Trade, Globalisation in the Spotlight as G20 Leaders Head to Hamburg Summit

6 July 2017

Leaders from the G20 will be arriving in Hamburg, Germany, for their annual summit this weekend, which will feature high-profile discussions on free and fair trade, steel, protectionism, and international climate action.

Over the past several weeks, preparations for the 7-8 July meeting have intensified amid growing speculation over how leaders may resolve emerging debates over how to address the future shape of globalisation – and whether they will be able to reach agreed language on some of these issues in their final communiqué on Saturday.

Earlier this year, G20 finance ministers and central bank governors agreed at a meeting in Baden-Baden that they would work to “strengthen the contribution of trade” to their economies, and to focus on making trade more fair and inclusive, while omitting earlier pledges to tackle protectionism. How to define all of those terms – free trade, fair trade, and protectionism – have long been debated in the policy world. (See Bridges Weekly, 23 May 2017)

The G20 coalition, which includes 19 advanced and emerging economies as well as the European Union, makes up approximately 80 percent of global GDP, while approximately three-quarters of the world’s goods and services trade flows involve a G20 member.

Preparatory meetings, approaches

German Chancellor Angela Merkel said last month that reaching an agreed statement emphasising the value of open markets would be a central objective of her country’s G20 presidency – a goal that she has reaffirmed repeatedly as the summit draws ever nearer. (See Bridges Weekly, 22 June 2017)

"If we simply try to carry on as we have in the past, the worldwide developments will definitely not be sustainable and inclusive," said Merkel during a podcast earlier this week previewing her government’s goals of the summit. "We need the climate protection agreement, open markets and improved trade agreements in which consumer protection, social and environmental standards are upheld."

On Wednesday, the German leader said that “we are looking at the possibilities of cooperation,” while noting that her government’s vision of globalisation as a “win-win” situation contrasts sharply with that of the current US leadership, according to comments reported by Die Zelt and Reuters.

Other leaders have also weighed in over the past several weeks, with Chinese President Xi Jinping recently stating in an op-ed for Die Welt that “we hope that the G-20 will continue to uphold the great goal of an open world economy” and highlighting his country’s interest in greater cooperation with Germany and in ensuring strong international collaboration on the global economy.

EU leaders had a preparatory meeting on 29 June to agree their stance, with EU Council President Donald Tusk saying afterward that the bloc is “determined to protect and even strengthen the rules-based international order” and committed to climate action and other shared objectives in “turbulent times.”

In related news, Japanese and European leaders are set to announce a political agreement on a comprehensive trade agreement on Thursday 6 July, after confirming a ministerial-level deal on Wednesday evening.

The planned EU-Japan trade agreement, leaders from both sides say, would both yield important economic gains while demonstrating their commitment to shared values and open trade.  (See Bridges Weekly, 18 May 2017 and related story, this edition)

Meanwhile, reports have emerged that US President Donald Trump wishes to focus on the concept of “free and fair trade” in Hamburg and is also interested in discussing global overcapacity in steel, a topic that has featured in past G20 meets.

“On trade, no less than on alliances, America First does not mean America alone.  The goal of US trade policy is to expand trade in a way that is free and fair,” said Gary Cohn, Director of the White House’s National Economic Council, in a press briefing on 29 June previewing the summit.

“We look forward to engaging in free and fair trade with the G20 economies. The United States stands firm against all unfair trading practices, including massive distortions in the global steel market and other non-market practices that harm US workers,” he continued.

Regarding steel, Washington is currently conducting investigations into whether steel and aluminium imports are adversely affecting national security, using Section 232 of the Trade Expansion Act. The probe has sparked concern in many of Washington’s trading partners, including the European Union, whose top trade official recently cautioned that should the investigation lead to duties on EU producers, it would prompt some form of “retaliation.” (See Bridges Weekly, 4 May 2017 and 29 June 2017)

Sources say that the use of a national security justification for potentially imposing trade remedy measures drew intense scrutiny at a recent meeting of the WTO’s Goods Council in Geneva, Switzerland.

Various members, including many who are also part of the G20, such as the EU, China, and Russia, reportedly questioned the US on whether this type of probe was justified under the provisions on security-related exceptions and suggested that duties from the investigation could pose serious “systemic risks.”

Cohn also said that Trump will reaffirm and explain his announcement from June on the US’ planned withdrawal from the UN’s Paris climate agreement – along with his continued interest in negotiating a better deal. Leaders from a host of other economies have repeatedly affirmed that the landmark climate accord is both “irreversible” and not up for renegotiation.

IMF note: collaboration, rules-based system essential

The International Monetary Fund (IMF) also released a note for G20 leaders two days before the summit that referred to some improvements in the global recovery – while warning that much more needs to be done to shore up this recovery against potential risks.

Among its recommendations, the agency referred to the need for structural reforms that can help ensure “high and inclusive growth in the long term,” including helping those workers “who have been hurt by shifts in technology and trade.”

The note also stressed the importance of a rules-based trading system and continued international collaboration across a host of policy areas, along with backing trade “reforms” and domestic policies that help workers adapt to an ever-changing economy.

It also featured a warning against any moves away from international cooperation on economic policy and sustainability. “Myopic pursuit of zero-sum policies can only end by hurting all countries, as history shows,” the note says.

“Because national policies inevitably interact in a number of vital areas, creating strong spillovers across countries, the world economy works far better for all when policymakers engage in regular dialogue and work within agreed mechanisms to resolve disagreement,” the Fund continued.

WTO, OECD, UNCTAD reports

In preparation for the leaders’ gathering, the WTO, the Organisation for Economic Co-operation and Development (OECD), and the UN Conference on Trade and Development (UNCTAD) released last week their semi-annual reports on G20 trade and investment measures.

On trade, the WTO found that trade restrictive and facilitative measures saw a “moderate rise” over the course of the last six months, each numbering just over 40 measures, though their “trade coverage” was substantially different, at US$47 billion and US$163 billion, respectively.

The reports, which are designed to feed into the G20 process, also included a call for supporting open markets and the rules-based trading system.

“G20 leaders must show leadership in reiterating their commitment to open and mutually beneficial trade as a key driver of economic growth and a major engine for prosperity,” the report says, also calling upon the coalition of advanced and emerging economies to support reaching a “successful outcome” at the WTO’s Buenos Aires ministerial conference later this year.

Meanwhile, the joint report by OECD and UNCTAD on investment measures notes that “for the first time in years, a relatively greater proportion of restrictions to international investment” emerged over the period analysed, while cautioning against reading this as a pattern at this stage.

These new reports come in the context of some moderate improvements in estimated trade growth for 2017, though multiple international agencies have warned about the risks posed by political and policy uncertainty. (See Bridges Weekly, 8 June 2017)

ICTSD reporting; “Trump to demand G20 action on steel; closely-watched report delayed,” REUTERS, 29 June 2017; “China's Xi Singles Out Germany as Global Ally in Pre-G-20 Op-Ed,” BLOOMBERG, 4 July 2017; “As anti-G20 protests begin, Merkel says growth must be inclusive,” REUTERS, 2 July 2017; “Merkel takes aim at U.S. 'winners and losers' policy before G20,” REUTERS, 5 July 2017.

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