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PRIMER

by Colin Robertson
CGAI Vice-President & Fellow
June 2019

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Table of Contents

• Introduction
• Who and What is the G20?
• The G20’s Standing Agenda
• Trade Problems
• What Does the Osaka Summit Want to Achieve?
• What About Deliverables from Osaka?
• Canadian Objectives
• Do We Really Need a G20?
• The Economic Picture
• Further Reading
• About the Author
• Canadian Global Affairs Institute

Introduction

On Friday, June 28, Japanese Prime Minister Shinzo Abe hosts the leaders of the 19 major economic nations and the European Union in Osaka, Japan. As G20 finance ministers noted after their meeting earlier this month “growth remains low and risks remain tilted to the downside. Most importantly, trade and geopolitical tensions have intensified.”

Created in the wake of the 2007-2008 “Great Recession”, the G20 is economic multilateralism at work,  an insurance policy to prevent globalization going off the rails. This 14^th G20 summit is the culmination of a year-long series of ministerial meetings, hosted throughout Japan.

G20 leaders are a diverse group – liberal democrats, authoritarians and autocrats. While the plenary sessions are the point of the meeting, attention will be on the interactions between U.S. President Donald Trump and Chinese President Xi Jinping. Can they start to undo their trade war or will tariffs continue to escalate? 

While the focus is geo-economics, the geopolitics are always present.  After abandoning the nuclear deal with Iran, the Trump administration has re-imposed sanctions and tensions have risen with recent actions, attributed to Iran, against container ships and a U.S. drone. China continues to muscle into the South China Sea. HMCS Regina and MV Asterix recently transited the Straits of Taiwan and sailed into these international waters. Russia still occupies parts of Ukraine. Ukraine now has a new president and parliamentary elections are underway. Canada hosts the third Ukraine Reform Conference this July in Toronto. There is little discernible progress in the U.S.’s negotiations with North Korea over its nuclear and missile capacity. Canadian ships and aircraft are part of the international sanction efforts on North Korea.

Conflict continues in Yemen, Syria, Iraq, Afghanistan and Central Africa and famine ravages parts of Africa. The United Nations High Commissioner for Refugees reports there are over 70 million displaced persons. Among them are 25.9 million refugees, over half of whom are under the age of 18. With millions of stateless people not just in the Middle East and Africa, but in Asia and Latin America, it is estimated that one person is forcibly displaced every two seconds. Canada resettled more refugees than the United States in 2018, the first time the U.S. did not lead the world on this measure in decades.

Human rights are also part of the backdrop. China has said it will not permit any discussion of the Hong Kong situation because it is China’s “internal affair”. According to the UN Special Rapporteur, there is “credible evidence” that Prince Mohammad bin Salman, a participant at the G20, is liable for the killing of Washington Post columnist Jamal Khashoggi. Saudi Arabia is to host next year’s G20, but does this not give de facto impunity to MBS? 

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Who and What is the G20?

The G20 leaders’ summit is the culmination of a year-long process consisting of a series of meetings that include their central bankers, ministers of agriculture, employment, energy, finance, foreign affairs, health, labour, tourism and trade as well as the ongoing discussions between the leaders’ personal sherpas and their teams. Representing over 80 per cent of global output, the G20 nations are the designated “premier economic forum for international economic cooperation”. Their leaders are effectively the principal shareholders in the global economy meeting with their executive board – the heads of the organizations responsible for keeping the global economic, finance and trade operating systems in working order. It also includes civil society engagement through the Business 20, Civil 20, Labour 20, Science 20, Think 20, Women 20 and Youth 20.

The shareholders include the G7 nations: Canada, the United States, Japan, France, Germany, Italy, the United Kingdom and the European Union, as well as Argentina, Brazil, Mexico, Australia, China, India, Indonesia, Korea, Russia, Turkey, Saudi Arabia and South Africa.  With two-thirds of the world’s population, their economies account for approximately three-quarters of international trade and thus this is the forum to push back on protectionism.

Spain is a permanent invited guest to G20 meetings. As host, Japan  has also invited the Netherlands, Singapore, Vietnam, Thailand (representing the presidency of the Association of Southeast Asian Nations), Egypt (representing the presidency of the African Union), Chile (representing the presidency of the Asia-Pacific Economic Co-operation forum) and Senegal (representing the New Partnership for Africa’s Development). The heads of the United Nations, Organisation for Economic Co-operation and Development, World Trade Organization, International Monetary Fund, World Bank, Asian Development Bank, Financial Stability Board, International Labour Organization and the World Health Organization will also participate.

The G20, originally a meeting of finance ministers, their deputies and central bankers, was formed in 1999 in the wake of the Asian and Russian financial crisis with Canada’s then-Finance minister Paul Martin playing a lead role. It was raised to the leaders’ level in the wake of the 2007-2008 financial crisis when then-U.S. president George W. Bush convened a summit in Washington in November 2008 to address the crisis. As Council on Foreign Relations Fellow Stewart Patrick observes: “The event reflected a new reality. Western governments could no longer hope to resolve international economic crises themselves. They needed a more encompassing body that included rising nations.” The results of previous summits can be found in their communiqués.

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The G20's Standing Agenda

Setting the international framework for growth and stability is the de facto standing agenda for the G20. This includes:

• Good economic governance. This includes measures to curb corruption and promote transparency. There is a recognition that education and health policies create the conditions for growth and stability and that labour and environment policies are also critical to sustainable economic growth.
• Supporting sustainable development. With the conclusion of the Millennium Development plan in 2016, nations are now committed to 17 goals in the new UN Sustainable Development Agenda to be achieved by 2030, including zero poverty, gender equality, good health and wellbeing, clean water and sanitation, reduced inequalities, decent work and economic growth. Infrastructure is a big part of sustainable development and thus the importance of the regional development banks.
• Promoting international investment. Barriers to investment continue to plague G20 economies. Governments’ need to further open their economies will be addressed.
• Achieving sustainable fiscal policy. This means saving in good times so you can spend in recession and then get back to balance as quickly as possible.
• Sustaining the multilateral trading system. The escalating trade tariffs between the U.S. and China are destabilizing the world trading system and upending long-established global supply chains. The tariff disputes’ roiling markets are a reminder that the global system of free trade, which has delivered so much prosperity, is a fragile one. During the 1930s, trade wars only deepened the misery inflicted by the Great Depression. That is why, after the Second World War, countries agreed to gradually reduce tariffs.

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Trade Problems

Global Trade Alert reports that since 2008, notwithstanding the G20 pledge for standstill at the London 2010 summit, governments have taken 13,533 protectionist measures ranging from local content requirements to discriminatory regulatory practices. According to the WTO, G20 trade-restrictive measures for 2018 are more than six times larger than those recorded in 2017 and the largest since this measure was first calculated in 2012. While new import-facilitating measures rose significantly during this period, they are less than half that of trade-restrictive measures. World Trade Organization (WTO) Director-General Roberto Azevêdo has called for immediate action to de-escalate the situation.  Whether Trump and Xi will curb the trade war is an open question.

As the Peterson Institute observes in its tracking of U.S. trade actions, “President Donald Trump’s trade war with the world involves multiple battles with U.S. allies and others alike. Each battle uses a U.S. legal rationale, such as calling foreign imports a ‘national security threat,’ followed by Trump imposing tariffs and/or quotas on imports. Subsequent retaliation by trading partners and the prospect of further escalation risk significantly hampering trade and investment, and possibly the global economy.”

The U.S. is also unhappy with the operation of the WTO itself, especially its dispute settlement. Meeting in Japan earlier this month, G20 trade ministers declared their “sense of urgency” to the reform commitment their leaders made at Buenos Aires last November. Canada, working with like-minded countries, has taken the lead in trying to find solutions to make the process more transparent and efficient.  The leaders will speak to its importance, but there is no sense the WTO’s Doha round is going anywhere.

G20 Trade-Restrictive Measures (average per month)

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What Does the Osaka Summit Want to Achieve?

Abe has set eight themes for this year’s G20 and the Japanese document sets out the following:

1. Global Economy: There will be discussions on sustainable financing to promote universal health coverage (UHC), disaster risk financing, internal taxation and financing, and how to respond to economic and social structural changes brought by digitalization and globalization of the economy.

2. Trade and Investment: The rule-based multilateral trading system is at a critical juncture. In order to restore confidence in the multilateral trading system, it is imperative to maintain and strengthen the momentum of WTO reform. The Global Forum for Steel Excess Capacity (GFSEC), which was established in 2016 based on the agreement at the G20 Hangzhou summit, continues the process of information-sharing on members’ production capacities and support measures.

When trade ministers met earlier this month, they addressed the following:

• Dialogue on current international trade developments
• A sound business environment that promotes market-driven investment decisions
• Promotion of trade and investment that contribute to sustainable and inclusive growth
• WTO reform; recent developments in bilateral and regional trade agreements

Interface between Trade and Digital Economy will be a joint session with the Ministerial Meeting on Digital Economy. Japan is advocating a system of “Data Free Flow with Trust.”

3. Innovation: Under the past presidencies, G20 discussion has focused on how innovation, including digitalization, drives economic growth and enhances productivity. In January 2019, in his remarks at the World Economic Forum in Davos, Abe proposed the concept of “data free flow with trust” (DFFT), highlighting the necessity to engender public trust in the digital economy to further facilitate data flow. The trade ministers focused on four aspects:

• Data free flow with trust (DFFT)
• Human-centric AI
• Digital security
• Digital technology for sustainable development goals, including inclusion

4. Environment and Energy: The Osaka summit focuses on accelerating innovation such as hydrogen and carbon capture, utilization and storage (CCUS) as a major impetus for a virtuous cycle of environment and growth, mobilizing private finance for innovation, and improving the business environment for dissemination of innovative technologies. To address climate-related challenges on a global scale under the United Nations Framework Convention on Climate Change and the Paris Agreement, it is necessary to accelerate “a virtuous cycle of environment and growth” and aim to create a paradigm shift which promotes business-led innovation. G20 members are discussing how to prevent the discharge of plastic litter into the ocean and how to facilitate innovation in order to intensify global efforts.

5. Employment: Discussion has focused on: (1) adapting to demographic change; (2) promoting gender equality in labour markets; and (3) exchanging national policies and practices in response to the new forms of work.

6. Women’s Empowerment: On women’s labour participation, G20 leaders committed to the Brisbane Commitment “25 by 25”. This is a goal to reduce the gender gap in labour force participation by 25 per cent by 2025, drafted at the Brisbane Summit in 2014.  As digitalization is transforming society, STEM (science, technology, engineering and mathematics) education for girls is crucial, as is addressing all forms of gender-based violence, including in the digital context.

Discussion has focused on (1) implementation of G20 commitments including those related to women’s labour participation; (2) enhancing support for girls’ and women’s education, including the STEM area; and (3) engagement with women business leaders and entrepreneurs.

7. Development: Discussion has focused on:

• The 2030 Agenda for Sustainable Development: A review of the SDG is scheduled in New York this September.
• Accountability
• STI (science, technology and innovations) for SDGs
• Quality infrastructure for connectivity enhancement toward sustainable development (in co-operation with the Infrastructure Working Group)
• Human capital investment

8. Health: Discussion will focus on three issues: Achievement of universal health coverage (UHC); response to aging society; and management of health emergencies, including antimicrobial resistance (AMR).

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What About Deliverables from Osaka?

Assuming there is no blow-up, the communiqué will cover the waterfront of issues and is likely to most resemble last year’s Buenos Aires communiqué in form and content. Trade ministers devoted attention to the digital economy and artificial intelligence and this is likely to be reflected in the final document. Most of the action will be at the bilateral level in the meetings and pull-asides. The Xi-Trump deliberations will be closely watched.

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Canadian Objectives

This is Prime Minister Justin Trudeau’s fifth G20 summit and he will be accompanied by Foreign Affairs Minister Chrystia Freeland and Finance Minister Bill Morneau. Jonathan Fried, the Canadian sherpa, is one of Canada’s most experienced diplomats, having served as Canadian ambassador to the WTO and earlier to Japan.

The PMO’s news release says Trudeau will champion the main themes of “Canada’s 2018 G7 Presidency, including combatting climate change, promoting clean energy, and advancing gender equality and women’s empowerment. In addition, he will promote open trade and investment, call for stronger and more decisive action to combat violent extremism in all its forms, including online, and underline how countries, as part of their efforts to fight climate change, must make a clean economy affordable for everyone. Finally, he will stress the urgent need for G20 countries to uphold the rules-based international order, and to recognize the threat of those who seek to undermine this order.” Trudeau will likely press the Charlevoix G7 summit agenda: “To create good, middle-class jobs, invest in economic growth that benefits everyone, advance gender equality and women’s economic empowerment, fight climate change, protect our oceans, and promote clean energy.” He and French President Emmanuel Macron will probably speak to the recent meeting in Paris and call on fellow leaders to adopt the Christchurch Call to Action – a global pledge to eliminate terrorist and violent extremist content online.

For Trudeau, it will be an opportunity to push Canadian interests on three major files:

• Can he convince Xi to let up on Canada? We want our hostages freed, the canola embargo lifted and no more harassment over our meat and pork shipments. The Chinese want Meng Wanzhou returned and Huawei eligible for our 5G procurement. EU leaders, and now Trump, are pressing for the release of Michael Kovrig and Michael Spavor.
• Can he advance our trade agenda? He needs a commitment from the European leaders that CETA member-state ratification is a priority. He will also be looking ahead to the Canada-EU summit in mid-July. With the new transpacific partnership now in effect, he needs to sell Canadian food and services. Trade Diversification Minister Jim Carr recently completed a trade mission to Japan and South Korea to sell Canadian goods, especially in the agri-food sector that has been adversely affected by Chinese trade action: the embargo on canola and harassment over our pork and beef. We also need buy-in for the Canadian-led initiative to reform the WTO. The U.S. has blocked appointments of new judges because it justifiably believes that the current system is slow, capricious and unfair. We need better rules on state subsidies, state-owned enterprises and intellectual property.
• Building on his meetings last week in Washington, can Trudeau engage North American leaders on other issues besides moving the new NAFTA forward? (Mexico just ratified it, it is under consideration in Canada’s Parliament and the administration is preparing to submit its legislation to Congress). The three leaders will likely discuss Venezuela. Trudeau should speak on the useful work of the Lima Group. This same group could also look at Central America and those fleeing Honduras, Guatemala and El Salvador. This is the main cause of the latest U.S.-Mexico border problems and it deserves the kind of constructive hemispheric attention that the Lima Group can provide.

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Do We Really Need a G20?

Yes. At a time when globalization, the maintenance of a liberal international order and multilateral co-operation are under question, the G20 is an important forum to discuss, and hopefully advance, common global interests. More people will likely work on the draft of the final communiqué than may read it, but the process of getting there is what really matters. It’s  another form of insurance against geo-economic  calamity.

The G20 filled a gap in the architecture of top-table meeting places at the UN and G7. The permanent members of the United Nations Security Council – Russia, China, France, Britain and the U.S. – represent the world of 1945 and the early Cold War. As we witness with Syria and other crises, getting the Security Council to act constructively is very difficult. Reforming it is an exercise in futility. The G7 group of leaders – the U.S., France, Britain, Germany, Japan, Italy and Canada – was created in 1975-1976 following the economic crisis that OPEC induced. It is Eurocentric. It doesn’t include China, India or Brazil. Russia joined in 1998, but it was suspended in 2014 after its invasion of Crimea. 

At the leadership level, the G20 complements the work of the other major financial and economic institutions. These include the “Bretton Woods twins” – the International Monetary Fund (IMF) and World Bank – and the WTO. As Patrick observes: “The G20 has the potential to act more nimbly and (at least in principle) transcend stultifying bloc politics that afflict the United Nations and other universal membership organizations.” Some suggest that the G20 should create a parallel foreign ministers’ track, arguing that the political and the economic go hand-in-hand, but this is probably a bridge too far for now. The ongoing meetings between central bankers and finance ministers (the original G20) now include other ministerial meetings as well as regular discussions with business, civil society and think tanks.

So, the G20 makes sense. It accounted for 86 per cent of global GDP (at market exchange rates), 77 per cent of global trade and 64 per cent of global population in 2017. It is more representative of the world economy than the G7, which together accounted for 46 per cent of global GDP, 34 per cent of global trade and 10 per cent of global population. Like the G7, much of the G20’s value is in its process. What is important about these summits is not the prepared statements delivered at the main table, but the frank discussions and informal meetings that take place in the corridors and meeting rooms around the main conference. Sir Winston Churchill, who popularized the word “summitry”, observed that “jaw-jaw” between leaders is better than “war-war”.

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The Economic Picture

 According to the IMF’s World Economic Outlook (April 2019): “after strong growth in 2017 and early 2018, global economic activity slowed notably in the second half of last year, reflecting a confluence of factors affecting major economies. Global growth is now projected to slow from 3.6 percent in 2018 to 3.3 percent in 2019, before returning to 3.6 percent in 2020. China’s growth declined following a combination of needed regulatory tightening to rein in shadow banking and an increase in trade tensions with the United States. The euro area economy lost more momentum than expected as consumer and business confidence weakened and car production in Germany was disrupted by the introduction of new emission standards; investment dropped in Italy as sovereign spreads widened; and external demand, especially from emerging Asia, softened. Elsewhere, natural disasters hurt activity in Japan. Trade tensions increasingly took a toll on business confidence and so financial market sentiment worsened, with financial conditions tightening for vulnerable emerging markets in the spring of 2018 and then in advanced economies later in the year, weighing on global demand.” According to the  Global Financial Stability Report, financial conditions have also tightened markedly in emerging and developing economies over the past six months. Global trade is rebounding although protectionist actions, especially by the Trump administration, are disrupting long-established supply chains. 

CHARTS from IMF BLOG

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Further Reading

The official Japanese site has useful information, as does Global Affairs Canada. The best Canadian source for G20 documentation, with a chronology of past summits, is the University of Toronto’s G20 Information Centre managed by John Kirton. The Centre for International Governance Innovation (CIGI) in Waterloo does excellent research work on G20 issues. Both are also involved in the G20 Insights project that has produced a series of excellent policy briefs drawing on work by the Think 20.

G20 Economies 1992 and 2017

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About the Author

A former Canadian diplomat, Colin Robertson is Vice-President and Fellow at the Canadian Global Affairs Institute and hosts its regular Global Exchange podcast.  He is an Executive Fellow at the University of Calgary’s School of Public Policy and a Distinguished Senior Fellow at the Norman Paterson School of International Affairs at Carleton University.  Robertson sits on the advisory councils of  the Johnson-Shoyama School of Public Policy,  North  American Research Partnership, the Sir Winston Churchill Society of Ottawa and the Conference of Defence Associations Institute.  He is an Honorary Captain (Royal Canadian Navy) assigned to the Strategic Communications Directorate. During his foreign service career, he served as first head of the Advocacy Secretariat and minister at the Canadian Embassy in Washington, consul general in Los Angeles, consul and counsellor in Hong Kong and in New York at the UN and Consulate General. A member of the teams that negotiated the Canada-U.S. FTA and then NAFTA, he is a member of the Deputy Minister of International Trade’s NAFTA Advisory Council and the North American Forum.  He writes on foreign affairs for  the Globe and Mail and he is a frequent contributor to other media. The Hill Times has named him as one of those who influence Canadian foreign policy, most recently in their 2018 “top 40”.

[email protected]

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Canadian Global Affairs Institute

The Canadian Global Affairs Institute focuses on the entire range of Canada’s international relations in all its forms including (in partnership with the University of Calgary’s School of Public Policy), trade investment and international capacity building. Successor to the Canadian Defence and Foreign Affairs Institute (CDFAI, which was established in 2001), the Institute works to inform Canadians about the importance of having a respected and influential voice in those parts of the globe where Canada has significant interests due to trade and investment, origins of Canada’s population, geographic security (and especially security of North America in conjunction with the United States), social development, or the peace and freedom of allied nations. The Institute aims to demonstrate to Canadians the importance of comprehensive foreign, defence and trade policies which both express our values and represent our interests.

The Institute was created to bridge the gap between what Canadians need to know about Canadian international activities and what they do know. Historically, Canadians have tended to look abroad in a search for markets because Canada depends heavily on foreign trade. In the modern post-Cold War world, however, global security and stability have become the bedrocks of global commerce and the free movement of people, goods and ideas across international boundaries. Canada has striven to open the world since the 1930s and was a driving factor behind the adoption of the main structures which underpin globalization such as the International Monetary Fund, the World Bank, the World Trade Organization and emerging free trade networks connecting dozens of international economies. The Canadian Global Affairs Institute recognizes Canada’s contribution to a globalized world and aims to inform Canadians about Canada’s role in that process and the connection between globalization and security.

In all its activities, the Institute is a charitable, non-partisan, non-advocacy organization that provides a platform for a variety of viewpoints. It is supported financially by the contributions of individuals, foundations and corporations. Conclusions or opinions expressed in Institute publications and programs are those of the author(s) and do not necessarily reflect the views of Institute staff, fellows, directors, advisors or any individuals or organizations that provide financial support to, or collaborate with, the Institute.

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