The G20 in Osaka: all quiet on the Eastern front

All is not well with the G20, which lacks democratic legitimacy, is hopelessly divided and is also losing its political influence. The main reason for this is the conflict between the US and China, the EU and the rest of the world. So how should we interpret the predictably surprising outcomes of the meeting of G20 leaders in Osaka, Japan, with respect to the role played by the World Trade Organisation (WTO), US trade wars and EU strategy?

In the run-up to the G20 summit, most of the mainstream media predicted another battle in the US trade war against the rest of the world. The focus of these fears was President Trump’s ‘America First’ policy, which seeks to put paid to ‘multilateralism’ in international trade policy. Yet once again, that is not what happened. Trump remains true to what we have come to expect: an unpredictable, uncompromising businessman and deal maker. Just a few weeks previously he had announced that the trade dispute with China was a national emergency and imposed sanctions on the Chinese telecommunications supplier Huawei. So it came as a big surprise when a turnaround in the trade dispute was announced in Osaka. There was talk of a truce, with negotiations supposedly now set to resume in the improved atmosphere. Cue jubilation on the trading floor, with stockbrokers jumping for joy and share prices leaping – largely overlooking the persistent downturn in global manufacturing.

Meanwhile, the WTO continues to languish. The Osaka leaders’ declaration again advocated reform, raised the problems associated with the WTO dispute settlement system (which, due to the US’s refusal to appoint new arbitrators, is on the verge of functional incapacity), and expressed the usual shared commitment to make as much progress as possible on all these issues. However, it still remains unclear what interests the parties to the conflict in the international trade war are pursuing with a WTO reform, precisely because each of them has their own opinion of what ‘fair’ or ‘equitable’ trade actually means. Accordingly, for now, multilateralism in its present form is no longer in crisis, though it does remain one of the causes of the present slump. Why? Because the WTO has never been an organisation aimed at regulating international trade for the benefit of the many through negotiations based on solidarity and a level playing field. Rather, it is an agent of liberalisation in which powerful players are striving to impose their free-trade ideology on the whole world.

Trump’s partial break with the WTO continues a trend, albeit in a more radical form and at a brisker pace, that began before Obama and is unlikely to undergo fundamental change even when Trump is no longer president. The reason for this is that WTO multilateralism, being governed by consent rules, does not deliver what its neo-liberal US clientele expects, namely comprehensive economic liberalisation driven by US interests. So Trump’s ‘America First’ strategy should be seen in terms of continuity in US policy, albeit without losing sight of deeper reasons rooted in the now distant past, such as the structural US trade deficit. Whenever there is the prospect of a promising bilateral deal, as opposed to a ‘lame’ WTO, Trump offers such an agreement (an eye for an eye, a tooth for a tooth). Another thing he does is fuel conflicts, for example with the EU, which he has threatened with customs tariffs on cars, citing national security interests. Elsewhere, especially in a digital commerce context, he seems more inclined to rely on multilateralism, trying to overcome the blockade in the WTO by forming a kind of ‘coalition of the willing’. The aim of the game is to prevent both the taxation of electronically traded goods and services and forced data localisation, thereby denying national governments the right to hold data on their citizens. The backdrop to this is the fact that the business models of the ‘four horsemen of the Apocalypse’ (Google, Facebook, Amazon and Apple) hinge on unrestricted access to user data worldwide. In principle, Trump’s trade policy agenda is true to his election campaign pledge: to negotiate “the best deals ever” for US corporations. And there is little prospect of this changing, bearing in mind the recent launch of his re-election campaign.

Meanwhile, the European Union is endeavouring to secure and consolidate its own position in the trade war by placing the focus on multilateralism. Despite this, the announcement at the Osaka summit that the EU had concluded a free trade agreement with the Mercosur countries (excluding Venezuela, whose membership has been suspended) came as a surprise. By clinching such deals, the EU is trying to salvage whatever it can from the strategy of concluding “deep and comprehensive trade agreements”, which deeply impinge on the national powers of the negotiating partners. In so doing, with the looming impending failure of Osaka, the EU sent a signal to the US that the Europe is capable of going it alone. Ultimately, such a signal was masked by other ongoing conflicts, such as those between the US and Iran (the nuclear deal), the conflict with Russia, but also the ‘TTIP lite’ negotiations with the US, in which Trump pressured the EU into buying US liquid petroleum gas (LPG).

By the same token, the conclusion of the negotiations on the EU-Mercosur agreement is feted as a great success in defending multilateralism against the threat of Trump-style protectionism. No mention is made of the fact that this agreement constitutes the continuation of a misguided economic and trade policy, which – while ostensibly flying the flag for free trade – effectively sees big corporations emerge as the winners, at the expense of third countries. Another thing the EU fails to mention is the calamitous human rights record in Brazil and its consequences for the Mercosur agreement, which does, after all, include a clause on human rights . So why not stop the deal’s ratification right now, instead of suspending it later because of human rights violations?

The Mercosur agreement now awaits ratification by the member states of both economic areas, after formal legal scrutiny. So there is still a chance to block this agreement. However, this will require mobilisation on a scale similar to that which opposed the deals with Canada (CETA) and the United States (TTIP). As with the Economic Partnership Agreements (EPAs) concluded with ACP countries (in Africa, the Caribbean and the Pacific), fighting the Mercosur agreement threatens to become a cause taken up by just a few dedicated organisations led by the guiding principle of solidarity in international trade. That said, since the major mobilisation against TTIP, many networks critical of globalisation have consolidated their position, so foundations have been laid for a common strategy aimed at preventing the EU-Mercosur agreement. And the focus can now switch to getting serious and enlisting widespread public support.