What did the G20 summit really achieve?

G20 leaders gathered in Buenos Aires amid tensions and differences. There was the Russian seizure of ships in the Sea of Azov, trade tensions, conflicting views on climate change and other issues. The drama started before the summit. Donald Trump canceled his meeting with Vladimir Putin, and Angela Merkel’s arrival was delayed because the German Air

Force could not get her official aircraft to work properly.

Still it was a relatively harmonious summit and all leaders, including Trump, were on their best behavior. They managed to issue a communique without the US leader issuing his customary dissenting opinion. That in itself was a success. The communique refrained from a blanket endorsement of free trade, instead opting to call for reform of the World Trade Organization. While this may be disappointing for most leaders who wholeheartedly endorse the global free trading regime, it was probably the only possible compromise, given the current occupant of the White House.

The most awaited event was the post-summit dinner between Trump and Chinese President Xi Jinping. Trump had threatened to ramp up existing tariffs of 10 percent on $200 million of goods to 25 percent, as well as potentially levying tariffs on a further $265 million of Chinese imports. This spooked the markets, which had been on a volatile downward trajectory since October.

Trump agreed on a moratorium of 90 days, leaving the existing 10 percent tariff in place but postponing hikes or expansions. In exchange, the Chinese leader agreed to buy significant quantities from the US agricultural, energy and industrial sectors. China also promised to give antitrust approval to the important acquisition of the Dutch semiconductor manufacturer NXP by Qualcomm, which had been withheld so far. Importantly there were conversations regarding intellectual property and investors’ rights in China. Markets lapped it up and rallied on Monday morning, both in Asia and in Europe.

This may all sound good, but the two leaders have not averted danger but merely kicked the can down the road and given their negotiators breathing space. Ninety days is not a long time to come up with an overall trade agreement.

Markets were right in their initial reaction, though: Let us not forget that Trump’s proposal would have resulted in significant inflation of the US supply chain, which would have been passed on to consumers and adversely affected the terms of trade of US goods.

While it may be nice to have some respite over the holiday season, the underlying danger that America’s tough trade talk might undermine the international trading system has not dissipated.

The second achievement of the G20 summit was less noticed, but will probably be more enduring. Saudi Crown Prince Mohammed bin Salman and Vladimir Putin agreed to continue their cooperation on the OPEC+ stage where 10 countries lead by Russia work with OPEC in order to balance the oil markets. The next OPEC meeting takes place later this week in Vienna. OPEC+ has its work cut out. It will need to agree to take barrels off the market to avert a supply glut.

For observers this is a deja vu moment reminiscent of December 2016 when the 24 countries coordinated for the first time and subsequently managed to eliminate the inventories overhang over time. Saudi Energy Minister Khalid Al-Falih, and his Russian counterpart, Alexander Novak, have worked tirelessly since then trying to institutionalize a framework agreement. We can probably expect an announcement within the week.