Japan will host the G20 Summit on the 28th and 29th of June in Osaka. The G20 is a yearly event where twenty of the world’s biggest economies gather to address issues of economic concern, especially those related to global financial stability.
Expect Prime Minister Abe, as leader of the world’s third largest economy, to continue efforts to fill the void left by US withdrawal from the Trans-Pacific Partnership (TPP) in January 2017. The Prime Minister ignored President Donald Trump’s withdrawal decision by entering into a similar high-level multilateral trade agreement with remaining TPP members late last year. Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) countries, accounting for nearly 13.5% of global GDP, left the door open for the US to join later.
However, no consortium led by Japan or any other country can replace the US. Abe is doing what he can, including fighting a charm offensive to gain sway over the mercurial President. The G20 Summit provides Abe with a platform to further fight for rules-based multilateralism. “Japan’s presidency of this year’s G20 is symbolic of its geopolitical activism and leadership under Prime Minister Abe,” said John West, author of “Asian Century…on a Knife-edge”.
G20 Summit themes include:
- Restructuring the World Trade Organization (WTO) to better protect free and fair global trade.
- Working towards realizing the Regional Comprehensive Economic Partnership (RCEP), a proposed free-trade agreement covering roughly half the world’s economy.
- Promoting free cross-border data flows, while ensuring companies which profit from the global digital economy are fairly taxed.
- Addressing issues of climate change, universal healthcare, aging populations and inclusive growth.
Nevertheless, G20 side-talks between the US and China will likely overshadow multilateral discussions. The global economy is showing signs of weakness when Trump is threatening to slap increasing tariffs of up to 25% on approximately $300bn of remaining Chinese imports not already taxed. Twenty-five percent tariffs were imposed on $200bn of Chinese imports earlier in May. Trump is using tariffs as a stick not just to reduce trade imbalances. He also uses them to try to stop China from engaging in intellectual property theft and from subsidizing strategic industries in violation of WTO rules. He may also use them to advance US geopolitical interests in the Asia Pacific region.
Threat of an escalating trade war results from US fears that China’s growth comes at its expense. Both nations see themselves as pitted in Great-Power Competition. China is a rising nation seeking global economic, technological and military supremacy over a declining US hegemon. However, China cannot retaliate against US tariffs like-for-like as it lacks sufficient US imports. Expect neither superpower to play softball. In the worst-case scenario, a trade war could morph into a geopolitical struggle over regional territories China historically claims as its own.
Until recently, China’s President Xi Jinping has appeased the US President with his own charm offensive. In May trade negotiations between US and China collapsed. Neither leader can afford to lose face. Trump is seeking reelection in 2020. Xi must convince Communist Party elite that he can realize China’s global ambitions.
Last week Xi met with North Korean leader Kim Jong-un to strengthen his negotiating hand in Osaka side-discussions. With the global economy minimally at stake, events at the G20 will be closely watched.
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