New Delhi: This weekend, on 28-29 June, Japanese Prime Minister Shinzo Abe will welcome world leaders for the annual summit of the Group of Twenty (G20) in Osaka. While discussions are expected to centre around the deteriorating global economy, the summit’s most anticipated event is the likely meeting between US President Donald Trump and his Chinese counterpart Xi Jinping, on the sidelines of the meet.
Prime Minister Narendra Modi is also expected to have a meeting with Trump on G20 sidelines and discuss several issues, including trade.
According to a press release issued by the Ministry of External Affairs, India plans to focus on energy security, financial stability, disaster-resilient infrastructure, reformed multilateralism, WTO reforms and counter terrorism operations among others.
What is G20?
The G20 started in 1999 as a meeting of finance ministers and central bank governors in the aftermath of the Asian financial crisis. It acted as an international forum to facilitate global economic cooperation and discuss ways to improve economic governance.
In 2008, the first G20 leaders’ summit was held and it played a key role in responding to the global financial crisis that year.
One should also note how there was a gradual shift in power from G8 (now G7) to G20 thereafter. This change was a tacit acknowledgement of the rise of “other powers” — including countries such as India, Brazil and Turkey.
G20 is a club of 19 nations (Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, UK, US) and the EU. The forum collectively represents 85 per cent of global GDP, 75 per cent of world trade and two third of the world’s population.
Along with several international institutions such as the Financial Stability Board (FSB), International Monetary Fund (IMF) and World Trade Organisation (WTO), G20 forms the backbone of today’s global economic governance.
Although expectations are high, commentators argue that the level of cooperation among major economies at this year’s summit is nowhere near what it was a decade ago, in the aftermath of the 2008 economic meltdown.
What we now witness is emergence of a “G-Zero world” — a world order acutely lacking any form of leadership — as put by political scientist Ian Bremmer.
Here are some of the major issues on agenda in this summit.
Also read: US-China trade war: Here’s why the tariff tiff has stock markets in a fix
Trump-Xi to discuss trade war
A focal point of this summit is the scheduled meeting between Trump and Xi. Trade talks between US and China have remained suspended since May, affecting markets and slowing down global economic growth.
Trump had earlier stated that he would impose an additional 25 per cent tariff on $300 billion worth of Chinese goods if trade talks do not progress. The US has been seeking verifiable measures to get intellectual property rights and greater access for American goods to enter Chinese markets.
Trump has also been demanding an end to forced technology transfer (FTT). FTT is the process by which companies must share technology, either through regulations or as part of a joint venture agreement, in exchange for access to Chinese markets.
The US argues that this forces American companies to give up their trade secrets and remain in danger of losing its competitive edge. This has been one of the most contentious issues of the US-China trade war.
Another sticking point has been US’ trade deficit with China — which was $2.6 million in the last quarter. China, however, disagrees and says that US has been trying to stop its growth in the global economy.
Markets hoping for US-China trade agreement
Deepening trade conflict between two of the world’s largest economies has disrupted global value chains and led to increasing economic uncertainty. A direct consequence has been concerted reduction in interest rates by central banks across the globe — in an effort to tackle economic slowdown.
Stakeholders across the globe have been desperately hoping that the two economic giants will reach a temporary trade agreement. Mike Mackenzie writes in The Financial Times that “no matter the soothing tones from the upcoming G20 meeting, rising protectionism looks entrenched and that will only gnaw away at a globalised economy”.
Leaders of the 2008 G20 summit had also faced a similar scenario with respect to adopting protectionist trade policies. The concluding G-20 statement that year had stated: “We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty”.
Also read: Companies moving out of China because of US trade war? Here are India’s new sops to woo them
WTO reforms
US blocking appointments of new judges to the World Trade Organisation’s (WTO) appellate body is another topic of discussion at the summit this year. The appellate body is at the heart of WTO’s vital dispute resolution mechanism.
In the absence of WTO’s dispute resolution mechanism, countries fear that the global trading regime would go back to its chaotic pre-world war phase.
US, Japan and EU also want to put pressure on China to reform its state-owned enterprises and improve market access.
US-Iran tension and oil prices
Escalating tensions between the US and Iran, and its subsequent effect on oil supply across the world is yet another major agenda of the G20 summit.
The G20 energy ministers have agreed to collaborate and bring stability in oil prices. They have expressed concern over the recent attacks on oil tankers in the Persian Gulf and its impact on global oil supply. The US has blamed Iran for the attacks, with Trump even ordering a retaliatory attack last week before calling it off.
The US has pulled out of the 2015 Iran deal and reimposed heavy sanctions on the latter. As a result of this, remaining countries in the agreement have struggled to counter American sanctions and alleviate the burden on Iran’s economy. Iran had earlier this month announced that it is accelerating its nuclear program and will soon breach the terms of the deal.
Promoting debt transparency and sustainability
On 9 June, the finance ministers of G20 nations had agreed on a set of principles to undergo transparent and sustainable lending- borrowing processes for infrastructure projects. They are likely to seek endorsement of these principles at the summit.
These principles partially stem from concerns over China’s lending processes which have pushed several developing economies under huge amounts of debt. Part of this debt has been accumulated in China’s Belt and Road Initiative (BRI), even though it denies that the project is a debt trap.
Also read: Christchurch mosque attacks: How to stop terrorists from misusing internet tops G20 agenda
The central issue is whether the United States can accept the emergence of China as a near equal power. Or whether it will try, at this late state, to reverse that process. The world will pay an enormous price if the US slices globalisation into two spheres, undoing its natural unifying, agglomerating force. America’s closes allies in Asia – Japan, South Korea, Taiwan, perhaps we should include India as well – do more business with China. Asking them to choose between giants will hurt each one of them. 2. The rest of the world will do their sums. India should navigate this widening fault line with utmost care. In some ways, we should thank President Trump for giving us a reality check.