There is a reason the 2018 Group of Twenty (G20) Leaders’ Declaration has been dubbed as one with the “weakest” wording on trade ever.
A week before the two-day G20 Summit began in Buenos Aires on 30 November, the World Trade Organisation (WTO) brought out its ‘20th monitoring report on G20 trade measures’. It revealed that the G20 economies imposed as many as 40 new trade-restrictive measures from mid-May, 2018 to mid-October, 2018. The estimated trade coverage of these measures was pegged at a staggering USD 481 billion. Not only was this amount more than six times larger than that was recorded during the previous period, but also the largest since such a computation was first done in 2012. In addition, it was the first time since 2015 that the monthly average of trade-restrictive measures outpaced the trade-facilitating ones. A closer look showed that tariff hikes accounted for almost three-quarters of the total import-restrictive measures registered. Tariff increases were followed by import bans as the most-used import-restrictive measure.
Significantly, WTO Director-General Roberto Azevêdo had then even highlighted that these findings should be of serious concern for G20 governments and the entire international community. Projecting that further escalation remains a real threat, he cautioned that if the nations continued along the current course, the economic risks would increase, with potential effects for growth, jobs and consumer prices around the world. While assuring that the WTO was doing its best to back de-escalation attempts, he, however, noted that finding solutions would need political will and leadership from the G20. Incidentally, the WTO has been publishing the Report on G20 trade measures since 2009 following a request by G20 leaders themselves.
Given this background, ideally G20 leaders should not have had any difficulty in incorporating in their communiqué a pledge against protectionism and a commitment towards safeguarding multilateral trading norms—like they did in the Declaration following all the earlier Summits since the first one held a decade ago. Disappointingly, there was no such mention this time around—reportedly due to resistance from the US, which was responsible for many of those trade-restrictive measures. The latest WTO’s G20 trade measures report showed that around 79 percent of the current import-restrictive coverage was related to bilateral measures between the U.S. and China.
The G20 is touted as the world’s premier informal platform for political, economic and financial cooperation. The European Union and 19 leading economies from the developing and developed worlds that constitute the G20 together account for 85 per cent of global economic output, 80 per cent of global investment, 75 percent of international trade and 66 percent of world population. So, when G20 leaders meet annually, there is generally a surge in expectation that they would acknowledge the most pressing problems that have been impacting the global economy ever since they met the previous year, and arrive at an understanding on ways to adequately address those persistent issues.
During the period between the previous G20 Summit in Hamburg, Germany on July 7-8, 2017 and the one that was held this year, protectionism, trade tensions, unilateral trade restrictive measures and threats to the multilateral rule-based trading system were the themes that had hogged many a headline. Reflecting this, another WTO report released on 11 December—ten days after the G20 Summit—showed that all the WTO member nations together applied 137 new trade-restrictive measures (including import taxes, export duties, tariff hikes and quantitative curbs) between October 16, 2017 and October 15, 2018. The trade coverage of these measures was estimated to be a whopping USD 588.3 billion—notably, over seven times larger in value terms when seen year-on-year.
Worryingly, the dilution of the stand on protectionism has major implications for the G20 process in terms of its credibility that was hard won. Remember, the bloc had functioned diligently, effectively and swiftly to successfully handle and contain the 2008-09 global financial and economic crises and bring much-needed stability to the world economy.
In an increasingly inter-reliant and interconnected world, trade tensions, owing to its multifarious consequences, has and always will be a major agenda item that the preeminent grouping can ill afford to ignore. Also, it is a no brainer that only an internationally coordinated strategy can help manage the complexities in a globalised economy.
However, ignoring the elephant in the room, which is trade protectionism in its various forms, does not augur well for the reputation of the forum, especially when it has been facing criticism due to some of the previously agreed G20 commitments—including on global tax cooperation, resisting trade protectionism, or deadlines for completion of the Doha Round trade negotiations—not being fully implemented or adhered to.
What is also of concern regarding the G20 process is that the 2018 Summit Declaration saw a divergence from the norm of the communiqué being a consensus-based one. The Trump administration saw to it that its solitary stand on climate change, including its decision to withdraw from the Paris Agreement, was incorporated in the document.
This sort of blatant arm-twisting to dilute or distort commitments on trade and other important issues such as environment protection is severely eroding the effectiveness of the G20 process. It is also giving rise to questions regarding the constitution of the G20, which is currently imbalanced due to greater developed world representation and influence.
While the developing world members may not have had the clout to insert a separate line on anti-protectionism into the 2018 communiqué (à la the U.S. on climate change), they may take heart from the fact that G20 commitments are only voluntary and not legally binding. However, having earned a seat at the high table, it is important that these developing nations do not fritter away the opportunity to make a difference. Therefore, they should invest more in agenda-setting and ensuring that G20 commitments beneficial to the developing world are implemented promptly.
Editorial Note: The 2018 G20 Leaders’ Declaration has been dubbed as one with the “weakest” wording on trade ever. Despite a huge increase in new trade- restrictive measures (as shown by the latest WTO report), the G20 communiqué didn’t have a pledge against ‘protectionism’ like the Declaration following all the Summits since the first one in 2008. This was due to resistance from the U.S., which was responsible for several of those trade- restrictive measures. This sort of blatant arm-twisting to dilute commitments is severely eroding the effectiveness of the G20 process.
About the Author: Arun S. Nair is a visiting fellow at the New Delhi-based think-tank Research and Information System for Developing Countries (RIS). He was formerly a journalist, lawyer, and an IMF Fellow. He has participated in the International Visitor Leadership Program (the U.S. State Department’s premier professional exchange program) on ‘the U.S. Trade Policy’. As an economic policy correspondent he has covered important events including the WTO’s Doha Round ministerial negotiations at Geneva in 2008, Nairobi in 2015, and Buenos Aires in 2017, as well as the IMF and World Bank Annual Meetings in 2014 and 2015.