The recent 13
th G20 summit in Buenos Aires was a success because at least it managed to issue a Joint Communique, unlike in the case of the APEC summit which took place in Papua New Guinea in October when the two economic giants, the US and China, did not agree on a joint communique. Also in the case of G7 summit in June, US President Donald Trump withdrew his signature from the joint communique. On the whole, this year’s G20 meeting and its Communique confirmed the supremacy of the G7 or the rich countries in the group but with China challenging their supremacy.
Created as an offset of the G-7 in 1999, it remains a rich countries’ club where half the members are from rich advanced countries (US, UK, Japan, France, Canada, Australia, Germany, Russia, Italy and the EU) and other half are Emerging Market Economies (China, Indonesia, Turkey, Brazil, India, South Korea, Argentina, South Africa, Saudi Arabia and Mexico). The first G20 summit was held 10 years ago to alleviate and find workable solutions to the global financial crisis. This year’s summit was held to discuss sustainable agriculture, infrastructure for development and future of work.
The US had a big presence and clearly the most unpredictable and volatile President Trump dominated the entire meeting and the Communique echoed Trump’s words regarding the need to reform the WTO and the world trading system.
It is a weak communique regarding trade because it lacked any reference to risks of protectionism which was highlighted in the BRICS meeting on the side lines of the G20 summit.
In his dinner meeting with President Xi Jinping on December 1, Trump agreed to have a 90-day halt on tariff escalation planned from January 2019. China agreed to buy ‘substantial amounts’ of agricultural and industrial exports from the US to reduce its trade deficit. Further talks will follow in Washington. Trump promised not to raise tariffs on goods imported from China during this period. US had intended to raise tariffs on $250 billion of Chinese goods from 10 to 25 per cent from January. He also threatened to impose levies on $267 billion of goods from China covering all imports and $200 billion in new tariffs.
The trade war has so far not brought about any changes in China’s economic policies. It has actually increased the American trade deficit with China. But it has slowed down China’s industrial growth.
There is a slowdown in growth of important sectors like rail freight usage, bank lending and electrical consumption from 11 per cent last year to 9 per cent this year. It has led to US farmers suffering from the retaliatory increase in duties on Soybean exports to China. US stock markets and oil prices have also fallen in part on fears that China will buy fewer goods.
The commitment by the world’s biggest economies that represent 85 percent of the world economic output to multilateral trade and a “rules based international order” has remained intact but the calling for reforms of the WTO was undertaken at the behest of the US. The G20 communique for the first time criticised the working of the WTO by saying “it (WTO) is failing to meet its objectives and needs reforms. We renew our commitment to work together to improve a rules based international order that is capable of effectively responding to a rapidly changing world.” US objected to the positive reference to a rules-based international order because in the current system, China has been able to get away with unfair trading policies.
It would be difficult for G20 to undertake reform for the WTO because in the past it has not been able to reform the International Financial Architecture or the IMF quota system by which the developed countries have a lion’s share (63 per cent) of quotas as compared to the global south.
A lower quota means lower access to IMF loans. US has the highest quota of 17.7 per cent, while India has only 2.75 per cent and China 6 per cent.
Today the 20 countries have a different id entity than when G20 was founded. Intended to be setting a framework for global governance, it has become a stage for an increasing number of authoritarian and populist leaders. This year, the controversial presence of Prince Salman bin Mohammad of Saudi Arabia created a stir. The Saudi delegation was the first to arrive in Buenos Aires in six planes. Despite the controversy surrounding the Prince regarding the murder of dissident journalist Jamal Khashoggi in Istanbul’s Saudi Arabian embassy, Russian Prime Minister Vladimir Putin and Prime Minister Modi met him. Mr. Modi’s imminent concerns regarding oil supply from Saudi Arabia and its investments in India is understandable. Also Modi has made an important suggestion for coordinated action regarding fugitive economic offenders like Vijay Mallya and Nirav Modi. Modi’s meeting with Japanese Prime Minister Shinzo Abe and President Trump was also successful and termed as ‘Jai’. It was a good occasion for the three countries worried about China’s rise to come together and work out a strategy. Another trilateral talk was between Russian Prime Minister Vladimir Putin and Chinese President Xi Jinping. It clearly showed the spirit of cooperation between the three and marked improvement in the diplomatic relations between India and China.
The G20 summits come at a great cost, especially for a country like Argentina which is still reeling under high inflation and an austerity drive.
Its currency (Peso) plunged against the dollar in April due to the rise in US interest rates and fleeing FIIs. Its dollar debts became too expensive and it had to go to IMF for a $50 billion loan.
Is hosting G20 summit a showboating exercise or does G20 actually resolve any global problems? For the richest country, the US, it didn’t mean much effort or expenditure as Trump brought in 10 aircrafts and a US navy vessel, 3 surveillance aircrafts and 3 refuelling aircrafts involved in monitoring Buenos Aires while emergency cyber intelligence support was provided by the US department of homeland security.
For the Argentinian President, it must have been an ordeal. The government had asked all Buenos Aires residents to go for a long weekend because it wanted less people around during the summit, but many refused to leave because for them daily wages are important for survival. President Mauricio Macri has succeeded in hosting a G20 summit without the violence that accompanied the last G20 summit in Hamburg. But Macri had to employ 22,000 security agents for the vast security operation.
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