After a long time, in fact ever since the Trump Presidency began 21 months ago in January 2017, we finally have a global meet that has bettered expectations, however marginally! In an increasingly fractious and protectionist world, the G20 meet at Buenos Aires has kept hopes of multilateralism alive. And that’s no mean achievement.
It helped, of course, that expectations were low to begin with. Not because this was the 13th meeting of the G20, the all-powerful grouping of world leaders who together represent about 85 per cent of global GDP and 75 per cent of global trade. But because the grouping—the outcome of a belated realisation in the developed world that a body that excludes developing countries cannot claim to represent the larger global community nor do very much for our shared future—has increasingly failed to live up to expectations in recent years.
Part of the reason, perhaps, is that the outcome of G20 meetings tends to be compared with the outcome of the first few meetings, especially the 2009 Pittsburgh Summit. That summit, held under the shadow of the collapse of U.S.-based investment bank Lehman Brothers, saw global leaders led by the United States, sink their differences and agree to cooperate on an unprecedented scale. Their coordinated action effectively pulled the global economy back from the brink of what threatened to fast become the next Great Depression.
In the event, the global economy has recovered faster than anticipated when the crisis first broke out. After contracting 0.5 per cent in 2009 (advanced countries output contracted 3.4 per cent while emerging economies did much better, growing by 2.7 per cent), the global economy went on to recover better than expected. By 2010 world output actually grew 5 per cent and worries about depression receded.
However, not only has recovery been patchy but also policies adopted to counter the shock have left their mark. Even as growth has remained below long-term trend and unemployment unacceptably high in developed countries, developing countries have not stayed immune. Growth has fallen and inflationary pressures have surfaced even as debt levels, both public and private have shot through the roof as prolonged monetary easing in response to the crisis, brought interest rates close to zero and in some cases below zero.
Meanwhile, protectionist policies in many countries, principally U.S., saw global trade, long considered a key driver of growth, suffer as countries turned inward. So, even as the world economy has recovered, the recovery is far from complete or even. Unemployment continues to be high in most of the developed world, barring the United States where growth is now set to touch a two-decade high, while the developing world is yet to recover from years of excessive inflow of capital, followed by abrupt outflows.
Indeed, the host country, Argentina, is in the throes of a serious economic crisis. The economy is expected to contract over 2 per cent this year. Meanwhile, surging inflation has seen its currency, peso, lose close to 40 per cent value against the U.S. dollar since the start of this calendar year, leading to rising unemployment and economic distress that spilled onto the streets of its capital.
It is against this background of rising protectionism, uneven recovery, high unemployment and rising dissatisfaction in the world that world leaders met for the two-day summit at Buenos Aires. The host country had identified three focus areas—future of work, infrastructure and development and sustainable food future. But the interest of the global community was only on one issue: rising trade tensions between U.S. and China that threaten to bring the global economy once again to the brink.
With Trump threatening to impose further tariffs on Chinese exports into U.S.—it has already imposed three rounds of punitive tariffs on $200 billion worth of Chinese goods, with the threat of more to come in January—all eyes were on the meeting (on the sidelines) between Trump and Chinese President Xi Jinping. No dramatic breakthrough was expected and none happened. But to the extent world leaders finally signed off on an agreement that reaffirms a commitment to multilateral trade and a “rules-based international order”, even as it accedes to U.S. demands for urgent reform of the World Trade Organisation (WTO), it is a victory (of sorts!) for multilateralism.
The key paragraph in the final communiqué reflects the hard-won compromise. “International trade and investment are important engines of growth, productivity, innovation, job creation and development. We recognise the contribution that the multilateral trading system has made to that end. The system is currently falling short of its objectives and there is room for improvement. We therefore support the necessary reform of the WTO to improve its functioning. We will review progress at our next Summit.”
And that for India is the biggest takeaway from the just-concluded meet in the Argentine capital. Sure the closing communiqué makes no concrete promises nor does it mention protectionism and the dangers of unilateral trade action. But at a time when U.S. is increasingly withdrawing from multilateral engagements in favour of bilateral deals where it can arm-twist smaller powers (witness the recent renegotiation of North Atlantic Free Trade Agreement (NAFTA) and its replacement with the much more U.S.-centric US-Mexico-Canada Agreement (USMCA), any reiteration of faith in multilateralism is a positive.
Countries like India, minnows in global trade but strongly integrated into the global economy, have much to gain from a ‘rules-based’ global trading order under the aegis of multilateral bodies like the WTO that are far more democratic than bodies like the World Bank or the International Monetary Fund, both of which are far more representative of First World interests. Hopefully, the agreement reached in Buenos Aires will slow down, if not reverse, the movement away from multilateralism.
From India’s perspective, the summit also enabled Prime Minister Modi to participate in two trilateral meets, both of strategic importance to India. The meet between India, Japan and U.S. is a first and sets the tone for a growing relationship with two major economic powers. The second, between India, Russia and China, was held after a gap of 12 years; a reflection, perhaps, of how little importance was attached to it in the past as well as the realisation (even if somewhat belated) of the need to cultivate strategic relations with all countries, even with those with whom we have not had the best of relations in the past.
The next G20 meet, to be held in Osaka Japan in June 2019, will hopefully build on the success (albeit limited) of the 2018 summit.
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