G20 states must play by the multilateral rule book even when President Trump regards trade as a zero-sum game
Given Donald Trump’s election to the White House, it was perhaps inevitable that the G20 meeting of finance ministers would end in an impasse. First, the U.S. decided in January to withdraw from the Trans-Pacific Partnership. Then it called to renegotiate the North American Free Trade Agreement. In more recent weeks, the Trump administration has ratcheted up its rhetoric on the U.S. trade imbalances vis-à-vis Germany and China. Each of these is a pattern of the populist penchant to play the victim card in the global multilateral system, and contributed to the deadlock at the Baden-Baden G20 meeting last weekend.
This is not to deny that there is some familiarity to the failure of G20 nations to live up to past pledges. In this instance, it was the difficulty of including a clause to unequivocally eschew protectionism in the final communiqué, largely aimed to placate the new U.S. Treasury Secretary Steven Mnuchin, who was echoing the general anti-globalisation mood in Washington. Notable among the earlier promises to revitalise the world economy is a 2014 commitment to put in place fiscal stimulus policies to boost global annual GDP by about 2% by 2018.
Consolidating gains from globalisation
At last week’s meeting, European countries, notably France, were keen to incorporate stronger language on the preservation of regulated free trade arrangements and more generally on the consolidation of the rules-based multilateral system. But these nations would do well to recognise that the current uncertain scenario still opens up new avenues. This was Chinese President Xi Jinping’s rallying call at the World Economic Forum in Davos, of the need to consolidate the gains from globalisation. Indeed, such an opportunity becomes a necessity given the moral and political imperatives of narrowing the inequalities arising from uneven economic growth and redistribution. Finding common cause with communist China should not pose much of a concern for democratic countries long wedded to the preservation of the liberal world order they crafted in the post-World War years. Signs of greater openness are already evident in the willingness of Germany and Britain to Chinese acquisitions and mergers in sectors that were earlier a preserve of domestic corporations.
In his paper to the China Development Forum 2017, Nobel Laureate Joseph Stiglitz made a compelling case about why multilateral trade deficits, rather than bilateral ones, really matter over the long term. He argued that states ought to play by the multilateral rule book, even when Mr. Trump regards trade as a zero-sum game. He especially emphasised significant initiatives, such as the China-backed Asian Infrastructure Investment Bank, as alternative fora for cooperation among states. Resoluteness on the part of the global south, aided by like-minded nations, may persuade Washington to see reason and eschew isolationism. The G20 can’t throw in the towel.
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