G20 summit bring a truce in US-China trade relations – but it’s likely to be temporary


Tony Walker, La Trobe University

The United States and China have arrived at a temporary truce in a trade conflict that was threatening to further destabilise world equity markets, entrench a global slowdown and cause more damage to a rules-based international order.

Agreement by US President Donald Trump and his Chinese counterpart, Xi Jinping, to allow further negotiations before threatened tariff increases on Chinese imports come into effect is a welcome development.

However, this is a temporary respite, a short-term fix, not a long-term solution to myriad trade and other tensions that have put the US and China at odds with each other.

For their own purposes and in their own interests, Trump and Xi have come away from the Argentine capital with a deal that papers over differences that extend from China’s activities in the South China Sea to its mercantilist trade policies.




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Much at stake as Donald Trump and Xi Jinping meet at G20


As far as we know, China’s ruthless assertion of its sovereignty over disputed waters in the South China Sea was not a material subject for discussion in Buenos Aires except, possibly, in passing.

China’s rise and America’s relative decline ensure these global economic superpowers will continue to bump up against each other.

So, what was achieved and what are the prospects for an accord reached on the sidelines of the G20?

In their efforts to lower trade tensions and prevent a further erosion of global confidence, Trump and Xi agreed to a 90-day extension on the imposition of additional US tariffs on some US$200 billion of Chinese imports.

Trump had threatened to increase tariffs from 10% to 25% on an initial batch of Chinese imports from January 1. He had also flagged his intention to impose levies on another US$267 billion worth of imports if progress was not made in resolving broad-based trade differences.

A joint statement laid out a timeline for continuing negotiations. It reads:

Both parties agree that they will endeavour to have this transaction completed within the next 90 days. If, at the end of this period of time, the parties are unable to reach an agreement, the 10 percent tariffs will be raised to 25 percent.

In return for these temporary concessions, China agreed to:

… purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between the two countries. China has agreed to start purchasing agricultural product immediately.

China also agreed to crack down on sales of Fentanyl by making it a controlled substance. The US is battling an opioid crisis in which Fentanyl is a lethal component.

In retaliation for US trade actions, China had imposed duties on US$110 billion of imports. A principal component of this is soybeans, effectively killing one of America’s more lucrative export markets.

Trump has been under huge pressure from his Mid-Western rural heartland over a collapse in the Chinese market for American agricultural products.

The two sides also agreed to address structural problems in the trading relationship. These extend to five areas – forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft.

These are highly complex issues and unlikely to be resolved in the short term, if at all.

In the wash-up of the Xi-Trump discussions it appears China has got more out of the deal than the US – at least for now. It has secured a stay of execution for the implementation of tariff increases and forestalled, for the time being, tariffs on an additional bloc of Chinese exports.

In return, it has agreed to buy unspecified quantities of US products and to talk about differences.

Trump’s willingness to compromise after months of bombast reflects pressures from a shellshocked grain-producing constituency and alarm on Wall Street at prospects of a full-blown trade war.

From Beijing’s perspective, China has demonstrated that its growing economic heft has enabled it to avoid the appearance of yielding to US pressure.

If not a “win-win” for China – as Chinese officials are fond of saying – it is certainly not a “lose-lose”.

In a statement at odds with months of fire-breathing rhetoric over China’s allegedly perfidious trade practices, Trump hailed his understanding with Xi. He said:

This was an amazing and productive meeting with unlimited possibilities for both the US and China.

For their part, Chinese officials were more circumspect.

Foreign Minister Wang Yi said the talks were conducted in a “friendly and candid atmosphere”. The presidents:

agreed that the two sides can and must get bilateral relations right… China is willing to increase imports in accordance with the needs of its domestic market and the people’s needs.

Impetus for a face-saving deal in Buenos Aires has been prompted by growing concerns about the global economy. The signs of a slowdown are clear. Trade volumes had begun to moderate in the third quarter, heightening worries of a global retrenchment.

International Monetary Fund managing director Christine Lagarde at the G20 summit.
AAP/EPA/G20 handout

On the sidelines of the G20, the International Monetary Fund’s managing director, Christine Lagarde, noted:

Pressures on emerging markets have been rising and trade tensions have begun to have a negative impact, increasing downside risks.

In its October Outlook statement, the IMF warned about threats to global growth due to trade disturbances.

In their final communique, G20 leaders danced around contentious issues on trade to accommodate American objections to having the word “protectionism” inserted in the document.

In the end, participants settled on the need for reform of the World Trade Organisation to describe a world trading system that is falling short of its objectives. Washington has been agitating for a review of the WTO to strengthen its dispute resolution and appeal procedures.

The US has also objected to a continuing description of China as a developing country, with concessions that enable it to take advantage of less developed country status in its access to global markets.




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On climate change, Washington separated itself from the other G20 members. All, except the US, reaffirmed their commitment to the Paris Agreement. The US announced in 2017 it was pulling out of Paris.

Foreign policy specialists will be sceptical about a de-escalation of trade hostilities given the range of issues bedevilling the US-China relationship.

Reflecting a hardening of US attitudes towards China, and in contrast to the optimism that had prevailed for much of the past two decades, Ely Ratner in Foreign Affairs notes:

Even if tariffs are put on hold, the United States will continue to restructure the US-China economic relationship through investment restrictions, export controls, and sustained law enforcement actions against Chinese industrial and cyber-espionage.

At the same time, there are no serious prospects for Washington and Beijing to resolve other important areas of dispute, including the South China Sea, human rights and the larger contest over the norms, rules and institutions that govern relations in Asia.

A stiffening view in the US towards China is shared more or less across the board. In those circumstances, a temporary ceasefire in Buenos Aires is unlikely to be sustained.The Conversation

Tony Walker, Adjunct Professor, School of Communications, La Trobe University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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What makes the G20 a force for global good – when its members agree they want it to be


Christian Downie, Australian National University

Compared to other international organisations, the G20 would seem to be one of the weakest.

It has no formal mandate like the United Nations. It has no permanent staff or buildings like the World Bank. It certainly has no funds like the International Monetary Fund. It has no power to make formal rules that members must follow, nor to take action against states that fail to comply, like the World Trade Organisation.

So how does the G20 get anything done?

What has made it influential in tackling problems like the global financial crisis? Why is it tasked with addressing some of the most pressing global problems, such as climate change?

A big part of the answer is the sheer power of its members. But also vital is the G20’s informal structure, which provides members with significant flexibility, and its close working relationship with other international organisations that also have a seat at the G20 table.

Economic muscle

The members of G20 pack enormous punch.

The group comprises 18 of the 21 nations with the biggest economies by gross domestic product, plus South Africa and the European Union.

This means there are effectively 43 countries with a stake in the G20. Together they account for about 85% of global gross domestic product, and about 65% of the world’s people.


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So when they agree to coordinate their national policies in a particular policy domain they can transform the global landscape.

In the wake of the global financial crisis in 2008, for example, G20 leaders agreed to coordinate their economic policies to ameliorate the worst impacts of the crash. Compared to previous crises of similar magnitude, the global economy recovered much more quickly than many anticipated. This is credited in large part to the G20’s role in expediting a coordinated response.

Seats at the table

Although the G20 does not have its own permanent staff and resources, it is adept at enlisting the commitment and resources of other international organisations when it needs to.

Bodies such the International Monetary Fund and the Organisation for Economic Cooperation and Development are well-integrated into the G20’s negotiation processes.




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These organisations often prove willing partners because they depend, to varying degrees, on the material and political support of G20 member states for their existence.

Take, for example, the Financial Stability Board, established by the G20 at its 2009 London summit in London.

The board works to promote the stability of the global financial markets by coordinating the work of national and international financial authorities. The G20 has relied on the board to take the lead on making large financial institutions less vulnerable to collapse, such as by forcing them to hold more capital, implementing tougher transparency standards, and monitoring their progress.

Similarly, the G20 has enlisted the OECD to help to make multinational companies pay tax; the United Nations Environment Programme to boost green finance; and the International Energy Agency to help address the problem of fossil-fuel subsidies.

Where there’s a will

That is not to say the G20 always delivers.

G20 leaders announced as far back as 2009 that they would phase out fossil-fuel subsidies. In ten years there has been limited progress.

Nevertheless, because global problems like climate change must be solved by collective action, the G20 remains a vital multilateral forum.

Particularly given G20 members account for 80% of the world’s primary energy demand, and about the same percentage of human-caused carbon emissions.




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We have so many ways to pursue a healthy climate – it’s insane to wait any longer


As a result, accelerated G20 cooperation could dramatically improve the prospects for a clean energy transition

Should they wish to do so, G20’s leaders have the capacity to achieve much more than talking. At their best they have the power to transform the rules that govern the globe.The Conversation

Christian Downie, Australian Research Council DECRA Fellow, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Much at stake as Donald Trump and Xi Jinping meet at G20



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US President Donald Trump and Chinese President Xi Jinping are set to meet again at the G20 in Buenos Aires, at a pivotal moment in world economic history.
AAP/EPA/Roman Pilipey

Tony Walker, La Trobe University

When US President Donald Trump meets his Chinese counterpart, Xi Jinping, on the margins of the G20 summit in Buenos Aires between November 30 and December 1, nothing less than a reasonably healthy global trading system and continued economic growth will be on the table.

It is one of the more significant meetings between two global leaders in the modern era.

The encounter will recall the high-wire diplomacy between Ronald Reagan and Mikhail Gorbachev in the 1980s, which signalled the end of the Cold War and, as it happened, the disintegration of the former Soviet Union.

Or, before that, Richard Nixon’s visit to China in 1972, which resulted in the signing of the Shanghai Communique and an end to decades of hostility between the United States and China.




Read more:
The risks of a new Cold War between the US and China are real: here’s why


World markets unnerved by an evolving trade conflict between the world’s two largest economies will take their cues from this encounter between an unpredictable US president and a Chinese leader who will not want to be seen to yield ground. Or, to give it an oriental description, lose face.

This is a fractious moment in world economic history.

Billions of dollars in global equity markets will rest on a reasonable consensus in the Argentine capital. The two sides will reach for a compromise that will enable relative stability to be restored to an economic relationship that is threatening to unravel.

Since a ragged outcome, or even failure, is in no-one’s interests, it is hard to believe Washington and Beijing will not seek to calm legitimate concerns about the risks of a full-blown trade war and its impact on global growth.

US-China trade tremors are already having an impact on growth projections for 2018-2020.

In its latest World Economic Outlook, the International Monetary Fund reports the world economy is plateauing, partly due to trade tensions and stresses in emerging markets.

The IMF has scaled back its global growth projections from its July Outlook forecast for 2019 to 3.7% from 3.9%. It has marked down US growth by 0.2 percentage point to 2.5%, and China by a similar margin to 6.2%.

However, if trade disruptions persist, fallout will become more serious in 2020 with global growth projected to be down by 0.8%, and with it US and China growth down significantly.

Trade wars have consequences, including risks of a global recession.

All this invests the Trump-Xi encounter with more-than-usual significance. A bad outcome will heighten risks of an accelerating global slowdown.

In the lead-up to the G20, American and Chinese officials have been preparing the ground, with the Chinese side anxious to reduce tensions following a November 1 phone call between the two presidents.

But it is less clear that Washington is willing to ease pressure on China to liberalise further a foreign investment environment, seek ways to reduce a trade gap and make more conspicuous efforts to tone down concerns about Chinese pilfering of its intellectual property.

In a media briefing in Beijing, Chinese officials underscored China’s desire for a reasonable outcome in Buenos Aires. Wang Shouwen, a vice commerce minister, said:

We hope China and the US are able to resolve their problems based on mutual respect, benefits and honesty.

However, Trump is continuing to threaten further increases in tariffs on US$200 billion of Chinese imports now set at 10% but due to increase to 25% from January 1. He told The Wall Street Journal this week:

The only deal would be China has to open up their country to competition from the United States.

Trump also threatened to slap tariffs on an additional US$267 billion worth of Chinese imports if negotiations with Xi are unsuccessful:

If we don’t make a deal, then I’m going to put the US$267 billion additional on [at a tariff rate of either 10% or 25%].

This next batch of Chinese imports might include laptops and Apple iPhones, which are among China’s biggest exports to the US.

Further complicating the possibility of a satisfactory negotiation in Buenos Aires is a lingering dispute between the US and China over reforms to the World Trade Organisation to strengthen its dispute resolution and appeal mechanisms.

The US also objects to China’s continued description as a “developing country” under WTO rules. This includes provisions that are favourable to Chinese state-owned enterprises.

A collapse in efforts to reform the WTO would strike another blow at a multilateral trading system that is under more stress than at any time since globalisation gathered pace in the 1990s.

The US-China trade conflict, which is threatening to become a full-blown trade war with unpredictable consequences, cannot be separated from a more general deterioration in relations.

These were given expression last month by Vice President Mike Pence in a speech to the Hudson Institute, in which he lambasted China in a way that prompted talk of a new cold war.

Pence accused China of deploying:

… an arsenal of policies inconsistent with free and fair trade, including tariffs, quotas, currency manipulation, forced technology transfers, intellectual property theft and industrial subsidies handed out like candy. These policies have built Beijing’s manufacturing base, at the expense of its competitors – especially the United States.

The US trade deficit with China reached US$375 billion last year – nearly half the US global trade deficit.

None of this augurs well for a constructive resolution of US-China differences at the G20, although you might hope Trump’s approach would be tempered by concerns about the economic consequences of a conspicuous failure.

What seems most likely, given the stakes involved, is for officials from both countries to be tasked with responsibility for addressing a range of American concerns, with the aim of resetting the relationship.

This would seem to be a best-case scenario.

In the meantime, officials working on the draft of a final communique will be struggling to satisfy competing demands from G20 participants for clear-cut statements on protectionism and climate change.

These have been staples of such communiques since the G20 was formed ten years ago amid a global financial crisis.




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Washington is reportedly resisting an explicit call to fight protectionism. It is also demanding a watering down of the G20’s commitment to the Paris Agreement on climate change.

Consensus on these issues is proving elusive, further undermining efforts to address global challenges.

This underscores a dramatic shift in the global geopolitical environment since Trump gained office.

At the 2016 G20 summit in Hangzhou, world leaders agreed on a “rules-based, transparent, non-discriminatory, open and inclusive multilateral trading system with the World Trade Organisation playing the central role in today’s global trade”.

On climate, the G20 committed itself “to complete our respective domestic procedures in order to join the Paris Agreement”.

Two years later, a “rules-based” trading system is being shredded and the Paris Agreement is at risk of unravelling. These are troubled times, not helped by an American pullback from the stabilising role in global affairs it has played since the second world war.The Conversation

Tony Walker, Adjunct Professor, School of Communications, La Trobe University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Does the G20 summit really make a difference? World leaders reckon it does



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Leaders pose for the official G20 family photo at their 2014 summit in Brisbane.
Andrew Taylor/AAP

Adam Triggs, Australian National University

“The secret to success is sincerity. Learn to fake that, and you’ve got it made.”

So goes an old gag. Many might be wondering something similar about this weekend’s G20 summit in Buenos Aires.

Each year the leaders of 20 of the world’s largest economies get together and make a lot of promises about working together to make the world a better place.

Are those promises kept? Are they just committing to do things they would have done anyway?

In short, does the G20 summit really make any difference?




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What on earth is the G20 and why should I care?


To find out, I interviewed dozens of politicians and officials from every G20 country about the influence and importance of the annual gathering since its first meeting in 2008.

My analysis shows most G20 promises are kept, and the forum really does exert a positive influence on its member nations.

Cooperation or coincidence?

Before I started my research I had reasons to be sceptical.

For example, at the G20’s second meeting, in London in 2009, the assembled leaders committed to fiscal stimulus packages worth a combined US$5 trillion in response to the 2008 global financial crisis. Central banks, like the Reserve Bank of Australia, also committed to aggressively cut interest rates.

The data shows they did what they promised. But didn’t countries have an incentive to do what they did anyway? What role did the G20 play?

Similarly in 2010, at the G20 meeting in Toronto, spooked by the European debt crisis, leaders promised to halve deficits by 2013 and stabilise debt-to-GDP ratios by 2016.

Many countries achieved this. But weren’t many countries, such as Australia, already on the “back to surplus” bandwagon? Did the G20 have any influence?

More than just a talkfest

Was the G20 a real influence, or were countries just promising to do what they would have done anyway?

To find out, I interviewed a total of 63 senior politicians and officials from every G20 country.

They included former Australian prime minister Kevin Rudd, former Australian treasurers Wayne Swan and Joe Hockey, US Federal Reserve chairperson Janet Yellen and her predecessor Ben Bernanke, former US Treasury secretary Jack Lew, Bank of Japan governor Haruhiko Kuroda, and Bank of England governer Mark Carney.

I asked them whether they believed the G20 had influenced their and other countries’ policies.

The answer was yes – sometimes.

It depended on the country, the policy area and other things, like whether there was an international economic crisis. But the influence was definitely there.

According to Kevin Rudd, who oversaw the Australian government’s successful response to the global financial crisis:

The G20 played a positive role in the quantum of Australia’s fiscal stimulus.

Politicians from ten other countries said the same thing – verified with data, where possible.




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Sharing experiences, shaping thinking

What about the G20’s influence on central banks?

These banks have domestic mandates. The Reserve Bank of Australia can’t refuse to change interest rates because it annoys New Zealand, for example. It must do what is best for the nation. What room is therefore left for G20 co-operation?

My research suggests the G20 does influence the thinking of central bankers and, through them, central bank policies.

“There is a lot of exchange of views in the G20 which I think is influential,” Ben Bernanke, who chaired the US Federal Reserve from 2006 to 2014, told me.

Mark Carney, who was governor of the Bank of Canada before heading the Bank of England, said the G20 was “a useful forum in which central banks can explain the reasons for their policy decisions”.

What about those 1,000 structural reforms?

According to Joe Hockey, Australia’s treasurer from 2013 to 2015:

The G20 growth strategy process absolutely resulted in countries doing things differently, particularly by learning from one another.

US officials agreed, confirming they got the idea of an asset-recycling initiative – where governments lease existing infrastructure assets to private companies and invest the proceeds in new infrastructure projects – from Australia through the G20.

A place to learn

German officials said because of G20 commitments their government developed a financial literacy and education program to better equip Germany’s citizens, particularly young people, in their engagement with the financial system.

Russian officials said Vladimir Putin embraced their 2017-2020 reform agenda on female economic participation after learning about the benefits through the G20.

The G20 has also prevented nations embracing “beggar-thy-neighbour” policies that improve the country’s relative economic position by harming others. It has pressured members not to devalue their currencies in pursuit of competitive trade advantage. It has helped countries resist resorting to trade protectionism. It has defused tensions around controversial policies such as quantitative easing, and improved the communication of central banks on future policy changes.




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Janet Yellen, former chair of the US Federal Reserve, said she “genuinely took to heart” concerns expressed at the G20 about aspects of US policy.

There are exceptions

The G20’s influence is not universal. Large countries are less influenced than smaller ones. Said a former senior US official:

Most Americans, and many in Congress, are proudly indifferent to what the rest of the world thinks.

Jacob Lew, US Treasury Secretary from 2013 to 2017, agreed:

There can be a backlash in the United States if you make the argument that you are doing something to comply with international rules.

The full results have been published by the Brookings Institution (available here).

So if commentators complain about the G20 being a pointless talkfest, just remember there is evidence to the contrary. It might not grab the headlines but the G20 plays an important role behind the scenes. We will be relying on it now, more than ever, to calm global tensions.The Conversation

Adam Triggs, Research fellow, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

All eyes on November’s G20 meeting as tensions between China and the US ratchet up



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Much attention will be on the next meeting between Chinese President Xi Jinping and US President Donald Trump at the G20 in late November.
AAP/EPA/Roman Pilipey

Tony Walker, La Trobe University

When G20 finance ministers met in Bali last week to review economic developments in the lead-up to the annual G20 summit, they could not ignore troubling signs in the global economy driven by concerns about an intensifying US-China trade conflict.

Last week’s slide in equities markets will have served as a warning – if that was needed – of the risks of a trade conflict undermining confidence more generally.

China’s own Shanghai index is down nearly 30% this year. This is partly due to concerns about a trade disruption becoming an all-out trade war.




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The risks of a new Cold War between the US and China are real: here’s why


IMF Managing Director Christine Lagarde’s call on G20 participants to “de-escalate” trade tensions or risk a further drag on global economic growth might have resonated among her listeners in Bali, but it is not clear calls to reason are getting much traction in Washington these days.

Uncertainties caused by a disrupted trading environment are already having an impact on global growth. In its latest World Economic Outlook, the IMF revised growth down to 3.7% from 3.9% for 2018-19, 0.2 percentage points lower than forecast in April.

IMF Managing Director Christine Lagarde has called on G20 members to
AAP/EPA/Made Nagi

The IMF is predicting slower growth for the Australian economy, down from a projected 2.9% this year to 2.8% next year. The May federal budget projected growth of 3% for 2018-19 and the following year.

Adding to trade and other tensions between the US and China are the issues of currency valuations, and a Chinese trade surplus.

In September, China’s trade surplus with the US ballooned to a record U$34.1 billion.

This comes amid persistent US complaints that Beijing has fostered a depreciation of the Yuan by about 10% this year to boost exports, which China denies.

These are perilous times in a global market in which the US appears to have shunned its traditional leadership role in favour of an internally-focused “America First” strategy.

So far, fallout from an increasingly contentious relationship between Washington and Beijing has been contained, but a near collision earlier this month between US and Chinese warships in the South China sea reminds us accidents can happen.

This is the background to a meeting at the G20 summit in Buenos Aires late in November between US President Donald Trump and Chinese President Xi Jinping. That encounter is assuming greater significance as a list of grievances between the two countries expands.

US Vice President Mike Pence’s speech last week to the conservative Hudson Institute invited this question when he accused of China of “malign” intent towards the US.

Are we seeing the beginning of a new cold war?

The short answer is not necessarily. However, a further deterioration in relations could take on some of the characteristics of a cold war, in which collaboration between Washington and Beijing on issues like North Korea becomes more difficult.

By any standards, Pence’s remarks about China were surprising. He suggested, for example, that Chinese meddling in American internal affairs was more serious than Russia’s interventions in the 2016 president campaign.

He accused Beijing of seeking to harm Republican prospects in mid-term congressional elections and Trump’s 2020 re-election bid. This was a reference to China having taken its campaign against US tariffs to newspaper ads in farm states like Iowa.

Soybean exports to China have been hit hard by retaliatory tariff measures applied by Beijing in response to a first round of tariffs levied by the US.

“China wants a different American president,” Pence said.

This is probably true, but it could also be said that much of the rest of the world – not to mention half of the US population – would like a different American president.

All this unsteadiness – and talk of a “new cold war” – is forcing an extensive debate about how to manage relations with the US and China in a disrupted environment that seems likely to become more, not less, challenging.

Australian academic debate, including contributions from various “think tanks”, has tended to focus on the defence implications of tensions in the South China Sea for Australia’s alliance relationship with the US.

This debate has narrowed the focus of Australia’s concerns to those relating to America’s ability – or willingness – to balance China’s regional assertiveness.

This assertiveness increasingly is finding an expression in China’s activities in the south-west Pacific, where Chinese chequebook – or “debt-trap” – diplomacy is being wielded to build political influence.

Australian policymakers have been slow to respond to China’s push into what has been regarded as Australia’s own sphere of influence.




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Despite strong words, the US has few options left to reverse China’s gains in the South China Sea


Leaving aside narrowly-focused Australian perspectives, it might be useful to get an American view on the overarching challenges facing the US and its allies in their attempts to manage China’s seemingly inexorable rise.

Among American China specialists, few have the academic background and real-time government experience to match that of Jeffrey Bader, who served as President Barack Obama special assistant for national security affairs from 2009-2011.

In a monograph for the Brookings Institution published in September, Bader poses a question that becomes more pertinent in view of Pence’s intervention. He writes:

Ever since President Richard Nixon opened the door to China in 1972, it has been axiomatic that extensive interaction and engagement with Beijing has been in the US national interest.

The decisive question we face today is, should such broad-based interaction be continued in a new era of increasing rivalry, or should it be abandoned or radically altered?

The starkness of choices offered by Bader is striking. These are questions that would not have entered the public discourse as recently as a few months ago.

He cites a host of reasons why America and its allies should be disquieted by developments in China. These include its mercantilist trade policies and its failure to liberalise politically in the three decades since the Tiananmen protests.

However, the costs of distancing would far outweigh the benefits of engagement to no-one’s advantage, least of all American allies like Japan, India and Australia.

None of these countries, in Bader’s words, would risk economic ties with China nor join in a “perverse struggle to re-erect the ‘bamboo curtain’… We will be on our own”. He concludes:

American should reflect on what a world would be like in which the two largest powers are disengaged then isolated from, and ultimately hostile to each other – for disengagement is almost certain to turn out to be a way station on the road to hostility, he concludes.

Bader has been accused of proffering a “straw man argument’’ on grounds that the administration is feeling its way towards a more robust policy, and not one of disengagement. But his basic point is valid that Trump administration policies represent a departure from the norm.




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At the conclusion of the IMF/World Bank meetings in Bali, Christine Lagarde added to her earlier warnings of “choppy” waters in the global economy stemming from trade tensions and further financial tightening. She said:

There are risks out there in the system and we need to be mindful of that…bIt’s time to buckle up.

That would seem to be an understatement, given the unsteadiness in the US-China relationship and global geopolitical strains more generally.The Conversation

Tony Walker, Adjunct Professor, School of Communications, La Trobe University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Three charts on: G20 countries’ stealth trade protectionism


Giovanni Di Lieto, Monash University and David Treisman, Monash University

It is clear that trade protectionism is alive and well in the G20, whose countries account for 78% of global trade. But this protectionism isn’t in the form of tariffs, which are duties placed on imports, making imported goods and services more expensive than they would be otherwise. Instead, trade protectionism is being pursued through “non-tariff barriers” such as import quotas, restrictive product standards, and subsidies for domestic goods and services.

This shows that while countries are reducing the obvious barriers to trade, like tariffs, they are still pursuing stealth forms of trade protectionism through non-tariff barriers.

Our research on trade protectionism in the services sector shows that the lower the barriers to trade, the greater company profits. Lower trade barriers create a larger market for Australian goods and services.

We also found that increased domestic regulation leads to higher profits as standards improve across the sector. For Australia this is very significant because the services sector employs four out of five Australians and accounts for 20% of Australia’s total exports.

Eliminating trade protectionism is also good for consumers, as it means a larger market for goods and services. This leads to lower prices and more choice of goods and services.

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The World Trade Organisation uses the term “trade restrictive activity” for measures like the imposition of a tariff. “Trade facilitation” refers to the simplification of export and import processes, making it easier to trade across countries. “Trade remedies” refers to actions taken by states against certain imports that are hurting domestic industries.

For example, in 2016 the Australian Anti-Dumping Commission slapped duties on Italian tomatoes that were being sold in Australia for less than they sold in Italy.

The data show that tariffs have been declining in the G20 over the past few years, while countries have been easing the processes of exporting and importing. However there have been a lot of trade remedies, as countries try to protect their domestic industries.

But looking at data on non-tariff barriers to trade tells a very different story.

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Until 2015 there was a huge increase in non-tariff measures, which then sharply declined. Since then not many measures have been removed. This shows that non-tariff barriers are currently the major mechanism for trade restrictions in the most developed economies.

As in the case of technical standards and regulations, non-tariff barriers can be used as a form of covert trade protectionism.

Technical standards and regulations can be quite legitimate and necessary for a range of reasons. They could take the form of a limit on what gases cars are allowed to emit, earthquake standards in regions prone to seismic activity, and even nutritional information on food and drinks.

But having too many different standards makes life difficult for companies that wish to access a market, as one product or service will need to comply with different standards in many countries.

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What has occurred in Australia echoes what has happened throughout the G20. There has been little activity recently in tariffs, but a significant use of non-tariff and technical barriers to trade.

This is a huge shift in Australia’s economic policy, which had until recently emphasised trade liberalisation as a recipe for growth.

According to the Australian Productivity Commission, trade restrictions directly raise the cost of both foreign and domestic goods and services, negatively impacting both Australian consumers and businesses.

Where to from here?

President Donald Trump’s trade agenda aims to distance the United States from the World Trade Organisation, which was setup to remove barriers to international trade.

In response, companies in the United States are now filing a huge number of anti-dumping cases against foreign goods and services.

At first glance, Australia appears to be off the hook when it comes to Trump’s hardline approach. We already have a bilateral trade agreement with the United States, not to mention a US$28 billion trade deficit with the US.

The ConversationBut the dangers of Trump’s trade doctrine could affect other countries and this disruption to global supply chains and financial security would eventually flow on to Australia.

Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash University and David Treisman, Lecturer in Economics, Bachelor of International Business, Monash Business School, Monash University

This article was originally published on The Conversation. Read the original article.

As an historic nuclear weapons treaty is reached, G20 leaders miss the mark on North Korea



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In North Korea’s eyes, its nuclear program is the only guarantee of regime survival.
Reuters/KCNA

Joseph Camilleri, La Trobe University

Over the weekend, more than 120 countries adopted a treaty at a UN conference that prohibits the production, stockpiling, use or threatened use of nuclear weapons or other nuclear explosive devices. Australia was a notable absentee. So were the nine countries that possess nuclear weapons.

While the UN conference was taking a major step toward the elimination of nuclear weapons, the US and its allies – notably Japan, South Korea and Australia – were hoping to use the G20 summit in Hamburg to focus attention on the danger North Korea’s nuclear ambitions pose.

However, the declaration issued at the end of the G20 does not even mention the issue. We can now expect a UN Security Council resolution that condemns North Korea’s latest missile test and applies slightly tougher sanctions.

The glaring contradiction between the boycott of the nuclear ban negotiations and the preoccupation with the North Korean nuclear threat does not seem to have dawned on the US and its allies.

Kim’s misguided provocation and Trump’s futile bluster

In North Korea’s eyes, its nuclear program is the only guarantee of regime survival.

North Korea’s apparently successful intercontinental ballistic missile test last week is widely seen, and portrayed by the regime itself, as part of a relentless drive to develop a reliable long-range nuclear weapon capable of striking the US.

The US responded to the latest test by declaring the policy of “strategic patience” is now over. In a speech delivered in Poland prior to the G20, US President Donald Trump warned he is considering “some pretty severe things” in response to North Korea’s “very, very bad behaviour”.

Donald Trump’s pre-G20 speech in Warsaw.

Yet America’s options are limited. In the first five months of his presidency, Trump’s strategy was to cajole China into taking a more confrontational stance with North Korea. But there are limits to what China is able or prepared to do.

Trump then intimated the use of tougher sanctions against North Korea, possible financial or trade sanctions against China for failing to do more, and even the direct use of military force.

However, resorting to these coercive tools is unlikely to have the desired result. History tells us harsh economic sanctions are often counter-productive. They impoverish economies, strengthen dictatorships, and drive dissent underground.

As for a military strike on North Korea, it could well lead the regime’s leader, Kim Jong-un, to launch a devastating strike against America’s allies, – notably Japan and South Korea. This might include the use of chemical, biological and possibly nuclear weapons. Such a turn of events may even drag China into the conflict.

More promising is the policy of strategic caution advocated by Russian President Vladimir Putin and his Chinese counterpart Xi Jinping, which they reiterated in their separate meetings with Trump on the sidelines of the G20 summit.

Both Russia and China argue North Korea can be persuaded to halt nuclear and missile tests if, in return, the US and South Korea suspend their joint military exercises. This would be a prelude to the resumption of talks involving the US and North Korea that could lead to undertakings for all sides to refrain from the use of force or other aggressive measures.

This more pragmatic stance is close to the position of South Korean President Moon Jae-in, who argued in Hamburg that the focus should be kept on further sanctions and dialogue.

Why the treaty?

Nothing said at the G20 summit will resolve the North Korean crisis, for it is but a symptom of a deeper ailment.

The US and Russia, which between them account for 92% of the world’s nuclear weapons, are clearly intent on preserving and modernising their nuclear arsenals. They and other nuclear-armed countries have steadfastly resisted repeated calls for nuclear disarmament – even though Article 6 of the Nuclear Non-Proliferation Treaty requires them to do just that.

The nuclear weapons treaty that has just emerged is a direct response to the morally and legally culpable inaction of the nuclear-armed countries – something the G20 summit did not and could not do.

Put simply, the treaty is a comprehensive effort to bring the rule of law to bear on all aspects of the nuclear assault on the planet. It designates a nuclear-weapon-free world as “a global public good of the highest order”, on which depend:

… human survival, the environment, socioeconomic development, the global economy, food security and the health of current and future generations.

The treaty’s provisions are robust and thorough. In addition to prohibiting production, possession and deployment, each party to it undertakes never to test, transfer or receive from any recipient any nuclear weapons or explosive devices, and never to assist anyone or receive assistance from anyone to engage in any such activity.

Countries are further prohibited from ever allowing nuclear weapons or other nuclear explosive devices to be stationed, installed, deployed or tested in their territory, or anywhere under their jurisdiction or control.

But there’s more to the treaty than this. It specifically acknowledges the unacceptable suffering and harm caused to the victims by nuclear weapons, as well as of those affected by the testing of nuclear weapons, in particular indigenous peoples.

The treaty also reinforces the legal obligation of relevant countries to provide appropriate remedies to the victims of nuclear testing, and effective repair of environmental damage.

Those who have been busy drafting and redrafting the treaty have taken great care to make room at a future date for those countries that have not participated in the negotiations – in particular nuclear-armed countries and their allies. A well-crafted set of procedures allows for the progressive, transparent and carefully verified dismantling of their nuclear activities.

Nothing said at the G20 summit will resolve the North Korean crisis.
Reuters/Kay Nietfield

Australia’s negative role

The dramatic events of the last week raise troubling questions for the future direction of Australian foreign policy. Why is it that Australia has been absent from the negotiations leading up to the adoption of this treaty?

More than that, why has it done all in its power to thwart the initiative?

The reasons are not hard to find. There is within Australia a firmly entrenched but dangerous mindset that America’s military might, including its nuclear arsenal, underwrites Australia’s national security.

The Australian government’s opposition to the nuclear ban treaty is the logical consequence of its subservience to US strategic objectives and priorities. It is the extension of longstanding policies that have led Australia to entanglement in protracted, costly and unwinnable wars – in Korea, Vietnam, Afghanistan, Iraq and now Syria.

It is the result of Australia’s psychological insecurity, and the tendency of governments to try to demonstrate at every opportunity that we remain America’s most faithful ally.

Yet there are other options. Australia has much to gain from actively supporting efforts to prohibit and eliminate nuclear weapons, and from collaborating with like-minded countries and international organisations to develop an effective long-term nuclear disarmament agenda.

Such a process would create immense possibilities for easing tensions in the Asia-Pacific region – not just in the Korean peninsula, but in China-US and China-Japan relations, and in the South China Sea.

The ConversationPublic support for such a transition is greater than many would think. The nuclear ban treaty is the beginning, not the end.

Joseph Camilleri, Emeritus Professor of International Relations, La Trobe University

This article was originally published on The Conversation. Read the original article.

When Trump met Putin, and how the Russian won the day



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The much-anticipated meeting between Vladimir Putin and Donald Trump finally took place at the G20 summit in Hamburg.
Reuters/Carlos Barria

Kumuda Simpson, La Trobe University

It was the meeting we’ve all been waiting for. US President Donald Trump and Russian President Vladimir Putin met on Friday during the G20 meeting in Hamburg, Germany.

The key question was whether Trump or Putin would emerge as the stronger leader, with most backing Putin’s ability to manipulate and control the exchange. Trump’s lack of diplomatic or political experience, and his unwillingness to prepare for the encounter, inspired very little confidence that he would walk away with any serious concessions from Putin.

The meeting was scheduled to take half-an-hour. In fact it lasted more than two hours, and an indication the two leaders found a significant amount to talk about. The only other people present were US Secretary of State Rex Tillerson, Russian Foreign Minister Sergei Lavrov, and two interpreters. The little we know of what was actually discussed has come from statements Lavrov and Tillerson gave to the press following the meeting.

Russian interference in the US election

Tillerson said Trump pressed Putin over Russian interference in the 2016 election, but seemed to accept his denial that Russia did any such thing.

President Putin denied such involvement, as I think he has in the past.

Tillerson said the White House was not “dismissing the issue” but wanted to focus on “how do we secure a commitment” that there will not be interference in the future.

The big question going in to the meeting was whether or not Trump would raise the accusation with Putin. While he clearly did, the ease with which he appears to have accepted Putin’s protestations of innocence, and his reassurance that it won’t happen again, is remarkable.

According to journalists’ reports on Twitter, Lavrov had a slightly different spin on Trump’s reaction to the issue. He said:

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In light of Trump’s remarks in Poland the day before, when he called into doubt the reliability of US intelligence on the issue, this has further undermined the credibility of the US intelligence community. That Trump did this during a face-to-face meeting with Putin can only deepen the mistrust between the CIA and FBI have for the White House, and further damage morale.

It can also be read as a clear victory for Putin, who came away from the meeting without having to seriously address charges that Russia systematically engaged in what is a gross violation of the democratic integrity and sovereignty of another country.

Syria

There was a clear opportunity for Trump to use the meeting to pressure Putin over his continuing support for Syrian President Bashar al-Assad.

While any significant agreements over how to resolve one of the most complex conflicts in the region were highly unlikely, the two leaders did agree to support a ceasefire in an area of southwestern Syria. There were no other details, and Tillerson himself admitted that ceasefires in Syria have tended to fall apart very quickly.

While Russia and the US have a shared interest in fighting Islamic State in Syria, they disagree over the almost every other aspect of the conflict, particularly the future of Assad and the role of Iran.

Trump has recently ratcheted up to anti-Iranian rhetoric and it seems the Russian relationship with Iran could become a significant point of conflict between the US and Russia in the future.

No transcript of the meeting is available so it’s impossible to know exactly what was discussed here. But if Putin was not pressed on these points, it is certainly a missed opportunity.

Shared interests

While both Lavrov and Tillerson highlighted the shared interests the two countries have, neither Ukraine nor the ongoing nuclear crisis in North Korea could be counted among them.

North Korea’s testing of an intercontinental ballistic missile guaranteed that it would be high on the list of issues that would be discussed. Russia has contradicted the consensus among the other G20 leaders over the missile’s range, and blocked a resolution by the UN Security Council calling for “significant measures” in response to the test.

So, what do we make of this highly anticipated meeting?

With very little detail about what was actually discussed, and with the narrative firmly controlled by Lavrov, Trump would seem to have gained very little while conceding much.

Putin has come away with an implicit agreement to move on from the question of election meddling, without promising more than “dialgue” on Ukraine, no agreement on how to deal with North Korea, and no real movement on the horrific human tragedy in Syria.

The ConversationAlong with Tillerson’s affirmation that the two leaders shared “a clear positive chemistry”, it’s hard not to recall George W. Bush’s claim to have seen into Putin’s soul, and conclude that Putin has once again expertly played a US president.

Kumuda Simpson, Lecturer in International Relations, La Trobe University

This article was originally published on The Conversation. Read the original article.

The G20’s economic leadership deficit


Adam Triggs, Australian National University

Few have heard of the Baltic Dry Index. It measures the demand for bulk shipping carriers, used for international trade. It usually attracts little attention. But nine years ago this index had the undivided attention of the 20 most powerful leaders in the world.

It was when the global financial system was on a precipice. Stock markets were crashing. Credit markets were freezing. Rolling failures across financial institutions were shattering confidence. Unable to wait for monthly trade data, the Baltic Dry Index showed in real-time what many leaders feared: global trade and commerce were grinding to a halt.

Leaders faced the real prospect of another Great Depression. But they were determined not to make the mistakes of the past. They resisted a return to protectionism. They slashed interest rates and buttressed the International Monetary Fund and development banks. Over the next three years, they implemented US$5 trillion of co-ordinated fiscal stimulus, the largest in history.

That leadership is needed again today. The risks leaders face at the latest G20 meeting in Hamburg, Germany, might not be as serious as those the leaders who met in Washington faced back in 2008. But the risks are present, and leaders are disengaging with the G20’s ever-expanding agenda. They are more likely to use the G20 for cheap political point scoring than for advancing co-operation on critical global challenges.

Australia can play a role in helping the G20 to deliver this leadership.

Economic challenges

Protectionist measures are on the rise. Protectionist rhetoric is rising faster. The World Trade Organisation shows that the stock of trade-restrictive measures is growing, up 8.5% in the 12 months to May 2017 alone.

The G20’s growth agenda from 2014 is in tatters. The G20 committed to make G20 GDP 2.1% bigger by 2018. Instead, the International Monetary Fund forecasts it to fall short by almost 6%.

A strong, effective G20 is manifestly in the interests of the global community, but particularly of Australia. Three-quarters of our merchandise trade is with G20 countries. Our banks rely on them for wholesale funding. Our tourism sector relies on them for two-thirds of our tourists. Our universities rely on them for the vast majority of their students.

Critically, the G20 is an opportunity for Australia to have a say in how global governance will be shaped in the years ahead and to be a regional champion for Asia.

Through in-depth interviews with over 40 central bank governors, ministers and officials from G20 countries, my research suggests there are practical things the G20 could do to increase its relevance. Importantly, participants see Australia as a developed economy, closely integrated in Asia and which promotes the values of the open, rules-based international order. This makes Australia well placed to push for pragmatic changes to improve the G20 process, particularly having hosted the 2014 meeting.

My interviewees warned that the G20’s agenda is too heavily dictated by the host country. In 2011, when France hosted the meeting, President Nicolas Sarkozy asked UK Prime Minister David Cameron to produce a report on reforming global governance. This instantly elevated the issue and saw substantial involvement from other leaders. Australia should push for allowing more leaders to champion the issues important to them, rather than leaving it all to the host country.

Participants similarly suggested that the G20’s peer-review process is too weak. This is the process through which countries review and give advice on each other’s policies. It’s critical to the G20’s ability to generate peer pressure, which is how a non-binding forum influences policies.

But participants saw this process as being a “tick and flick” exercise, isolated to junior officials in G20 working groups. Australia should advocate to change this, elevating the peer-review process to the level of ministers, governors and leaders. This will allow the people who have political capital to raise substantive points with one another.

For the G20 to demonstrate global leadership, participants suggest that it needs a genuine agenda for growth, with a stronger focus on making growth more inclusive. The OECD has some suggestions for this, such as investment in infrastructure, education and microeconomic reforms that lift workforce participation and create new opportunities for quality investment. The IMF shows that GDP gains can be 25% larger if structural reforms like this are co-ordinated between countries.

Participants also wanted progress on trade but warned that reaching agreement has been difficult. Recent research suggests the G20 should seek to promote consistency between the plethora of global, regional and bilateral trade agreements and develop a framework for how they can be scaled up into a global, WTO-led agreement.

The research shows that countries benefit most when trade liberalisation happens globally, but the “noodle bowl” of existing trade agreements is a nightmare for exporters to navigate. Australia, as a strong advocate for free trade, is well placed to show leadership on this issue.

Outcomes on trade are also vital for inclusive growth. Research shows that the poor can afford 63% more goods and services because of free trade, more than twice the benefit that flows to the rich.

But talk is cheap. It’s easy to commit to reforms but only half of G20 commitments are being implemented.
Australia should push for a serious accountability framework to monitor implementation and identify the countries that fall short.

The ConversationA weakening of the G20 is a weakening of Australia’s international influence. Few countries have a greater incentive to put solutions on the table.

Adam Triggs, Research fellow, Australian National University

This article was originally published on The Conversation. Read the original article.