G-20 Trade Ministers Pledge "Political Leadership" to Boost Growth, Prosperity
Trade ministers from the G-20 coalition of major advanced and emerging economies concluded a two-day meeting in Shanghai, China, on Sunday, calling for increased efforts to tackle sluggish trade and economic growth, while providing political signals on specific topics such as industrial overcapacity and environmental goods.
The 9-10 July meeting comes just months before leaders from the group are set to meet for their annual summit, being hosted this year by China in the city of Hangzhou. The Chinese presidency has set the theme of the upcoming summit as “Towards an Innovative, Invigorated, Interconnected, and Inclusive World Economy,” calling for steps to shore up the global economy and ensure stronger growth in both the medium and long term.
Strategy for growth
Nearly two years ago, G-20 leaders presented national plans aimed at boosting the group’s collective GDP by over two percent above planned trajectories by 2018. The plans featured over 1000 combined measures, both existing and new, which they said could inject US$2 trillion into the global economy. (See Bridges Weekly, 20 November 2014)
Last weekend, ministers said in their joint statement that “we need to do more to achieve our common objectives for global growth, stability, and shared prosperity.” They pledged to give the necessary “political leadership” to promote trade and investment policies geared toward these ends, particularly in light of the Brisbane outcomes.
The promises came amid warnings of increasing trade restrictions by members of the group, despite repeated commitments to ensure a “standstill” against any new measures of this kind, along with “rolling back” existing ones. WTO officials warn that the growing “stockpile” of these restrictions could have a chilling effect on trade flows. (See Bridges Weekly, 23 June 2016)
“Speaking frankly, global trade is not in good shape today,” said WTO Director-General Roberto Azevêdo at the Shanghai meeting.
The Geneva-based organisation has predicted that growth in world trade by volume will hit 2.8 percent this year, on par with last year but still slow relative to historical averages. (See Bridges Weekly, 14 April 2016)
Given this worrisome context, ministers reiterated their past “standstill and rollback” pledges, while also signing off on a “G-20 Strategy for Global Trade Growth,” under which they agreed to “lead by example” in areas such as policy coherence, e-commerce, and slashing trade costs.
“We recognise that these activities, by promoting trade opening and integration and supporting measures for economic diversification and industrial upgrading will contribute to global prosperity and sustainable development,” they said.
Notably, ministers in Shanghai also endorsed the “G-20 Principles for Global Investment Policymaking,” which they explained were geared toward improving coherence both domestically and internationally in this area. These non-binding principles include calls against protectionism, stress the right to regulate "for legitimate public policy purposes," urge effective and efficient policies for investment promotion, and highlight the need for approaches that ensure legal certainty and non-discriminatory, open, transparent, predictable investment conditions.
“Global investment is an engine of economic growth and sustainable development,” they said, highlighting the value it can have for job creation, boosting ties between countries through global value chains, and help foster improved trade growth in the future.
“Today, however, global investment flows remain well below pre-crisis peak levels. Policy attention and cooperation is required to put investment growth back on track,” they urged.
Meanwhile, the trade ministers’ statement makes no direct mention of UK citizens’ vote last month to leave the European Union, which many international agencies have suggested could have consequences for growth, both in the short and long-term. (See Bridges Weekly, 30 June 2016)
Indeed, the Organisation for Economic Co-operation and Development (OECD) said on 11 July that it would be delaying the release of its “Composite Leading Indicators” (CLIs) – a tool it uses to predict developments in the economic arena – until September to better understand what the vote itself has done to the long-term prospects for the global economy.
“The CLIs cannot… account for significant unforeseen or unexpected events,” the Paris-based agency said on Monday. The Brexit vote qualifies as among those “unexpected events,” meaning that the organisation will need more time to accumulate the necessary data and make more accurate projections.
TFA, WTO post-Nairobi strategy
Trade ministers in Shanghai did devote several paragraphs of their eight-page statement to current and future trade deals, both within the aegis of the WTO and outside it.
“We affirm the central role of the WTO in today’s global economy,” they said, noting the importance of the organisation’s rulebook and dispute settlement function, among others.
Moving forward, one of the main objectives touted by officials would be bringing the WTO’s Trade Facilitation Agreement (TFA) into force, citing the lowered trade costs that could come from the deal. The TFA was adopted in Bali, Indonesia, in December 2013, with a view to easing customs procedures and cutting transit times for goods. (See Bridges Daily Update, 7 December 2013)
G-20 ministers have pledged to ratify the accord by year’s end, while pressing other countries to do the same. To date, 85 WTO members have ratified the TFA, meaning that just over 20 more members must do so for the accord to enter into force.
Along with implementing other outcomes agreed in Bali in 2013 and in Nairobi last December, G-20 members called for advancing future talks in order to ensure that the WTO’s Eleventh Ministerial Conference (MC11) in 2017 will be a success.
“We agree to work with all WTO members to set the direction together towards positive outcomes at MC11 and beyond in a balanced, inclusive, and transparent way with a sense of urgency and solidarity,” they said.
Ministers also reaffirmed language in the Nairobi ministerial document aimed at advancing negotiations in certain areas of the Doha Development Agenda, while stating that some newer topics emerging in regional trade deals and business sector discussions may be “legitimate” for raising in the ambit of the WTO, “without prejudice to respective positions relating to possible negotiations in the future.”
The timing for concluding talks on the plurilateral Environmental Goods Agreement (EGA) was also raised during the Shanghai meeting, with ministers confirming that they hope to reach a “landing zone” at the leaders’ summit in September.
An EGA “ministerial” would then be planned before year’s end to conclude the talks, they added. The news suggests a slight shift in timing, given earlier expectations that a deal might be ready in time for the leaders’ event in Hangzhou.
However, G-20 officials involved in the EGA talks generally characterised the talks as fruitful, without going into specifics.
“Most notably, ministers from countries participating in the environmental goods negotiation provided important political momentum for completing the Environmental Goods Agreement this year and identified a clear path to do so,” said US Trade Representative Michael Froman after the meeting.
The environmental goods initiative was formally launched two years ago, with the 17 participating WTO members aiming to clinch a deal that would cut tariffs on a set of mutually-agreed products. The most recent round was held in Geneva, Switzerland, last month, with participants still negotiating on which goods to include, along with institutional issues and other related topics. (See Bridges Weekly, 30 June 2016)
Another hot-button topic raised in Shanghai was the ongoing crisis across the steel sector, which has escalated tensions between China – the top producer of the metal – and various other major players, including the EU and the US.
The debate has particularly drawn attention toward how much responsibility China has in addressing the problem, and the nature of the root causes of the global overcapacity in steel, along with aluminium and other industrial goods. Ultimately, the language agreed at the G-20 gathering does not specifically refer to Beijing, and particularly highlights the importance of cooperation and coordination going forward.
“We recognise that excess capacity in steel and other industries is a global issue which requires collective responses,” said the trade ministers’ statement. The document also referred to the potential of state aid to cause market distortions, adding that the issue does “require attention.” Ministers also pledged to increase their discussions in this field and pursue “effective steps,” without saying what those steps might be.
The statement also raises the possibility of a “Global Steel Forum” among major steel-producing countries, which had already been floated following a bilateral meeting between the US and China in early June. (See Bridges Weekly, 9 June 2016)
If created, this forum would provide an additional space – aside from the existing Steel Committee under the Organisation for Economic Co-operation and Development (OECD) – for participants to discuss issues relating to industrial overcapacity, ministers said.
Editor’s note: This story has been updated to include additional details on the investment aspect of the discussions in Shanghai.