The Global Security News: 1. US Security from Michael_Novakhov (88 sites): Eurasia Review: Osaka G20 Summit: Mixed Outcome – Analysis

The G20 Summit at Osaka came up with a mixed picture on trade. The US and China struck a trade truce. But the summit failed to address issues related to WTO reforms.

By Pradumna Bickram Rana and Jason Ji Xianbai*

ON 28-29
JUNE 2019, the Group of Twenty (G20) leaders representing two-thirds of
the world population and 85 percent of the global output assembled in
Osaka, Japan for their 2019 summit.

At the gathering of leaders, a wide range of topics including data
governance, quality infrastructure, financial resilience, international
taxation, gender equality and climate change were covered. But it was
trade that preoccupied the leaders. At the conclusion of the two-day
meeting, a mixed picture of relief and disappointment on trade issues
emerged.

Relief: US-China Trade Truce

The Osaka Summit was held against the background of aggressive trade
confrontations between the United States (US) and China which have
roiled the global economy. According to the International Monetary Fund,
global growth is expected to slow to 3.3 percent this year from 3.6
percent in 2018 and globally the economic losses from the US-China trade
war could amount to US$455 billion in 2020.

Much to the relief of the world, the US and China signalled a pause
in mutual hostilities at Osaka. The US promised to withhold tariffs on
an additional $300 billion worth of Chinese goods and ease some, yet
unspecified, restrictions on China’s hard-pressed telecommunications
giant Huawei.

China in return agreed to purchase a “tremendous amount of US farm
goods”. Concessions on both sides have led to some relief. Top US and
Chinese officials have spoken by telephone but face-to-face negotiations
have yet to be scheduled.

There is, however, a sense of déjà vu among some. Presidents Donald
Trump and Xi Jinping had struck a similar ceasefire agreement during the
Buenos Aires G20 Summit of December 2018 that unravelled soon after.
Whether the “Osaka truce” between the two superpowers will last is an
open question given the structural nature of the competition between the
US’ liberal market economic model and China’s coordinated state
capitalism model that underlie the conflicts.

Perhaps the US and China are just kicking the can down the road yet
again at Osaka. The détente could even be part of China’s filibustering
strategy to sit Trump out.

Reason for Optimism

That said, there is a good reason to be more optimistic this time
around because of the urgency on both sides to address the adverse
impacts of the trade war. Farmers, manufacturers and other businesses
with exposure to China have been badly hurt in the US. In June, the
manufacturing Purchasing Managers’ Index dived to 50.1, the worst level
in a decade.

Private investment on capital goods also continue to decline as
corporate leaders brace themselves for the uncertainties ahead. With
Trump seeking a re-election, resolving the multibillion-dollar dispute
with China once and for all and turning the economic situation around
could be a winning strategy.

On the Chinese side too, the economy is clearly deteriorating. In
2018, China registered the lowest economic growth in almost thirty
years. Trade sanctions imposed by the US continue to weigh on China’s
economy. Should the trade war drag, Beijing will almost certainly miss
its target economic growth rate of 6.0 to 6.5 percent for this year.

Disappointment: WTO Reforms

At the Buenos Aires G20 Summit seven months ago, the leaders had
committed “to improve a rules-based international order” and pledged to
support the “necessary reform” of the WTO. This for the first time
elevated the subject of WTO reforms as an agenda item for the G20.

After the summit, countries were encouraged to put forward proposals
on how to make the global trade governing body fit for the purpose in
today’s economic and political landscape. A number of proposals were
forwarded to Geneva in the months leading up to the Osaka summit.

The US wanted to disqualify G20 members such as China from enjoying
the lenient “special and differential treatment” at the WTO. China had
proposed to save the adjudicative system now bordering on collapse. The
EU and Canada had lobbied to write new global rules to enhance trade
policy transparency and curb trade-distorting measures such as excessive
subsidies.

As priorities differed significantly across major powers, the leaders
ended up talking past each other at Osaka. Consequently, the G20
leaders’ declaration while admitting that the WTO needed reform fell
short of mentioning any specific steps to be taken to improve the
functioning and governance of the WTO.

More worryingly, leaders appeared to have toned down the seriousness
of the issue. An earlier draft of the statement had called for a “sense
of urgency” to reform the WTO which was “facing unprecedented
challenges”, but this strong language was missing in the final version.
This suggests that Japan did not want to repeat the experience of Papua
New Guinea which hosted the APEC Summit last year failing to mediate the
leaders’ declaration in the context of US-China tensions.

Key Issues in WTO Reforms

Of
particular concern is the Trump administration’s veto on the appointment
of new judges and its unwillingness to extend the terms of existing
judges at the WTO’s dispute settlement mechanism known as the appellate
body. This body now has the minimum three judges needed to function. If
the situation is not resolved by December, the enforcement mechanism and
the “crown jewel” of the rules-based global trading system will cease
to function.

The WTO’s decision-making protocol based on full consensus of the
membership (164 members) has meant that decisions are often taken at a
glacial pace. To reverse this situation, in Osaka, Japan had proposed a
“plurilateral agreement” among 50 WTO members on cross-border data
movement and e-commerce.

Although 24 countries, including the US, China, the European Union
and Singapore signed up to Tokyo’s plan, large emerging economies like
India, Indonesia, South Africa and Egypt opposed it on the grounds of
multilateralism-centrality and the grouping’s lack of legitimacy and
universal representation on matters related to trade.

The Osaka Summit, together with the preceding Buenos Aires Summit,
had been dominated by bilateral issues related to the trade war between
the US and China. It is critically urgent that the forthcoming summits
including the Riyadh summit next year focus on key issues in reforming
the WTO including its governance system. Otherwise the effectiveness and
clout of the most rules-based multilateral institution in the world
will diminish greatly.

*Pradumna B. Rana is a Visiting Associate Professor at the Centre for Multilateralism Studies (CMS) at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore. Xianbai Ji is a Research Fellow at RSIS.

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