no solid results will be achieved and no framework for agreement would transpire.
Anticipating an escalation of tensions, Moody’s is not very optimistic and predicts that the ten percent tariffs on US $200 billion of Chinese goods would increase by 25 percent by January 1, 2019. In fact, it is estimated that China’s growth rate would slow down to six percent from 6.7 percent next year, and the main impediment is the fact that it has not agreed to go through with the major structural reforms the Trump administration demands. Abandoning the “Made in China 2025” state program does not seem likely either and it is one of the main US demands.
Consequently, minimal results are expected from the talks, Anne Van Pragh from the global credit strategy and research unit at Moody’s says, “We don’t expect much breakthrough at G20. If the two sides agree to anything, it will be partial and short-lived because it’s not just about tariffs. It’s about geopolitical tensions and a rising China that is challenging to the US.”
Meanwhile, investors around the world await the event and the smallest positive indication from these talks would drive up the stock market. According to them, it does not matter if no deal is done, even a “basic agreement” would suffice to “drive up the market 2000 points higher.” Apparently, tumbling stocks have always motivated Trump to try out a fast remedy and the current scenario might make him lenient.
As far as the G20 summit is concerned, it stands to gain clout if its platform helps in reducing the trade war frictions troubling the world and re-establishes the trust missing in Sino-US ties nowadays. There is some hope as even in the past, a lot of important business was settled on the sidelines. Notwithstanding the glitches, the G20 remains an excellent opportunity for de-escalation even though it might not completely clear up the air. At the end of the day, even if nothing substantial is achieved from this year’s G20 Summit, at least it provides a permanent venue for nations of the world to keep the doors of communication open.
As Mike Callaghan had said, “The G20 has shortcomings, but it is an active forum of international economic consultation at the highest level. In a highly integrated global economy, cooperation and dialogue are essential.”
Sabena Siddiqui is a foreign affairs journalist and geopolitical analyst with special focus on the Belt and Road Initiative, CPEC and South Asia. She tweets @sabena_siddiqi.